Exam 25: Creating a Negotiable Instrument

A claim in recoupment can be used against a holder in due course.

Trisha loaned Brian $600 evidenced by a promissory note. When Brian paid off the loan, he did not ask Trisha for the note. She sold it to Carin, a holder in due course. Brian does not have to pay Carin since he already paid Trisha the full $600.

To be negotiated, bearer paper must simply be delivered to the recipient.

Tim wrote a negotiable note. Subsequently, Tim's debts were discharged in bankruptcy. If a holder in due course presents the note for payment, Tim does not have to pay.

Kent Weston wrote a check for $500 payable to the order of Chester Jones. Chester indorsed the back of the check as follows: "Chester Jones." The check is now