Exam 25: Transfer and Holder in Due Course

The Code provides an exception to the executory promise rule in:

Sharp Finance Company has furnished Keith with some pre-printed forms for customers to sign to finance repairs on their homes.After the customers sign the notes naming Keith as the payee, he sells them to Sharp Finance.Sometimes Keith is busy and does a poor job on the homes so he can get on to the next job.When customers complain, he says he'll get around to fixing the problems.If the customers don't pay the note, Sharp Finance sues them.Can the customers use the defenses they have against Keith against Sharp? Explain.

A negotiation may be valid to transfer the instrument even under which of the following condition(s)?

Personal defenses include all but:

Jennifer, who stole a check "payable to cash," cannot be a holder since she did not receive possession by voluntary transfer.

Mamie induces Reagan, by fraud in the inducement, to make an instrument payable to the order of Mamie .She subsequently negotiates the instrument to Jeff, a holder in due course.If Mamie later reacquires the instrument from Jeff , Mamie will succeed to Jeff 's rights as a holder in due course under the shelter rule.

A holder must actually have the instrument in his possession.

The principal advantage of negotiable instruments is their legitimacy.

An anomalous indorsement is:

The transfer of a negotiable instrument in such a manner that the transferee becomes a holder is known as:

Carmen needs quick cash, so she thinks of a scheme.She tells Frank she is collecting for Laotian refugees.Frank writes a check for $100 payable to the order of Carmen.Carmen indorses the check and delivers it to Pete, who doesn't know of Carmen's scam, for $90 cash.Pete gives the check to Emily as a present.Frank discovers Carmen's deception and refuses to pay Emily.Will he win?

Landscaping company Phyllrox Co.purchased a forklift from Brown's Equipment Co.Phyllrox made a down payment in cash and signed a promissory note for $7,500.For $7,200 Brown's sold the note to Corporate Bank, who took it in good faith without notice of any problems with it.After Phyllrox used the forklift for two weeks, it broke down and could not be repaired.Phyllrox refuses to make any more payments to Corporate Bank.In this case:

A "without recourse" indorsement eliminates all of an indorser's liability.