Exam 26: Holder in Due Course

For purposes of negotiable instruments, "value" is defined as:

Buying an instrument for a price less than face value means the buyer had notice of a defense or claim against the instrument.

The financial officer responsible for signing checks left the signature stamp on her desk when she went out of her unlocked office for lunch and a dishonest employee used the stamp to place an unauthorized signature on an instrument.The financial officer may deny the validity of the signature since it was unauthorized.

Sharp Finance Company has furnished Carl with some pre-printed forms for customers to sign to finance repairs on their homes.After the customers sign the notes naming Carl as the payee, he sells them to Sharp Finance.Sometimes Carl 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 it.If the customers don't pay the note, Sharp Finance sues them.Can the customers use the defenses they have against Carl against Sharp Finance? Explain what law or laws apply to this situation.

__________ is overdue for purposes of preventing a purchaser from becoming a holder in due course if the purchaser has notice that she is taking the instrument on a day after demand has been made or after it has been outstanding for an unreasonably long time.

The notice requirement of the Federal Trade Commission's rule for consumer credit contracts has the effect of:

Defenses that may be asserted against a holder in due course are called:

The concept of value, for purposes of negotiable instruments, includes:

The "value" requirement of a holder in due course is the same as "consideration" for a contract.

An unauthorized signature may be ratified and thereby become valid so far as its effect as a signature and so far as removing civil and criminal liability of the person who had forged the signature.

Notice of which of the following circumstances should alert a purchaser of a negotiable instrument that he might not be accorded the favored position of a holder in due course?

Whether a holder has notice is determined by a wholly objective standard under the Code.

Otis, a holder in due course, buys a note made out by Joe to Southern Appliance.Even though Joe's debt was discharged through bankruptcy, Otis can collect on the note.

A Federal Trade Commission rule limits the rights of a holder in due course of an instrument that evidences a debt arising out of:

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

Claims, relating to whether the purchaser of an instrument can become a holder in due course, include:

A bank gives value when it allows a depositor to withdraw funds against a deposited check.

Which of the following would prevent the holder of an instrument from asserting holder in due course status?

Zeke indorsed his paycheck in blank and cashed it at his local grocery store.A burglar stole the check from the store, which immediately notified Zeke's employer.The employer gave the drawee bank a stop payment order.The burglar indorsed the check with a false name and transferred it to a convenience store, which took it for value and in good faith.When the check is presented to the drawee bank:

A person who takes a check stamped "NSF" may still be a holder in due course.