Exam 25: Transferability and Holder in Due Course

Lauren transfers an instrument to Miguel in a form and by a means that makes Miguel a "holder." This is

An indorsee cannot use the notation "without recourse" to avoid liabil?ity for payment on the instrument.

Finest Office Company employs General Construction, Inc. (GCI), to reno?vate an office and signs a note for $10,000 payable to GCI. GCI breaches the contract, but sells the note for $5,000 to Happy Collection Agency, which knows that GCI has not performed. Happy is an HDC of the note in the amount of

Rayette transfers a draft by signing it and delivering it to Suki. Suki is

A person who acquires a check stamped "insufficient funds" is put on no?tice and therefore acquires HDC status.

Eve possesses an instrument that is "payable to bearer." She loses it. Flik finds it. On this instrument, Flik may

Fact Pattern 25-1B First Bank's account agreement states that deposited items will be given pro?vi?sional credit only until collection is final, but the bank's practice is to extend immediate credit. -Refer to Fact Pattern 25-1B. Suppose First Bank has no rea?son to suspect there would be a problem if immediate credit is extended on an item on which, in fact, there is an outstanding stop-payment order. According to the court's decision in Case 25.3, Mid Wisconsin Bank v. Forsgard Trading, Inc., with respect to this item, First Bank would be

To pay for investment advice from financial consultants Smith and Jones, Tony signs a check payable to "Smith or Jones." A proper in?dorsement of the check is

Clem gets a $100 check as a gift from Daria. Clem crudely increases the amount of the check to $1,000 and transfers it to eReady Computers, Inc., in exchange for a computer. eReady deposits the check in its bank account at First City Bank. HDCs of this check include

Kris transfers a note, on which Liu is the maker, to Mia, who takes it for value and in good faith. Mia knows that Kris breached the contract underlying the note, giving Liu a defense against payment. With respect to this note, Mia is

A person who accepts an instrument that has been completed without knowing that it was incomplete when originally issued cannot be an HDC.

A blank indorsement specifies no particular indorsee.

On the back of a check payable to Nero, he writes "Pay to Odell, without recourse" and signs it. This

To pay for a new desk bought at Office Outlet, Pete makes a check pay?able to "Offs Outlet." A proper indorsement of the check is

Fact Pattern 25-A1 Quiky Delivery Company contracts to provide services to Regal Bakeries, Inc. At Quiky's request, Regal makes checks for the services payable to "Quiky Delivery Co. and Secure Credit Corp." One check, however, is pay?able to "Quiky Delivery Co. Secure Credit Corp." . -Refer to Fact Pattern 25-A1. Suppose the check payable to "Quiky Delivery Co. Secure Credit Corp" is indorsed and negotiated only by Secure. Quiky files a suit to recover the amount. According to the decision in Case 25.1, Hyatt Corp. v. Palm Beach National Bank, the court will most likely rule that

Dru signs a check payable to Excel Services, Inc., and gives it to Excel, leaving the amount blank but authorizing Excel to fill it in for $1,000. Excel fills in $1,500 and negotiates the check to Friendly Credit Corporation, an HDC. Friendly Credit can enforce the check for

The shelter principle may apply to anyone who can trace his or her title back to an HDC.

To pay property taxes, Retail Store Corporation signs a check payable to "Tyra, County Tax Collector." Before Tyra negotiates the check, Vince replaces her in office. The check can be negotiated by

A transfer of a negotiable instrument cannot give a holder more rights than its prior possessor.

An instrument payable to two persons jointly requires the indorsement of only one of the payees for negotiation.