Roberts issued a negotiable instrument to Blackmar based on a promise by Blackmar to provide Roberts with a complete gym set to be installed in the basement of his (Roberts) house. Roberts had been looking at this set in a catalog provided by Blackmar for several months, thinking that Blackmar was the salesperson for the company whose name appeared in the catalog. Blackmar, however, had no affiliation with the company. Roberts issued a promissory note to Blackmar thinking that he was paying for the gym set. Blackmar instead indorsed the note and passed it on to Upson for the money he owed to Upson. When Upson presented this note to Roberts for payment, Roberts refused to pay claiming fraud.
Is Roberts liable to Upson or can he (Roberts) refuse to make good on the promissory note?
Roberts is liable for payment of the note to Upson. This is a case of fraud in the inducement, a personal defense. This defense is not good against Upson as long as Upson can prove that he took the instrument in good faith not knowing the circumstances.
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