Michael issues a check to Paula. She negotiates the check to Hal as payment for a used television set. Hal has no notice of any claims or defenses and takes the check in good faith. Hal indorses the check and gives it to his son as a birthday present
Is Hal's son a holder in due course? What rights does he have with respect to the check? If Michael has a defense of fraud in the inducement against Paula, can he use that defense against Hal or Hal's son?
Hal's son is not a holder in due course because he did not give value for the check. However, he has the rights and privileges of a holder in due course, which means he takes the instrument free of most defenses or adverse claims to it. He has these rights because he is a holder through a holder in due course and receives these rights under the "shelter rule" outlined in the UCC. If Michael has a defense of fraud in the inducement against Paula, this is a personal defense, which means it cannot be used against a holder in due course or one with the rights of a holder in due course. Therefore, Michael cannot use this defense against either Hal or his son.
You might also like to view...
Identify a salesperson as a change agent.
What will be an ideal response?
Charlotte and Chloe are part of a sales team that work together to reach the sales goals by splitting up tasks. Both Chloe and Charlotte want to be seen as the team lead. As a result, they often embarrass themselves in front of potential clients. This team is in which stage of group development?
A. forming B. storming C. norming D. adjourning
One way to quantify the overall value of an item or service to a customer is by using a(n) ________
Fill in the blank with the appropriate word.
Under securities law, misleading information that would reasonably affect investment decisions by securities owners includes:
a. overly optimistic statements by executives b. cautious speculation by shareholders about future profits c. commentary from an unbiased stock analyst d. a newspaper reporter's speculation that the price of a stock will increase e. an independent website's prediction that a company will have a successful quarter