State whether the following provisions in a note Impair or preclude negotiability, the Instrument in each Instance being otherwise In proper form. Answer each statement with either “Negotiable” or Nonnegotiable” and explain why. A. A note signed by Henry Brown in the trade name of the Quality Store. Nonnegotiable, no fixed amount. B. A note for $850, payable to the order of TV Products Company, “If, but only if, the color television set for which this note is given proves entirely satisfactory to me. ” Nonnegotiable, has a condition on it. C.
A note executed by Adams, Burton, and Caddy Company, a partnership, for SSL ,OHO, payable to the order of Davis, payable only out of the assets of the partnership. Nonnegotiable, must be for cash (unless by asset they refer to cash, then negotiable) D. A note promising to pay $500 to the order of Leigh and to deliver ten tons of coal to Leigh. Nonnegotiable, contains additional undertaking. E. A note for $10,000 executed by Eaton payable to the order of the First National Bank of Anemone, in which Eaton promises to give additional collateral if the bank deems itself insecure and demands additional security.
Negotiable. F. A note reading, “l promise to pay to the order of Richard Roe $2,000 on January 1, 2013, but It Is agreed that If the crop of Blacker falls below ten bushels per acre for the 2012 season, this note shall be extended Indefinitely. ” Nonnegotiable, has conditions. G. A note payable to the order of Ray Rogers fifty years from date but providing that payment shall be accelerated by the death of Sills Hughes to a point of time four months after his death. H.
On January 10, Hughes paid Proctor $200, in conformity with their agreement of January 3. Following Mile’s refusal to pay the note on March 2, 2013, Hughes sues Miles for $1,000. Is Hughes a holder in due course? If so, for what amount? Hughes is a holder in due course, but only up until the point in which he learned of the breach of warranty, and therefore is entitled to $600, the amount they had put onto the note at the time. 10. Thornton fraudulently represented to Day that he would obtain for her a new car to be used in Day’s business for $17,800 from Penne Motor Company.
Day thereupon executed her personal check for $17,800 payable to the order of Penne Motor Company and delivered the check to Thornton, who immediately delivered it to the motor company in payment of his own prior indebtedness. The motor company had no knowledge of the representations made by Thornton to Day. Penne Motor Company now brings an action on the check that was not paid against Day, who defends on the ground of failure of consideration. Is Penne subject to this defense? Explain. Penne is a holder in due course and is not subject to the defense because of it being a personal defense.
Day could have prevented this by making the check for Thornton nonnegotiable, preventing Thornton from turning the check over to Penne. 1 1 . Adams, who reads with difficulty, arranged to borrow $2,000 from Bell. Bell prepared a note, which Adams read laboriously. As Adams was about to sign it, Bell diverted Dame’s attention and substituted the following paper, which was identical to the note Adams had read except that the amounts were different: On June 1, 2012, I promise to pay Ben Bell or order Twelve Thousand Dollars with interest from date at 16 percent.
This note is secured by certificate No. 13 for 100 shares of stock of Broadside Mills, Inc. Adams did not detect the substitution, signed as maker, handed the note and stock certificate to Bell, and received from Bell $2,000. Bell endorsed and sold the paper to Fore, a holder in due course, who paid him $11,000. Fore presented the note at maturity to Adams, who refused to pay. What are Fore’s rights, if any, against Adams? Adams is able to use a real defense against Fore, Fraud in the Execution. Fore needs to file action against Bell.
