The scenario involves a promissory note endorsed in blank and subsequently stolen. Under Utah UCC § 3-301, a “person entitled to enforce” an instrument is one who possesses the instrument and is the holder of the instrument, or a non-holder in possession of the instrument who has the rights of a holder, or a person not in possession of the instrument but entitled to enforce it under § 3-309 (loss, theft, destruction). Here, the original payee, Anya, was the holder. When Anya endorsed the note in blank, it became payable to bearer. Anyone in possession of a bearer instrument is generally a holder. However, the thief, having unlawfully obtained possession, is not a holder in due course (HDC) if they had notice of the adverse claim or defect in title. Even if the thief were to transfer the note to a subsequent purchaser, that purchaser would need to demonstrate they are a holder in due course to cut off certain defenses. A thief, by definition, has void title and cannot be a holder in due course. Therefore, Anya, as the original payee and owner, retains her rights to the instrument. Since the thief is not a person entitled to enforce, Anya can recover the instrument from anyone in possession of it, including a subsequent holder who is not an HDC. Utah UCC § 3-305(a)(1) provides that a holder takes an instrument subject to claims of ownership. As the thief never acquired rightful possession or title, Anya’s claim of ownership remains superior. Therefore, Anya can recover the instrument from the person who received it from the thief.

The core issue here is whether the instrument qualifies as a negotiable instrument under Utah’s adoption of UCC Article 3. A key requirement for negotiability is that the instrument must be payable to order or to bearer. Utah Code § 70A-3-104(1) defines a negotiable instrument as an unconditional promise or order to pay a fixed amount of money, payable to bearer or to order, on demand or at a definite time, and not stating any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money. In this scenario, the promissory note is payable “to the order of the United States Treasury.” This specific phrasing, “to the order of,” is a classic “words of negotiability” that signals an intent to create a negotiable instrument. The fact that the payee is a government entity does not, in itself, prevent negotiability. The note also promises to pay a fixed sum of money ($10,000) and appears to meet other requirements like being signed by the maker and payable on demand or at a definite time (though the exact timing isn’t detailed, the structure implies it). Therefore, the instrument is a negotiable instrument.

The core issue revolves around the negotiability of an instrument containing a promise to pay a sum certain in money, subject to a condition precedent that is not directly tied to the payment itself. Under UCC Article 3, specifically Utah’s adoption of it, a negotiable instrument must contain an unconditional promise or order to pay a sum certain in money. Utah Code Section 70A-3-104(1) defines a negotiable instrument. Utah Code Section 70A-3-105(2)(a) states that an instrument is not negotiable if it is payable “only out of a particular fund except as otherwise provided in this section.” However, Section 70A-3-105(2)(b) provides an exception: “a promise or order to pay from a particular fund is an unconditional promise or order unless the instrument is limited to payment out of that fund.” The critical distinction is whether the reference to the fund is merely for source of payment or a limitation on payment. In this scenario, the reference to “revenue derived from the sale of widgets” is a limitation on payment, making the promise conditional and thus rendering the instrument non-negotiable. The phrase “subject to the availability of sufficient revenue” explicitly creates a condition precedent to payment. Therefore, the instrument fails the unconditional promise requirement for negotiability under Utah law.

The core issue revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder under Utah’s UCC Article 3. A negotiable instrument must meet specific requirements, including being payable on demand or at a definite time, and containing an unconditional promise or order to pay a sum certain in money. If an instrument is not negotiable, a transferee takes it subject to all claims and defenses that would be available in a contract for the non-negotiable instrument, and any defenses available against the original payee. In this scenario, the promissory note is payable to “any bank” or “cashier’s check.” The phrase “or cashier’s check” introduces ambiguity regarding the payee. While “any bank” is generally acceptable under UCC § 3-110(c)(2)(ii) if the bank is specified as the payee, the addition of “or cashier’s check” potentially makes the instrument payable to either a bank or a cashier’s check itself, which is not a person or entity. This ambiguity can render the instrument non-negotiable. If the instrument is deemed non-negotiable, then any subsequent transferee, including Ms. Albright, would not qualify as a holder in due course and would take the instrument subject to all defenses, including the maker’s defense of fraud in the inducement. The Uniform Commercial Code in Utah, specifically Article 3, defines the requirements for negotiability. For an instrument to be negotiable, it must be payable to order or to bearer. An instrument payable to “cashier’s check” as a payee is generally not considered payable to order or to bearer, thus failing a fundamental requirement of negotiability. Therefore, even if Ms. Albright took the note for value and in good faith, without notice of any defect or defense, she cannot be a holder in due course of a non-negotiable instrument. The maker’s defense of fraud in the inducement is a real defense that can be asserted against any holder, including a holder in due course, if the fraud goes to the execution of the instrument itself, but here it is fraud in the inducement, which is a personal defense. However, the crucial point is the instrument’s negotiability. If the instrument is non-negotiable, all personal defenses are available against the transferee.

Under Utah law, specifically Utah Code Annotated § 70A-3-305, a holder in due course (HOC) takes an instrument free from all defenses and claims except for certain real defenses. Real defenses, which can be asserted even against an HOC, are specifically enumerated. These include infancy, duress that nullifies assent, fraud that nullifies assent, illegality of the transaction that nullifies assent, discharge in insolvency proceedings, and generally, any other defense that could be asserted against a simple contract. The scenario describes a promissory note that was procured through fraud in the inducement. Fraud in the inducement occurs when a party is deceived about the underlying reasons or considerations for entering into a contract but still understands the nature of the instrument they are signing. This type of fraud is a personal defense, not a real defense. Therefore, an HOC taking the note would be able to enforce it against the maker, as the defense of fraud in the inducement is cut off. The correct answer identifies this principle by stating that the HOC can enforce the note because fraud in the inducement is a personal defense.

The scenario involves a promissory note that is payable “on demand” to the order of “any holder.” This type of instrument is considered a negotiable instrument under UCC Article 3, specifically Utah Code Section 70A-3-104. The key element here is the holder’s ability to present the note for payment at any time. The maker of the note, Mr. Abernathy, has a contractual obligation to pay the holder upon demand. The fact that the note is undated does not affect its negotiability or the maker’s obligation to pay; UCC 70A-3-108(a) states that a promise to pay is “on demand” if it states that it is payable on demand, payable at sight, or otherwise indicates that it is payable at the will of the holder. When a note is payable on demand, the statute of limitations begins to run from the date of issue or, if undated, from the date of issuance. However, the question asks about the immediate enforceability upon presentation. Mr. Abernathy’s assertion that he needs “reasonable time to arrange funds” is not a valid defense against immediate payment when the instrument is a demand note. The holder is entitled to payment upon proper presentment. Therefore, the holder can demand immediate payment.

The question revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder under Utah’s Uniform Commercial Code (UCC) Article 3. A holder in due course takes an instrument free from all defenses of any party to the instrument with whom the holder has not dealt, except for certain real defenses. Real defenses, which can be asserted even against an HDC, are those that go to the very validity of the instrument itself or the obligation to pay. Examples of real defenses include infancy, duress that nullifies assent, fraud in the execution (or “real fraud”), illegality of a type that nullifies the obligation, and discharge in insolvency proceedings. Personal defenses, on the other hand, such as breach of contract, failure of consideration, or fraud in the inducement, are generally cut off by a holder in due course. In this scenario, the promissory note was initially issued by Mr. Abernathy to Ms. Gable for the purchase of a vintage car. Ms. Gable subsequently negotiated the note to Mr. Henderson. Mr. Henderson took the note for value, in good faith, and without notice of any claim or defense against it, thus qualifying as a holder in due course. Mr. Abernathy’s defense is that Ms. Gable misrepresented the condition of the car, inducing him to purchase it. This type of misrepresentation, where Mr. Abernathy understood the nature of the instrument he was signing but was deceived about the underlying transaction (the car’s condition), constitutes fraud in the inducement. Fraud in the inducement is a personal defense. Therefore, Mr. Abernathy cannot assert this personal defense against Mr. Henderson, who is a holder in due course. The question asks what defense Mr. Abernathy can assert. Since fraud in the inducement is a personal defense, it is not assertable against an HDC. The only defense that would be available against an HDC in this context, assuming no other facts were presented, would be a real defense. However, none of the options provided represent a real defense that Mr. Abernathy could successfully assert against Mr. Henderson. The question is implicitly asking for the *type* of defense that is generally cut off by an HDC, and that type is personal defenses. Therefore, the defense of fraud in the inducement is a personal defense that Mr. Abernathy cannot assert against Mr. Henderson. The question is framed to test the understanding of what defenses *can* be asserted, implying that the absence of a real defense means the personal defense is unavailable.

The core issue here is whether a holder in due course (HDC) status can be maintained when a negotiable instrument is transferred after it has been dishonored by nonacceptance. Under UCC Article 3, specifically Utah Code § 70A-3-302, a holder in due course takes an instrument free of claims to it or defenses against it, except for certain real defenses. To qualify as an HDC, a holder must take the instrument for value, in good faith, and without notice that it is overdue or has been dishonored or that any person has a defense or claim against it. Dishonor by nonacceptance occurs when a draft is presented for acceptance and the drawee refuses to accept it. UCC § 70A-3-304(1)(a) states that a draft is overdue if it is presented for acceptance after its due date or, if it is presented for acceptance on or before the due date and the drawee refuses to accept it. A holder who takes an instrument with notice of dishonor by nonacceptance cannot be an HDC. Therefore, when the promissory note was transferred to Ms. Albright after the bank had already dishonored it by nonacceptance, she had notice of the dishonor. This notice prevents her from meeting the requirements of UCC § 70A-3-302(1)(c), which mandates that the holder must take the instrument without notice that it is overdue or has been dishonored. Consequently, Ms. Albright does not qualify as a holder in due course and takes the note subject to any defenses that the maker, Mr. Chen, may have against the original payee.

In Utah, under UCC Article 3, the concept of “holder in due course” (HDC) is crucial for determining the rights of a party who takes possession of a negotiable instrument. To qualify as an HDC, a person must take the instrument (1) for value, (2) in good faith, and (3) without notice that the instrument is overdue or has been dishonored or that there is a defense or claim against it. Utah Code § 70A-3-302 outlines these requirements. If a party meets these criteria, they take the instrument free from most defenses and claims that the issuer or prior parties might have against the original payee. For instance, personal defenses such as breach of contract or lack of consideration, which would be available against the original payee, are generally cut off by an HDC. However, certain real defenses, like forgery or material alteration, can still be asserted against an HDC. The scenario involves a promissory note transferred to an individual who appears to meet the HDC requirements, implying that prior contractual disputes between the original parties would not typically be a valid defense against this transferee. Therefore, the transferee would acquire the rights of an HDC.

The scenario involves a promissory note that is payable to order and is later transferred by delivery alone, without endorsement, to a holder in due course (HDC). Under Utah’s Uniform Commercial Code (UCC) Article 3, specifically concerning negotiable instruments, the transfer of an instrument that is payable to order requires endorsement to qualify the transferee as a holder. Without the proper endorsement, the transferee, even if they took the instrument for value and in good faith, does not become a holder in due course. Instead, they acquire the rights of the transferor, which means they take the instrument subject to any defenses that could have been asserted against the transferor. In this case, the original maker of the note had a valid defense against the original payee. Since the note was not endorsed, the subsequent holder, who paid value and took in good faith, is not a holder in due course and cannot take the instrument free of this defense. Therefore, the maker can assert the defense against the current holder. The UCC, in sections like Utah Code Ann. § 70A-3-201, details the requirements for negotiation and transfer. A transfer of an instrument payable to order requires endorsement. If an instrument is transferred for value and the transferee takes possession of the instrument, but it is not endorsed, the transferee has a specifically enforceable right to the endorsement of the transferor, but until endorsement, the transferee is not a holder. This distinction is crucial because only a holder in due course can take an instrument free from most defenses. The absence of the required endorsement means the holder does not achieve HDC status and is subject to all defenses available against the transferor.

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder under UCC Article 3, as adopted in Utah. A negotiable instrument, like a promissory note, can be transferred to an HDC, who takes the instrument for value, in good faith, and without notice of any claims or defenses. However, even an HDC is subject to certain real defenses, which go to the validity of the instrument itself. Among the real defenses listed in UCC § 3-305(a)(1) are infancy, duress that nullifies assent, fraud that nullifies assent, illegality of the transaction that nullifies assent, and discharge in insolvency proceedings. Personal defenses, such as breach of contract or failure of consideration, are generally cut off by a holder in due course. In this scenario, the note was issued by a minor, which constitutes a real defense under UCC § 3-305(a)(1)(i) because infancy can render a contract voidable. Even though Ms. Sterling qualifies as a holder in due course, she cannot enforce the note against Mr. Henderson due to this real defense. The subsequent transfer of the note to Mr. Sterling, even if he were a holder in due course, does not cure the initial defect. The defense of infancy is effective against any holder, including a holder in due course, because it is a defense that goes to the fundamental validity of the instrument’s creation.

The question concerns the enforceability of a promissory note that was altered after its creation. Under Utah UCC Article 3, a holder in due course (HDC) takes an instrument free of most defenses and claims, but this protection is not absolute. Specifically, UCC § 3-305(a)(1) states that an HDC is subject to a defense of a kind that the law generally recognizes as invalidating the obligation of a party against the party’s will. This category includes real defenses, such as forgery or material alteration. A material alteration is defined in UCC § 3-305(a)(2) as an alteration that changes the contract of any party in a way that is fraudulent or that significantly alters the character or scope of the obligation. In this scenario, the increase in the principal amount of the promissory note from $5,000 to $15,000, without the consent of the maker, constitutes a material and fraudulent alteration. Therefore, the obligation of the maker is entirely discharged, even against an HDC. The note is not enforceable for any amount, not even the original $5,000, because the alteration was material and fraudulent. The UCC provides that if an instrument is materially and fraudulently altered, the instrument is voided. The protection afforded to an HDC under UCC § 3-302 does not extend to nullifying the effect of a material and fraudulent alteration on the underlying obligation of the maker. The maker’s defense of material alteration is a real defense that can be asserted against any person, including an HDC.

The core issue here revolves around the concept of a holder in due course (HIDC) and the defenses available against such a holder under Utah’s UCC Article 3. A negotiable instrument must meet specific criteria to be considered such, including being payable to order or to bearer, for a fixed amount, and on demand or at a definite time. If an instrument is not negotiable, the transferee takes it subject to all claims and defenses that could be asserted against the transferor, and any holder is subject to these. In this scenario, the “Promissory Note for Services Rendered” states it is payable “to the order of ‘The Beneficiary'”. This phrase, “The Beneficiary,” is problematic. Under UCC § 3-109, an instrument is payable to order if it is payable to the order of an identified person or to a transferee of an identified person. While “The Beneficiary” identifies a recipient, it is not an *identified person* in the sense required for order paper. It is akin to being payable to a fictitious payee or to cash, which under UCC § 3-110(d) (and Utah’s adoption thereof) would generally make the instrument payable to bearer. However, if it’s interpreted as not being payable to order or to bearer, it fails the negotiability test. Assuming for the sake of argument that it *is* negotiable (e.g., treated as bearer paper due to the non-specific payee), the critical point is the nature of the defense raised by Mr. Henderson. Mr. Henderson’s defense is that the underlying services for which the note was given were never performed. This constitutes a “real defense” or a defense that can be asserted against a holder in due course. Real defenses, such as fraud in the execution, forgery, material alteration, infancy, duress, illegality of the obligation, or discharge in insolvency proceedings, are effective against an HIDC. A failure of consideration or breach of contract, which is what Mr. Henderson is asserting, is generally a “personal defense” and is cut off by a holder in due course. However, the initial defect in negotiability is paramount. If the instrument is not negotiable, then the transferee, Ms. Albright, cannot be a holder in due course, regardless of her good faith or lack of notice. A transferee of a non-negotiable instrument takes subject to all defenses that could have been asserted against the original transferor. Therefore, Ms. Albright, as a mere assignee, would be subject to Mr. Henderson’s defense of failure of consideration. The calculation here is not mathematical but conceptual: 1. Assess negotiability of the instrument. 2. If negotiable, assess if the transferee is a holder in due course. 3. If a holder in due course, determine if the defense is real or personal. 4. If not negotiable, or if the defense is real, the defense is effective. In this case, the instrument’s phrasing “to the order of ‘The Beneficiary'” likely renders it non-negotiable because “The Beneficiary” is not an identified person as required by UCC § 3-109. Consequently, Ms. Albright, as the transferee, cannot achieve HIDC status and takes the instrument subject to all of Mr. Henderson’s defenses, including the failure of consideration due to non-performance of services. Therefore, Mr. Henderson can assert this defense against Ms. Albright.

The scenario describes a promissory note that is payable to “Bearer.” Under UCC Article 3, as adopted in Utah, a negotiable instrument payable to bearer is negotiated by mere delivery. The UCC distinguishes between instruments payable to order and instruments payable to bearer. An instrument payable to order requires endorsement and delivery for negotiation. However, an instrument payable to bearer, such as the note in question, is negotiated by the person in possession of the instrument delivering it to another person. The UCC specifies that if an instrument is payable to “Cash” or “XX” or any other indication that it is payable to bearer, it is payable to bearer. Similarly, if it is payable to a named person or bearer, it is payable to bearer. The key is that the instrument itself indicates it is payable to bearer. Therefore, when Ms. Albright simply hands the note to Mr. Chen, she is effectively negotiating it, transferring all rights in the instrument to Mr. Chen, who then becomes the holder. The absence of an endorsement is irrelevant for bearer paper. This principle is fundamental to understanding how title to negotiable instruments is transferred under Utah law, ensuring efficient commerce.

The scenario involves a promissory note that is payable to “bearer” and is transferred by physical delivery. Under UCC Article 3, as adopted in Utah, an instrument payable to bearer is negotiated by delivery alone. The question focuses on whether a thief who obtains possession of such an instrument can transfer good title. UCC Section 3-301 states that a person may be a holder of an instrument if the person is in possession of the instrument and the instrument is payable to that person or to bearer. UCC Section 3-302 defines a holder in due course, but a thief, by definition, cannot be a holder in due course because they do not acquire the instrument for value, in good faith, and without notice of any claim or defense. However, the critical point here is that bearer paper, when transferred by mere delivery, can pass good title to a *subsequent* holder who takes it for value, in good faith, and without notice, even if the transferor was a thief. The thief, by delivering the instrument, is a possessor, and the instrument is payable to bearer. While the thief themselves does not have good title, they can effectuate a negotiation. The question asks about the validity of the transfer of title to the *buyer*, not the thief’s rights. If the buyer meets the requirements of a holder in due course, they can acquire good title. The explanation does not involve any calculations.

The core concept here is the effect of a restrictive endorsement on a negotiable instrument under Utah’s Uniform Commercial Code (UCC) Article 3. A restrictive endorsement, such as “For deposit only,” places limitations on how the instrument can be negotiated or paid. Utah UCC § 3-206 addresses the effect of restrictive endorsements. If an instrument is restrictively endorsed “For deposit only,” the depository bank (the first bank to which an instrument is transferred for deposit) becomes a holder for value. However, any subsequent bank or person who takes the instrument must have acted in accordance with the restriction to be a holder in due course or to enforce the instrument. In this scenario, the restrictive endorsement “Pay to the order of Aurora Bank only” is a clear limitation. Aurora Bank, as the named payee and the bank to which the instrument is restrictively endorsed, can properly negotiate or deposit it. However, when the instrument is later presented to Summit Bank, which is not Aurora Bank, Summit Bank cannot acquire rights as a holder in due course or enforce the instrument if it pays or gives value in a manner inconsistent with the restriction. Since Summit Bank is not Aurora Bank, it cannot simply pay cash over the counter or credit the account of someone other than Aurora Bank without potentially violating the restriction. The UCC generally allows a bank that is named as the payee in a restrictive endorsement to receive payment, but a bank that is not named as the payee cannot discharge its liability by paying the instrument to someone other than the named restrictive payee or by crediting the account of someone other than the restrictive payee. Therefore, Summit Bank, not being Aurora Bank, is not authorized to pay the instrument to the bearer, even if the bearer is the original payee, because the restriction directs payment or negotiation specifically to Aurora Bank. The restriction effectively channels the instrument’s negotiation and payment through Aurora Bank.

The scenario involves a negotiable instrument that is payable to order. Under Utah Code Annotated § 70A-3-109, an instrument is payable to order if it is payable to a named person or to that person’s order. In this case, the instrument is made payable to “the order of Bear Claw Outfitters.” This specific phrasing clearly indicates that the instrument is intended to be payable to the designated payee, Bear Claw Outfitters, and anyone to whom that payee properly endorses it. The question asks about the effect of the payee’s endorsement of the instrument to “all other creditors of Bear Claw Outfitters.” This is not a valid endorsement for the purpose of transferring rights under UCC Article 3. An endorsement must be for a specific payee or payees, or in blank. An endorsement attempting to transfer rights to an amorphous group like “all other creditors” does not meet the requirements for a valid negotiation under UCC Article 3, specifically concerning the transfer of rights to the instrument. Therefore, the endorsement is ineffective to transfer the instrument to the creditors as a group, and Bear Claw Outfitters, as the original named payee, retains the right to enforce the instrument. The UCC, in Utah Code Annotated § 70A-3-301, defines who may enforce an instrument, and this includes the holder of the instrument, or a person not in possession of the instrument who is entitled to enforce it. Since the endorsement is invalid for the intended purpose of collective transfer, Bear Claw Outfitters remains the party with the right to enforce.

The scenario involves a negotiable instrument that has been altered. Specifically, the amount payable has been changed. Under UCC Article 3, particularly Utah’s adoption of it, an altered instrument can still be enforced according to its original tenor by a holder in due course. A holder in due course (HDC) is a holder who takes an instrument that is (i) taken for value, (ii) taken in good faith, and (iii) taken without notice that the instrument is overdue or has been dishonored or that there is a defense or claim against it. In this case, if the bank acts as an HDC, it can enforce the instrument for the original amount of $5,000, despite the unauthorized alteration to $15,000. The fact that the bank paid the altered amount does not preclude it from seeking recourse based on the original tenor if it meets the HDC criteria. The UCC prioritizes the rights of an HDC to protect the free negotiability of commercial paper. If the bank were not an HDC, it would generally be bound by the altered amount, but the question implies the bank is acting in a capacity that would allow it to seek recovery based on the original terms, provided it qualifies as an HDC. The explanation does not involve a calculation as the question is conceptual.

The scenario involves a promissory note that is payable to “cash” and is not made payable to order or to bearer. Under Utah’s Uniform Commercial Code (UCC) Article 3, specifically Section 3-109, an instrument is payable to bearer if it is payable to “cash,” or to a specified person or bearer, or to an order of a fictitious person. However, an instrument that is payable to a specified person but not to order or bearer is generally payable to the person identified in the instrument. The crucial point here is that an instrument payable to “cash” is considered bearer paper under UCC 3-109(a)(3) because it is payable to a person identified as “cash,” which is treated as a bearer instrument. Therefore, possession of the instrument is sufficient to entitle the possessor to enforce it against the obligor, assuming no other defenses exist. The fact that the note is not explicitly made payable to “order” or “bearer” does not negate its bearer status when it is made payable to “cash.” The question tests the understanding of how instruments payable to “cash” are classified under UCC Article 3, particularly regarding negotiability and enforceability. The correct answer hinges on the specific definition of bearer paper as outlined in the UCC, which includes instruments payable to “cash.” The explanation does not involve any calculations.

The question concerns the liability of an accommodation party under UCC Article 3, as adopted in Utah. An accommodation party is one who signs an instrument for the purpose of lending their credit to another party to the instrument. Under UCC § 3-605(d), an accommodation party is liable in the capacity in which they sign. This means if they sign as a maker, they are primarily liable; if they sign as an endorser, they are secondarily liable. The key principle is that the accommodation party is not entitled to discharge of their liability on the instrument even though the accommodated party is discharged, unless the accommodation party has a defense against the holder. The question presents a scenario where an accommodation endorser’s liability is being considered. The accommodation endorser, Ms. Albright, signed the back of a promissory note to help Mr. Baxter obtain a loan. The note is a negotiable instrument. The bank, as the holder, accepted the note with Ms. Albright’s endorsement. Later, Mr. Baxter, the accommodated party, pays the note in full. Upon payment by the accommodated party, the instrument is discharged, and the accommodated party is generally entitled to enforce the instrument against the accommodation party, or to recover from the accommodation party the amount the accommodation party paid. However, the question asks about the accommodation endorser’s liability to the bank, the holder, *after* the accommodated party has paid the note. When the accommodated party pays the note, the note is discharged, and the bank no longer has a claim against any party on the instrument. The accommodation party’s recourse is then against the accommodated party, not against the holder of the discharged instrument. Therefore, the bank’s claim against Ms. Albright is extinguished upon Mr. Baxter’s payment of the note in full. The liability of an accommodation party is to the holder of the instrument. Once the instrument is paid by the primary obligor, the instrument is discharged, and the holder has no further claim against any party. The accommodation party, having paid, would then have a right of recourse against the accommodated party.

In Utah, under UCC Article 3, the concept of a holder in due course (HIC) is crucial for determining the rights of a party who takes an instrument. A holder in due course takes an instrument free from most defenses and claims that a prior party could assert against the original payee. To qualify as a holder in due course, a person must take the instrument (1) for value, (2) in good faith, and (3) without notice that the instrument is overdue or has been dishonored or that there is any defense or claim to it on the part of any person. The scenario involves a promissory note originally made by Mr. Abernathy to Ms. Barnaby. Ms. Barnaby then negotiates this note to Mr. Chen. For Mr. Chen to be a holder in due course, he must meet the statutory requirements. The question states that Mr. Chen purchased the note for $5,000, which constitutes value. The scenario also indicates that Mr. Chen had no knowledge of any issues with the note or Mr. Abernathy’s defenses. Specifically, the prompt states Mr. Chen was unaware of any potential fraud or illegality in the original transaction between Abernathy and Barnaby. This lack of knowledge fulfills the good faith and no-notice requirements. Therefore, Mr. Chen qualifies as a holder in due course. As a holder in due course, Mr. Chen takes the note free from Mr. Abernathy’s personal defenses, such as fraud in the inducement, which would have been available against Ms. Barnaby. Mr. Abernathy’s obligation to pay the note to Mr. Chen remains enforceable.

The core issue revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder under UCC Article 3, as adopted in Utah. A negotiable instrument is taken by a holder in due course if it is taken (1) for value, (2) in good faith, and (3) without notice that it is overdue or dishonored or that there is a defense or claim against it. In this scenario, the promissory note was originally issued by Ms. Albright to “Sunbeam Solar,” a fictitious entity. The note was then endorsed in blank by an individual purporting to be the sole proprietor of Sunbeam Solar to Mr. Finch. Mr. Finch, in turn, negotiated the note to Ms. Gable for value, and she took it without notice of any defects. The critical defense raised by Ms. Albright is that the note was issued for a fraudulent purpose, specifically that Sunbeam Solar never intended to provide the solar panels. Fraud in the inducement, where a party is tricked into signing a negotiable instrument by misrepresentation of an underlying fact, is a real defense that can be asserted against even a holder in due course. However, the UCC distinguishes between fraud in the factum (real fraud, where the signer does not know they are signing a negotiable instrument or is tricked about its nature) and fraud in the inducement. Fraud in the inducement is a personal defense, which is cut off by a holder in due course. Since Ms. Gable acquired the note for value, in good faith, and without notice of any claims or defenses (she had no knowledge of the fraudulent nature of the underlying transaction), she qualifies as a holder in due course. Therefore, the defense of fraud in the inducement, which is a personal defense, cannot be asserted against Ms. Gable. The Uniform Commercial Code, specifically Utah Code Annotated § 70A-3-305, outlines the defenses available against a holder in due course. While real defenses like forgery or material alteration are effective, personal defenses such as fraud in the inducement, lack of consideration, or breach of contract are generally not. Ms. Albright’s situation involves fraud in the inducement, making her defense ineffective against Ms. Gable.

The question revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder. Under UCC Article 3, specifically Utah’s adoption of it, an HDC takes an instrument free from most defenses, except for certain real defenses. Real defenses, also known as universal defenses, can be asserted against anyone, including an HDC. These defenses are typically those that affect the fundamental validity of the obligation or the instrument itself. Examples include infancy, duress that nullifies assent, fraud that nullifies assent (as opposed to fraud in the inducement), discharge in insolvency proceedings, and material alteration. Personal defenses, on the other hand, such as breach of contract, lack of consideration, or fraud in the inducement, are generally cut off by a holder in due course. In this scenario, the forged signature of the accommodation party, Ms. Albright, renders the instrument void as to her from its inception. A forged signature is a real defense under UCC § 3-305(a)(1)(A), meaning it can be asserted against any holder, including an HDC. Therefore, Mr. Henderson, as an HDC, cannot enforce the note against Ms. Albright because her signature was forged. The amount of the note is irrelevant to the availability of this real defense.

The scenario involves a promissory note that is transferred to a holder in due course (HDC). Under Utah law, specifically Utah Code Ann. § 70A-3-305, an HDC takes an instrument free from all defenses of any party to the instrument with whom the holder has not dealt, except for certain real defenses. These real defenses include infancy, duress that nullifies assent, fraud that nullifies assent, discharge in insolvency proceedings, and discharge by any other means provided by law. Personal defenses, such as breach of contract, failure of consideration, or payment, are cut off by an HDC. In this case, the maker’s defense is that the payee failed to deliver the promised goods, which constitutes a failure of consideration. This is a personal defense. Therefore, the HDC, assuming all other requirements for HDC status are met (taking for value, in good faith, and without notice of any claim or defense), can enforce the note against the maker despite this personal defense. The amount of the note is irrelevant to the enforceability against an HDC with respect to personal defenses. The key is the nature of the defense and the status of the holder.

The core issue revolves around the negotiability of an instrument containing a promise to do an act other than pay money. Under UCC Article 3, specifically Utah Code Ann. § 70A-3-104(1)(b), a negotiable instrument must contain an unconditional promise or order to pay a fixed amount of money, and nothing else. The instrument in question states, “I promise to pay to the order of Anya Sharma the sum of Five Thousand Dollars ($5,000.00) on demand, or, at my option, to deliver to her one ounce of pure gold of equal value.” The inclusion of the option to deliver gold, which is a commodity and not money, renders the promise conditional and uncertain in its ultimate form of payment. This deviates from the requirement for a fixed amount of money. Therefore, the instrument is not a negotiable instrument under UCC Article 3. The presence of an alternative performance, which is not payment of money, violates the principle that a negotiable instrument must be payable in money only. While the instrument specifies a monetary amount, the alternative of delivering gold means the holder cannot be certain they will receive money, or the exact monetary equivalent at the time of payment, as the value of gold fluctuates. This uncertainty about the nature of the payment makes it non-negotiable.

The core issue revolves around the negotiability of a promissory note that contains a clause permitting acceleration of the payment due date. Under UCC Article 3, as adopted in Utah, a promise to pay a fixed amount of money is a prerequisite for negotiability. However, the presence of an acceleration clause does not, in itself, render the instrument non-negotiable. Utah Code Section 70A-3-104(1)(c) defines a negotiable instrument as one that promises to pay a fixed amount of money, with or without other promises, conditions, obligations, or powers. The Official Comment to UCC 3-104 clarifies that clauses permitting acceleration do not affect the negotiability of the instrument because the amount ultimately payable is still fixed at the time of payment, even if that time can be advanced. The key is that the acceleration is triggered by a specific event or default, and the ultimate amount due remains determinable. Therefore, a note with such a clause, provided it meets other requirements like being payable on demand or at a definite time and being payable to order or bearer, remains negotiable. The scenario presents a promissory note that otherwise appears to conform to the requirements of negotiability, with the only potential impediment being the acceleration clause. Since this clause is permissible under UCC Article 3, the note is negotiable.

The core issue here is determining whether the instrument qualifies as a negotiable instrument under Utah’s UCC Article 3. A key requirement for negotiability is that the instrument must be payable to order or to bearer. The instrument in question states it is payable “to the order of the account of Willow Creek Ranch.” Utah Code Section 70A-3-109(b) states that an instrument is payable to order if it is payable to the order of an identified person or to a person or its order. However, it also specifies that an instrument payable to “the order of an account” or to “the order of [a] specified account” is payable to the identified person if the account is identified. In this scenario, “Willow Creek Ranch” is the identified person associated with the account. Therefore, the phrase “to the order of the account of Willow Creek Ranch” is treated as being payable to the order of Willow Creek Ranch. This satisfies the “to order” requirement. Furthermore, the instrument is a draft, as it is an order to pay a sum certain in money, signed by the drawer, and payable on demand. The absence of a specific payee name after “order of” but the clear identification of the entity whose account is to be paid allows for the instrument to be treated as payable to the order of that entity. This aligns with the intent of Article 3 to promote the free flow of commerce through negotiable instruments. The instrument is not payable to a specific named individual, but to the “account of” a named entity, which under Utah law, is construed as payable to the order of that entity.

The question revolves around the concept of a holder in due course (HDC) and the defenses that can be asserted against them under Utah’s Uniform Commercial Code (UCC) Article 3. Specifically, it tests the understanding of real defenses versus personal defenses. A real defense is a defense that can be asserted against any holder, including an HDC, while a personal defense is generally not effective against an HDC. In this scenario, the promissory note was initially signed by Mr. Abernathy under duress, which constitutes a real defense under UCC § 3-305(a)(1)(A). Duress, if it is of such a nature as to vitiate assent, makes the instrument voidable or void, and in the case of voidness, it is a real defense. If the duress makes the instrument void, it is a real defense that can be raised against any holder, including an HDC. If the duress merely makes the instrument voidable, it is a personal defense, and thus not effective against an HDC. However, the UCC, in its commentary and common law interpretation, generally treats duress that fundamentally impacts assent as a real defense. Mr. Abernathy’s signature was obtained through a threat of physical harm to his family, which is a severe form of duress that would likely render the instrument void. Therefore, this real defense can be asserted against any holder, including Ms. Bell, even if she qualifies as an HDC. The fact that Ms. Bell paid value and took the instrument in good faith does not negate the presence of a real defense. The UCC distinguishes between defenses that go to the fundamental validity of the obligation (real defenses) and those that relate to the transaction between the original parties (personal defenses). Duress, as described, falls into the former category.

The scenario involves a promissory note that was originally payable to “bearer.” Under Utah UCC § 3-201, negotiation of an instrument payable to bearer occurs by delivery. Transfer of possession is sufficient for negotiation. Since the note was payable to bearer, any subsequent holder in due course (HDC) or even a mere holder could acquire rights to it through simple delivery, assuming other requirements for holder status are met. The fact that the note was later endorsed in blank does not change the method of negotiation for a bearer instrument; it remains negotiable by delivery. Therefore, when Ms. Anya Sharma received the note from Mr. Ben Carter through delivery, she became a holder. The question asks about the effect of this transfer on her status as a holder. Because the instrument was payable to bearer, delivery alone is sufficient to effectuate a negotiation and make her a holder. The explanation of why the other options are incorrect involves understanding the requirements for negotiation of different types of instruments. For an instrument payable to a specific person (order paper), negotiation requires endorsement and delivery. Since this was bearer paper, endorsement is not required for negotiation by delivery. The concept of “due course” relates to acquiring HDC status, which requires more than just taking by delivery; it involves taking for value, in good faith, and without notice of any defense or claim. However, the question focuses solely on becoming a “holder,” which is a broader category than HDC and is achieved by possession of an instrument drawn, issued, or endorsed to that person or to bearer.

The scenario involves a promissory note that is payable to order and is transferred by endorsement and delivery. The Uniform Commercial Code (UCC) Article 3, as adopted in Utah, governs negotiable instruments. For a transferee to become a holder in due course (HDC), certain requirements must be met. These include taking the instrument for value, in good faith, and without notice of any claim to the instrument or defense against it. In this case, Ms. Anya Sharma received the note as a gift. A gift does not constitute “value” as defined by UCC § 3-303, which requires a bargained-for exchange, such as performing or promising to perform services, or incurring or discharging an antecedent debt. Since Ms. Sharma did not give value for the note, she cannot qualify as a holder in due course, regardless of her good faith or lack of notice. Therefore, she takes the note subject to any defenses available to the maker, such as the lack of consideration for the original promise. The original maker, Mr. Elias Vance, can assert this defense against Ms. Sharma because she is not an HDC.