South Carolina law, as codified in the Uniform Commercial Code (UCC) Article 3, governs negotiable instruments. A key concept is the holder in due course (HIDC). To achieve HIDC status, a holder must take an instrument that is (1) negotiable, (2) signed by the maker or drawer, (3) a draft or note, (4) payable on demand or at a definite time, (5) payable to order or bearer, (6) without notice that it is overdue or has been dishonored or that any person has a defense or claim against it, and (7) acquired in good faith and for value. In this scenario, Amelia receives the note from Barnaby. She paid value for it by canceling Barnaby’s antecedent debt, which constitutes value under UCC § 3-303. She took the note without notice of any defenses or claims, as she was unaware of the original agreement’s issues. The note itself is payable to order (“Pay to the order of Barnaby Davis”) and appears to be regular on its face. Therefore, Amelia satisfies the requirements to be a holder in due course. As an HIDC, Amelia takes the instrument free from most defenses, including the defense of failure of consideration, which is a personal defense available to the original parties. Thus, Amelia can enforce the note against Clara despite Clara’s defense.

The scenario presented involves a promissory note that is payable on demand. Under South Carolina’s adoption of UCC Article 3, specifically Section 3-108, a note payable on demand is considered due and payable immediately upon its creation. This means that the statute of limitations for bringing an action on the note begins to run from the date of issuance, not from any subsequent event like a demand being made. The UCC distinguishes between instruments payable on demand and those with a fixed maturity date or payable at a definite time. For instruments payable on demand, the UCC does not require a formal demand to trigger the statute of limitations. Therefore, when Beatrice issued the note to Mr. Abernathy on January 1, 2020, it was immediately actionable. South Carolina law, consistent with UCC Article 3, sets a statute of limitations for actions on negotiable instruments, which is typically six years from the date the cause of action accrues. Since the cause of action accrued on January 1, 2020, the statute of limitations would expire on January 1, 2026. Consequently, Mr. Abernathy’s action filed on February 15, 2026, is time-barred under South Carolina law. The fact that Mr. Abernathy made a demand on January 15, 2026, is irrelevant to the accrual of the cause of action for statute of limitations purposes on a demand instrument.

Under South Carolina law, specifically 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 an instrument that is (1) negotiable, (2) signed by the maker or drawer, (3) a promise or order to pay a fixed amount of money, (4) payable on demand or at a definite time, (5) payable to order or to bearer, and (6) 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. Furthermore, the holder 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. If an instrument is taken with knowledge of a defense or claim, the holder cannot be an HDC. The question presents a scenario where a holder receives a check with a notation that indicates a potential dispute regarding the underlying transaction. This notation, “Payment in full for services rendered,” serves as notice of a claim or defense related to the performance of those services. Therefore, the holder, by taking the instrument with this notation, cannot satisfy the “without notice” requirement for HDC status. This prevents the holder from acquiring the instrument free from all claims to it on the part of a second party and free from all defenses of any party to the instrument with whom the holder has not dealt.

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder under South Carolina’s UCC Article 3. A negotiable instrument is generally subject to the defenses of the obligor against a holder in due course, unless those defenses are “real” defenses. Real defenses are those that can be asserted against anyone, including an HDC, whereas “personal” defenses are generally cut off by an HDC. Among the defenses listed, fraud in the execution (also known as real fraud) is a real defense. This occurs when the obligor is deceived as to the nature of the instrument itself, such as signing a document they believe to be something entirely different. Fraud in the inducement, on the other hand, where the obligor is deceived about the underlying transaction but knows they are signing a negotiable instrument, is a personal defense and is cut off by an HDC. Illegality in the consideration for the instrument, unless it renders the entire transaction void, is typically a personal defense. Payment or discharge of the instrument, if properly made to the proper party before the instrument is negotiated to an HDC, is a defense, but it is not a defense that arises from the instrument’s formation or the obligor’s understanding of its nature. Therefore, fraud in the execution is the defense that would most effectively be asserted against a holder in due course in South Carolina, as it is a real defense that cannot be precluded by the holder’s status.

The scenario involves a promissory note that was originally payable to “bearer.” Under UCC Article 3, as adopted in South Carolina, a negotiable instrument payable to bearer is negotiated by mere delivery. The subsequent endorsement of the note by the original payee, Mr. Alistair Finch, to “Alistair Finch only” transforms the instrument from bearer paper into order paper. For order paper to be negotiated, it requires endorsement by the named payee and delivery. Since the note was delivered to Ms. Clara Bell but not endorsed by Mr. Finch to her, the negotiation is incomplete. Therefore, Ms. Bell does not become a holder in due course, nor does she have the rights of a holder. She possesses the instrument, but the negotiation is not effective to transfer the rights of a holder because the required endorsement is missing. This lack of proper endorsement means the instrument is not fully negotiated to Ms. Bell.

The scenario involves a promissory note endorsed in blank and then specially endorsed. When a negotiable instrument, such as a promissory note governed by UCC Article 3 as adopted in South Carolina, is endorsed in blank, it becomes payable to bearer. Subsequently, a special endorsement converts it back to being payable to a specific person. The initial endorsement by “Eleanor Vance” without specifying a payee makes it payable to bearer. When “Eleanor Vance” then specially endorses it to “Finley Croft,” the note is now payable to Finley Croft. Finley Croft can then negotiate the note by endorsement and delivery. If Finley Croft then endorses it in blank by simply signing their name, it again becomes payable to bearer. However, the question asks who has the right to enforce the note *after* Finley Croft’s blank endorsement. Because Finley Croft endorsed it in blank, it is now bearer paper. Any holder in possession of bearer paper can enforce it. Therefore, “Gideon Bell,” who is in possession of the note after Finley Croft’s blank endorsement, has the right to enforce it. The prior special endorsement to Finley Croft is effectively superseded by Finley Croft’s subsequent blank endorsement, making the instrument payable to bearer. The UCC § 3-205 defines a special endorsement and a blank endorsement. A blank endorsement makes the instrument payable to bearer. A special endorsement makes the instrument payable to any person specified. If an instrument payable to order is endorsed in blank, it becomes payable to bearer. If an instrument payable to bearer is endorsed specially, it becomes payable to a person named. If the person named then endorses it in blank, it reverts to bearer paper.

Under South Carolina law, specifically UCC Article 3, a holder in due course (HDC) takes an instrument free from most defenses and claims that a prior party might have against the instrument. To qualify as an HDC, a holder must take the instrument for value, in good faith, and without notice that the instrument is overdue or dishonored, or that there is a defense or claim against it. In this scenario, the promissory note was initially issued by Mr. Abernathy to Ms. Gable. Ms. Gable then negotiated the note to Mr. Henderson. Mr. Henderson, before the due date, paid $5,000 for a $10,000 note. He also had no knowledge of any defenses Mr. Abernathy might have against Ms. Gable, such as a failure of consideration or fraud in the inducement. Therefore, Mr. Henderson took the instrument for value (as $5,000 is more than a nominal amount and constitutes value for the purpose of acquiring rights in the instrument), in good faith, and without notice. This fulfills the requirements for Mr. Henderson to be a holder in due course. As an HDC, Mr. Henderson is generally entitled to enforce the instrument according to its terms, even if Mr. Abernathy has a defense against Ms. Gable. The defense of illegality of the transaction, if it renders the obligation void, is a real defense that can be asserted against an HDC. However, if the illegality merely makes the transaction voidable, it is a personal defense and cannot be asserted against an HDC. Assuming the illegality in the original transaction between Abernathy and Gable was voidable rather than void, Mr. Henderson, as an HDC, would be able to enforce the note. The question asks about the enforceability against Mr. Abernathy. Since Mr. Henderson is an HDC and the defense of illegality is likely a personal defense (voidable), he can enforce the note.

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder, specifically in the context of a negotiable instrument governed by UCC Article 3, as adopted in South Carolina. For an instrument to be negotiable, it must meet several requirements, including being payable to order or to bearer, for a fixed amount of money, and without other undertakings or instructions by the drawer not constituting payment instructions. In this scenario, the promissory note contains a clause stating it is “subject to the terms and conditions of the Purchase Agreement dated June 1, 2023.” This additional undertaking, which is not merely a payment instruction, renders the instrument non-negotiable. According to UCC § 3-104(a), a negotiable instrument must not contain such extraneous promises or orders. Because the note is non-negotiable, it cannot be transferred by endorsement and delivery to create a holder in due course. Instead, the transferee, even if they paid value and took in good faith, would only acquire the rights of an assignee. As an assignee, they are subject to all defenses and claims that were available to the maker against the original payee. The defense of failure of consideration, where the maker received no value for the note, is a real defense that can be asserted against an assignee. Therefore, the maker of the note can successfully raise the defense of failure of consideration against the bank, even though the bank acted in good faith and paid value for the instrument, because the instrument’s non-negotiable nature prevents the bank from achieving HDC status.

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 South Carolina. A negotiable instrument, such as a promissory note, can be transferred to an HDC, who takes the instrument free from most personal defenses. However, certain real defenses, which go to the validity of the instrument itself or the obligation to pay, can be asserted even against an HDC. These real defenses are enumerated in UCC § 3-305(a)(1). Among these real defenses is infancy, provided that infancy is a defense under the law of South Carolina governing the contract. UCC § 3-305(a)(1)(i) explicitly states that an obligor is not liable on an instrument if the obligor is a minor and infancy is a defense to the obligation under applicable law. South Carolina law, like most jurisdictions, recognizes infancy as a defense to contracts entered into by minors, making such contracts voidable at the minor’s election. Therefore, when a minor issues a promissory note, and that note subsequently comes into the hands of an HDC, the minor can still assert the defense of infancy to avoid payment on the note, as this is a real defense. The fact that the note was transferred for value, in good faith, and without notice of any claim or defense (the requirements for HDC status) does not overcome the real defense of infancy. The other options represent personal defenses, such as breach of contract or failure of consideration, which are generally cut off by negotiation to an HDC. The existence of a forged endorsement would also be a real defense, but the scenario does not suggest a forged endorsement.

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses that can be asserted against such a holder under South Carolina law, specifically UCC Article 3. A person who takes an instrument for value, in good faith, and without notice of any claim or defense against it is a holder in due course. However, certain defenses are “real defenses,” meaning they can be asserted even against an HDC, while others are “personal defenses” and are generally cut off by an HDC. The scenario describes a promissory note where the maker’s signature was procured by fraud in the inducement. Fraud in the inducement occurs when a party is persuaded to sign a negotiable instrument by false representations about the underlying transaction or the nature of the obligation, but the maker knows they are signing a negotiable instrument. This is a personal defense. Real defenses, on the other hand, typically involve issues like forgery, material alteration, or fraud in the factum (or fraud in the execution), where the maker is deceived about the nature of the instrument itself. Since Bartholomew was aware he was signing a promissory note, the fraud was in the inducement, not in the factum. Therefore, this personal defense is cut off by a holder in due course. The question asks about the enforceability of the note against Bartholomew by a holder in due course, given the fraud in the inducement. Because the fraud was in the inducement and not in the factum, it is a personal defense and is ineffective against a holder in due course. Thus, the holder in due course can enforce the note against Bartholomew.

The core issue here revolves around the concept of a holder in due course (HOC) and the defenses available against such a holder. Under South Carolina law, which largely follows UCC Article 3, a holder in due course takes an instrument free from most personal defenses, but not from real defenses. A real defense is one that can be asserted against any holder, including a holder in due course. Forgery is a real defense, meaning it is a defense that can be raised against anyone who tries to enforce the instrument, regardless of whether they are a holder in due course. The UCC explicitly lists forgery of a signature as a real defense in Section 3-305(a)(1)(A) of the Uniform Commercial Code, which is adopted in South Carolina. Therefore, even though Ms. Gable paid value for the note and took it in good faith without notice of any claims or defenses, she cannot enforce the note against Mr. Henderson because his signature was forged. The forgery fundamentally invalidates the instrument as to Mr. Henderson. This principle ensures that individuals are not bound by instruments to which they never genuinely assented. Other defenses, such as breach of contract or failure of consideration, are personal defenses and would generally be cut off by a holder in due course. However, a forged signature is a defect that goes to the very creation of the instrument.

The scenario involves a promissory note that is payable “on demand.” Under South Carolina law, as codified in UCC Article 3, a demand instrument is generally considered to be due immediately upon its creation. This means that the statute of limitations for bringing an action to enforce the instrument begins to run from the date of issue or, in some cases, from the date of a required presentment. For a note payable on demand, the UCC generally treats the date of issue as the starting point for the statute of limitations. South Carolina Code Section 17-2-103(a) specifies a six-year statute of limitations for actions on negotiable instruments. Therefore, an action to enforce a demand note issued on January 15, 2018, would typically be barred if not filed by January 15, 2024. The concept of “due on demand” means that the holder can demand payment at any time, and the issuer is obligated to pay immediately. This immediacy also dictates when the limitations period begins to accrue. While presentment may be required by the terms of the note, the UCC’s treatment of demand instruments for statute of limitations purposes is generally tied to the issue date, absent specific contrary terms that create a different trigger for maturity. The UCC’s approach aims to provide clarity for when an instrument is truly stale and unenforceable.

The scenario involves a promissory note that contains an acceleration clause. An acceleration clause allows the holder of the note to declare the entire unpaid balance due and payable immediately upon the occurrence of a specified event, such as default in payment. In this case, the note is payable “on demand.” A demand instrument, as defined by UCC § 3-108(a) in South Carolina, is payable on presentment. Presentment is a demand for payment made by the holder of an instrument. Therefore, when the payee, Ms. Eleanor Vance, presented the note to Mr. Silas Croft for payment, it was a proper demand for payment. The note’s terms specify it is payable “on demand,” and the acceleration clause is triggered by the failure to pay upon such demand. Since Mr. Croft failed to pay the full amount when it was presented for payment, the acceleration clause becomes operative, making the entire unpaid principal and any accrued interest immediately due and payable. The UCC, specifically Article 3 as adopted in South Carolina, governs negotiable instruments. The concept of “on demand” payment is a key characteristic of demand instruments, and the enforceability of acceleration clauses is also a well-established principle within this framework, provided they meet certain requirements which are met here. The note is a negotiable instrument, and the payee has the right to demand payment according to its terms. The acceleration clause is a valid contractual provision that modifies the payment terms upon a specified event.

The scenario presented involves a promissory note that contains an acceleration clause and a provision for attorney’s fees upon default. Under South Carolina law, specifically UCC § 3-104 and its interpretations, a negotiable instrument must contain an unconditional promise to pay a fixed amount of money. An acceleration clause, which makes the entire amount due upon a specific event (like default), does not destroy negotiability because the amount payable, while subject to acceleration, is still considered a fixed amount at any given time. Similarly, a provision for attorney’s fees upon default, as stipulated in South Carolina Code Ann. § 36-3-104(a)(1), is also permissible. This section permits additional provisions that do not affect the character of the instrument as a promise or order to pay a fixed amount. The inclusion of these clauses does not render the promise conditional in a way that would impair negotiability. Therefore, the note remains a negotiable instrument.

The scenario involves a promissory note that was originally payable to “bearer.” Under South Carolina law, specifically UCC § 3-201, negotiation of an instrument payable to bearer is accomplished by delivery. Endorsement is not required for bearer paper. Therefore, when Mr. Abernathy delivered the note to Ms. Gable, the instrument was effectively negotiated to her. The fact that Ms. Gable did not endorse the note does not affect her status as a holder in due course, provided she otherwise meets the requirements of UCC § 3-302 (taking for value, in good faith, and without notice of any defense or claim). The question asks about the proper method of negotiation for a bearer instrument. Delivery alone is sufficient for negotiation of an instrument payable to bearer.

The scenario involves a promissory note that was negotiated by endorsement and delivery. The core issue is whether the holder, Ms. Gable, can enforce the note against the maker, Mr. Abernathy, despite the alleged fraud in the inducement that occurred between the original parties. Under South Carolina law, specifically UCC § 3-305, a party taking an instrument for value, in good faith, and without notice of any defense or claim (a holder in due course, or HDC) takes the instrument free from all defenses of any party to the instrument with whom the holder has not dealt, except for real defenses. Fraud in the inducement is a personal defense, not a real defense. Therefore, if Ms. Gable qualifies as an HDC, she can enforce the note against Mr. Abernathy, even though Mr. Abernathy has a defense against the original payee, Mr. Blackwood. The question implies Ms. Gable received the note by endorsement and delivery, and the problem does not provide any information suggesting she lacked good faith or had notice of the fraud. Thus, the presumption is that she is an HDC. The UCC § 3-302 definition of HDC requires taking for value, in good faith, and without notice of any claim or defense. Since fraud in the inducement is a personal defense, it is cut off by an HDC. Mr. Abernathy’s defense of fraud in the inducement is therefore ineffective against Ms. Gable if she is an HDC.

The scenario presented involves a promissory note that contains a clause stating, “This note is subject to the satisfactory completion of the construction project at 123 Main Street, Charleston, SC.” This clause makes the promise to pay conditional upon an external event, namely the satisfactory completion of the construction project. Under UCC Article 3, a negotiable instrument must contain an unconditional promise or order to pay a fixed amount of money. The inclusion of such a condition means that the instrument is not a negotiable promissory note. Instead, it is likely a contract for payment, but it lacks the essential element of unconditional promise required for negotiability. Therefore, it cannot be transferred by negotiation so as to give a holder in due course the rights specified in UCC Article 3. The UCC defines a negotiable instrument as one that contains an unconditional promise or order. South Carolina has adopted the Uniform Commercial Code, including Article 3, which governs negotiable instruments. The concept of negotiability is central to the efficient transfer of commercial paper, allowing for the free flow of credit. A promise is considered conditional if it states that it is subject to, or governed by, another writing, or that it is to be paid only out of a particular fund or source, or that it is limited to payment out of the entire assets of a partnership or unincorporated association. The clause in question clearly links the payment obligation to the satisfactory completion of a specific project, thereby rendering the promise conditional.

Under South Carolina law, specifically UCC Article 3, the concept of “presentment” is crucial for the enforcement of negotiable instruments. Presentment is a demand made upon the maker of a note, or drawee of a draft, for payment or acceptance. For a holder to be entitled to payment on a note, presentment is generally not required unless the note explicitly states it. However, for a holder to be entitled to payment on a draft, presentment to the drawee is a prerequisite. The scenario describes a promissory note, not a draft. Therefore, the holder of the promissory note is not required to make a presentment to the maker for the note to be due and payable. The UCC defines a note as a promise to pay. The maker’s obligation to pay arises upon the terms of the note itself, not upon a demand for payment unless the note’s terms stipulate such a requirement. In this case, the note is due on a specific date, and the maker’s failure to pay on that date constitutes a breach, regardless of whether the holder presented the note for payment. The UCC’s emphasis is on the instrument’s terms.

The scenario involves a promissory note that is payable to a specific individual, Eleanor Vance, and contains a clause that states it is “subject to the terms of the collateral agreement dated January 15, 2023.” Under UCC Article 3, as adopted in South Carolina, for an instrument to be negotiable, it must contain an unconditional promise or order to pay a fixed amount of money, payable on demand or at a definite time, and payable to order or to bearer. The inclusion of a clause that makes the promise or order subject to another writing, such as a collateral agreement, generally renders the instrument non-negotiable. This is because such a clause makes the promise conditional, as the terms of the collateral agreement could affect the amount or timing of payment. Therefore, the note, as described, is not a negotiable instrument under South Carolina law because the promise to pay is made conditional by reference to the collateral agreement. This conditionality prevents it from meeting the strict requirements of negotiability under UCC § 3-104.

The scenario involves a promissory note that was originally payable to “Bearer” and was then specially indorsed to “Camilla.” Subsequently, Camilla indorsed the note in blank and delivered it to Darius. The critical aspect here is the effect of the blank indorsement by Camilla on the negotiability and the rights of subsequent holders. Under South Carolina law, specifically UCC Article 3, a note payable to bearer remains payable to bearer even after a special indorsement. When Camilla specially indorsed it to herself (which is not what happened here, but is a common confusion), it would then be payable to her order. However, her subsequent indorsement in blank converts the instrument back into one payable to bearer. A holder in due course of an instrument payable to bearer needs only possession to enforce it. Darius, having possession of the note after Camilla’s blank indorsement, is presumed to be the holder. Since the note was originally payable to bearer, and Camilla’s blank indorsement did not alter this fundamental characteristic, Darius can enforce the note against the maker. The UCC § 3-205 defines a blank indorsement as one made by an authorized person that is not payable to an identified person. A special indorsement identifies the person to whom the instrument is payable. When an instrument payable to bearer is specially indorsed, it becomes payable to the special indorsee. However, if the special indorsee then indorses it in blank, it reverts to being payable to bearer. Darius, as the possessor of a note that is effectively payable to bearer, has the right to enforce it. The UCC § 3-301 states that a person entitled to enforce an instrument is a person in possession of the instrument that is payable to the person or to bearer, or the owner of the right to payment of a money due even if the instrument is lost, stolen, or destroyed. In this case, Darius possesses the instrument, and it is payable to bearer due to Camilla’s blank indorsement.

Under South Carolina law, specifically UCC Article 3, a holder in due course (HDC) takes an instrument free from most defenses and claims that a prior party might have had against the original payee. To qualify as an HDC, a holder must take the instrument for value, in good faith, and without notice of any defense or claim against it. The scenario involves a promissory note originally made by Mr. Abernathy to Ms. Bell. Ms. Bell then negotiates the note to Mr. Carter. Mr. Carter’s status as a holder in due course is determined by his acquisition of the note. He paid $8,000 for a note with a face value of $10,000, which constitutes taking for value. The crucial element for HDC status is good faith and absence of notice. If Mr. Carter had no knowledge of any defenses Mr. Abernathy might have against Ms. Bell (e.g., fraud in the inducement, lack of consideration), and he acquired the note in a transaction that was honest and fair in his own mind, he would be considered to have taken in good faith. The fact that he paid less than face value does not automatically preclude HDC status, as long as the discount is not so extreme as to shock the conscience and indicate bad faith or notice. In this case, paying 80% of the face value is generally considered a reasonable discount, not inherently indicative of bad faith or notice. Therefore, Mr. Carter, having taken for value, in good faith, and without notice of any defenses, would likely be a holder in due course. As an HDC, Mr. Carter would be able to enforce the note against Mr. Abernathy for its full face amount of $10,000, despite any personal defenses Mr. Abernathy might have had against Ms. Bell, such as a claim that Ms. Bell failed to deliver promised goods. This is because the UCC shields HDCs from such personal defenses.

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 South Carolina, an HDC takes an instrument free from most defenses, including those of a personal nature. However, certain real defenses, such as fraud in the execution, forgery, or discharge in insolvency proceedings, can be asserted even against an HDC. In this scenario, the note was originally issued for a valid business purpose, but it was later altered by the payee to increase the principal amount. This alteration constitutes a material alteration. While a holder in due course generally takes an instrument free from defenses, a material alteration is a real defense that can be asserted against any holder, including an HDC. Specifically, South Carolina Code Section 36-3-407(b) states that if an instrument is issued for value and a person with rights on the instrument, including an HDC, has an instrument that has been altered, the instrument may be enforced according to its original tenor. However, if the alteration is fraudulent, the instrument may be avoided entirely, or in some jurisdictions, enforced only according to its original tenor. South Carolina Code Section 36-3-407(a) defines a fraudulent alteration as one made with intent to defraud. Given that the payee intentionally increased the principal amount without consent, this is a fraudulent material alteration. Therefore, the original obligor can assert the defense of fraudulent material alteration against the HDC, limiting recovery to the original principal amount. The calculation involves identifying the original principal and the amount the HDC can enforce. Original Principal = $10,000. Amount after fraudulent alteration = $15,000. The HDC can enforce the instrument according to its original tenor, which is $10,000.

The core issue here is determining whether a document is a negotiable instrument under UCC Article 3, as adopted in South Carolina. For an instrument to be negotiable, it must meet several requirements, including being an unconditional promise or order to pay a fixed amount of money, payable on demand or at a definite time, and payable to order or to bearer. The presence of a clause that makes the promise or order subject to any other undertaking of the promisor or orderer, apart from the delivery of goods or services, generally renders the instrument non-negotiable. In this scenario, the promissory note explicitly states that payment is subject to the satisfactory completion of a specific construction project, which is an undertaking beyond the mere payment of money. This conditionality, tied to the performance of a separate contractual obligation, violates the “unconditional” requirement for negotiability. Therefore, the instrument, despite its form as a promissory note, is not a negotiable instrument under South Carolina’s UCC Article 3. This means it cannot be transferred by endorsement and delivery to give a holder in due course the rights afforded by Article 3, such as taking free of most defenses. The governing principle is found in South Carolina Code Section 36-3-104, which defines negotiable instruments and the conditions that can be included. A promise or order that is subject to “another undertaking” beyond the payment of money, unless that undertaking is for the sole purpose of protecting collateral, will typically destroy negotiability.

The scenario involves a promissory note that is payable to a specific individual, Eleanor Vance, and contains a clause stating it is “subject to the terms of the construction contract between Vance Construction and Charleston Properties dated January 15, 2023.” Under South Carolina law, as codified in UCC Article 3, for an instrument to be negotiable, it must contain an unconditional promise or order to pay a fixed amount of money. The inclusion of a clause that makes the promise to pay “subject to” another agreement, such as a construction contract, generally renders the promise conditional. This conditionality means the instrument fails to meet the requirements of a negotiable instrument under UCC § 3-104. Specifically, UCC § 3-106(b)(i) states that a promise is not unconditional if the instrument states that it is subject to or governed by another writing. Therefore, the note, by referencing and subjecting the payment to the terms of the construction contract, creates a condition precedent to payment that is not solely related to the payment of money. This makes the note non-negotiable. Consequently, it cannot be properly transferred by endorsement and delivery to become a holder in due course, nor can it be enforced by a holder against the maker under the rules applicable to negotiable instruments. The note is essentially a simple contract, and its transferability and enforceability would be governed by general contract law principles, not the specific protections afforded to holders of negotiable instruments under UCC Article 3.

South Carolina law, as codified in UCC Article 3, governs negotiable instruments. A key concept is the holder in due course (HDC). To qualify as an HDC, a holder must take an instrument that is apparently complete and not irregular, for value, in good faith, and without notice of any claim to it or defense against it. Good faith, under UCC § 1-201(20), means honesty in fact and the observance of reasonable commercial standards of fair dealing. Notice, under UCC § 1-201(25), includes actual knowledge, receipt of notice, or reason to know from all the facts and circumstances. If a holder has notice of a defense or claim, they cannot be an HDC and are subject to such defenses. For instance, if a bank receives a check that it knows was issued in exchange for a gambling debt, which is a defense to payment in South Carolina, the bank cannot be an HDC. This is because the bank had notice of a defense. The UCC prioritizes the free flow of commerce, but this is balanced by protecting parties from instruments taken under circumstances that suggest dishonesty or a disregard for the rights of others. The concept of notice is crucial; it is not about whether the holder *should* have known, but whether they *had reason to know* based on the facts available to them at the time of taking the instrument. This objective standard prevents a holder from deliberately ignoring suspicious circumstances to gain HDC status.

Under South Carolina law, as codified in UCC Article 3, a holder in due course (HDC) takes an instrument free from most defenses and claims that a prior party could assert against the original payee. To qualify as an HDC, a person must take the instrument (1) for value, (2) in good faith, and (3) without notice that it is overdue or dishonored or that there is any defense or claim against it. The scenario involves a promissory note. The initial payee, “Coastal Builders,” received the note from “Harborfront Properties.” Harborfront Properties later attempts to assert a defense of fraud in the inducement against “Oceanview Investments,” who purchased the note. For Oceanview Investments to be an HDC, they must meet the three criteria. Assuming Oceanview Investments purchased the note for a stated value, acted in good faith, and had no knowledge of any issues at the time of acquisition, they would be protected from Harborfront Properties’ defense of fraud in the inducement. Fraud in the inducement is a personal defense, which is cut off by an HDC. Real defenses, such as forgery or material alteration, would still be available. Since the question implies Oceanview Investments acquired the note in a manner consistent with HDC status, and fraud in the inducement is a personal defense, Oceanview Investments would take the note free from this defense.

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses that can be asserted against such a holder. Under UCC Article 3, specifically as adopted in South Carolina, an HDC takes an instrument free from most defenses that are available to prior parties against the original payee. However, certain defenses, known as real defenses, can be asserted even against an HDC. These typically include defenses that go to the validity of the instrument itself or the maker’s capacity to contract. Forgery, material alteration, fraud in the factum (fraud that induces the obligor to sign the instrument with neither knowledge nor reasonable opportunity to obtain knowledge of its character or its essential terms), discharge in insolvency proceedings, and defenses related to infancy or incapacity are generally considered real defenses. Personal defenses, on the other hand, such as breach of contract, failure of consideration, or fraud in the inducement, are cut off by an HDC. In this scenario, the note was procured through fraud in the inducement, meaning Mr. Abernathy understood he was signing a promissory note, but was misled about the underlying transaction. This is a personal defense. Since Ms. Chen acquired the note for value, in good faith, and without notice of any claim or defense, she qualifies as a holder in due course. Therefore, she takes the note free from Mr. Abernathy’s personal defense of fraud in the inducement. Mr. Abernathy remains obligated to pay the note to Ms. Chen.

The core issue here is determining whether the endorsement of a promissory note by an individual who is not a party to the note, but rather a witness to the signature of the maker, creates any liability under South Carolina’s version of UCC Article 3. South Carolina Code Section 36-3-419, concerning “Effect of unauthorized signature” and “Signature in anomalous indorsement,” is central. An anomalous indorsement is an indorsement by a person who is not a holder of the instrument. Such an indorsement, unless it clearly indicates that the indorser is attempting to negotiate the instrument, does not create liability on the part of the indorser. In this scenario, Mr. Abernathy’s signature appears below the maker’s signature, and the notation “Witness to Signature” clearly indicates his role as a witness, not as an intended party to the financial transaction or a holder seeking to negotiate the note. Therefore, his signature, placed in this context, does not make him an indorser with liability for payment under UCC Article 3. The purpose of an indorsement is to transfer rights in the instrument or to incur liability for payment. A witness signature, by its very nature and placement, does not fulfill either of these functions. The UCC distinguishes between signatures made in a representative capacity or as a guarantor and those made simply to attest to another’s signature. The phrasing “Witness to Signature” leaves no ambiguity about Abernathy’s intent.

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 South Carolina. 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 of any defense or claim to it on the part of any person. South Carolina law, mirroring the Uniform Commercial Code, distinguishes between “real” defenses (which can be asserted against an HDC) and “personal” defenses (which cannot). Among the real defenses listed in UCC § 3-305(a)(1) are infancy, duress that nullifies consent, fraud that induces the obligor to sign the instrument with neither knowledge nor reasonable opportunity to obtain knowledge of its character or its essential terms, and discharge in insolvency proceedings. South Carolina Code § 36-3-305(a)(1) enumerates these same defenses. The scenario describes a promissory note signed by Ms. Albright under economic duress, specifically, a threat of physical harm to her family if she did not sign. This type of duress, which goes to the very essence of assent and leaves the obligor with no reasonable alternative, constitutes a real defense. Therefore, even if Mr. Sterling were a holder in due course, Ms. Albright could still assert this defense against him. The other options represent personal defenses or situations that do not negate the status of a real defense against an HDC. For instance, a mere breach of contract by the payee is a personal defense, and the fact that the note was transferred for value does not negate a real defense. The absence of notice of the duress by Sterling would be relevant if it were a personal defense, but duress that nullifies assent is a real defense that can be raised regardless of the holder’s notice.

The scenario involves a promissory note that is payable to “bearer.” Under UCC Article 3, as adopted in South Carolina, an instrument payable to bearer is negotiated by mere delivery. The holder of such an instrument is entitled to payment upon its presentment, provided there are no defenses available to the obligor. In this case, Amelia is in possession of the note. The fact that she acquired it through a finder who found it, rather than through a direct transfer from the original payee, does not negate her status as a holder if she took possession. The key is that the note is payable to bearer. Unless the finder was a thief who stole the instrument from the true owner (which is not indicated), or Amelia had knowledge of a defect in the finder’s title or the instrument itself, she can enforce it. The question asks about the *enforceability* of the note by Amelia. Since it is a bearer instrument, possession is sufficient for negotiation. Therefore, Amelia, as the possessor of a bearer instrument, can enforce it against the maker, Mr. Henderson, assuming no other defenses are asserted by Mr. Henderson. The concept of holder in due course is not strictly necessary for enforceability against the maker, although it would protect Amelia against certain defenses. However, for simple enforceability by a holder, possession of a bearer instrument is sufficient.