In Oregon, as under the Uniform Commercial Code (UCC) Article 3, a holder in due course (HOC) 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 it is overdue or dishonored or that it has any defense or claim to it on the part of any person. Value is given if the holder takes the instrument as payment of, or as security for, an antecedent debt. Good faith, under UCC § 1-201(20), means honesty in fact and the observance of reasonable commercial standards of fair dealing. Notice is generally actual knowledge or reason to know. If a person takes an instrument with notice of a defense or claim, they cannot be a holder in due course. The question involves a promissory note that was originally made by Mr. Abernathy to Ms. Bell. Ms. Bell negotiated the note to Mr. Croft. Mr. Croft, in turn, endorsed the note to Ms. Davies. The critical element is whether Ms. Davies had notice of any defense or claim when she acquired the note. The scenario states that Ms. Davies purchased the note from Mr. Croft on the day it was due. UCC § 3-304(a)(2) states that a note is overdue if it is taken after the date on which it is due. Therefore, Ms. Davies took the note after its due date. Taking an instrument after its due date constitutes notice that it is overdue, which disqualifies the holder from being a holder in due course. Consequently, Ms. Davies is subject to any defenses Mr. Abernathy might have against Ms. Bell. The question asks about the status of the note in Ms. Davies’ possession, specifically concerning Mr. Abernathy’s potential defenses. Since Ms. Davies is not a holder in due course, Mr. Abernathy can assert his defenses against her.

The core issue here is whether the instrument presented to the bank for payment constitutes a negotiable instrument under Oregon’s UCC Article 3, specifically regarding its unconditional promise to pay. ORS 730104 defines a negotiable instrument as an unconditional promise or order to pay a fixed amount of money, payable on demand or at a definite time, payable to bearer or to order, and if it is a draft, it must be payable to order. ORS 730105 addresses the requirement for an unconditional promise or order. A promise or order is unconditional unless it states an express condition to payment, is subject to or governed by another writing, or incorporates by reference terms of another writing. However, certain statements do not make a promise or order conditional, such as stating the consideration for the instrument, referencing another writing for rights regarding collateral, prepayment, or acceleration, or stating that it is drawn under a letter of credit. In this scenario, the reference to the “terms of the accompanying security agreement” directly subjects the promise to pay to the conditions and stipulations contained within that separate agreement. This incorporation by reference, not falling under any of the permitted exceptions in ORS 730105, renders the promise conditional and thus destroys the negotiability of the instrument. Therefore, the bank cannot be a holder in due course because the instrument is not negotiable.

The scenario involves a negotiable instrument that was originally payable to “cash.” Under Oregon’s UCC Article 3, specifically ORS 7301090(3), an instrument payable to “cash” is payable to bearer. A bearer instrument is negotiated by mere possession and delivery. When the holder of a bearer instrument, Mr. Abernathy, transfers it to Ms. Bell without endorsement, the transfer is effective. Ms. Bell, as the holder of a bearer instrument transferred to her, becomes a holder. The question asks about the status of the instrument in Ms. Bell’s possession and her ability to enforce it. Since the instrument was payable to bearer, and it was delivered to Ms. Bell, she is a holder. As a holder, she has the right to enforce the instrument. The fact that it was not endorsed does not prevent her from being a holder or enforcing it, as endorsement is not required for bearer paper. The core concept being tested is the negotiation of bearer instruments and the rights of a holder thereof.

The core issue here is determining whether the instrument is a negotiable instrument under UCC Article 3, as adopted in Oregon. For an instrument to be negotiable, it must meet several requirements, including being payable to order or bearer, being for a fixed amount of money, and not containing any other undertaking or instruction by the maker or drawer not authorized by the UCC. In this scenario, the phrase “subject to the terms and conditions of the agreement dated January 15, 2023, between the maker and the payee” introduces a condition that renders the promise to pay conditional. UCC § 3-104(a)(1) requires that a negotiable instrument must contain an unconditional promise or order to pay. A promise or order is conditional if it states that payment is subject to, or governed by, another writing. The inclusion of such a reference, unless it merely specifies the source of funds or collateral, makes the instrument non-negotiable. The agreement mentioned here is not merely a source of funds or collateral; it is a governing agreement that potentially dictates terms of payment beyond the basic promise. Therefore, the instrument fails the negotiability test due to the conditional promise.

The core issue revolves around the negotiability of a draft and the effect of a restrictive indorsement. For a draft to be negotiable under UCC Article 3, it must contain an unconditional promise or order to pay a fixed amount of money, payable on demand or at a definite time, payable to order or to bearer, and payable to the issuer or account. In this scenario, the draft is a draft on a bank, which is a type of negotiable instrument. The phrase “For deposit only to the account of Elara Vance” is a restrictive indorsement. Under UCC § 3-206, a restrictive indorsement does not affect the right of the indorsee to demand payment from the party sought to be charged, nor does it affect the right of any subsequent holder to enforce the instrument. However, it does impose a duty on the depositary bank or any other bank that takes the instrument for collection to pay the instrument only in accordance with the indorsement. If a bank pays an instrument over a restrictive indorsement to someone other than the named account holder, it may be liable for conversion or breach of contract. In this case, the bank accepted the deposit into Anya Sharma’s account, which is not Elara Vance’s account. Therefore, the bank violated the terms of the restrictive indorsement. The question asks about the bank’s liability. The bank is liable because it failed to honor the restrictive indorsement by depositing the funds into the wrong account. The UCC’s provisions on restrictive indorsements (§ 3-206) are designed to protect the indorser’s intent. The bank’s action of depositing the funds into Anya Sharma’s account, rather than Elara Vance’s, constitutes a failure to comply with the indorsement’s condition. This failure makes the bank liable for the amount of the instrument.

The scenario involves a negotiable instrument that is payable to order. For an instrument to be properly negotiated by delivery, it must be in the possession of a holder. If the instrument is payable to order, negotiation requires endorsement by the person to whom it is payable. In this case, the promissory note is payable to the order of “Ms. Anya Sharma.” When Ms. Sharma delivers the note to Mr. Ben Carter without endorsing it, the transfer is not a negotiation that vests holder status in Mr. Carter. Instead, it constitutes a mere assignment of the right to receive payment. Under Oregon law, specifically ORS 730205, an instrument payable to order is negotiated by delivery with any necessary indorsement. Since the necessary indorsement by Ms. Sharma is absent, Mr. Carter does not become a holder in due course or even a regular holder. Therefore, Mr. Carter’s claim against the maker of the note is subject to all defenses that the maker could assert against Ms. Sharma, including the defense of lack of consideration. The question asks about Mr. Carter’s ability to enforce the note against the maker. Because the note was not properly negotiated, Mr. Carter is merely an assignee and his rights are subject to the maker’s defenses. The defense of lack of consideration is a real defense that can be asserted against any holder, including an assignee. Thus, the maker can successfully raise the defense of lack of consideration.

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 Oregon. A negotiable instrument is transferred by endorsement and delivery. The Uniform Commercial Code, specifically ORS 730301, defines a holder in due course. To qualify as an HDC, a holder must take the instrument (1) for value, (2) in good faith, and (3) without notice of any claim to the instrument or defense against it. In this scenario, Ms. Anya Sharma receives the promissory note from Mr. Ben Carter. Mr. Carter is the original payee and endorses the note in blank, making it bearer paper. Ms. Sharma takes the note for value because she is giving up her claim against Mr. Carter for the $10,000 loan. She also appears to be acting in good faith. The critical element is notice. If Ms. Sharma had notice of the defect in the title of Mr. Carter (i.e., that he obtained the note from Ms. Elara Vance through fraud in the inducement), she would not be an HDC. Fraud in the inducement is a personal defense. Personal defenses are generally cut off by a holder in due course. However, if Ms. Sharma had notice of this defense, she takes the instrument subject to it. The question implies that Ms. Sharma was aware of the circumstances under which Mr. Carter obtained the note from Ms. Vance, specifically the fraudulent misrepresentation made by Mr. Carter to Ms. Vance regarding the investment’s guaranteed returns. This knowledge constitutes notice of a claim or defense. Therefore, Ms. Sharma does not qualify as a holder in due course. As she is not an HDC, she takes the instrument subject to all defenses available to Ms. Vance against Mr. Carter, including fraud in the inducement. Consequently, Ms. Vance can assert this defense against Ms. Sharma. The UCC, in ORS 730305, details that a holder who is not an HDC is subject to the defenses and claims in recoupment of the issuer of the instrument and of any prior party. Fraud in the inducement is a classic personal defense. Since Ms. Sharma had notice of the fraud, she is not an HDC and cannot enforce the note against Ms. Vance, as the note is still subject to Ms. Vance’s defenses.

The scenario involves a negotiable instrument that has been altered. Under Oregon’s UCC Article 3, specifically ORS 730070, a holder in due course (HDC) is generally not subject to defenses arising from a material alteration of the instrument. A material alteration is defined as one that changes the contract of any party. In this case, the amount payable has been increased from $5,000 to $15,000, which is undeniably a material alteration. The critical question is whether Ms. Albright qualifies as a holder in due course. To be an HDC, a person must take an instrument that is (1) taken for value, (2) taken in good faith, and (3) taken without notice of any claim to the instrument or defense against it. Assuming Ms. Albright took the note for value (e.g., she paid for it), acted in good faith, and had no knowledge of the alteration or any defenses the maker might have at the time she acquired it, she would be an HDC. ORS 730070(a) states that an HDC has the right to enforce the instrument according to its original tenor. The original tenor was $5,000. Therefore, Ms. Albright, as an HDC, can enforce the note for the original amount of $5,000, despite the material alteration. The fact that the instrument was payable “to the order of” and was properly indorsed by the payee is a prerequisite for negotiability but does not directly determine the outcome of the alteration defense for an HDC. The primary legal principle is the protection afforded to HDCs against certain defenses, including material alteration, but only to the extent of the original terms of the instrument.

This question delves into the concept of a holder in due course (HDC) and the defenses available against such a holder under Oregon’s UCC Article 3. A negotiable instrument is transferred to a holder in due course if it is taken for value, in good faith, and without notice of any claim or defense. When a holder meets these criteria, they are generally subject only to real defenses, which are defenses that can be asserted against any holder, including an HDC. Personal defenses, on the other hand, are typically not effective against an HDC. In the scenario presented, the promissory note was originally issued by Alistair to Beatrice. Beatrice then negotiated the note to Clara. Clara’s status as a holder in due course would be challenged by Alistair if he could assert a real defense. Real defenses include infancy, duress, illegality of the transaction, fraud in the execution (real fraud), and discharge in insolvency proceedings. Personal defenses include ordinary fraud (fraud in the inducement), breach of contract, lack of consideration, and unauthorized completion of an instrument. Alistair’s claim that Beatrice fraudulently induced him to sign the note by misrepresenting the quality of the antique furniture he was purchasing constitutes fraud in the inducement, which is a personal defense. Therefore, if Clara took the note for value, in good faith, and without notice of this defense, she would be a holder in due course and Alistair could not assert this personal defense against her. However, if Alistair can prove that he was prevented from reading the note due to Beatrice’s deception, and he did not know it was a negotiable instrument or its essential terms, this would constitute fraud in the execution (real fraud), which is a real defense and would be effective even against an HDC. Without specific evidence of Alistair being prevented from reading the instrument itself, the defense of fraud in the inducement remains a personal defense. The question asks which defense would NOT be available against Clara if she is a holder in due course. Since fraud in the inducement is a personal defense, it is not available against an HDC. The other options represent real defenses that would be available against an HDC.

The scenario describes a situation where a promissory note, governed by Oregon’s UCC Article 3, contains a clause that makes the payment contingent upon the maker’s personal satisfaction with the quality of artisanal cheese delivered. Under UCC § 3-109(b), an instrument is payable on demand if it states that it is payable “on demand” or “at sight,” or otherwise indicates that it is payable at the will of the holder, or in an event that is not ascertainable except on demand. However, if an instrument is payable upon an event, that event must be one that will occur or is certain to occur. A promise to pay that is subject to the maker’s subjective satisfaction, such as satisfaction with the quality of goods, generally renders the instrument non-negotiable because the time of payment is not ascertainable with certainty. The UCC prioritizes certainty in payment terms for negotiability. While some conditions might be permissible if they are objective or tied to specific, verifiable events, a condition based purely on subjective personal satisfaction of the maker, without any objective standard or timeframe, prevents the instrument from meeting the requirements of being “payable on demand or at a definite time.” Therefore, the note in this case is not a negotiable instrument under Oregon law because the payment is conditioned on an event (satisfaction with cheese quality) that is not ascertainable except at the will of the maker and lacks the required certainty for negotiability.

The scenario involves a negotiable instrument that was originally payable to “bearer.” Under UCC Article 3, as adopted in Oregon, an instrument payable to bearer is negotiated by delivery alone. This means that the physical transfer of the instrument from one person to another is sufficient to effectuate negotiation, without the need for endorsement. Therefore, when Elias delivers the instrument to Fiona, who then delivers it to Gavin, the negotiation is complete with each transfer. Gavin, as the holder in due course of an instrument negotiated by delivery, is entitled to enforce it. The question asks about the validity of the negotiation to Gavin. Since bearer paper is negotiated by delivery, and the instrument was indeed delivered to Gavin, the negotiation is valid. The fact that the instrument was originally payable to bearer is the crucial element. Any subsequent endorsements or lack thereof are irrelevant for the negotiation of bearer paper by delivery.

The scenario involves a negotiable instrument that was originally payable to “cash” or bearer. Under Oregon UCC § 3-109(a)(1), an instrument is payable to bearer if it states that it is payable to bearer or to the order of bearer, or to a fictitious payee, or otherwise indicates that the possessor of the instrument is entitled to payment. An instrument payable to “cash” is generally considered payable to bearer. When an instrument is payable to bearer, it can be negotiated by mere delivery. The question asks about the effect of a special endorsement. A special endorsement specifies a person to whom or to bearer the instrument is to be payable. In this case, the endorsement by Anya to “bearer” converts the instrument from being specially endorsed to being payable to bearer again. The subsequent negotiation by a possessor requires only delivery. Therefore, the instrument is negotiated by delivery. The key principle here is that a bearer instrument, once specially endorsed to bearer, remains a bearer instrument and can be negotiated by delivery. This is distinct from an instrument specially endorsed to a named individual, which would then require endorsement by that individual.

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 Oregon. A negotiable instrument must meet specific requirements to be considered such, including being payable to order or to bearer, a fixed amount of money, and payable on demand or at a definite time. The instrument in question, a promissory note, is payable to “the order of Avery,” which satisfies the “order” requirement. It specifies a fixed amount and a definite time of payment. However, the critical factor is the knowledge of the alleged defect at the time of negotiation. For a party to qualify as a holder in due course, they must take the instrument for value, in good faith, and without notice of any claim to the instrument or defense against it. In this scenario, the note was negotiated to Briar. Briar paid value for the note by discharging a pre-existing debt owed by Avery. This satisfies the “for value” requirement. Briar’s actions in accepting the note without further inquiry, especially given Avery’s distressed financial state and the unusual nature of the transaction (Avery seemingly trying to offload the note quickly), could be interpreted as lacking good faith or, more critically, having notice of a defense. The defense Avery has against the original payee, Clara, is fraud in the inducement. Clara misrepresented the value of the goods for which the note was given. Fraud in the inducement is a real defense that can be asserted against a holder not in due course, but it is a personal defense that is generally cut off by a holder in due course. The question hinges on whether Briar had notice of this defense. Notice can be actual or constructive. Constructive notice arises when a party has reason to know of a fact. Briar’s knowledge that Avery was desperate to sell the note at a discount, coupled with the absence of any inquiry into the underlying transaction, strongly suggests that Briar had reason to know that something was amiss. While Briar did not have actual knowledge of the fraud, the circumstances were such that a reasonable person in Briar’s position would have inquired further. Oregon’s UCC, like the general UCC, emphasizes that taking an instrument under circumstances that should alert a reasonable person to a defect can prevent HDC status. Therefore, Briar likely had notice of Avery’s defense, preventing HDC status. Consequently, Briar takes the note subject to the defense of fraud in the inducement that Avery could assert against Clara.

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder. Under Oregon UCC § 3-305, a holder in due course takes an instrument free from most defenses, but not from certain real defenses. A real defense is one that can be asserted against any person, including an HDC. Forgery is a real defense under UCC § 3-305(a)(1)(A) because it renders the instrument void. If an instrument is void ab initio, it cannot be enforced by anyone, including an HDC. In this scenario, Elara’s signature was forged by Finn. Therefore, the note is void as to Elara. Since the note is void, Finn had no right to transfer it, and any subsequent holder, even an HDC, cannot enforce it against Elara. The fact that Cascade Bank took the instrument for value, in good faith, and without notice of any claim or defense (making it an HDC) is irrelevant when the underlying instrument is void due to forgery. The UCC prioritizes protecting individuals from forged signatures, recognizing this as a fundamental defense that cuts off even HDC rights.

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder under Oregon’s version of UCC Article 3. A negotiable instrument is taken by a holder in due course if it is taken for value, in good faith, and without notice of any claim to the instrument or defense against it. In this scenario, the instrument is a negotiable instrument. The initial transaction between Alana and Ben involved a fraudulent inducement, which constitutes a real defense under UCC § 3-305(a)(1)(A) and ORS 73.3050(1)(A). Real defenses are generally effective against all holders, including HDCs. Personal defenses, such as breach of contract or misrepresentation in the inducement, are generally not effective against an HDC. Fraud in the execution, where a party is deceived about the nature of the instrument itself, is a real defense. Fraud in the inducement, where a party is deceived about the underlying transaction but knows they are signing a negotiable instrument, is typically a personal defense. However, the question states Alana was induced to sign by Ben’s fraudulent misrepresentation that the instrument was merely a receipt for a deposit, not a promissory note. This misrepresentation goes to the fundamental nature of the instrument Alana believed she was signing. This is classified as fraud in the execution, a real defense. Even if Clara qualifies as a holder in due course because she took the note for value, in good faith, and without notice of the fraud, she is still subject to real defenses. Therefore, Alana can assert the defense of fraud in the execution against Clara.

No calculation is needed for this question as it tests understanding of the legal concept of holder in due course status under Oregon’s adoption of UCC Article 3. A holder in due course (HDC) takes an instrument free of most defenses and claims of prior parties. To achieve HDC status, a holder must take the instrument for value, in good faith, and without notice that it is overdue or dishonored or that there is any defense or claim to it. In Oregon, as in most states adopting the UCC, taking an instrument as payment for a pre-existing debt can constitute taking for value, provided certain conditions are met. However, if the holder had notice of a defense or claim, they cannot be an HDC. The scenario describes a situation where the holder received the note as collateral for a pre-existing debt. While taking collateral for a pre-existing debt can be for value, the crucial element here is the notice of the stop payment order. A stop payment order is a clear indication of a dispute or defense concerning the instrument. Therefore, receiving the instrument with knowledge of the stop payment order prevents the holder from meeting the “without notice” requirement for HDC status. The Uniform Commercial Code, as adopted in Oregon, specifically addresses what constitutes notice. A person has notice of a fact if they have actual knowledge of it, received other notice of it, or from all the facts and circumstances known to them at the time, they have reason to know it exists. A stop payment order, communicated to the holder, directly provides such notice. Consequently, the holder in this case cannot be a holder in due course.

The scenario involves a promissory note that was transferred by endorsement and delivery. The question asks about the liability of the endorser, Silas Croft, to the holder, Penelope Ainsworth, under Oregon’s version of UCC Article 3. When a person endorses a negotiable instrument, they generally undertake a conditional liability. This liability arises if the instrument is dishonored by the maker or drawee, and the holder presents the instrument for payment or acceptance and gives notice of dishonor to the endorser, as required by UCC § 3-415(a). In this case, the note was transferred by endorsement. If the maker, Bartholomew Finch, defaults on payment, and Penelope Ainsworth properly presents the note for payment and gives notice of dishonor to Silas Croft, then Silas Croft becomes secondarily liable for the amount of the note. This secondary liability is a fundamental aspect of endorsement in negotiable instruments law, ensuring a chain of accountability. Without proper presentment and notice of dishonor, the endorser’s liability is discharged under UCC § 3-505. Therefore, Silas Croft’s liability is contingent on these presentment and notice requirements being met.

In Oregon, under UCC Article 3, the concept of discharge of a party from liability on an instrument is governed by specific provisions. When a holder unjustifiably impairs the value of collateral, this can lead to the discharge of parties secondarily liable, such as endorsers, to the extent of the impairment. This principle is rooted in the idea that secondary obligors should not be held liable for the full amount if the primary obligor’s ability to repay, secured by collateral, is diminished by the holder’s actions. Specifically, ORS 73.0609(2) addresses this. If a holder, without the consent of the secondary obligor, unjustifiably impairs the value of collateral for a party who is primarily liable, then any secondary obligor whose obligation is affected by the impairment is discharged to the extent of the impairment. The question focuses on the scenario where the holder fails to take reasonable steps to preserve the value of collateral, which constitutes an unjustifiable impairment. For instance, if a promissory note is secured by a vehicle and the holder allows the vehicle to deteriorate significantly without maintenance, thereby reducing its market value, this impairment can discharge parties secondarily liable. The extent of discharge is typically measured by the amount by which the collateral’s value was diminished. In this scenario, the impairment is the full value of the collateral, which is $5,000. Therefore, the secondary obligor, Silas, would be discharged from liability to the extent of this $5,000 impairment. The question is designed to test the understanding of this specific discharge provision and its application in a factual context, distinguishing it from other discharge methods like payment or cancellation. The core concept is that the holder’s inaction prejudiced the secondary obligor’s recourse against the collateral.

The core issue here is whether a holder in due course (HDC) can enforce an instrument that contains a material alteration. Under UCC § 3-307, a holder in due course takes an instrument free of defenses and claims except for certain real defenses. A material alteration is generally a real defense. However, UCC § 3-407(c) provides an exception for a holder in due course that takes the instrument after it has been completed without authority. In such a case, the HDC may enforce the instrument as completed. The scenario describes a promissory note that was originally for \$500 but was altered to \$5,000. The payee, Silas, altered the note after its issuance but before it was negotiated. The subsequent holder, Beatrice, acquired the note for value, in good faith, and without notice of any claim or defense, thus qualifying as a holder in due course. Because Beatrice took the instrument after the unauthorized completion (the alteration), she can enforce it as completed, meaning for the amount of \$5,000. The explanation does not involve a calculation but rather the application of UCC § 3-407(c).

The core issue revolves around the negotiability of an instrument that contains a promise to pay a sum certain in money, subject to a condition precedent. Under UCC Article 3, as adopted in Oregon, a negotiable instrument must contain an unconditional promise or order to pay a sum certain in money. ORS 73.0104(1)(b) specifies that a promise or order is conditional if it states an obligation to do any act in addition to the payment of money. Furthermore, ORS 73.0104(1)(c) clarifies that a promise or order is not conditional if it is subject to a promise or order to pay money or grant a right to payment of money, or if it states that it is secured by collateral. However, a statement that the instrument is subject to promises or assurances made in connection with the transaction giving rise to the instrument does not render the promise or order conditional if the buyer has the right to enforce those promises or assurances or the buyer has the right to obtain performance of any promise or assurance. In this scenario, the payment of the note is explicitly contingent upon the successful completion of the construction project by a specified date. This contingency makes the promise to pay conditional, as the obligation to pay is not absolute but depends on an external event occurring. Therefore, the instrument fails to meet the unconditional promise requirement for negotiability under Oregon law. The mention of collateral does not cure the conditional nature of the promise to pay; it merely secures an otherwise negotiable instrument.

The core issue revolves around whether a purported negotiable instrument, a promissory note in this case, qualifies as such under Oregon’s adoption of UCC Article 3. For an instrument to be negotiable, it must meet several criteria outlined in ORS 73.0104. These include being an unconditional promise to pay a fixed amount of money, payable on demand or at a definite time, and payable to order or to bearer. The note states it is payable “upon the satisfactory completion of the construction project at 123 Main Street, Portland, Oregon.” This phrase introduces a condition precedent to payment, meaning payment is contingent upon an event (satisfactory completion) rather than being solely dependent on the passage of time or a demand. ORS 73.0106(a) states that an instrument is not payable to order or to bearer if it states “that it is subject to … another transaction or event to be performed before or as part of the payment.” The phrase “satisfactory completion of the construction project” clearly links payment to an external event that is not merely a reference to another source of rights or obligations. Therefore, the note fails the “unconditional promise” requirement for negotiability. Consequently, it cannot be treated as a negotiable instrument under Article 3, and defenses available against a holder in due course would not be precluded. The correct answer is that the instrument is not negotiable because payment is conditioned on an event.

The core concept here is the holder in due course (HDC) status and its protection against certain defenses. Under Oregon law, which largely follows 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 a limited set of real defenses. Among the defenses listed, “any other law” generally refers to consumer protection statutes or other specific legal prohibitions that might render an instrument void or unenforceable. A general claim of breach of contract or failure of consideration, while valid defenses between the original parties, are typically cut off if the holder qualifies as an HDC. Similarly, a claim of fraud in the inducement, where a party is persuaded to sign an instrument by misrepresentation about the underlying transaction, is usually a personal defense that an HDC can overcome. However, fraud in the execution, where a party is deceived about the nature of the instrument itself and does not understand that they are signing a negotiable instrument, is a real defense. The phrase “any other law” is broad enough to encompass situations where a statute might render an instrument void from its inception, such as usury laws that make a loan agreement illegal, or specific consumer credit regulations that invalidate certain terms or instruments. Therefore, a defense arising from a statute that declares an instrument void or unenforceable would prevail even against an HDC.

The core issue here is whether the purported promissory note qualifies as a negotiable instrument under Oregon’s Uniform Commercial Code (UCC) Article 3, specifically concerning the “unconditional promise” requirement. A promise is conditional if it is subject to any condition other than the unconditional promise or order to pay. In this scenario, the note states, “Payable only out of the funds of the ‘Evergreen Project’ and not otherwise.” This language explicitly limits payment to a specific source of funds, thereby making the promise conditional. According to ORS 73.1040(1), a negotiable instrument must contain an unconditional promise or order to pay a fixed amount of money. ORS 73.1040(2) further clarifies that a promise or order is conditional if it states an obligation to do any act in addition to the payment of money, or if it states that the promise or order is subject to any other undertaking or contingency. By tying payment exclusively to the success or availability of funds from the “Evergreen Project,” the note creates a contingency that renders the promise conditional. Consequently, it fails to meet the criteria for negotiability under UCC Article 3 as adopted in Oregon. This means it cannot be transferred by endorsement and delivery in a manner that would cut off defenses available to the maker against the original payee, nor can it be treated as a draft or certificate of deposit for purposes of Article 3. It would likely be treated as a simple contract for payment, subject to all defenses available to the maker.

The scenario involves a negotiable instrument, specifically a promissory note, that is payable “on demand” or “at a definite time.” The core issue is whether a subsequent endorsement that attempts to modify the payment terms renders the instrument non-negotiable. Under UCC Article 3, as adopted in Oregon, a promise to pay must be for a fixed amount of money and payable on demand or at a definite time. A further undertaking or instruction that is not related to the payment of money generally will render the instrument non-negotiable. In this case, the endorsement by Ms. Anya Sharma attempts to add a condition that the payment is contingent upon the successful completion of the Cascade Mountain Trail project. This conditionality directly impacts the certainty of payment, transforming a previously unconditional promise into a conditional one. Such a condition, not directly tied to the amount of money or the time of payment in a manner permitted by UCC 3-104, means the instrument no longer meets the requirements for negotiability. Therefore, the note, after Sharma’s endorsement, is no longer a negotiable instrument.

The core issue here is whether the instrument qualifies as a negotiable instrument under UCC Article 3, as adopted in Oregon. For an instrument to be negotiable, it must meet several criteria, including being a signed writing, containing 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. In this scenario, the instrument is a signed writing promising to pay a fixed sum of money. However, the condition that payment is contingent upon the successful completion of a specific construction project in Portland, Oregon, renders the promise conditional. UCC § 3-104(a)(1) explicitly states that a promise or order is conditional if it states an obligation to do any act in addition to the payment of money. Therefore, the instrument is not negotiable. A holder in due course (HDC) can only take a negotiable instrument free from certain defenses. Since this instrument is not negotiable, it cannot be taken by an HDC. Consequently, any transferee, including Ms. Chen, takes the instrument subject to all defenses that would be available in a simple contract action, including the defense of failure of consideration or the condition precedent not being met. The fact that the construction project was not completed means the condition for payment has not occurred. Therefore, the maker of the instrument is not obligated to pay.

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 Oregon. For a party to qualify as an HDC, they must take the instrument for value, in good faith, and without notice of any defense or claim. If an instrument is acquired by an HDC, it is generally subject only to real defenses, not personal defenses. In this scenario, the promissory note was originally issued by Ms. Albright to “Melody Makers Inc.” for the purchase of sound equipment. Melody Makers Inc. then negotiated the note to “Harmony Finance Corp.” before maturity. The critical point is whether Harmony Finance Corp. had notice of any defenses when it acquired the note. The UCC defines notice broadly. Actual knowledge or receiving notification is one form of notice. However, notice also includes “reason to know” of facts that would constitute a defense or claim. Ms. Albright’s defense is that the sound equipment was fundamentally defective and failed to perform as represented, constituting a breach of warranty or failure of consideration. This is generally considered a personal defense. If Harmony Finance Corp. acquired the note with knowledge of this defect, or with knowledge of facts that would lead a reasonable person to inquire further and discover the defect, it would not be a holder in due course. The fact that Harmony Finance Corp. is a financial institution that regularly purchases notes from Melody Makers Inc. and is aware of the typical quality of Melody Makers Inc.’s equipment, and that the equipment was described as “state-of-the-art” which could imply a certain standard of performance, could impute knowledge or at least a reason to know of potential issues if the equipment was, in fact, defective. Without explicit evidence that Harmony Finance Corp. had actual knowledge of the defect or was willfully blind to it, we must consider what constitutes “notice.” If Harmony Finance Corp. had reason to know of the defect due to its regular dealings and the nature of the representation of the goods, it might not be an HDC. However, a mere possibility or a suspicion is not enough to negate HDC status. The question asks what defense Ms. Albright can assert. If Harmony Finance Corp. is indeed an HDC, it takes the note free from personal defenses like breach of warranty or failure of consideration. It would only be subject to real defenses, such as forgery, fraud in the factum (making the instrument itself appear to be something it is not), material alteration, or discharge in insolvency proceedings. Since the defect in the equipment is a personal defense, Ms. Albright cannot assert it against an HDC. The question is designed to test the understanding of what constitutes notice sufficient to prevent HDC status and the distinction between real and personal defenses. If Harmony Finance Corp. had no notice of the defect, it is an HDC and Ms. Albright’s defense is cut off. The question implies that Harmony Finance Corp. acquired the note in good faith and for value before maturity. The crucial element is notice. If Harmony Finance Corp. was aware of the defect or had reason to know of it, then it is not an HDC, and Ms. Albright can raise her defense. The prompt does not provide information suggesting Harmony Finance Corp. had such notice. Therefore, assuming Harmony Finance Corp. meets the requirements of value, good faith, and lack of notice, it is an HDC. Under Oregon law, an HDC takes the instrument free of all defenses except those specifically enumerated as real defenses. The defense of breach of warranty or failure of consideration is a personal defense, not a real defense. Thus, if Harmony Finance Corp. is an HDC, Ms. Albright cannot assert this defense. The scenario does not present any facts that would constitute a real defense. Therefore, the defense Ms. Albright wishes to assert is not available against a holder in due course.

The core issue here revolves around the concept of “presentment” and the consequences of a bank’s failure to honor a properly presented draft, specifically a check. Under Oregon’s UCC Article 3, a bank is generally obligated to pay a properly presented draft drawn on it. A draft is properly presented when it is presented to the bank for payment by the holder or an agent. In this scenario, the check from Willow Creek Enterprises was presented to First National Bank of Oregon on Tuesday, July 16th. The bank’s refusal to pay on Wednesday, July 17th, without a valid excuse (such as insufficient funds or a stop payment order, neither of which are indicated), constitutes a wrongful dishonor. Wrongful dishonor by a payor bank creates a cause of action for the drawer of the check. The drawer, in this case, is Willow Creek Enterprises. The measure of damages for wrongful dishonor is typically the amount of the item plus expenses and loss of interest. However, if the dishonor occurs to a person or business that is a merchant, as Willow Creek Enterprises likely is given its name and the context of commercial transactions, there is a presumption of consequential damages, which can include damage to reputation or credit standing. ORS 73.0502(1) and ORS 73.0502(2) are relevant here. ORS 73.0502(1) states that if an instrument is presented for payment, the payor bank must pay or return the item or send a notice of dishonor. ORS 73.0502(2) further clarifies that if the payor bank fails to exercise ordinary care in returning the item or sending notice of dishonor, it is liable to the drawer for damages caused by the failure. The damages are the amount of the item plus expenses and loss of interest. In the case of a dishonor of an item that causes a loss of money, the damages are the actual damages sustained. For a merchant, the damages are presumed to be at least the amount of the item plus consequential damages. Therefore, Willow Creek Enterprises can recover the face amount of the check, plus any incidental expenses incurred, and potentially consequential damages due to the bank’s failure to honor the instrument. The bank’s internal processing delay does not excuse its obligation to pay or return the item within the statutory timeframes.

The core issue here revolves around the concept of discharge of a party from liability on a negotiable instrument under UCC Article 3, specifically focusing on alteration and the rights of a holder in due course. In Oregon, as in other states adopting UCC Article 3, a material alteration of an instrument that is fraudulent and made by a holder discharges any party whose obligation is affected by the alteration, unless that party assents to the alteration. However, a holder in due course (HDC) can enforce the instrument according to its original tenor if the alteration is not fraudulent. Consider a scenario where a check is originally made payable to “Cash” for $500. It is then altered to be payable to “Alex” for $5,000. The original maker, Ms. Gable, is the obligor. If the holder who received the altered check is an HDC, they can enforce the instrument against Ms. Gable only for the original amount of $500, provided the alteration was not fraudulent. If the alteration was fraudulent, then any party whose obligation is affected by the alteration is discharged. However, the question implies the alteration is not necessarily fraudulent by the holder, but rather a change made after issuance. The UCC’s stance is that an HDC can recover on the original tenor of the instrument even if it has been materially altered, unless the alteration was fraudulent. Since the question does not specify that the alteration was fraudulent on the part of the holder seeking to enforce it, the HDC can enforce it for the original amount. The UCC § 3-407(b) states that if a holder in due course takes an instrument that is altered, the holder may enforce the instrument according to its original tenor. Therefore, the HDC can enforce the instrument against Ms. Gable for the original $500. The key is that the HDC’s rights are preserved up to the original tenor, assuming the alteration wasn’t a fraud perpetrated by the HDC themselves.

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 Oregon. A negotiable instrument is taken by a holder in due course if it is taken for value, in good faith, and without notice of any claim or defense against it. In this scenario, the promissory note is for $10,000, and it is payable to “bearer.” The note was originally issued by Silas Croft to Meadowlark Bank. Silas later transferred it to Juniper Investments, who then endorsed it in blank and sold it to Anya. Anya, who paid $9,500 for the note, is the holder. The question is whether Anya is a holder in due course and what defenses can be asserted against her. First, we must determine if Anya qualifies as a holder in due course. She took the note for value ($9,500, which is less than the face amount but still constitutes value). She received the note by negotiation, as it was endorsed in blank and she is in possession of it. Assuming she took it in good faith and without notice of any claims or defenses, she would be a holder in due course. Now, let’s consider the defenses Silas can raise. UCC § 3-305(a) outlines the claims in recoupment and defenses that can be asserted against a holder in due course. These include defenses that can be asserted against a simple contract, such as lack of consideration, fraud in the inducement, and duress. However, certain defenses, known as real defenses, can be asserted against any holder, including an HDC. These typically involve issues that go to the very existence of the instrument or the obligor’s capacity, such as forgery, fraud in the execution, material alteration, infancy, and illegality of a type that renders the obligation void. In this case, Silas’s claim that Meadowlark Bank failed to deliver the agreed-upon consulting services constitutes a breach of contract, which is a defense that can be asserted against a holder who is not an HDC. However, it is generally considered a personal defense, not a real defense. UCC § 3-305(a)(2) states that an HDC takes the instrument free of claims in recoupment and defenses of the obligor stated in § 3-305(a)(2) which are available in a simple contract. Silas’s defense of failure of consideration is a defense available in a simple contract. Therefore, if Anya is a holder in due course, she would take the note free of this defense. The amount Silas paid ($500) is relevant to the concept of “value” for HDC status, but it does not change the nature of the defense. Anya paid $9,500 for a $10,000 note. The fact that she paid less than face value does not automatically prevent her from being an HDC, as long as she paid something of value and acted in good faith without notice. The UCC does not require payment of the full face amount for HDC status. Therefore, the failure of Meadowlark Bank to provide consulting services is a personal defense that Silas Croft cannot assert against Anya if she is a holder in due course. The question asks what Silas can assert against Anya. Since Anya paid value, took possession of the bearer instrument, and is presumed to have acted in good faith and without notice, she is likely a holder in due course. Consequently, Silas cannot assert the personal defense of failure of consideration against her. The correct answer is that Silas cannot assert the defense of failure of consideration against Anya.

The core issue revolves around the negotiability of a draft and the application of UCC Article 3, specifically regarding the effect of a stated purpose or condition on the promise to pay. Under Oregon law, as codified in UCC Article 3, a negotiable instrument must contain an unconditional promise or order to pay a fixed amount of money, payable on demand or at a definite time. The presence of language that makes the payment contingent upon an event or ties it to a specific source of funds can render the instrument non-negotiable. In this scenario, the draft states it is “payable only out of the proceeds of the sale of the vintage Corvettes located at the Portland International Raceway.” This phrase explicitly links the payment to a specific, contingent event—the successful sale of those particular Corvettes. Such a clause creates a source of payment limitation, making the promise to pay conditional rather than unconditional. UCC § 3-104(a)(1) requires an unconditional promise or order. UCC § 3-105(b) clarifies that a promise or order is not unconditional 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, except as provided in this section. While there are exceptions, such as an order to pay out of the general assets of a partnership or an estate, this draft’s reference to specific, identifiable assets for payment falls outside those exceptions, making it a conditional promise. Consequently, the draft does not meet the requirements for negotiability under Oregon’s UCC Article 3, and therefore, it cannot be a negotiable instrument.