The scenario describes a promissory note that is payable on demand. Under New York’s Uniform Commercial Code (UCC) Article 3, a demand instrument is generally considered due and payable immediately upon its creation. The UCC specifies that if a note is payable on demand, the statute of limitations for enforcement begins to run at the time of issuance or, if issued for collection, when the instrument is issued. For a note payable on demand, the UCC generally provides a statute of limitations of six years from the date of demand, or if no demand is made, six years from the date the issuer has reason to know that the cause of action has accrued. However, for instruments payable on demand, the UCC specifically states that the statute of limitations runs from the date of issuance or, if the instrument is antedated, from the date of delivery. In the absence of a specified maturity date, the instrument is payable on demand. Therefore, the statute of limitations for a demand note commences upon its issuance.

Under New York’s UCC Article 3, a holder in due course (HDC) takes an instrument free from most defenses and claims of a prior party. To qualify as an HDC, a holder must take the instrument for value, in good faith, and without notice that it is overdue or dishonored or that there is a defense or claim against it. The scenario describes a promissory note that was initially issued for a valid debt. The fact that the note was later altered to increase the principal amount does not inherently negate the original holder’s status as a holder in due course if they took the original, unaltered note for value and in good faith. However, the question hinges on whether the *subsequent* holder can claim HDC status on the *altered* instrument. If the alteration is material and fraudulent, it can discharge the party whose obligation is affected, unless that party assents to the alteration. A holder who takes an instrument with knowledge of a material alteration cannot be a holder in due course. In this case, if the bank accepted the note *after* the material alteration without knowledge of the fraud, it could potentially be an HDC of the *original* tenor of the note, but not the altered tenor. However, the question asks about the bank’s ability to enforce the note as altered. A material alteration, if fraudulent, can discharge the obligor from liability on the altered instrument. While a holder in due course can enforce an instrument even with certain defenses present, they cannot enforce an instrument that has been materially and fraudulently altered if they took it with notice of the alteration. If the bank took the note *without* notice of the alteration and the alteration was indeed material and fraudulent, New York UCC § 3-407(2) states that a holder in due course can enforce the instrument according to its original tenor. The question implies the bank is attempting to enforce the *altered* amount. Since the alteration was material and fraudulent, it discharges the obligor on the altered instrument. A holder in due course can only enforce the original tenor. Therefore, the bank cannot enforce the note for the increased amount. The correct answer is that the bank cannot enforce the note for the increased amount because a holder in due course can only enforce an instrument according to its original tenor when there has been a material and fraudulent alteration.

In New York, under 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 achieve HDC status, a person must take the instrument (1) for value, (2) in good faith, and (3) without notice that it is overdue or has been dishonored or that there is any defense or claim to it. A post-dated check, like the one issued by Ms. Anya Sharma, is generally not considered overdue until the date it is payable. If Mr. Vikram Singh acquires the check on June 10, 2024, which is dated June 15, 2024, he is not taking it after its due date. Furthermore, the fact that Ms. Sharma intended to stop payment due to a dispute with the drawer, Mr. Ravi Kapoor, does not, in itself, constitute notice to Mr. Singh of a defense or claim at the time of acquisition, unless Mr. Singh had actual knowledge of the dispute or circumstances that would make his acquisition of the check in good faith questionable. Since Mr. Singh purchased the check for its face value, and there is no indication he had knowledge of the underlying dispute or that the check was dishonored or overdue at the time of his purchase, he would likely qualify as a holder in due course. Therefore, he would take the check free from Ms. Sharma’s defense of breach of contract or misrepresentation by Mr. Kapoor.

The core issue here is whether the instrument qualifies as a negotiable instrument under UCC Article 3, specifically as adopted by New York. 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. In this scenario, the instrument is a draft, which is an order to pay. The critical phrase is “subject to the approval of the quality control division.” This phrase creates a condition precedent to payment, meaning payment is contingent upon an external event occurring. Under UCC § 3-104(a)(1), an instrument must contain an unconditional promise or order. A promise or order is 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, except as otherwise provided in this section. UCC § 3-106(b)(i) clarifies that a promise or order is not made conditional by reason of the fact that the promise or order is subject to promises or orders concerning the discharge of the drawer or indorser. However, the condition here relates to the performance of the underlying contract (quality control approval), not the discharge of a party. This condition directly impacts the certainty of payment, making the promise conditional. Therefore, the draft is not negotiable. The question asks about the legal status of the instrument as a negotiable instrument. Since it contains a condition that makes the payment contingent on an external event (quality control approval), it fails the unconditional promise requirement of negotiability under New York’s UCC Article 3.

The core issue here is whether a holder in due course (HDC) status can be achieved for an instrument that was originally payable to order but was then altered to be payable to bearer. Under New York’s UCC Article 3, specifically Section 3-204(c), a holder of an instrument that is originally payable to order, but is then completed by filling in the blank in a way that makes it payable to bearer, does not become a holder in due course of the instrument as completed. This is because the completion of the instrument in this manner is considered an unauthorized completion, and an HDC can only take an instrument that is complete when taken, or one that is incomplete but completed in a way that is authorized. When an instrument payable to order is altered to be payable to bearer, it fundamentally changes the nature of the instrument and the parties who can properly negotiate it. The UCC aims to protect parties from unauthorized material alterations. Therefore, even if the holder otherwise meets the requirements for HDC status (taking for value, in good faith, and without notice of any defense or claim), the alteration to bearer status prevents them from being an HDC of the altered instrument. The original obligor can still assert defenses against such a holder. The question tests the understanding of how material alterations, particularly those affecting the payee designation from order to bearer, impact the ability to attain HDC status, even when the instrument is otherwise regular on its face and acquired under seemingly proper circumstances. This principle is crucial for understanding the rights and liabilities associated with negotiable instruments in New York.

The scenario involves a promissory note that was originally payable to “bearer.” Under UCC § 3-201, negotiation of an instrument payable to bearer is by delivery. Since the note was payable to bearer, it could be negotiated by mere delivery to a subsequent holder. The fact that the note was endorsed in blank by the original payee, Amelia Vance, does not change the method of negotiation for a bearer instrument; an endorsement in blank on a bearer instrument converts it into a bearer instrument, which can still be negotiated by delivery alone. Therefore, when Marcus handed the note to his associate, Priya, without any further endorsement from Marcus, the negotiation was valid. Priya, as the holder by delivery of a bearer instrument, is entitled to enforce it. The question of whether Marcus had authority to take possession of the note from Amelia is irrelevant to the validity of the negotiation from Marcus to Priya, as Marcus was in possession of a bearer instrument. The critical point is that possession of a bearer instrument, even if obtained improperly, allows for negotiation by delivery.

The question revolves around the concept of “holder in due course” (HDC) status under UCC Article 3, specifically as adopted in New York. For a party to be a holder in due course, they 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 bearer or to order, 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. Crucially, the holder must take the instrument (7) for value, (8) in good faith, and (9) without notice that it is overdue or has been dishonored or that there is a defense against or claim to it on the part of any person. In the scenario presented, the promissory note is payable to “order” and specifies a fixed amount of money, making it negotiable. The note is transferred by indorsement. The critical factor for HDC status is the absence of notice of any defense or claim. If an indorsee receives notice of a defense or claim *before* they have completed their part of the transaction, they cannot be a holder in due course. The fact that the note was transferred for value and in good faith is necessary but not sufficient. The knowledge of the ongoing litigation concerning the validity of the original transaction, which constitutes a defense to payment, prevents the indorsee from meeting the “without notice” requirement. Therefore, the indorsee takes the note subject to the maker’s defenses, such as the defense of fraud in the inducement or failure of consideration that might arise from the underlying transaction. New York law, consistent with the UCC, upholds these principles. The indorsee’s knowledge of the lawsuit means they had notice of a defense to the instrument, disqualifying them from HDC status.

The core issue here revolves around the concept of “presentment” and the discharge of liability for parties secondarily liable on a negotiable instrument under UCC Article 3, as adopted in New York. Specifically, New York UCC § 3-605 addresses the discharge of a party by a holder’s failure to discharge in a timely manner. For a drawer or indorser to be discharged due to a holder’s delay in presentment or notice of dishonor, two conditions must generally be met: (1) the instrument must be a draft (like a check), and (2) the drawer or indorser must not have received notice of dishonor, and the drawer must have had the right to demand payment from the drawee. In this scenario, the instrument is a promissory note, not a draft. UCC § 3-506, as interpreted by New York law, pertains to the time allowed for acceptance or payment. UCC § 3-605(a)(1) states that a holder discharges any party to the instrument by an intentional voluntary act, such as surrender of the instrument to the party, cancellation, or intentional destruction. UCC § 3-605(b) addresses discharge by cancellation or destruction. UCC § 3-605(c) deals with discharge by alteration. UCC § 3-605(d) covers discharge by renunciation. UCC § 3-605(e) addresses discharge of a party by reacquisition. UCC § 3-605(f) deals with discharge of accommodation parties. UCC § 3-605(g) pertains to discharge by fraudulent and material alteration. The crucial point is that a holder’s mere delay in presenting a promissory note for payment, without more, does not discharge a party secondarily liable on the note, as there is no secondary liability in the same way as for a draft’s drawer or indorser, and the conditions for discharge under § 3-605 are not met by simple delay in presentment. The obligation of the maker of a note is primary. The question hinges on whether the holder’s inaction constitutes a discharge. Under New York law, UCC § 3-605(a)(1) outlines ways a holder can discharge a party, but delay in presentment of a note is not among them unless it leads to a specific form of impairment of recourse or collateral, which is not indicated here. Therefore, the delay in presenting the promissory note for payment does not discharge the maker’s obligation.

The scenario involves a promissory note payable to “bearer.” Under UCC Article 3, as adopted in New York, a bearer instrument is payable to anyone who possesses it. Negotiation of a bearer instrument occurs by mere delivery. Therefore, when Elara delivered the note to Finn without endorsement, she effectively negotiated it to him. Finn, as a holder, can enforce the instrument. The key concept here is the negotiation of bearer paper. UCC § 3-201(b) states that negotiation of an instrument payable to bearer requires only delivery. New York’s adoption of the UCC follows this principle. Elara’s intention to transfer possession but not ownership is irrelevant to the legal effect of delivery of a bearer instrument. The UCC prioritizes the objective transfer of possession for bearer paper. Thus, Finn is a holder in due course if he meets the other requirements (good faith, without notice of any claim or defense, and for value), but even if not, he is a holder by virtue of the negotiation through delivery. The absence of endorsement does not prevent negotiation of bearer paper.

The scenario involves a promissory note that is payable to a specific individual, making it order paper. The initial holder, Ms. Anya Sharma, endorses it in blank by simply signing her name on the back. According to UCC § 3-205, an endorsement in blank converts order paper into bearer paper. Bearer paper is then payable to whoever is in possession of it, regardless of whether they are named or identified. The subsequent endorsement by Mr. Ben Carter, which is a special endorsement, does not reconvert the instrument back to order paper. UCC § 3-205(b) clarifies that a special endorsement does not change the character of the instrument from bearer paper to order paper. Therefore, when Mr. Carter leaves the note on a public bench, anyone who finds it and takes possession of it in good faith can enforce it. The fact that the note is dated in New York and the transactions occur within New York are relevant for jurisdiction but do not alter the fundamental rules of negotiability and endorsement under the UCC, which is adopted in New York. The UCC prioritizes the clear and efficient transfer of negotiable instruments. The UCC’s framework for negotiation and transfer, particularly concerning endorsements in blank, is designed to facilitate commerce by making such instruments easily transferable. The initial blank endorsement effectively makes the instrument payable to the possessor, and subsequent special endorsements do not revert this status.

This question tests the understanding of the concept of “holder in due course” (HDC) and the defenses available against an HDC under New York’s Uniform Commercial Code (UCC) Article 3. Specifically, it focuses on the distinction between real defenses (which are effective against an HDC) and personal defenses (which are generally not effective against an HDC). The scenario involves a promissory note that was originally for a legitimate business purpose but was subsequently altered to increase the principal amount. The alteration of a negotiable instrument is a real defense under UCC § 3-305(a)(2), as it constitutes a material alteration. A holder in due course takes the instrument free from all defenses except those specifically enumerated as real defenses. Since the note was materially altered without the assent of the party who originally signed it, the defense of alteration is available against any holder, including an HDC. Therefore, the HDC can only enforce the instrument according to its original tenor, meaning the original principal amount before the alteration. The calculation is straightforward: the original principal amount is \( \$10,000 \). The alteration increased this to \( \$15,000 \). An HDC can only recover the original amount.

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder. Under New York’s UCC Article 3, specifically section 3-305, an HDC takes an instrument free from all defenses of any party to the instrument with whom the holder has not dealt, except for certain “real” defenses. Fraud in the execution, also known as real fraud or 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, is a real defense that can be asserted even against an HDC. In this scenario, the fact that Mr. Abernathy was tricked into signing a document he believed was a loan application, without understanding it was a promissory note, constitutes fraud in the execution. This defense is not cut off by negotiation to an HDC. Therefore, Mr. Abernathy can raise this defense against Ms. Chen, even though she is an HDC. Other defenses, such as fraud in the inducement (misrepresentation about the underlying transaction) or breach of contract, are generally personal defenses and would not be available against an HDC. The question specifically states Mr. Abernathy was unaware of the instrument’s character, pointing to fraud in the execution.

The core issue here is determining whether a purported negotiable instrument can be enforced by a holder in due course (HDC) despite a defense available to the maker. Under New York’s UCC Article 3, specifically regarding the rights of a holder in due course (NY UCC § 3-305), an HDC takes an instrument free from all defenses of any party to the instrument with whom the holder has not dealt, except for certain real defenses. Among the real defenses, which can be asserted even against an HDC, is fraud in the factum. Fraud in the factum occurs when a party is induced to sign an instrument with neither knowledge nor reasonable opportunity to learn of its character or essential terms. This is distinct from fraud in the inducement, where the party knows they are signing a contract but is misled about the underlying reasons or benefits. In the scenario presented, Ms. Albright was aware she was signing a document that purported to be a loan agreement, and she understood its essential terms. She was not deceived about the nature of the instrument itself. Her belief that the loan was unsecured, based on Mr. Sterling’s misrepresentation, constitutes fraud in the inducement, not fraud in the factum. Therefore, this defense is generally cut off against a holder in due course. Since Ms. Albright’s defense is fraud in the inducement, and Mr. Sterling’s subsequent negotiation to an HDC is presumed (as there’s no indication otherwise), the HDC can enforce the instrument against Ms. Albright.

The scenario involves a promissory note that is payable to order but lacks a specific payee. Under New York’s Uniform Commercial Code (UCC) Article 3, specifically Section 3-115, an instrument that is otherwise complete but is payable to the order of a nonexistent or incorrectly named person or entity is generally considered incomplete and not properly payable until it is completed by delivery. However, if the instrument is delivered with the intent that it be payable to the person who possesses it, it can be treated as properly payable to that possessor. In this case, the note is payable “to the order of ___________,” leaving the payee blank. This creates an issue of incomplete delivery and missing essential terms for negotiability. According to UCC 3-115, if an instrument contains blanks, the person in possession of it has the power to complete it by filling in the blanks. The UCC presumes that the completion is authorized. However, the key is that the note must have been delivered to someone for it to be considered “issued.” If the note was simply created and left unsigned or undelivered, it would not be an instrument. Assuming the note was signed and delivered to Ms. Anya Sharma, she has the authority to fill in the blank. Once she fills in her name as the payee, the instrument becomes payable to her order, satisfying the requirements of UCC 3-109 for a payable-on-demand instrument. Therefore, Ms. Sharma can properly complete the note by inserting her name as the payee, making it a negotiable instrument payable to her order. The fact that the note is payable on demand is also a key factor, as it is an acceptable form of payment term under UCC 3-108. The question tests the understanding of how blanks affect negotiability and the concept of authorized completion under UCC 3-115, especially in the context of an instrument payable on demand.

The core issue here revolves around the concept of holder in due course (HDC) status and the defenses available against such a holder under New York’s UCC Article 3. A person who takes an instrument for value, in good faith, and without notice of any defense or claim to the instrument is a holder in due course. However, even an HDC takes subject to certain real defenses, which are defenses that go to the validity of the instrument itself, rather than just a contractual obligation. Among the real defenses listed in UCC § 3-305(a)(2) are defenses such as infancy, duress, illegality of the transaction, or fraud in the factum. Fraud in the factum occurs when a party is induced to sign an instrument with neither knowledge nor a reasonable opportunity to learn its character or essential terms. This is contrasted with fraud in the inducement, where a party knows they are signing a negotiable instrument but is deceived about the underlying transaction. Fraud in the inducement is a personal defense and is not available against an HDC. In this scenario, Elara was induced to sign the promissory note by Mateo’s misrepresentation about the investment’s profitability. She understood she was signing a promissory note, but was misled about the investment’s nature and prospects. This constitutes fraud in the inducement. Therefore, since Mateo is not an HDC (as he participated in the fraudulent inducement), and even if he were, Elara’s defense of fraud in the inducement would not be available against a true HDC. However, the question asks about Mateo’s ability to enforce the note against Elara. Mateo, as the immediate party to the fraud in the inducement, cannot enforce the note against Elara. If Mateo had negotiated the note to a true HDC, that HDC would likely be able to enforce it against Elara, subject to any real defenses. Since Mateo is the one seeking enforcement and he was aware of the fraud in the inducement, Elara can raise this defense. The question tests the distinction between real and personal defenses and the conditions under which an instrument is enforceable by a party who is not an HDC.

Under New York’s 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 a holder who is not an HDC. To qualify as an HDC, 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 against it. The concept of “value” for an HDC is broader than just payment. It includes the performance of the promise for which the instrument was issued or transferred, or the acquisition of a security interest in or a lien on the instrument. If a person acquires an instrument as a gift or by inheritance, they are generally not considered to have taken it for value and thus cannot be an HDC. Similarly, if the instrument is taken with knowledge of a defense, such as a breach of warranty by the seller of the instrument, that knowledge prevents the holder from taking in good faith and without notice. Therefore, a holder who receives an instrument as a gratuitous transfer or who has actual knowledge of a defect in title or a defense against payment cannot attain HDC status, regardless of whether the instrument was properly negotiated. The principle is that the HDC status is a privilege earned by providing value and acting in good faith, not an automatic right.

The core issue here revolves around the negotiability of an instrument that contains a promise to pay a sum certain in money, but also includes an obligation to perform an act other than the payment of money. Under New York’s UCC Article 3, specifically § 3-104, an instrument is a negotiable instrument if it is a writing that contains an unconditional promise or order to pay a sum certain in money and is payable on demand or at a definite time, and payable to order or to bearer. Crucially, § 3-104(a)(1) explicitly states that a negotiable instrument must not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money. The instrument in question requires the maker to deliver a specific quantity of gold bullion in addition to the stated monetary sum. This additional obligation to deliver a commodity, gold bullion, is an “undertaking or instruction…to do any act in addition to the payment of money.” Such a clause destroys the negotiability of the instrument because it introduces an element of uncertainty regarding the exact value and nature of the payment, making it impossible to determine a “sum certain” in money as required by the statute, and also violates the prohibition against additional undertakings. The UCC’s purpose is to facilitate commerce through the free circulation of instruments whose payment terms are clear and readily ascertainable. The inclusion of a commodity delivery obligation fundamentally undermines this purpose by introducing variables beyond a simple monetary payment. Therefore, the instrument is not a negotiable instrument under UCC Article 3.

The core issue revolves around whether a post-dated check can be considered a negotiable instrument under UCC Article 3, as adopted in New York. New York UCC § 3-104(1)(c) requires an instrument to be payable on demand or at a definite time. A check, by definition, is a draft drawn on a bank and payable on demand (UCC § 3-104(2)(b)). However, the post-dating of a check, while potentially affecting its immediate negotiability for certain purposes like presentment for payment before the date, does not inherently alter its fundamental character as a draft payable on demand once the date arrives. The UCC generally permits post-dated checks and treats them as payable on the date indicated. The crucial element for negotiability is the certainty of the payment time. A check post-dated to a specific future date is payable at that definite time. Therefore, a properly post-dated check, meeting all other requirements of negotiability, remains a negotiable instrument. The inquiry is about its status *as* a negotiable instrument, not about when it can be legally cashed or presented. The ability to transfer it by endorsement and delivery, or to sue on it, is contingent on its status as a negotiable instrument. The UCC does not void negotiability due to post-dating; rather, it clarifies when presentment is proper. The legal effect of post-dating in New York is that the check is not payable until the date specified. However, this does not strip it of its character as a negotiable instrument if all other requirements are met. Thus, it is a negotiable instrument, payable on the specified date.

Under New York’s Uniform Commercial Code (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, payable to order or to bearer, and not stating any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money. This question probes the understanding of what constitutes an “other undertaking or instruction” that would render an instrument non-negotiable. The scenario involves a promissory note that includes a clause requiring the maker to maintain a certain debt-to-income ratio. This requirement is an undertaking in addition to the payment of money. UCC § 3-104(a)(3) explicitly states that a promise or order is not unconditional if it states “an undertaking to do any act in addition to the payment of money.” Maintaining a specific financial ratio is a performance obligation beyond mere payment, thus disqualifying the instrument from being negotiable under Article 3. The absence of this additional undertaking is what preserves negotiability. Therefore, an instrument that merely promises to pay a sum certain without any additional stipulations related to the maker’s financial health or other collateral actions would be negotiable.

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder. Under New York’s UCC Article 3, a person who takes an instrument for value, in good faith, and without notice of any claim or defense is generally afforded special protection. This protection means they take the instrument free from most personal defenses that could have been asserted against the original payee. Personal defenses include things like breach of contract, lack of consideration, or fraud in the inducement. Real defenses, however, such as forgery, material alteration, or discharge in insolvency proceedings, can generally be asserted even against an HDC. In this scenario, the promissory note was initially issued by Ms. Anya Sharma to “Melody Music Inc.” for the purchase of a custom-made piano. Melody Music Inc. subsequently endorsed the note in blank and negotiated it to Mr. Ben Carter. Mr. Carter took the note for value, believing it was a legitimate transaction, and without any knowledge that Melody Music Inc. had misrepresented the piano’s condition, which constitutes fraud in the inducement. This fraud is a personal defense. When Mr. Carter, now a holder in due course, seeks to enforce the note against Ms. Sharma, the personal defense of fraud in the inducement is generally unavailable to Ms. Sharma as a defense against Mr. Carter. However, if Ms. Sharma had discovered the fraud and properly revoked her acceptance or negotiated the instrument back to a prior holder who was *not* an HDC, or if Mr. Carter had notice of the fraud, then the defense might be available. Since Mr. Carter qualifies as an HDC and there’s no indication he had notice or that the instrument was reacquired under circumstances that would prevent him from being an HDC, Ms. Sharma cannot assert this personal defense against him. The question asks what defense Ms. Sharma *can* assert against Mr. Carter. Since fraud in the inducement is a personal defense, it is cut off by Mr. Carter’s HDC status. Therefore, Ms. Sharma cannot assert this defense.

The core issue here revolves around the concept of “holder in due course” (HDC) status and its implications for defenses against payment. Under New York’s UCC Article 3, specifically § 3-305, a holder in due course takes an instrument free from all defenses of any party to the instrument with whom the holder has not dealt, except for certain real defenses. Among the real defenses that can be asserted even against an HDC are those that render the obligation of the party a nullity, such as fraud in the factum. Fraud in the factum occurs when a party is induced to sign an instrument without knowledge or reasonable opportunity to learn its character or essential terms. In this scenario, Mr. Abernathy was presented with a document that he believed to be a simple testimonial for a colleague, not a negotiable instrument promising to pay $5,000. He had no reason to suspect it was anything other than what it appeared to be, and he did not have a reasonable opportunity to discover its true nature. This constitutes fraud in the factum. Therefore, even if Ms. Bellweather is a holder in due course, she cannot enforce the instrument against Mr. Abernathy because fraud in the factum is a real defense that is effective against an HDC. The other options represent personal defenses (like breach of contract or failure of consideration) which are cut off by HDC status, or situations that do not apply to the facts presented, such as a forged signature or a material alteration that was not apparent.

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 New York. 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. UCC § 3-305(a) outlines the claims in recoupment and defenses that can be asserted against a holder in due course. Specifically, UCC § 3-305(a)(2) states that a holder in due course takes the instrument free of defenses of any party to the instrument with whom the holder has not dealt, except for certain real defenses. Among the real defenses, which can be asserted against anyone, including an HDC, are those listed in UCC § 3-305(a)(1). These include infancy, duress that nullifies the obligation, fraud that nullifies the obligation, and discharge in insolvency proceedings. The defense of illegality of the transaction is generally a personal defense, not a real defense, unless the law that makes the obligation illegal also states that the instrument is void. In this scenario, the note was given for gambling debts, which in New York are generally void under New York General Obligations Law § 5-419. A contract that is void is a nullity and cannot be ratified. Therefore, a negotiable instrument issued in connection with a void contract is also void. A void instrument can be asserted as a defense against anyone, including a holder in due course, because it never created a valid obligation in the first place. UCC § 3-305(a)(1)(ii) specifically allows for defenses of “such other incapacity, or duress, or illegality of the transaction, as nullifies the obligation of the subject.” The gambling debt, being void under New York law, falls under this category of illegality that nullifies the obligation. Therefore, the maker can assert the illegality of the gambling transaction as a defense against the holder in due course.

The scenario involves a promissory note that contains a clause for acceleration upon the occurrence of a specific event, namely the maker’s failure to maintain a certain debt-to-equity ratio. Under New York’s UCC Article 3, an instrument is negotiable if it contains 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. While the acceleration clause itself does not destroy negotiability, its conditionality is key. UCC § 3-109(1)(c) states that a definite time includes a time when an event certain to happen occurs. However, the event of failing to maintain a specific debt-to-equity ratio is not an event certain to happen; it is contingent upon the maker’s financial performance and choices. This contingency renders the time of payment uncertain. Therefore, the note, as modified by this conditional acceleration clause, is not a negotiable instrument under Article 3. The maker’s promise to pay is still present, and the amount is fixed, but the certainty of payment time is compromised by the conditionality of the acceleration trigger. This lack of certainty in the payment time is a fundamental requirement for negotiability, distinguishing a negotiable instrument from a mere contract for payment. The core principle is that a holder of a negotiable instrument must be able to ascertain the maturity date with reasonable certainty.

The core issue here is determining whether the instrument qualifies as a negotiable instrument under UCC Article 3, specifically focusing on the “unconditional promise or order” requirement and the concept of negotiability. New York has adopted the Uniform Commercial Code (UCC) with some variations, but the fundamental principles of negotiability are consistent. 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, to order or to bearer, and payable to order or bearer. The inclusion of “subject to the terms and conditions of the underlying agreement” in the promissory note creates a contingency. This phrase makes the promise conditional, as payment is explicitly tied to the terms and conditions of another agreement, which could include various stipulations that might affect the amount or timing of payment. Under UCC § 3-104(a), an instrument must contain an unconditional promise or order. If the promise is subject to conditions stated within the instrument itself, it generally destroys negotiability. While the note specifies a fixed amount and a definite time, the conditional language is the disqualifying factor. The Uniform Commercial Code, as enacted in New York (NY UCC § 3-104), requires an unconditional promise. The phrase “subject to the terms and conditions of the underlying agreement” makes the promise conditional. Therefore, the instrument is not negotiable.

The core issue here is determining whether the instrument qualifies as a negotiable instrument under UCC Article 3, as adopted by New York. For an instrument to be negotiable, it must meet several requirements, including being payable on demand or at a definite time, and containing an unconditional promise or order to pay a fixed amount of money. In this scenario, the promissory note states it is payable “upon the successful completion of the Kepler-186f colonization project.” This contingency makes the payment due date uncertain and dependent on an event that may or may not occur, thus failing the “definite time” requirement of UCC § 3-104(a)(2). Furthermore, the promise to pay is conditioned on the success of a specific, future event, which violates the “unconditional promise” requirement under UCC § 3-104(a)(1). Because the note is not payable on demand or at a definite time and contains a conditional promise, it is not a negotiable instrument. Consequently, it cannot be negotiated by endorsement and delivery, nor can it be enforced by a holder in due course against the maker. Instead, it would be treated as a non-negotiable contract, and rights would be governed by contract law principles.

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 New York, a holder in due course takes an instrument free from all defenses of any party to the instrument with whom the holder has not dealt, except for certain real defenses. The relevant defenses mentioned in UCC § 3-305 include infancy, duress that nullifies the obligation, fraud that induces the obligor to make the instrument with neither knowledge nor reasonable opportunity to obtain knowledge of its character or its essential terms, discharge in insolvency proceedings, and any other law of New York making the obligation of defense available to the obligor. Personal defenses, such as breach of contract or failure of consideration, are generally cut off by an HDC. In this scenario, the promissory note was issued by Mr. Abernathy to Ms. Bellweather. Ms. Bellweather then negotiated the note to Mr. Chen. Mr. Abernathy’s defense is that Ms. Bellweather failed to deliver the antique grandfather clock for which the note was given. This constitutes a failure of consideration, which is a personal defense. Mr. Chen, as a holder in due course, took the note for value, in good faith, and without notice of any defense against it. Therefore, Mr. Chen is generally entitled to enforce the note against Mr. Abernathy, despite the failure of consideration. The question asks what Mr. Chen can enforce. Since failure of consideration is a personal defense, it is cut off by an HDC. Thus, Mr. Chen can enforce the note for its full face amount.

The core issue revolves around the enforceability of a promissory note containing a clause that allows for acceleration of the due date upon the occurrence of certain events, specifically a change in the borrower’s employment status. Under New York’s Uniform Commercial Code (UCC) Article 3, a negotiable instrument must contain an unconditional promise to pay a fixed amount of money. While acceleration clauses are generally permissible, they must not render the promise so uncertain as to defeat negotiability. UCC § 3-104(a)(1) requires an unconditional promise. UCC § 3-108 defines a demand instrument as payable on demand, and an instrument payable at a definite time if it is payable on request or at an identifiable time or times. A clause that makes the due date contingent upon an event that is not within the control of the maker, and which could occur at any time, potentially renders the payment due date uncertain. In this scenario, the acceleration triggered by voluntary termination of employment introduces such uncertainty. The UCC permits acceleration on default or occurrence of a condition that is not speculative. Voluntary termination of employment is a condition that can occur at any time and is not necessarily tied to a default in payment. Therefore, the note is likely not a negotiable instrument because the promise to pay is not for a fixed amount at a definite time, as the acceleration event introduces an unacceptable level of uncertainty regarding the payment timeline. The note would be considered a non-negotiable contract, subject to contract law principles, but it cannot be negotiated as a negotiable instrument under UCC Article 3.

The scenario involves a promissory note that was initially payable to a specific payee. When the note is transferred by endorsement and delivery, it becomes an order instrument. For an order instrument to be negotiated effectively, it must be endorsed by the payee and delivered to the transferee. In this case, the note is made payable to “Anya Sharma.” If Anya Sharma endorses the note in blank, it becomes payable to bearer. However, the question states Anya Sharma endorsed the note “Pay to the order of Ben Carter” and then delivered it to Ben Carter. This is a special endorsement. Subsequently, Ben Carter, without endorsing the note, delivered it to Clara Davis. Under New York UCC Article 3, specifically § 3-201, a transfer of an instrument vests in the transferee such rights as the transferor has therein. However, to be a holder in due course, one must take the instrument for value, in good faith, and without notice of any defense or claim. More importantly, to be a holder of an order instrument, the transferee must have possession and be the named payee or a special endorsee. Since Ben Carter delivered the note to Clara Davis without endorsing it, Clara Davis did not become a holder of the order instrument. While she possesses the note, and Ben Carter had the right to transfer it, she is not the named payee or a special endorsee. Therefore, she cannot enforce the instrument against the maker unless she is able to obtain Ben Carter’s endorsement. In New York, under UCC § 3-301, a person entitled to enforce an instrument is the holder of the instrument, a non-holder in possession of the instrument who has the rights of a holder, or a person not in possession of the instrument who is entitled to enforce it pursuant to Section 3-309. Clara Davis is not a holder because the special endorsement to Ben Carter was not further endorsed to her. She is a non-holder in possession, but she does not have the rights of a holder because the necessary endorsement is missing. Thus, she cannot enforce the instrument against the maker.

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder. Under New York’s UCC Article 3, specifically \(§ 3-305\), a holder in due course takes an instrument free of all defenses of any party to the instrument with whom the holder has not dealt, except for certain “real” defenses. Among the defenses listed in \(§ 3-305(a)(2)\), infancy is a real defense. A real defense is one that can be asserted against any holder, including an HDC. Fraud in the execution, also known as fraud in the factum, is another real defense. This occurs when a party is induced to sign an instrument without knowing its nature or its essential terms, believing it to be something else entirely. For instance, if a person is tricked into signing a negotiable instrument believing it to be a receipt for a minor purchase, that constitutes fraud in the execution. Conversely, fraud in the inducement, where a party is persuaded to sign an instrument based on a false promise or misrepresentation about the underlying transaction, is a personal defense and is generally not available against an HDC. In the scenario presented, the misrepresentation by the seller regarding the quality of the goods constitutes fraud in the inducement. Since Ms. Anya Petrova is a holder in due course (she took the note for value, in good faith, and without notice of any defense), she is generally protected from personal defenses. Infancy is a real defense, but the scenario does not indicate that Ms. Petrova was a minor when she signed the note. Therefore, the only defense that would be effective against Ms. Petrova, if it were fraud in the execution, would be that specific type of fraud. However, the described fraud is in the inducement. Thus, Ms. Petrova, as an HDC, can enforce the note against the maker, Mr. Ivan Volkov, despite the fraud in the inducement.

No calculation is required for this question as it tests conceptual understanding of the UCC’s framework for negotiable instruments. The Uniform Commercial Code (UCC), as adopted in New York, defines a negotiable instrument as a signed writing that contains an unconditional promise or order to pay on demand or at a definite time a fixed amount of money, payable to order or to bearer, and which does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money, except as authorized by the UCC. Specifically, UCC § 3-104 outlines these requirements. A key aspect is the “unconditional promise or order.” This means the promise or order must not be subject to any contingencies or conditions that would require the occurrence or non-occurrence of some other event or agreement for payment to be made. If a writing contains such a condition, it generally fails to qualify as a negotiable instrument under Article 3, even if it otherwise resembles a check or note. This exclusion is crucial for maintaining the free negotiability and certainty required for instruments to function effectively in commerce. For example, a promise to pay “upon completion of the construction project” would likely be considered conditional.