The scenario involves a promissory note that is not payable on demand or at a definite time, but rather “upon the death of the maker.” Under New Mexico’s Uniform Commercial Code (UCC) Article 3, specifically concerning negotiable instruments, a key requirement for negotiability is that the instrument must be payable either on demand or at a definite time. A promise to pay upon the occurrence of an event that is not certain to occur, or the timing of which is not ascertainable with certainty, renders the instrument non-negotiable. The death of the maker is an event that is certain to occur, but the exact time of its occurrence is not a definite time as contemplated by UCC § 3-108, which defines payable on demand or at definite time. While the note might be enforceable as a contract, it fails to meet the stringent requirements of Article 3 for negotiability. Therefore, it cannot be transferred by endorsement and delivery in a manner that would grant a holder in due course the rights provided by UCC Article 3. The instrument is an enforceable contract, but not a negotiable instrument.

In New Mexico, as governed by UCC Article 3, the concept of “negotiability” is paramount for an instrument to be considered a negotiable instrument. For an instrument to be negotiable, it must meet several criteria, including being payable to order or to bearer, contain an unconditional promise or order to pay a fixed amount of money, and be payable on demand or at a definite time. Furthermore, it must not contain any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money. This includes prohibitions against incorporating terms that restrict the transferability of the instrument or that state the instrument is subject to or governed by another writing. The specific wording “subject to the terms of the agreement dated January 15, 2023” creates a direct reference to another document that could potentially modify the terms of payment or other obligations, thus rendering the promise conditional and destroying negotiability. While referencing another writing for the purpose of stating rights as to collateral, prepayment, or acceleration does not destroy negotiability, a general reference to the terms of an agreement does. Therefore, an instrument containing such a clause is not a negotiable instrument under New Mexico law.

The core issue here revolves around the concept of presentment and the discharge of parties liable on a negotiable instrument when presentment is improperly made. Under New Mexico’s Uniform Commercial Code (UCC) Article 3, specifically concerning negotiable instruments, a holder must present the instrument for payment or acceptance to the appropriate party. If presentment is made to the wrong party, or if it is made under circumstances that do not comply with the UCC’s requirements for proper presentment, certain consequences can arise regarding the discharge of parties secondarily liable. In this scenario, the promissory note is payable “on demand.” The UCC defines “on demand” as including instruments payable at sight or at any time the holder presents them. Presentment for payment is typically made to the principal debtor. For a note payable on demand, presentment is generally required to charge an indorser or a drawer of a draft. However, the question states the note was presented for payment to the maker’s estate administrator, who is not the maker. While an administrator may manage the estate’s affairs, they are not the primary obligor on the note in their personal capacity, nor are they typically the designated party for presentment unless the note specifically states so or they have assumed liability. The UCC provides that if a note is payable on demand, presentment for payment is required to charge the drawer or an indorser. However, if presentment is made to a party not obligated to pay the instrument, or in a manner that is not compliant with UCC requirements, it may not effectively charge those who would otherwise be liable. Specifically, if a holder presents a note to someone not obligated to pay it, and this action causes the instrument to be dishonored, it does not necessarily discharge parties secondarily liable if the presentment itself was fundamentally flawed. The UCC generally requires presentment to the person primarily liable. Presenting to an administrator of an estate, without further context indicating their direct obligation on the note, is not the standard presentment to the maker. New Mexico UCC § 3-505 (now § 55-3-505) outlines what constitutes sufficient presentment. However, the critical point is who must receive the presentment to charge secondary parties. For a promissory note, the maker is primarily liable. Presentment to an administrator of the maker’s estate is not presentment to the maker. If the note had been properly presented to the maker (or their estate if the maker was deceased and the estate was properly handling the debt), and then dishonored, indorsers would be on the hook. But an improper presentment, such as to an unauthorized party, does not trigger the liability of indorsers. The UCC aims to ensure that parties have proper notice and opportunity to pay. Presenting to someone who has no authority to pay the note does not fulfill this purpose. Therefore, the indorser, Elias, would not be discharged due to this improper presentment. The UCC discharge provisions focus on payment, tender of payment, cancellation, alteration, or fraudulent intent. Improper presentment to a non-obligated party does not fall under these discharge categories for the indorser. The liability of the indorser is contingent upon proper presentment and dishonor. An invalid presentment means no dishonor has legally occurred to trigger the indorser’s liability.

The core issue revolves around the negotiability of an instrument that contains a promise to pay a fixed sum of money, subject to a condition precedent. Under New Mexico’s adoption of UCC Article 3, specifically concerning the requirements for negotiability, an instrument must contain an unconditional promise or order to pay a fixed amount of money. The presence of a clause stating “upon satisfactory completion of the construction project at 123 Main Street, Santa Fe, New Mexico” introduces a condition precedent to the payment obligation. This means that payment is not guaranteed and is contingent upon an event that may or may not occur. Such a condition renders the promise conditional, thereby destroying the negotiability of the instrument. While the instrument specifies a fixed sum and is payable on demand, the conditionality of the payment itself is the critical factor. An instrument that is subject to a condition precedent is not a negotiable instrument under UCC § 3-104. The UCC generally aims for certainty and predictability in commercial paper, and conditional promises undermine these principles by creating uncertainty about the ultimate obligation to pay. Therefore, an instrument with such a clause cannot be a negotiable instrument.

The core concept here revolves around the liability of parties on a negotiable instrument, specifically when a person signs in a representative capacity. Under New Mexico’s UCC Article 3, an authorized representative who signs a negotiable instrument on behalf of a principal is generally not personally liable if the instrument clearly indicates the representative capacity and identifies the principal. This is governed by principles of agency and the specific provisions of UCC § 3-402, which deals with signatures in representative capacity. For personal liability to attach, the signature must not adequately show the representative capacity or identify the principal, or the representative must fail to be authorized. In this scenario, Mr. Abernathy signed “for” the company and the company’s name was also present. This clearly indicates he was acting on behalf of the company, not in his individual capacity. Therefore, he is not personally liable for the instrument. The UCC prioritizes clarity and intent. When the intent is to bind the principal and not the agent, and this intent is evident from the instrument itself, the agent is shielded from personal liability. The presence of the company name and the word “for” before it serves this purpose.

The scenario describes a promissory note that is payable to “cash” or “bearer.” Under New Mexico’s Uniform Commercial Code (UCC) Article 3, specifically Section 3-109, 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 to any other indicated person not representing the payee. In this case, the note is payable to “cash,” which is considered a bearer instrument. A bearer instrument is negotiated by simple delivery. The holder of a bearer instrument is presumed to be the owner. Therefore, if the note is delivered to someone, that person becomes the holder and can enforce the instrument. The fact that the note is not endorsed does not prevent its negotiation or enforcement because bearer paper does not require endorsement for transfer of rights. The issue of whether the note was obtained by fraud or misrepresentation is a separate defense that the maker might raise against a holder in due course, but it does not affect the initial negotiation or the fact that the current holder is in possession of a bearer instrument.

The scenario involves a promissory note that contains an acceleration clause. An acceleration clause allows the holder of the note to declare the entire unpaid balance immediately due and payable upon the occurrence of a specified event, such as a default in payment. In New Mexico, as governed by UCC Article 3, such clauses do not affect the negotiability of the instrument, provided the acceleration is triggered by a specified event. The note here is for a fixed sum of money, payable on demand, and contains a clause stating that if the maker fails to pay any installment of interest when due, the entire principal sum shall become immediately due and payable at the option of the holder. This is a standard acceleration clause. The question asks about the effect of this clause on the instrument’s negotiability. According to New Mexico UCC § 3-108(b)(2), an instrument is payable on demand if it states that it is payable on demand, at sight, or otherwise indicates that it is payable at the will of the holder or no time for payment is stated. Furthermore, UCC § 3-104(a) 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, and payable to order or to bearer. Critically, UCC § 3-108(b)(2) specifically states that an instrument may be payable on demand even though it contains a term stating that the holder may accelerate payment of the instrument. Therefore, the presence of the acceleration clause does not render the note non-negotiable. The instrument meets all other requirements for negotiability: it is a promise to pay a fixed amount of money, it is payable on demand, and it is payable to order (implied by the term “bearer” in the context of commercial paper, but if it were payable to a specific person without further words, it would be an order instrument). The fact that it is payable on demand is explicitly stated, and the acceleration clause does not make the payment due at an indefinite time, as the condition for acceleration is clearly defined.

The scenario involves a promissory note that is payable on demand. Under New Mexico’s Uniform Commercial Code (UCC) Article 3, specifically concerning negotiable instruments, a note payable on demand is generally considered due and payable immediately upon its creation. The concept of “reasonable time” for demand instruments is relevant when determining when a holder is deemed to have demanded payment or when the statute of limitations begins to run, particularly in cases of stale checks or instruments that have been outstanding for an extended period without presentment. However, the question focuses on the immediate enforceability of the instrument from the maker’s perspective upon its delivery to the payee. Since the note explicitly states “on demand,” the maker’s obligation to pay arises at the moment the note is issued and delivered to the payee, unless there are specific conditions precedent to demand stated within the instrument itself, which are not indicated here. Therefore, the maker is obligated to pay upon the payee’s presentment of the note for payment. The UCC generally presumes that demand instruments are enforceable upon delivery. The concept of “presentment” is key here, as the payee must present the instrument for payment to trigger the maker’s immediate duty to pay. In New Mexico, as in most states adopting the UCC, the UCC defines “on demand” instruments as those that state “on demand,” “at sight,” or “when presented.” The maker’s liability attaches upon such presentment. The UCC also addresses the concept of discharge of the instrument and parties, but the initial obligation to pay arises upon the instrument’s issuance and the holder’s demand. The UCC § 3-108(a) states that a promise is payable on demand if it states that it is payable on demand, sight, or otherwise. For such instruments, the UCC § 3-412 states that the issuer of a note is obliged to pay the note. The maker’s obligation is to pay the note according to its terms.

Under New Mexico law, specifically UCC Article 3, a holder in due course (HDC) takes an instrument free from most defenses and claims that a prior party could assert against the original payee. To qualify as an HDC, a person must take 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, with or without interest or other charges; (4) payable on demand or at a definite time; (5) payable to order or to bearer; and (6) not stating any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money, unless it is to provide collateral or collection costs. Furthermore, the holder 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 on the part of any person. In the given scenario, the promissory note from “Canyon Creations” to “Desert Designs” for \$5,000, dated January 15, 2024, payable on demand, is a negotiable instrument. “Pueblo Payments” acquired this note on February 1, 2024. To determine if Pueblo Payments is a holder in due course, we examine the acquisition. Pueblo Payments paid \$4,500 for the note, which constitutes taking for value. The prompt does not indicate any knowledge of defenses or claims against the instrument by Pueblo Payments, implying good faith and lack of notice. The note was acquired well before any indication of dishonor or overdue status. Therefore, Pueblo Payments likely meets the criteria for a holder in due course under New Mexico UCC Article 3. As an HDC, Pueblo Payments would be able to enforce the note against Canyon Creations, even if Canyon Creations had a defense against Desert Designs, such as a breach of contract, unless that defense is one that cannot be asserted against an HDC, such as a real defense like forgery or material alteration. The question asks about the enforceability against Canyon Creations. Since Pueblo Payments is a holder in due course, it can enforce the note against Canyon Creations for the full \$5,000, free from any personal defenses Canyon Creations might have had against Desert Designs. The amount paid by Pueblo Payments (\$4,500) is relevant to the value given, but does not limit the amount it can recover from the maker, as long as it took the instrument in good faith.

The scenario involves a promissory note that is initially payable to “bearer.” Under New Mexico’s version of UCC Article 3, a note payable to bearer is negotiable. When the note is subsequently specially indorsed by the payee to “Elara Vance,” it becomes payable to Elara Vance. If Elara Vance then indorses the note in blank by simply signing her name on the back, the note reverts to being payable to bearer. This is because a special indorsement followed by an indorsement in blank is treated as an indorsement in blank. Therefore, anyone in possession of the note after Elara Vance’s blank indorsement is a holder. The critical point is that a holder of a bearer instrument is a holder in due course if they meet the requirements of taking the instrument for value, in good faith, and without notice of any claim or defense. The question asks about the enforceability of the note against the maker, assuming the holder meets these requirements. Since the note is now payable to bearer and the holder is a holder in due course, the maker cannot assert personal defenses, such as a failure of consideration in the underlying transaction, against this holder. The maker’s obligation is to pay the instrument according to its terms.

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 Mexico’s UCC Article 3, a holder in due course takes an instrument free from all defenses of any party to the instrument with whom the holder has not dealt, except for certain real defenses. A party who has dealt with the holder cannot assert personal defenses against that holder. In this scenario, Elara dealt directly with the original payee, Banco de la Sierra, when she issued the promissory note. Therefore, any personal defenses she might have against Banco de la Sierra, such as failure of consideration or misrepresentation, are generally cut off once the note is negotiated to an HDC. However, if Banco de la Sierra had knowledge of Elara’s defenses or if the negotiation to the bank was fraudulent or irregular, the bank might not qualify as an HDC. Assuming the bank acted in good faith, paid value, and took the instrument without notice of any defense or claim, it would be an HDC. Since Elara dealt with the original payee, her personal defenses are not valid against the bank if the bank is an HDC. The question asks what defense Elara *can* assert. The concept of a negotiable instrument being void ab initio, meaning it was invalid from its inception due to illegality or a fundamental defect, constitutes a real defense. Real defenses are generally available even against an HDC. For instance, if the underlying transaction was illegal in New Mexico, rendering the note void, Elara could assert this defense. However, the prompt does not provide information suggesting the note was void from inception. Instead, it implies personal defenses. Since Elara dealt with the original payee, she cannot assert personal defenses against a holder in due course. The question implicitly asks for a defense that *could* be asserted, even against an HDC, or a situation where the holder might not be an HDC. The most fundamental defense that can be asserted against any holder, including an HDC, is that the instrument itself is void. However, without specific facts indicating the note was void, we must consider the limitations of personal defenses. Elara dealt with Banco de la Sierra, meaning she cannot raise personal defenses against them if they are an HDC. The question asks what defense Elara can assert against the bank, assuming the bank is a holder in due course. Elara cannot assert personal defenses against an HDC with whom she has not dealt. Since she dealt with the original payee, she cannot assert personal defenses against a *subsequent* HDC. However, the question is about asserting defenses against the bank itself. If the bank is an HDC, Elara’s personal defenses are cut off. The only defenses that remain are real defenses. The options provided will test the understanding of this distinction. If the note was procured by fraud in the factum (i.e., Elara was tricked into signing something she did not understand was a negotiable instrument), this is a real defense. If it was fraud in the inducement (i.e., Elara knew she was signing a note but was lied to about the underlying transaction), this is a personal defense and would be cut off by an HDC. Without specific facts pointing to a real defense, and given Elara dealt with the original payee, she is limited. The question is designed to probe the understanding of what defenses are *not* cut off by an HDC. The key is that Elara dealt with the original payee. This means that any personal defenses she has against the original payee are cut off if the note is negotiated to an HDC. The question is subtly asking what type of defense *could* still be raised, implying a real defense or a situation where the holder is not an HDC. Given the options, the most likely correct answer would relate to a real defense or a flaw in the bank’s HDC status. However, the explanation must focus on the general principles. Elara’s personal defenses are unavailable against an HDC. If the note was procured by fraud in the factum, this is a real defense that can be asserted against an HDC. If the note was procured by fraud in the inducement, this is a personal defense and cannot be asserted against an HDC. Since Elara dealt with the original payee, she cannot assert personal defenses against a subsequent holder in due course. The question is framed to test the knowledge of what remains. The crucial point is that Elara dealt with the original payee, Banco de la Sierra. This means that any personal defenses she has against Banco de la Sierra are cut off if the note is negotiated to a holder in due course. The question asks what defense Elara *can* assert against the bank. If the bank is an HDC, Elara cannot assert personal defenses. The only defenses available against an HDC are real defenses. Examples of real defenses include infancy, duress, illegality of the transaction that makes the obligation void, and fraud in the factum. Fraud in the inducement is a personal defense. Therefore, if the note was obtained by fraud in the inducement, and the bank is an HDC, Elara cannot assert this defense. The question is likely testing the understanding of what defenses are *not* cut off. The calculation is not numerical but conceptual. The concept tested is the distinction between real and personal defenses in the context of a holder in due course under New Mexico’s UCC Article 3. Elara dealt with the original payee. If the bank is a holder in due course, Elara cannot assert personal defenses against the bank. Personal defenses include fraud in the inducement, breach of contract, and failure of consideration. Real defenses, which can be asserted against a holder in due course, include infancy, duress, illegality that renders the instrument void, and fraud in the factum. The question asks what defense Elara can assert. This implies a defense that is not cut off by the bank’s potential holder in due course status.

The scenario describes a promissory note payable to the order of “the bearer.” Under New Mexico’s version of UCC Article 3, a negotiable instrument that is payable to bearer is transferred by delivery alone. Negotiation of an instrument payable to bearer does not require endorsement. Therefore, when Mateo delivers the note to Anya without endorsement, Anya becomes the holder of the note. The question asks what Anya’s status is. Since the note is payable to bearer, and Anya is in possession of it, she is the holder. A holder is a person that is in possession of a negotiable instrument that is payable either to bearer or to identified person that is the person in possession. In this case, the note is payable to bearer, and Anya is in possession. Therefore, Anya is the holder.

The core issue here revolves around the concept of a holder in due course (HIDC) and the defenses available against such a holder. Under New Mexico 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 real defenses. Real defenses are those that can be asserted against any holder, including an HIDC. Examples of real defenses include infancy, duress that nullifies assent, fraud that induces the inducement of the instrument, discharge in insolvency proceedings, and any other defense or claim in recoupment of which the holder of the instrument cannot be a holder in due course. Personal defenses, such as breach of contract, failure of consideration, or fraud in the inducement, are generally not effective against an HIDC. In this scenario, the promissory note was negotiated to Ms. Anya Sharma, who took it for value, in good faith, and without notice of any claim or defense. This establishes her as a holder in due course. The defense of failure of consideration, which is a personal defense arising from the underlying contract for the landscaping services, cannot be asserted against Ms. Sharma. Therefore, she can enforce the note according to its terms, despite the alleged poor quality of the landscaping work. The UCC specifically enumerates these defenses, and the distinction between real and personal defenses is crucial for determining enforceability against an HIDC. New Mexico law, by adopting UCC Article 3, follows these established principles.

The scenario involves a promissory note that is payable on demand. Under New Mexico’s Uniform Commercial Code (UCC) Article 3, a demand instrument is generally considered to be due on its date of issue. Therefore, the statute of limitations for enforcing such an instrument begins to run from the date of issue. If a promissory note is undated, the UCC generally provides that it is considered to be dated as of the time of its issue. In this case, the note was issued on January 15, 2020, and was payable on demand. Thus, the cause of action to enforce the note accrued on January 15, 2020. New Mexico law, specifically New Mexico UCC § 3-118, provides a statute of limitations of six years for enforcing notes payable on demand. Consequently, the six-year period would commence on January 15, 2020. Adding six years to this date brings us to January 15, 2026. Therefore, any action to enforce the note must be brought on or before January 15, 2026.

The core issue here is whether the indorsement on the promissory note qualifies as a special indorsement or a restrictive indorsement under New Mexico’s UCC Article 3. A special indorsement specifies the person to whom the instrument is payable, effectively making that person the new holder. In contrast, a restrictive indorsement conditions the indorsement’s effect, such as “for deposit only” or “pay any bank.” The indorsement by Ms. Anya Sharma states “Pay to the order of Mr. Ben Carter, for deposit only.” This indorsement contains two distinct clauses. The first part, “Pay to the order of Mr. Ben Carter,” is a special indorsement, identifying a new payee. However, the subsequent clause, “for deposit only,” is a restrictive indorsement. Under New Mexico UCC § 3-206, if an indorsement includes words that prohibit further transfer or negotiation (like “for deposit only”), but also contains words that indicate a further transfer or negotiation is permitted (like “pay to the order of”), the indorsement is generally treated as restrictive. Specifically, UCC § 3-206(c) states that an indorsement that purports to be for the benefit of the indorser or to transfer to the indorsee for the indorsee’s benefit is effective only to the extent of the indorsement’s terms. When an indorsement is restrictive, a bank or other intermediary is generally obligated to follow the restriction. In this scenario, while Ms. Sharma initially designated Mr. Carter as the payee, the “for deposit only” clause restricts further negotiation of the note by Mr. Carter, making it payable only to him for the purpose of deposit into his account. Therefore, Mr. Carter cannot negotiate the note to a third party, such as Ms. Clara Diaz. The indorsement is not a qualified indorsement, which would disclaim liability, nor is it a blank indorsement, which would make the note payable to bearer. The presence of the restrictive language “for deposit only” supersedes the special indorsement for purposes of further negotiation.

The core issue here is determining whether the instrument presented to Elara qualifies as a negotiable instrument under New Mexico’s UCC Article 3. A key requirement for negotiability is that the instrument 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 document states “payment will be made from the proceeds of the sale of the ‘Azure Horizon’ property.” This phrase introduces a contingency; payment is explicitly tied to a specific future event (the sale of the property) rather than being an unconditional promise. Such a condition makes the promise conditional, thereby destroying its negotiability. New Mexico’s UCC § 3-104(a) defines a negotiable instrument, and § 3-105(a)(2) specifically addresses promises that are conditional, stating that a promise or order is not unconditional if it states an obligation to do any act in addition to the payment of money. The sale of the property is an additional act beyond the simple payment of money. Therefore, the instrument is not a negotiable instrument because the promise to pay is conditional upon the sale of the property.

The question concerns the enforceability of a draft against a drawer when the draft is presented for payment by a holder in due course after the drawer has issued a stop payment order. Under New Mexico’s Uniform Commercial Code (UCC) Article 3, a stop payment order is generally effective according to its terms. However, the UCC also provides protections for holders in due course (HDCs). Specifically, UCC § 3-305(a)(1) states that 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 listed in § 3-305(a)(2). A stop payment order is typically considered a personal defense, not a real defense. Therefore, a holder in due course who took the draft without notice of the stop payment order would generally be able to enforce the instrument against the drawer, notwithstanding the stop payment order. The drawer’s argument that the stop payment order discharged their obligation is a defense that is cut off by the HDC’s status. The scenario describes a holder who took the draft for value, in good faith, and without notice of any claim or defense, which are the elements of being a holder in due course. Consequently, the drawer cannot assert the stop payment order as a defense against this holder.

Under New Mexico law, specifically UCC Article 3, a holder in due course (HDC) takes an instrument free from most defenses and claims that a prior party could assert against the original payee. To qualify as an HDC, a person must take the instrument for value, in good faith, and without notice that the instrument is overdue or dishonored or that there is any defense or claim against it. In this scenario, Mr. Abernathy purchased the promissory note from Ms. Chavez. The note was originally made by Mr. Davison to Ms. Chavez. Mr. Abernathy paid \( \$5,000 \) for a note with a face value of \( \$6,000 \). This payment constitutes taking the instrument for value. The fact that the note was already past due when Mr. Abernathy acquired it is crucial. UCC § 3-302(a)(2) explicitly states that a holder takes an instrument “without notice that it is overdue or dishonored or that there is a defense or claim.” A note that is past its due date is considered overdue. Therefore, Mr. Abernathy had notice that the instrument was overdue at the time of acquisition. This notice prevents him from being a holder in due course. As he is not an HDC, he takes the instrument subject to the defense of lack of consideration that Mr. Davison can assert against Ms. Chavez. Consequently, Mr. Abernathy cannot recover the full \( \$6,000 \) from Mr. Davison.

The core issue revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder under New Mexico’s Uniform Commercial Code (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. Section 3-305 of the UCC outlines the claims in recoupment and defenses that are available against a holder in due course. These include real defenses (which are available against all holders, including HDCs) and personal defenses (which are generally not available against HDCs). Among the real defenses listed in UCC § 3-305(a)(1) are those that render the obligor’s obligation a nullity, such as infancy, duress that nullifies the obligation, or illegality of the type that nullifies the obligation. Fraud in the factum, where the instrument itself is misrepresented, is also a real defense. Fraud in the inducement, however, where the maker is deceived about the nature of the transaction but understands they are signing a negotiable instrument, is typically a personal defense. In this scenario, Ms. Alana’s misrepresentation that the document was a guest registry rather than a promissory note constitutes fraud in the factum. She was deceived about the very nature of the instrument she was signing. Therefore, this defense is a real defense and is available against a holder in due course, even if Mr. Bennington acquired the note without notice of this defense. Consequently, Ms. Alana can assert this defense to avoid liability on the note.

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder. Under New Mexico’s Uniform Commercial Code (UCC) Article 3, a holder in due course takes an instrument free from most defenses, with certain exceptions. These exceptions are often termed “real defenses” and are generally limited to matters that render the instrument void or that involve fraud in the factum, infancy, duress that nullifies assent, illegality of the type that nullifies the obligation, or discharge in insolvency proceedings. Personal defenses, such as breach of contract, failure of consideration, or fraud in the inducement, are generally cut off by an HDC. In this scenario, the note was procured through fraudulent misrepresentation regarding the quality of the vintage wine, which constitutes fraud in the inducement. This is a personal defense. If Mr. Abernathy can establish that Ms. Bell is a holder in due course, then he cannot assert this personal defense against her. To be an HDC, Ms. Bell must have taken the note for value, in good faith, and without notice that it was overdue or had been dishonored or that there was any defense or claim to it on the part of any person. Assuming Ms. Bell meets these criteria, she would take the note free from Mr. Abernathy’s personal defense of fraud in the inducement. Therefore, Mr. Abernathy would be obligated to pay the note to Ms. Bell.

The scenario involves a promissory note that was transferred by endorsement. The initial payee, Elara, endorsed the note in blank to Finn. A blank endorsement makes the instrument payable to bearer. Subsequently, Finn, without endorsing the note, physically delivered it to Gia. Under New Mexico UCC Article 3, a person in possession of an instrument endorsed in blank is a holder. Gia, by taking possession of the note which was endorsed in blank and then physically delivered to her, became the holder of the instrument. The UCC, specifically New Mexico § 55-3-205, defines an endorsement in blank as one that does not specify a particular person to whom the instrument is to be payable. When an instrument is endorsed in blank, it becomes payable to bearer and may be negotiated by delivery alone. Therefore, Finn’s physical delivery of the note to Gia, even without Finn’s further endorsement, constitutes a negotiation. Gia, as the possessor of a bearer instrument, is the holder. The question asks about Gia’s status. Since she possesses the instrument, which is payable to bearer due to the blank endorsement, and it was delivered to her, she is a holder. The concept of “holder in due course” is not directly at issue here for determining Gia’s status as a holder, though it would be relevant for determining her rights against prior parties if she were to sue. The critical point is that delivery of a bearer instrument is sufficient for negotiation.

The core issue here revolves around the concept of holder in due course (HDC) status and the defenses available against such a holder. Under UCC Article 3, a person taking an instrument for value, in good faith, and without notice of any defense or claim to the instrument may become a holder in due course. However, certain defenses are “real defenses” and can be asserted against even an HDC, while others are “personal defenses” that are cut off by HDC status. The scenario describes a promissory note that was altered without the maker’s consent. Specifically, the interest rate was changed. This alteration constitutes a material alteration of the instrument. UCC Section 3-407 addresses the effect of alteration. If an instrument is materially altered, a party whose obligation is affected by the alteration is discharged unless that party assents to the alteration. However, UCC Section 3-305(a)(2) provides that an HDC takes the instrument subject to defenses of a kind specified in Section 3-305(a)(2) that are available against a simple contract. A material alteration that is fraudulent is a real defense, meaning it can be asserted against an HDC. Here, the alteration of the interest rate is a material alteration. Assuming the alteration was fraudulent (which is implied by the fact that it was done without consent and to the detriment of the maker), it acts as a real defense. Therefore, the maker can assert this defense against any holder, including an HDC, to avoid payment of the altered amount. The original amount or the amount as originally agreed upon may still be enforceable by the holder if they can prove the original terms, but the maker is not obligated to pay the altered amount. The question asks about the maker’s liability for the *altered* amount. Since the alteration is a real defense, the maker is not liable for the altered amount.

The core concept here is the requirement for a negotiable instrument to be payable to order or to bearer. A check made payable “to the order of cash” is generally treated as payable to bearer. This is because “cash” is not a specific payee, and the instrument can be negotiated by mere delivery. New Mexico, like most states, follows UCC Article 3, which addresses the negotiability of instruments. Under UCC § 3-109(c), an instrument payable to “cash” or to “the order of cash” is payable to bearer. Therefore, when a check is made payable to “the order of cash,” it is considered a bearer instrument. A bearer instrument is negotiated by delivery alone. No endorsement is required for negotiation. This contrasts with instruments payable to a specific person, which require endorsement for negotiation. The scenario describes a situation where the maker of the check intended it to be payable to cash, and the subsequent negotiation of this check would follow the rules for bearer instruments, meaning it can be transferred by physical delivery. The question tests the understanding of how an instrument payable to “cash” is treated under the UCC and how it is negotiated. The key is recognizing that “cash” functions as a designation of a bearer.

The scenario involves a promissory note payable to “bearer” and then endorsed in blank. Under New Mexico’s UCC Article 3, specifically concerning the rights of a holder, a person in possession of an instrument is a holder if the instrument is payable to bearer or, in the case of a note, to an identified person and the person is in possession. When an instrument is payable to bearer, it can be negotiated by mere delivery. An endorsement in blank converts an instrument payable to order into one payable to bearer. Therefore, when the note, originally payable to “bearer,” is endorsed in blank by Elias, it remains payable to bearer. This means that possession of the note by anyone, including a thief, constitutes them a holder. The question then asks about the rights of a holder in due course. A holder in due course (HDC) takes an instrument free from most defenses and claims that a party to the instrument might have against the original payee or a prior holder. However, for Elias to have the rights of an HDC, he must have taken the note for value, in good faith, and without notice of any claim or defense. The problem states that Elias found the note. Finding an instrument does not constitute taking it for value, nor does it necessarily imply good faith or lack of notice. Therefore, Elias, despite possessing the note, cannot claim the status of a holder in due course simply by finding it. The UCC, particularly in New Mexico, emphasizes the requirements for HDC status, which are not met by merely possessing a lost instrument. The UCC defines a holder as a person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession. Negotiation of an instrument payable to bearer occurs by delivery. An endorsement in blank makes the instrument payable to bearer. Thus, possession of the note by Elias, who found it, makes him a holder. However, to be a holder in due course, Elias must have taken the instrument for value, in good faith, and without notice of any claim or defense. Finding the note means Elias did not give value for it, nor did he acquire it in good faith or without notice. Therefore, Elias is a holder but not a holder in due course.

The core issue here revolves around the concept of “presentment” and the obligations of a party to whom a negotiable instrument is presented for payment. Under New Mexico’s UCC Article 3, specifically regarding the rights and duties of parties to negotiable instruments, a drawee or other person against whom a draft is presented for payment is entitled to receive the instrument and, if requested, a receipt for payment. However, the drawee is not obligated to surrender the instrument if they have a valid claim to retain it, such as a claim of ownership or a defense against payment. In this scenario, while the bank (drawee) has a right to demand the instrument for cancellation upon payment, it does not have an absolute right to retain it if the presenter has a legitimate reason for not surrendering it immediately. The presenter, in this case, is asserting a claim that the instrument was improperly negotiated. Therefore, the bank’s refusal to pay until the instrument is surrendered, without acknowledging the presenter’s claim of wrongful possession, is not necessarily a breach of its duty to pay. The presenter’s right to payment is contingent on fulfilling the requirements of presentment, which typically includes surrendering the instrument. The bank’s action is essentially seeking assurance that it is paying the rightful holder and that the instrument will be properly discharged. This aligns with the principle that a drawee should not be liable for wrongful payment. The UCC emphasizes good faith in all transactions. While the presenter has rights, the drawee also has rights and duties to protect itself from double payment or payment to an unauthorized party. The scenario implies a dispute over rightful possession, which the bank is attempting to resolve by requiring the instrument’s surrender before payment, a reasonable step to ensure proper discharge.

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder, specifically focusing on real defenses. Under UCC Article 3, as adopted in New Mexico, a holder in due course takes an instrument free from all defenses except those specifically enumerated as real defenses. Forgery is a real defense. A forged signature on a negotiable instrument renders the instrument void ab initio, meaning it is void from the beginning. Consequently, no party can acquire rights through a forged signature. Even if a subsequent holder takes the instrument for value, in good faith, and without notice of any defect, they cannot become an HDC of an instrument that was never validly issued due to a forged drawer’s signature. Therefore, the bank that paid the check bearing the forged signature of the drawer cannot recover from the purported drawer, as the drawer’s signature was not genuine. The Uniform Commercial Code, particularly concerning warranties of presentment, implies a warranty that the presenter is entitled to payment, which includes the genuineness of the drawer’s signature. A bank paying on a forged drawer’s signature is generally liable to the account holder whose signature was forged and cannot recover from the purported drawer, as the drawer never authorized the payment.

The core issue here is whether a holder in due course (HDC) status can be maintained when the instrument is transferred after a material alteration that is not authorized. Under New Mexico’s UCC Article 3, specifically regarding negotiable instruments, a holder in due course takes an instrument free from most defenses and claims. However, a material alteration can affect the rights of a holder. Section 3-407 of the UCC addresses alteration. If an instrument is materially altered, a holder who is not a holder in due course can enforce it according to its original tenor. A holder in due course, however, can enforce the instrument according to its tenor at the time of the alteration. This means they can enforce it as altered, but only if the alteration was made by someone other than the holder themselves and the holder had no notice of the alteration. In this scenario, the original amount was \( \$500 \), and it was altered to \( \$5,000 \). This is a material alteration. If the holder took the instrument after this alteration, and the alteration was made by someone other than the holder, the holder in due course can enforce the instrument as altered, meaning for \( \$5,000 \). However, the question implies the holder acquired the instrument after the alteration, and the alteration itself was a fraudulent act. The critical point is that an HDC can enforce an altered instrument according to its tenor at the time of the alteration, meaning the altered amount. If the alteration was fraudulent and material, a holder who is not an HDC can only enforce it according to its original tenor. But an HDC can enforce it as altered. Therefore, the holder in due course can enforce the instrument for the altered amount of \( \$5,000 \).

No calculation is required for this question. The core concept revolves around the concept of “holder in due course” (HDC) status and the defenses that can be asserted against an HDC under New Mexico’s Uniform Commercial Code (UCC) Article 3. A holder in due course takes an instrument free from most defenses, including claims of a party to the instrument and ordinary defenses such as breach of contract or lack of consideration. However, certain real defenses are good against an HDC. These real defenses are enumerated in UCC § 3-305(a)(1) and are generally those that would make the obligation void or voidable in the hands of the obligor. Examples include infancy, duress that nullifies consent, illegality of the transaction that renders the obligation void, and fraud in the factum (fraud that induces the obligor to sign the instrument with neither knowledge nor reasonable opportunity to obtain knowledge of its character or its essential terms). Fraud in the inducement, where the obligor knows they are signing an instrument but is deceived about the underlying transaction, is generally a personal defense and not good against an HDC. In this scenario, the fact that the instrument was obtained through a fraudulent scheme to induce the maker to believe they were investing in a legitimate venture, but the venture was a sham, constitutes fraud in the inducement. Therefore, while the maker was deceived, they understood they were signing a negotiable instrument. This type of fraud does not rise to the level of fraud in the factum, which would render the instrument void. Consequently, an HDC would take the instrument free from this defense.

The core issue here revolves around the concept of “holder in due course” (HDC) status and the defenses available against an HDC under New Mexico’s adoption of UCC Article 3. A holder in due course takes an instrument free from most defenses, including those arising from simple contract disputes. However, certain “real defenses” can be asserted even against an HDC. These real defenses are typically those that make the instrument void or that relate to the fundamental validity of the obligation. Examples include infancy, duress that nullifies assent, fraud that nullifies assent, illegality of the type that makes the obligation void, and discharge in insolvency proceedings. In this scenario, the promissory note was originally issued by Ms. Anya Sharma to “Desert Bloom Nurseries, Inc.” for the purchase of rare cacti. The note contained a clause stating it was non-negotiable. However, the UCC, as adopted in New Mexico, specifically addresses non-negotiable instruments and their transfer. Under UCC § 3-104(b), an instrument that would otherwise be a negotiable instrument but contains a statement that it is non-negotiable is not a negotiable instrument. This means Desert Bloom Nurseries, Inc. could not have been a holder in due course of the note, even if it had met other HDC requirements, because the note was explicitly made non-negotiable. Consequently, when Desert Bloom Nurseries, Inc. transferred the note to “Mountain View Capital,” Mountain View Capital could not attain HDC status. Instead, it took the note subject to all defenses that would have been available against Desert Bloom Nurseries, Inc. The defense of fraud in the inducement, which is the situation where a party is induced to enter into a contract by misrepresentation but still understands the nature of the transaction, is generally a personal defense. Personal defenses are cut off by an HDC. However, since Mountain View Capital is not an HDC, it is subject to this personal defense. Therefore, Ms. Sharma can raise the defense of fraud in the inducement against Mountain View Capital. The calculation is conceptual, not numerical. The key legal principle is that a non-negotiable instrument cannot be held by an HDC, and thus all defenses remain available to the maker.

The core issue revolves around the concept of “holder in due course” (HDC) status and its implications for defenses against payment. Under New Mexico UCC Article 3, a holder in due course takes an instrument free from most defenses, including those arising from simple contract disputes between the original parties. However, certain “real defenses” can be asserted even against an HDC. The scenario presents a promissory note that was initially for legitimate business purposes but later was modified by a separate, undisclosed agreement that altered its fundamental terms. This undisclosed modification, if it constitutes a material alteration or a breach of a condition precedent to the note’s effectiveness, could potentially be raised as a defense. When assessing whether a defense is available against an HDC, New Mexico law, consistent with the Uniform Commercial Code, distinguishes between personal defenses and real defenses. Personal defenses, such as fraud in the inducement, breach of contract, or lack of consideration, are generally cut off by an HDC. Real defenses, which go to the validity of the instrument itself or the HDC’s ability to enforce it, are not. Examples of real defenses include infancy, duress, illegality of the transaction, and material alteration. In this case, the modification agreement, if it fundamentally altered the nature of the obligation or was a condition precedent to the note’s enforceability that was not met, could be viewed as a real defense. Specifically, if the modification effectively nullified the original obligation or created a new, different obligation, it might be considered a material alteration or a defense akin to illegality or voidness of the underlying transaction. However, if the modification was merely a personal understanding between the original parties that did not go to the essence of the note’s validity or enforceability, it would likely be considered a personal defense, cut off by an HDC. The question asks about the defenses available to Mr. Aranda against Ms. Carmody, who is presumed to be an HDC. The key is to determine if the undisclosed modification constitutes a real defense. Without more information on the specific nature of the modification, it’s difficult to definitively classify it. However, if the modification was so significant that it fundamentally changed the terms of the note or made it conditional in a way that wasn’t apparent on the face of the instrument, it could be a real defense. A modification that is merely a personal agreement or a breach of a separate contract would not be a real defense. Given the options, the most accurate reflection of the law is that a holder in due course takes free of most defenses, but real defenses remain. The scenario hinges on whether the undisclosed modification rises to the level of a real defense. If the modification was a material alteration of the instrument or rendered the instrument void from its inception due to illegality or a similar fundamental flaw, then these would be real defenses. However, if the modification was a personal agreement or a breach of a separate contract that does not invalidate the instrument itself, it would be a personal defense, cut off by an HDC. The question is designed to test the understanding of this distinction. The correct answer identifies that while personal defenses are cut off, real defenses are not, and the effectiveness of the defense depends on its classification as real or personal.