Nevada Revised Statutes Chapter 104, which adopts the Uniform Commercial Code (UCC) Article 3 concerning Negotiable Instruments, outlines the requirements for an instrument to be considered negotiable. A key element is that the instrument must be payable on demand or at a definite time. If an instrument is made payable “upon completion of a specific construction project,” this introduces an element of uncertainty regarding the exact payment date. While the completion of a project might seem ascertainable, the UCC generally requires a more fixed or determinable time. NRS 104.3108(b) defines payable at a definite time to include instruments payable at a definite time subject to acceleration. However, the phrase “upon completion of a specific construction project” is not a “definite time” or a condition that triggers acceleration in the manner contemplated by the UCC. It is a contingent event whose timing is not fixed or determinable by reference to a calendar date or a period after a stated date. Therefore, an instrument payable in this manner would likely be considered non-negotiable because it fails the definite time requirement. The purpose of the definite time rule is to ensure that a holder can determine when the instrument is due and to protect the credit market by providing certainty. Contingent payment terms undermine this certainty.

The core issue here revolves around the concept of “holder in due course” (HDC) and the defenses available against such a holder under UCC Article 3, as adopted in Nevada. A negotiable instrument is taken by a holder in due course if it is taken (1) for value; (2) in good faith; and (3) without notice that it is overdue or dishonored or of any defense against or claim to the instrument on the part of any person. Nevada Revised Statutes (NRS) § 104.3302 outlines these requirements. In this scenario, Elara negotiates the promissory note to Finn. Finn’s purchase of the note for $8,000, which is less than its face value of $10,000, is generally considered taking for value, especially if the discount is not so gross as to shock the conscience and indicate bad faith. However, the critical element is Finn’s knowledge. Finn is aware of the dispute between Elara and the maker, Mr. Henderson, regarding the quality of the goods. This knowledge constitutes notice of a defense against the instrument. Specifically, Finn has notice of a claim to the instrument (Mr. Henderson’s potential defense of breach of warranty or failure of consideration). Under NRS § 104.3305, a holder in due course takes the instrument free of most defenses, including breach of contract and failure of consideration. However, a holder who has notice of a defense or claim at the time of taking the instrument cannot qualify as a holder in due course. Finn’s awareness of the ongoing dispute between Elara and Mr. Henderson prevents him from meeting the “without notice” requirement. Therefore, Finn is a mere holder, not a holder in due course. As a mere holder, Finn takes the instrument subject to all claims and defenses that are available to Mr. Henderson against Elara, including the defense of breach of warranty or failure of consideration due to the defective construction materials. Thus, Mr. Henderson can assert these defenses against Finn.

The core issue here is whether the instrument qualifies as a negotiable instrument under Nevada’s adoption of UCC Article 3. A key requirement for negotiability is that the instrument must be payable to order or to bearer. Nevada Revised Statutes (NRS) § 104.3104(1)(d) defines a negotiable instrument as one that is payable “to order or to bearer.” The phrase “payable to order” means payable to the order of a specific person or entity. The phrase “payable to bearer” means payable to anyone who possesses the instrument. In this scenario, the promissory note states it is payable “to the order of Ms. Elara Vance.” This specific designation of a payee, coupled with the phrase “to the order of,” clearly satisfies the “payable to order” requirement. Therefore, the instrument is negotiable. The other options are incorrect because they misinterpret the requirements for negotiability. An instrument payable “to Ms. Elara Vance” without the “order of” language would likely be considered a non-negotiable instrument, as it would be payable only to that specific person and not to her order. Similarly, an instrument payable “to cash” is payable to bearer, which is also a valid form of negotiability. The absence of a specific payee does not inherently render an instrument non-negotiable if it is otherwise payable to bearer.

Under Nevada Revised Statutes (NRS) Chapter 104, which largely adopts the Uniform Commercial Code (UCC) Article 3 concerning Negotiable Instruments, the concept of discharge of a party from liability on an instrument is governed by specific provisions. One such provision relates to discharge by payment or satisfaction. NRS 104.3602 states that an instrument is paid to the extent payment is made by a party with direct or indirect recourse on the instrument to another party whose obligation on the instrument is either prior in time or under the instrument equal in rank to the obligation of the party making payment. If payment is made by the maker or acceptor of a note payable at a definite time, or the drawee of a draft payable at a definite time, and the instrument is then held by a drawer or endorser, the maker, acceptor, or drawee is discharged. However, if the instrument is paid by a party secondarily liable (such as an endorser), and the instrument is returned to that party, that party is not discharged to the extent of their right to recourse against prior parties. In the scenario presented, the drawee, “Desert Sands Corporation,” pays the instrument. Since the drawee is the primary obligor on a draft, their payment typically discharges their own liability. However, the crucial detail is that the instrument is then reacquired by an endorser, “Nevada Mining Co.” If Nevada Mining Co. had a right of recourse against Desert Sands Corporation (which it would, as the drawee is the primary obligor), then Desert Sands Corporation would be discharged by this payment. However, the question implies Desert Sands Corporation is attempting to discharge its liability by paying an instrument it may have reacquired or by a transaction that doesn’t fit the standard discharge by payment to a holder in due course or a party with recourse. The core principle is that a party is discharged when they pay the instrument to a holder, and that payment is applied to their obligation. If Desert Sands Corporation, as the drawee, pays the instrument and it is then reacquired by Nevada Mining Co., an endorser, Desert Sands Corporation is discharged to the extent of the payment, provided Nevada Mining Co. has no further recourse against Desert Sands Corporation on that instrument. The question tests the understanding of who is discharged when a drawee pays an instrument that is subsequently held by an endorser. The drawee’s payment to a holder discharges the drawee’s obligation. If the instrument is then reacquired by an endorser, the drawee is discharged. The scenario describes a payment by the drawee, Desert Sands Corporation, to a holder. This payment discharges the drawee’s liability on the instrument. The fact that the instrument is subsequently held by Nevada Mining Co., an endorser, does not negate the discharge of the drawee from their primary obligation. The drawee’s obligation is to pay the instrument when due. Upon payment, their obligation is satisfied. The subsequent reacquisition by an endorser does not revive the drawee’s liability. Therefore, Desert Sands Corporation is discharged.

The scenario describes a situation where a negotiable instrument, specifically a promissory note, is transferred. The core issue revolves around whether the transferee, Amara, qualifies as a holder in due course (HDC) under Nevada law, which largely follows UCC Article 3. For Amara to be an HDC, the instrument must have been negotiated to her, she must have taken it for value, in good faith, and without notice of any claim or defense against it. In this case, the note was endorsed in blank by the original payee, making it bearer paper. Amara physically took possession of the note. She paid $8,500 for a note with a face value of $10,000, which constitutes taking for value. The critical element is notice. The question states Amara had “no knowledge of any claims or defenses” and the note itself did not appear irregular or put her on notice. Therefore, she took the instrument in good faith and without notice. Since all the requirements are met, Amara is a holder in due course. As an HDC, Amara takes the instrument free from most defenses, including the personal defense of lack of consideration between the original parties (Nevada Revised Statutes § 104.3305). The fact that the note was originally issued for a service that was not rendered is a personal defense. Therefore, Amara can enforce the note against the maker, Mr. Henderson, for the full unpaid balance. The unpaid balance is the face amount of $10,000.

The core issue here revolves around the concept of “presentment warranties” under UCC Article 3, specifically as adopted and interpreted in Nevada. Presentment warranties are made by a person who obtains payment or acceptance of an instrument or who transfers an instrument for payment or acceptance. These warranties are made to the drawee or acceptor of the instrument, or to any other party to whom payment or acceptance is made. Under Nevada Revised Statutes (NRS) § 104.3417, a person who presents an instrument for payment or acceptance warrants to the drawee or acceptor that: (1) the presenter is entitled to enforce the instrument or is authorized to obtain payment or acceptance on behalf of a person who is entitled to enforce the instrument; (2) the instrument has not been altered; and (3) the presenter has no knowledge that the signature of the purported maker is unauthorized. In this scenario, Silas presented a check to the First National Bank of Reno for payment. The check, however, was a forgery of the purported drawer’s signature. Silas, as the presenter, implicitly warrants that the signature of the purported drawer is genuine. Since the signature was forged, Silas breached this warranty. The bank, having paid the forged instrument, can recover the amount paid from Silas based on this breach of warranty. The measure of recovery is the amount of the instrument. Therefore, the bank can recover the full \( \$5,000 \) from Silas. The fact that Silas was unaware of the forgery does not negate the warranty, as the warranty is a strict liability provision regarding the genuineness of the signature. The bank’s negligence in failing to detect the forgery is generally not a defense to a breach of presentment warranty claim, unless the bank’s negligence substantially contributed to the forgery itself, which is not indicated here.

The core issue here is whether the instrument qualifies as a negotiable instrument under UCC Article 3, as adopted in Nevada. For an instrument to be negotiable, it must meet several requirements, including being an unconditional promise or order to pay a fixed amount of money, payable on demand or at a definite time, and payable to order or to bearer. The phrase “subject to the terms and conditions of the loan agreement dated January 15, 2023” introduces a contingency that makes the promise to pay conditional. UCC § 3-104(a)(1) states that a negotiable instrument must contain an unconditional promise or order. UCC § 3-106(a) further clarifies that a promise or order is unconditional unless it states an express condition to payment, or the promise or order is subject to or governed by another writing. While a reference to another writing for rights concerning collateral, prepayment, or acceleration does not ordinarily make a promise or order conditional, a reference that subjects the payment itself to the terms and conditions of another writing does. In this scenario, the instrument is explicitly “subject to the terms and conditions of the loan agreement,” which suggests that payment itself might be contingent upon compliance with those terms, thereby rendering the promise conditional. Therefore, it fails the negotiability test.

Nevada Revised Statutes (NRS) Chapter 104, which largely adopts UCC Article 3, governs negotiable instruments. A key concept is the holder in due course (HDC). To qualify as an HDC, a holder must take an instrument that is (1) negotiable, (2) apparently authentic and authorized, (3) not overdue or dishonored, and (4) without notice of any claim or defense against it or the issuer. Furthermore, the holder must take the instrument for value and in good faith. Good faith, under NRS 104.1201(20), means honesty in fact and the observance of reasonable commercial standards of fair dealing. Notice of a claim or defense can be actual knowledge, receipt of notification, or reason to know from all the facts and circumstances known at the time. If a person takes an instrument with notice of a defense, such as a breach of contract by the original payee, they cannot be a holder in due course. The scenario describes a situation where the assignee is aware of the underlying contractual dispute before acquiring the instrument. This knowledge prevents the assignee from meeting the “without notice” requirement for HDC status. Therefore, the assignee takes the instrument subject to the defenses that would be available against the original payee.

The core concept here revolves around the liability of an indorser of a negotiable instrument. Under Nevada law, specifically UCC Article 3, an indorser who signs a negotiable instrument without qualification generally undertakes a contract to pay the instrument if it is dishonored by the primary obligor and the holder takes the necessary steps to enforce that liability. These steps include presentment for payment and, if necessary, notice of dishonor. However, the UCC also allows for qualified indorsements, such as “without recourse,” which significantly alter the indorser’s liability. A qualified indorsement limits the indorser’s liability to the extent that they are not guaranteeing that the instrument will be paid by the maker or drawee; rather, they are only guaranteeing that they have no knowledge of any defense or claim against the instrument. In this scenario, Ms. Albright’s indorsement “without recourse” is a qualified indorsement. Therefore, when the note is dishonored by the maker, and the holder, Mr. Chen, seeks recourse against Ms. Albright, her liability is limited. She is not obligated to pay the note to Mr. Chen because the indorsement explicitly disclaims her secondary liability for the maker’s default. The UCC provisions, particularly NRS 104.3202, define the effect of a qualified indorsement, stating that it does not operate as a warranty that the maker or drawee will honor the instrument. Thus, Ms. Albright is not liable to Mr. Chen for the amount of the dishonored note.

The core issue here revolves around the concept of “holder in due course” (HDC) and the defenses available against such a holder under UCC Article 3, as adopted by Nevada. 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. Nevada law, following the UCC, defines HDC status by requiring that the holder take the instrument for value, in good faith, and without notice that it is overdue or has been dishonored or of any defense or claim to the instrument. In this scenario, the note was transferred to the Credit Union by endorsement and delivery. The Credit Union paid value for the note, which is satisfied by its agreement to purchase the note. The question of good faith and notice is crucial. Since the note was already in default when the Credit Union acquired it, and the Credit Union had knowledge of this default, it cannot be considered a holder in due course. UCC § 3-302(a)(2)(iv) states that a holder does not take in ordinary course of business if the instrument is overdue. Nevada law follows this principle. Because the Credit Union is not an HDC, it takes the instrument subject to all defenses that the maker would have against the original payee. One such defense is the failure of consideration, as the underlying services for which the note was given were not performed. Therefore, the Credit Union cannot enforce the note against Mr. Abernathy.

The core issue here is whether a holder in due course status can be maintained when a negotiable instrument is transferred in a manner that suggests a breach of a fiduciary duty, specifically concerning the negotiation of an instrument belonging to an estate. Under Nevada law, which largely follows UCC Article 3, a transferee of an instrument takes it for value and in good faith. However, good faith is defined as honesty in fact and the observance of reasonable commercial standards of fair dealing. When a fiduciary, such as an executor of an estate, negotiates an instrument for personal benefit, or in a transaction that would put a reasonable person on notice of a breach of duty, the transferee may be deemed to have notice of a claim or defense. In this scenario, Ms. Anya, as the executor of the estate, is transferring a promissory note. Mr. Ben, the transferee, is aware that Ms. Anya is the executor and that the note is an asset of the estate. Furthermore, the transfer occurs to satisfy Ms. Anya’s personal debt to Mr. Ben. This direct knowledge that the instrument is being used to discharge a personal obligation of the fiduciary, rather than for the benefit of the estate, constitutes notice of a breach of fiduciary duty. Such notice prevents Mr. Ben from being a holder in due course. Nevada Revised Statutes (NRS) § 104.3302, mirroring UCC § 3-302, defines a holder in due course, and a key element is taking the instrument without notice of any claim or defense. Notice of a breach of fiduciary duty is a form of notice of a claim against the instrument or a defense to payment. Therefore, Mr. Ben, by taking the note for Ms. Anya’s personal debt, has notice of the estate’s claim to the instrument and cannot claim holder in due course status.

The core issue revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder. Under Nevada law, which largely follows the Uniform Commercial Code (UCC) Article 3, a holder who takes an instrument for value, in good faith, and without notice of any defense or claim against it is an HDC. An HDC takes the instrument free from most personal defenses, such as breach of contract or failure of consideration. However, certain real defenses, like fraud in the execution (falsity of the very nature of the instrument), forgery, material alteration, infancy, or duress that nullifies assent, can be asserted even against an HDC. In this scenario, the underlying transaction for the purchase of the antique machinery in Nevada involved a promise to deliver specific, operational equipment. The seller’s failure to deliver the operational machinery constitutes a failure of consideration, which is a personal defense. Since the note was negotiated to a holder who had no notice of this underlying issue and took it for value in good faith, this holder qualifies as a holder in due course. Therefore, the maker of the note cannot assert the personal defense of failure of consideration against this holder in due course. The correct answer is the one that reflects that the holder in due course can enforce the instrument despite the seller’s failure to deliver the operational machinery.

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 Nevada, as governed by UCC Article 3, such clauses are generally enforceable. The key is whether the note, with the acceleration clause, still qualifies as a negotiable instrument. For an instrument to be negotiable, it must contain an unconditional promise to pay a fixed amount of money. UCC § 3-104(a) outlines the requirements for negotiability. While acceleration clauses can affect the certainty of the *time* of payment, they do not typically render the promise conditional in a way that destroys negotiability, provided the fixed amount is determinable. The presence of an acceleration clause does not inherently make the promise conditional; rather, it alters the due date upon a specified event. Therefore, the note remains a negotiable instrument. The concept of “holder in due course” status, which provides certain protections to transferees of negotiable instruments, is directly relevant here. A holder in due course takes an instrument free from most defenses, but this status is predicated on the instrument being negotiable in the first place. Since the acceleration clause does not destroy negotiability, the note can be transferred, and a subsequent holder could potentially qualify for holder in due course status if they meet the other requirements under UCC § 3-302, such as taking the instrument for value, in good faith, and without notice of any claim or defense. The acceleration clause itself, as a term of the note, is part of the instrument that a holder in due course takes subject to. The ability to accelerate payment is a feature of the instrument’s terms, not a condition that negates the promise to pay.

Nevada law, consistent with UCC Article 3, addresses the rights of a holder in due course (HDC) when presented with a negotiable instrument that has been altered. An alteration is a change that modifies the obligation of a party or an advantage or disadvantage to any party. Under NRS 104.3407, a holder in due course can enforce an altered instrument according to its original tenor, unless the alteration was fraudulent and the holder took the instrument with notice of the fraud. However, if the alteration is fraudulent and the holder is not an HDC, the holder can only enforce the instrument as it was originally written. In this scenario, the instrument was originally for $5,000, and the amount was fraudulently raised to $15,000. The payee, who is also the holder, is the one who altered the instrument. Since the payee is the one who committed the fraud, they cannot be a holder in due course. Therefore, the payee can only enforce the instrument according to its original tenor, which is $5,000. The question asks about the payee’s ability to enforce the instrument, and as the perpetrator of the fraudulent alteration, their rights are limited to the original amount.

The scenario involves a negotiable instrument that was originally payable to “Cash” and then endorsed in blank by the initial holder, Mr. Abernathy. A holder in due course (HDC) status is determined by meeting specific criteria under UCC Article 3, which Nevada has adopted. These criteria include taking the instrument for value, in good faith, and without notice of any claim or defense against it. In this case, Ms. Bell received the instrument from Mr. Abernathy, who had possession of it. There is no indication that Ms. Bell had any knowledge of any defects in Mr. Abernathy’s title or any defenses to payment when she acquired the instrument. Because Mr. Abernathy endorsed the instrument in blank, it became bearer paper, meaning it is payable to whoever is in possession of it. Ms. Bell, by taking possession of the bearer paper, became a holder. Assuming she meets the other requirements (value and good faith), she would be a holder in due course. The question asks about the status of the instrument in Ms. Bell’s possession. Since it was endorsed in blank, it is bearer paper. The fact that it was originally payable to “Cash” does not alter its negotiability or its status as bearer paper once endorsed in blank. Therefore, the instrument is bearer paper in Ms. Bell’s possession.

The core concept here is the distinction between a holder in due course (HDC) and a mere holder, particularly concerning defenses against payment on a negotiable instrument. Nevada law, like the Uniform Commercial Code (UCC) Article 3, defines an HDC as a holder who takes an instrument that is (1) negotiable, (2) authenticated by a party to it, (3) payable on demand or at a definite time, (4) payable to order or to bearer, and (5) for value, in good faith, and without notice that it is overdue or has been dishonored or of any defense or claim against it. A holder who does not meet these criteria is subject to all the defenses that would be available against the payee or a holder in due course. In this scenario, Ms. Anya Sharma is a holder, but not an HDC, because she received the note after its due date, thereby having notice of the overdue status. Consequently, she is subject to any defenses available to Mr. Ben Carter against the original payee, Ms. Clara Vance. Mr. Carter’s defense of fraud in the inducement, if proven, is a real defense, which is generally effective against any holder, including an HDC, unless specific exceptions apply (which are not indicated here). However, the question asks about defenses available against Anya as a mere holder. Fraud in the inducement is a personal defense, meaning it is typically assertable against a holder who is not an HDC. Since Anya is not an HDC due to taking the note after it was overdue, she takes subject to Mr. Carter’s defenses against Ms. Vance. Therefore, Mr. Carter can assert the defense of fraud in the inducement against Ms. Sharma.

The scenario involves a promissory note that contains a clause allowing the holder to accelerate the payment of the entire outstanding balance if they deem themselves insecure. This type of clause is known as an “at-will” or “insecurity” clause. Under Nevada law, specifically NRS 104.1208 (which mirrors UCC § 1-208), a term providing that one party may accelerate payment or performance or otherwise increase its power upon the happening of a condition such as “at will” or “when he deems himself insecure” or similar language, means that he shall deem himself insecure only in the good faith belief that the prospect of payment or performance is impaired. The UCC and its Nevada adoption emphasize the requirement of good faith in exercising such acceleration clauses. Therefore, the holder cannot arbitrarily demand full payment without a reasonable, good-faith belief that the prospect of payment is genuinely in doubt. The question asks about the enforceability of such a clause when the maker has consistently made payments on time. Consistent on-time payments would generally indicate that the prospect of payment is not impaired, thus negating a good-faith belief for acceleration. The holder’s subjective desire to call the loan due without any objective basis related to the maker’s financial stability or payment history would likely violate the good faith requirement. The enforceability hinges on the holder’s ability to demonstrate a good-faith belief that the prospect of payment was impaired, which is difficult to establish when payments are consistently made as agreed. Therefore, the clause is generally not enforceable under these circumstances because the holder cannot establish the necessary good faith belief that the prospect of payment was impaired.

The core issue revolves around the concept of holder in due course (HDC) status and the defenses available against such a holder. Under UCC Article 3, adopted in Nevada, a holder in due course takes an instrument free from most real defenses and personal defenses. Real defenses, which can be asserted even against an HDC, include infancy, duress, illegality, and fraud in the factum (real fraud). Personal defenses, such as breach of contract, lack of consideration, or fraud in the inducement (misrepresentation), are generally cut off by an HDC. In this scenario, the forged signature on the indorsement of the original payee, Ms. Anya Sharma, renders the transfer to Mr. Ben Carter void. A forged signature is ineffective to transfer title to the instrument. Therefore, Mr. Carter, despite potentially meeting the criteria for HDC status (taking for value, in good faith, and without notice of any claim or defense), could not have obtained good title from Ms. Sharma because her indorsement was forged. Since Mr. Carter did not acquire valid title, he could not pass good title to Ms. Clara Davis. Consequently, Ms. Davis, even if she qualifies as an HDC with respect to the instrument’s subsequent negotiation, cannot enforce it against the drawer, Mr. Ethan Reed, because the chain of title is broken by the forged indorsement. The forged indorsement is a real defense that can be asserted against any holder, including an HDC. Thus, Mr. Reed is not liable on the instrument.

In Nevada, 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 for value, in good faith, and without notice of any claim or defense against it. Notice includes actual knowledge, receipt of notice, or reason to know from all the facts and circumstances known to the person at the time of the transaction. Consider a scenario where Ms. Anya Sharma, a resident of California, purchases a promissory note from Mr. Ben Carter, a Nevada resident. The note, originally issued by Ms. Clara Davies to Mr. Carter, is for \$10,000, payable on demand. Mr. Carter endorsed the note in blank. Ms. Sharma paid \$9,500 for the note and had no knowledge of any disputes between Ms. Davies and Mr. Carter regarding the note’s origin or consideration. However, she did notice that the note was dated six months prior to her purchase and had a faint coffee stain on the corner, which she attributed to normal handling. Ms. Davies later refused to pay the note, claiming it was issued for a gambling debt, which is an illegal consideration under Nevada law. Under Nevada law, a holder who takes an instrument for value, in good faith, and without notice of a defense or claim is a holder in due course. The consideration paid, \$9,500 for a \$10,000 note, is generally considered “value.” The good faith element is assessed objectively and subjectively. While the coffee stain might raise a minor question, it is unlikely to constitute notice of a defense or claim, especially when the note is otherwise regular on its face. The crucial element is whether Ms. Sharma had notice of the illegality of the original consideration. Since the scenario explicitly states she had no knowledge of disputes and the coffee stain is not indicative of illegality, she likely took the note without notice. Therefore, Ms. Sharma qualifies as a holder in due course in Nevada and can enforce the note against Ms. Davies, free from the defense of illegality of consideration, as this is a real defense that can be asserted against a holder in due course, but illegality of consideration is a real defense. However, illegality of consideration is a real defense that can be asserted against any holder, including an HDC, under NRS 104.3305(1)(b). Therefore, Ms. Sharma, despite being an HDC, would not be able to enforce the note against Ms. Davies due to the illegality of the original consideration.

The core issue revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder under UCC Article 3, as adopted in Nevada. A negotiable instrument is taken by a holder in due course if it is taken (1) for value, (2) in good faith, and (3) without notice that it is overdue or has been dishonored or that there is an uncured default with respect to payment of another instrument issued as part of the same series, or that any defense or claim to it exists. Nevada Revised Statutes (NRS) § 104.3302 outlines these requirements. In this scenario, the promissory note was originally issued by Ms. Albright to “The Old West Bank” of Arizona. The bank later sold the note to Mr. Sterling. The critical fact is that Mr. Sterling received the note after its maturity date, as indicated by the overdue status. Under NRS § 104.3302(a)(2), a holder cannot be a holder in due course if the instrument is taken when it is overdue. Therefore, Mr. Sterling is a mere holder, not a holder in due course. As a mere holder, Mr. Sterling takes the instrument subject to all claims to it on the part of the person from whom he took it and all defenses of any party that would be available in an action on a simple contract. One such defense is illegality of the transaction, which is a real defense under NRS § 104.3305(a)(1)(ii). Since the original loan transaction between Ms. Albright and “The Old West Bank” was void due to the bank’s unlicensed operation in Nevada, the entire transaction is illegal and void ab initio. This illegality constitutes a real defense that can be asserted against any holder, including a holder who is not a holder in due course. Therefore, Ms. Albright can assert the defense of illegality against Mr. Sterling.

Under Nevada law, specifically Revised Uniform Commercial Code (UCC) Article 3, a holder in due course (HDC) takes an instrument free from all defenses and claims of any party with whom the holder has not dealt, except for certain real defenses. A real defense is a defense that can be asserted against any holder, including an HDC. Examples of real defenses include infancy, duress that nullifies assent, fraud that nullifies assent, discharge in insolvency proceedings, and, importantly, any other incapacity, or illegality of the transaction that renders the obligation of the party a nullity. For a defense to be considered “real” and thus effective against an HDC, it must go to the very root of the obligation, rendering it void from its inception. Mere voidable defenses, such as ordinary fraud in the inducement or breach of contract, are not effective against an HDC. The scenario describes a promissory note where the underlying transaction was deemed illegal under Nevada state law, specifically a gambling debt incurred in a jurisdiction where such activities were prohibited at the time of the transaction. This illegality renders the note void *ab initio* (from the beginning) under Nevada public policy and the UCC’s provision for illegality that nullifies the obligation. Therefore, even a holder who otherwise meets the criteria for being a holder in due course would be subject to this defense. The fact that the note was transferred for value, in good faith, and without notice of any claim or defense is relevant to establishing HDC status, but it does not overcome a real defense like illegality that makes the instrument void.

Under Nevada law, specifically NRS 104.3305, 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, to order or to bearer, and 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, except as provided in NRS 104.3104(1)(b). The scenario describes a check that contains an instruction to “deduct $50 for late fees before payment.” This additional instruction is not a simple acknowledgment of a debt or a statement of the transaction from which the obligation arose, nor is it a promise to pay collateral, or an authorization to pay from a particular account. Instead, it is a directive to modify the payment amount based on a condition external to the instrument itself. Such a conditional promise or order to pay renders the instrument non-negotiable because it violates the requirement of an unconditional promise or order to pay a fixed amount of money. The instrument becomes a mere assignment of funds or a contract for payment, rather than a negotiable instrument that can freely circulate in commerce. Therefore, a holder in due course would not be able to enforce this instrument against the drawer if the drawer had a defense to payment.

Nevada law, like the Uniform Commercial Code (UCC) Article 3, governs negotiable instruments. A crucial aspect is the concept of a holder in due course (HIDC). To qualify as an HIDC, a person must take an instrument that is (1) negotiable, (2) complete and not irregular, (3) that the holder takes for value, (4) in good faith, and (5) without notice of any claim or defense against it or dishonor of the instrument. The scenario involves a check drawn on a Nevada bank. The initial negotiation to Ms. Albright for services rendered constitutes taking for value. Her subsequent endorsement and delivery to Mr. Chen for an antecedent debt also satisfies the value requirement, as an antecedent debt is considered value under UCC § 3-303(a)(3), which is adopted in Nevada. Mr. Chen, receiving the check in good faith and without notice of any issues with the original payee’s claim or any defenses the drawer might have, would generally be considered a holder in due course. The fact that the check was post-dated does not, by itself, prevent it from being negotiable if it otherwise meets the requirements, nor does it automatically impart notice of a claim or defense. The question hinges on whether Mr. Chen acquired the rights of an HIDC. Since he took the instrument for value (antecedent debt), in good faith, and without notice of any defenses or claims, he meets the criteria. Therefore, he can enforce the instrument against the drawer, subject to any defenses that are real defenses (e.g., forgery, fraud in the execution, material alteration, infancy, duress, bankruptcy discharge, or illegality of the type that nullifies the obligation). However, personal defenses, such as breach of contract by the original payee, are cut off by an HIDC.

The core issue revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder. Under Nevada law, which largely follows the Uniform Commercial Code (UCC) Article 3, a holder in due course takes an instrument free from all defenses of any party to the instrument with whom the holder has not dealt, except for certain real defenses. Real defenses, also known as universal defenses, can be asserted against any holder, including an HDC. Examples of real defenses include infancy, duress, illegality of a type that nullifies the obligation, fraud in the execution (as opposed to fraud in the inducement), and discharge in insolvency proceedings. Personal defenses, on the other hand, such as breach of contract, lack of consideration, or fraud in the inducement, are generally not effective against an HDC. In the given scenario, the promissory note was procured through fraudulent misrepresentation regarding the quality of the goods. This constitutes fraud in the inducement, which is a personal defense. Ms. Anya, as a holder in due course, acquired the note after taking it for value, in good faith, and without notice of any defense or claim. Therefore, she is generally protected from personal defenses like fraud in the inducement. The fact that the note was originally issued in Nevada and the transaction occurred there does not alter the UCC’s framework for HDC status and available defenses. The key is the nature of the defense itself. Since fraud in the inducement is a personal defense, it cannot be asserted against Ms. Anya, who qualifies as an HDC. Consequently, Ms. Anya can enforce the note against Mr. Chen.

The core concept here revolves around the holder in due course (HDC) status and its implications for defenses against payment on a negotiable instrument. Under UCC Article 3, as adopted in Nevada, 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, which can be asserted even against an HDC, include fraud that induces any party to sign the instrument with neither knowledge nor reasonable opportunity to obtain knowledge of its character or its essential terms, and discharge in insolvency proceedings. Personal defenses, such as breach of contract or failure of consideration, are cut off by an HDC. In this scenario, the initial negotiation of the promissory note from Mr. Abernathy to Ms. Bell was based on a misrepresentation regarding the quality of the vintage wine being purchased. This constitutes fraud in the inducement, which is a personal defense. When Ms. Bell subsequently negotiates the note to Mr. Chen, who pays value, in good faith, and without notice of any claim or defense, Mr. Chen becomes a holder in due course. As an HDC, Mr. Chen is generally protected from personal defenses. Therefore, Mr. Chen can enforce the note against Mr. Abernathy despite the underlying fraud in the inducement. The Nevada statutes governing negotiable instruments, specifically UCC Article 3, define the requirements for HDC status and the types of defenses that are cut off. The question tests the understanding of the distinction between real and personal defenses and how HDC status shields a holder from the latter.

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. Under UCC Article 3, as adopted in Nevada, a negotiable instrument must contain an unconditional promise to pay a fixed amount of money. While acceleration clauses generally do not destroy negotiability, the specific nature of the acceleration trigger is crucial. In this scenario, the acceleration is triggered by the maker’s “inability to meet its obligations to its creditors generally.” This is considered an event that is within the control of the maker and is not a fixed or determinable event in the same way as a specific date or the occurrence of a specified event like a default on another instrument. Nevada law, consistent with UCC § 3-108(b)(2), permits acceleration if the time of payment is made due upon the occurrence of a fact or event that is certain to happen, even if the exact date is not known. However, an event that is contingent on the maker’s subjective financial state or general inability to meet obligations, which can be influenced by the maker’s actions or perceptions, is generally viewed as making the promise conditional. This conditionality can impair the instrument’s negotiability. Therefore, a holder in due course would not be able to enforce the note against the guarantor because the note’s negotiability is questionable due to the conditional acceleration clause. The guarantor’s liability is typically secondary to the primary obligation, and if the primary obligation is not on a negotiable instrument enforceable by a holder in due course, the guarantor’s position is affected. The scenario tests the understanding of what constitutes an unconditional promise in the context of acceleration clauses and their impact on enforceability by a holder in due course, particularly concerning secondary parties like guarantors.

Nevada Revised Statute 104.3305(2) addresses the issue of a holder in due course (HDC) status when a negotiable instrument is transferred for value and in good faith. Specifically, it states that a transferee acquires rights of an HDC if the instrument is transferred for value, in good faith, and without notice of any claim or defense. The critical element here is “without notice.” If the transferee has actual knowledge of a defense or claim, or knowledge of such an nature that the taking of the instrument amounts to bad faith, they cannot be an HDC. Furthermore, knowledge of an overdue instrument or dishonor also prevents HDC status. In this scenario, the bank’s knowledge of the impending lawsuit and the fact that the note was given for a speculative venture, which is a known risk, would likely constitute notice of a claim or defense, thereby preventing the bank from qualifying as a holder in due course. This is because the bank’s knowledge is not merely about a potential problem but about a specific, known dispute that could invalidate the instrument or give rise to a defense against payment. The Uniform Commercial Code (UCC) is designed to facilitate commerce by allowing certain transferees to take instruments free from most defenses, but this protection is forfeited when the transferee is aware of underlying issues that could affect the instrument’s validity or enforceability. The concept of “good faith” under UCC Article 3 is subjective, but it is also objective in the sense that knowledge of facts that would put a reasonable person on inquiry constitutes notice. The bank’s awareness of the lawsuit against the maker for fraud in the inducement, which is a real defense, directly impacts its ability to be a holder in due course.

The scenario involves a promissory note that was transferred by endorsement and delivery. The question hinges on determining whether the transferee qualifies as a holder in due course (HDC) under Nevada law, specifically UCC Article 3. For a holder to be an HDC, they must take the instrument (1) for value, (2) in good faith, and (3) without notice that the instrument is overdue or has been dishonored or that there is any defense against or claim to the instrument. In this case, Elara received the note as a gift, which means she did not give value. Taking for value is a fundamental requirement for HDC status. Without giving value, Elara cannot be considered an HDC, regardless of her good faith or lack of notice of any defenses. Therefore, she takes the note subject to any defenses that the maker, Finn, may have against the original payee, Aurora. The Uniform Commercial Code as adopted in Nevada, specifically NRS 104.3302, defines a holder in due course. The definition explicitly requires that the holder take the instrument for value. Gifts do not constitute value in the context of negotiable instruments law. Consequently, Elara is a mere holder, not a holder in due course, and Finn can assert his defenses against her.

The core issue here is whether the purported instrument qualifies as a negotiable instrument under Nevada’s adoption of UCC Article 3. A key requirement for negotiability is that the instrument must be payable “on demand or at a definite time.” NRS 104.3104(1)(c) defines a negotiable instrument as one that is payable “on demand or at a definite time.” The instrument in question states it is payable “upon the successful completion of the Sierra Ridge Project.” This contingency creates uncertainty regarding the exact date of payment. For an instrument to be payable at a definite time, the time of payment must be ascertainable from the instrument itself, without reference to external events that may or may not occur. A payment conditioned on the completion of a project, which might be delayed indefinitely or never completed, does not meet the “definite time” requirement. Therefore, because the payment is contingent upon an event that may not occur, the instrument is not a negotiable instrument under Nevada law. This classification means it cannot be transferred by negotiation and is subject to defenses that would not be available against a holder in due course.

The scenario describes a promissory note that is payable to “the order of cash.” Under UCC Article 3, as adopted in Nevada, a negotiable instrument must be payable to order or to bearer. An instrument payable “to cash” is generally considered payable to bearer. This is because “cash” is not a specific payee, and the instrument is effectively payable to anyone who possesses it. When an instrument is payable to bearer, it can be negotiated by mere delivery. However, if the instrument is later indorsed in blank, it remains bearer paper. If it is specially indorsed, it becomes order paper. In this case, the note is initially payable to the order of cash, making it bearer paper. When the maker delivers it to Ms. Anya Sharma, it is negotiated by delivery. If Ms. Sharma then indorses it in blank by simply signing her name on the back, it remains bearer paper, and subsequent negotiation requires only delivery. If she had specially indorsed it to Mr. Ben Carter by writing “Pay to the order of Ben Carter, Anya Sharma,” then it would become order paper, requiring Carter’s indorsement for negotiation. The question asks about the initial negotiation from the maker to Ms. Sharma. Since the note is payable to “cash,” it is bearer paper, and negotiation occurs by delivery. The subsequent indorsement by Ms. Sharma in blank does not change its status as bearer paper for the purpose of the initial negotiation. Therefore, the instrument is negotiable by delivery.