The Uniform Commercial Code (UCC) as adopted in Nebraska, specifically Article 3, governs negotiable instruments. A key concept is the holder in due course (HIDC). To attain HIDC status, a holder must take an instrument for value, in good faith, and without notice of any defense or claim against it. In this scenario, the promissory note was issued by Agnes to Bartholomew. Bartholomew then negotiated the note to Clara. Clara received the note after its maturity date. UCC § 3-302(a)(2) states that a holder takes an instrument “when the holder takes the instrument if it is taken after the holder has notice that it is overdue.” Taking an instrument after its maturity date constitutes notice that it is overdue. Therefore, Clara cannot be a holder in due course because she took the note after its maturity date, which means she had notice of its overdue status. This prevents her from qualifying as a holder in due course, and consequently, she takes the instrument subject to any defenses Agnes may have against Bartholomew, such as failure of consideration.

The scenario involves a promissory note payable to “Bear Creek Ranch” which is a fictitious entity. Under UCC Article 3, as adopted in Nebraska, a negotiable instrument must be payable to order or to bearer. A note payable to a fictitious payee is generally treated as payable to bearer if the person making the instrument intended it to be payable to a fictitious person. However, the critical factor here is that the note is payable to “Bear Creek Ranch,” which is not a real person or entity. Nebraska’s UCC § 3-110(b) states that an instrument is payable to order when it is payable to the order of an identified person or to an identified person or his or her order. If an instrument is payable to a fictitious person, it is payable to bearer if the person supplying the name of the payee knows that the payee is fictitious. In this case, the maker of the note, Mr. Abernathy, intended to create a note payable to a specific ranch, even if that ranch was not a legally recognized entity at the time of creation. The intent of the maker is paramount in determining the payee. Since the maker intended to pay “Bear Creek Ranch,” and this entity is fictitious, the instrument is deemed payable to bearer. Therefore, any holder in due course can enforce the instrument against the maker.

The core issue here is whether the instrument is a negotiable instrument under UCC Article 3 as adopted in Nebraska. For an instrument to be negotiable, it must contain an unconditional promise or order to pay a fixed amount of money, payable on demand or at a definite time, and payable to order or to bearer. Nebraska’s adoption of UCC Article 3, specifically Neb. Rev. Stat. § 2-104, defines a “draft” as an order to pay. Section 3-104(a) outlines the requirements for a negotiable instrument. A key element is that the promise or order must be unconditional. A condition precedent, such as requiring the completion of a construction project, generally renders the promise conditional, thus destroying negotiability. In this scenario, the payment of the note is explicitly contingent upon the satisfactory completion of the specified construction work. This contingency means the holder of the note cannot be assured of payment upon demand or at a definite time, as the payment is dependent on an external event not solely within the control of the maker or the holder’s ability to present the instrument. Therefore, the note fails the unconditional promise requirement, a fundamental prerequisite for negotiability. The UCC prioritizes certainty and predictability in commercial transactions, and allowing such conditions would undermine these principles. Consequently, the instrument is not a negotiable instrument.

The core issue revolves around whether a promissory note containing a clause for the payment of attorney’s fees and costs in the event of default constitutes a negotiable instrument under UCC Article 3, as adopted in Nebraska. Nebraska’s 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, payable to bearer or to order, and payable to the order of the instrument or to cash. A key element for negotiability is that the promise to pay must be unconditional. UCC § 3-106(a) states that a promise or order is unconditional unless it states an express condition to payment, or that it is subject to or governed by another writing. However, UCC § 3-106(b) provides exceptions, stating that a promise or order does not become conditional merely because it: (1) states limited sources or applications of payment, (2) is subject to waiver, or (3) requires a statement of account, balance, or the like, or (4) contains a statement that collateral has been given, or that there is a promise to furnish collateral. Crucially, UCC § 3-106(c) specifies that a promise or order is conditional if it states an obligation to do any act in addition to the payment of money, except for certain permitted acts. Payment of attorney’s fees and costs upon default is generally considered an undertaking to do an act in addition to the payment of money. While some jurisdictions have interpreted such clauses differently, the prevailing view, and the one that aligns with the strict interpretation of “unconditional promise” under Article 3, is that such a clause renders the instrument non-negotiable because it adds an obligation beyond the payment of a fixed sum of money. Therefore, a note that includes a stipulation for attorney’s fees and costs upon default fails the unconditional promise requirement for negotiability under Nebraska law.

Under Nebraska’s Uniform Commercial Code (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 holder must take the instrument for value, in good faith, and without notice of any defense or claim against it. The concept of “notice” is crucial. Notice can be actual or constructive. Constructive notice arises when a holder should have known about a defense or claim due to circumstances surrounding the transaction or the instrument itself, such as conspicuous irregularities or a stated purpose for the instrument that is unfulfilled. In this scenario, the promissory note was issued for the specific purpose of funding the construction of a new wing for the hospital. When the note was negotiated to Ms. Albright, the hospital was publicly advertising its financial distress and the cancellation of the construction project due to unforeseen circumstances. This public information, readily available, would put a reasonable person on notice that the underlying obligation for the note might have failed or been breached. Therefore, Ms. Albright, by taking the note without inquiring into the status of the construction project, is deemed to have notice of the defense of failure of consideration. This prevents her from qualifying as a holder in due course, and she is subject to the defenses available to the hospital, including the failure of the underlying purpose for which the note was issued.

The scenario involves a promissory note that is payable on demand. Under Nebraska Revised Statutes Section 2-108(1)(a), an instrument is payable on demand if it states that it is payable “on demand” or “at sight” or otherwise indicates that it is payable on demand. It also includes instruments for which no time for payment is stated. In this case, the note explicitly states “payable on demand.” Therefore, the holder of the note can properly demand payment at any time. The fact that the note was made in Omaha, Nebraska, and the maker resides in Lincoln, Nebraska, is irrelevant to the demandability of the instrument itself, as the terms of the note dictate the payment terms. The UCC, adopted by Nebraska, provides the framework for negotiable instruments. The maker’s ability to pay or the economic conditions in Nebraska do not alter the legal obligation to pay upon demand. The question tests the understanding of what constitutes a demand instrument under UCC Article 3, as adopted in Nebraska.

The question 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 Nebraska. A negotiable instrument is transferred to a party who takes it for value, in good faith, and without notice of any claim or defense. In this scenario, the negotiable instrument is a promissory note. The maker of the note, Mr. Abernathy, has a defense of material alteration, specifically the increase of the principal amount from \$5,000 to \$7,000. Under UCC § 3-305(a)(1)(iv) and § 3-407, a holder in due course is subject to defenses arising from “fraud that induced the obligor to sign the instrument with neither knowledge nor a reasonable opportunity to obtain knowledge of its important character or its essential terms.” This is known as fraudulent inducement or fraud in the factum. However, if the alteration is a mere unauthorized completion, meaning the instrument was signed with blanks that were then filled in, the HDC can enforce it as completed if they took it without notice of the completion. In this case, the alteration was a material change to an existing term (the principal amount), not filling in a blank. Therefore, Mr. Abernathy can assert the defense of material alteration against a holder in due course, but only to the extent of the alteration. The original principal amount was \$5,000. The note was altered to \$7,000. The alteration increased the amount by \$2,000. Thus, Mr. Abernathy’s liability to the HDC is limited to the original amount of \$5,000. The question asks what amount Mr. Abernathy is liable for to the HDC. The HDC can enforce the instrument according to its original tenor, which is \$5,000.

The core issue here is whether the instrument qualifies as a negotiable instrument under UCC Article 3, specifically as adopted in Nebraska. A key requirement for negotiability is that the instrument must contain an unconditional promise or order to pay a fixed amount of money. The instrument in question is a promissory note, but it contains a clause stating that payment is subject to the satisfactory completion of a construction project. This contingency directly impacts the unconditional nature of the promise. According to UCC § 3-104(a), a negotiable instrument must contain an unconditional promise or order. A promise or order is conditional if it states that payment is subject to any promise or order of the purchaser, or to any other undertaking of the seller. The clause “provided that the maker’s obligations under the attached construction contract are fully satisfied” creates such a condition precedent to payment. Therefore, the note is not negotiable. The fact that the note is payable to order and contains a fixed amount of money, and is payable on demand or at a definite time, are elements of negotiability, but they are insufficient if the unconditional promise requirement is not met. The reference to the construction contract means the holder of the note cannot be assured of payment solely from the face of the instrument without reference to external performance obligations. This makes it a non-negotiable instrument, and thus, not a “negotiable instrument” for purposes of Article 3.

The core issue revolves around the concept of holder in due course (HDC) status and the defenses available against payment on a negotiable instrument. Under UCC Article 3, as adopted in Nebraska, 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, such as forgery or material alteration, can be asserted even against an HDC. In this scenario, the note is negotiable, and it appears to meet the requirements for HDC status, assuming proper negotiation and absence of notice of defenses. The critical point is that a breach of contract by the payee (e.g., failure to deliver the antique clock) is a personal defense, not a real defense. Therefore, if the note was properly negotiated to a holder who took it for value, in good faith, and without notice of the breach of contract, that holder would be entitled to payment from the maker, even though the original payee failed to perform. The UCC specifically addresses this in provisions related to defenses against holders, distinguishing between those that cut off rights and those that do not. The question tests the understanding of which types of defenses are effective against an HDC.

The scenario involves a promissory note that is not payable to order or to bearer. Under UCC Article 3, as adopted in Nebraska, 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, and payable to order or to bearer. If an instrument is not payable to order or to bearer, it is generally not a negotiable instrument. Instead, it is treated as a simple contract for the payment of money. This means that the rights of a holder are governed by contract law, not by the special rules of Article 3, such as holder in due course status. Therefore, even if the note is transferred, the transferee does not acquire the special protections afforded to holders of negotiable instruments, including the ability to enforce the instrument free from most defenses that the maker might have against the original payee. The specific language of the note, stating it is payable “only to Ms. Anya Sharma,” explicitly negates the requirement of being payable “to order” or “to bearer,” which are essential for negotiability under UCC § 3-104. Consequently, the note is a non-negotiable instrument.

The core issue revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder. Under Nebraska’s UCC Article 3, specifically Neb. Rev. Stat. § 3-305, a holder in due course takes an instrument free from all defenses of any party to the instrument with whom the holder has not dealt except for certain real defenses. These real defenses include infancy, duress that nullifies assent, fraud that induces the obligation of a promise, discharge in insolvency proceedings, and any other discharge of which the holder has notice when taking the instrument. Personal defenses, such as breach of contract, lack or failure of consideration, or fraud in the inducement, are generally cut off by an HDC. In this scenario, the note was originally issued for a shipment of specialized agricultural equipment, which is a contractual obligation. If the equipment was defective, this would constitute a breach of contract or failure of consideration, which are personal defenses. Since the note was properly negotiated to Ms. Albright, and there is no indication she had notice of the defect or was involved in the original transaction, she is presumed to be a holder in due course. Therefore, the personal defense of breach of contract or failure of consideration cannot be asserted against her. The UCC defines a holder in due course as a holder who takes the instrument (1) for value, (2) in good faith, and (3) without notice that the instrument is overdue or dishonored or of any defense or claim to it on the part of any person. Assuming Ms. Albright meets these criteria, she takes free of the personal defenses.

The core concept here revolves around the distinction between a holder in due course (HDC) and a mere holder, particularly concerning defenses against payment on a negotiable instrument. Under Nebraska’s Uniform Commercial Code (UCC) Article 3, specifically § 3-305, an HDC takes an instrument free from most defenses that a party has against the original payee, with certain exceptions. These exceptions include real defenses, such as infancy, duress, illegality of the type that nullifies the obligation, and fraud in the factum (i.e., 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). Personal defenses, on the other hand, such as breach of contract, lack of consideration, or fraud in the inducement, are generally cut off by an HDC. In this scenario, the promissory note was initially issued to “Agri-Source Inc.” by Mr. Henderson. Agri-Source Inc. subsequently negotiated the note to “Farmstead Finance LLC.” For Farmstead Finance LLC to be an HDC, it must have taken the note for value, in good faith, and without notice that it was overdue or had been dishonored or that any defense or claim to it exists. Assuming Farmstead Finance LLC meets these criteria, it would be an HDC. The defense Mr. Henderson wishes to raise is that Agri-Source Inc. failed to deliver the promised fertilizer. This constitutes a breach of contract, which is a personal defense. Therefore, if Farmstead Finance LLC is indeed an HDC, it takes the instrument free from Mr. Henderson’s personal defense of breach of contract. Consequently, Mr. Henderson would still be obligated to pay Farmstead Finance LLC according to the terms of the note, despite the non-delivery of the fertilizer by Agri-Source Inc. The UCC’s policy is to promote the free negotiability of commercial paper by protecting good-faith purchasers.

The core issue here is whether the instrument qualifies as a negotiable instrument under UCC Article 3, specifically concerning the “fixed amount of money” requirement and the presence of additional terms. Nebraska, like other states, has adopted Article 3 of the Uniform Commercial Code. For an instrument to be negotiable, it must contain an unconditional promise or order to pay a fixed amount of money, payable on demand or at a definite time, and payable to order or to bearer. In this scenario, the promissory note includes a clause stating, “This note is secured by a mortgage on real property located in Douglas County, Nebraska.” While security agreements are common, a reference to a separate agreement that affects the promise to pay, such as allowing for acceleration or prepayment based on the terms of that separate agreement, can render the promise conditional. However, UCC § 3-104(a)(1) permits a promise or order to be unconditional even though it is accompanied by a statement of the transaction that gave rise to the instrument or a statement of collateral. The key is whether the reference itself imposes a condition on the payment obligation. A simple statement of collateral, without more, generally does not make the promise conditional. UCC § 3-106(b)(1) specifically states that an instrument is not made conditional by a further statement that collateral has been given to secure payment or by a statement that the instrument is subject to a term that permits acceleration or prepayment. Therefore, the mere mention of the mortgage as security does not destroy negotiability. The note also states, “Payable in lawful money of the United States.” This phrase simply specifies the medium of payment and does not introduce a condition that would defeat negotiability. The amount is fixed at $10,000. The note is payable to “the order of Anya Sharma,” satisfying the “to order” requirement. It is due “on demand.” Therefore, the instrument meets all the requirements for negotiability under UCC Article 3 as adopted in Nebraska.

Under Nebraska Revised Statutes Section 3-305, a holder in due course (HDC) takes an instrument free from all defenses except for real defenses. Real defenses are those that can be asserted against any holder, including an HDC. Fictitious payee situations, as described in Nebraska Revised Statutes Section 3-404(b), involve instruments payable to a payee who is not intended to have any interest in the instrument. In such cases, the instrument is deemed payable to bearer. When an instrument is payable to bearer, it can be negotiated by mere possession and delivery. If an instrument is made payable to a fictitious person and endorsed in the name of that fictitious person by the person making it payable, or by the person to whom it is delivered, then it is effective as if payable to bearer. This means that a subsequent holder who takes it in good faith, for value, and without notice of the circumstances surrounding its creation can become an HDC. Fraud in the inducement, where a party is tricked into signing an instrument but understands its nature and contents, is generally not a real defense and is cut off by an HDC. However, fraud in the factum, where a party is deceived about the nature or essential terms of the instrument itself, is a real defense. In the given scenario, the instrument was made payable to a fictitious entity, and the maker’s intent was for it to be payable to bearer. The subsequent negotiation by delivery to a holder who took it for value and without notice of the fictitious payee status would qualify that holder as an HDC. Therefore, the maker cannot assert the defense of fraud in the inducement against this HDC. The scenario describes fraud in the inducement, not fraud in the factum, and the fictitious payee rule under UCC Article 3, as adopted in Nebraska, converts the instrument to bearer paper, allowing for negotiation to an HDC who is shielded from such defenses.

The scenario involves a promissory note that contains a clause for acceleration upon default. The critical aspect is how Nebraska law, specifically UCC Article 3 as adopted by Nebraska, treats such acceleration clauses in relation to negotiability. Under UCC § 3-108(a), an instrument is payable on demand if it states that it is payable on demand, at sight, or on presentation, or otherwise indicates that it is payable at the option of a holder. However, § 3-108(b) clarifies that an instrument that is otherwise payable on demand is not rendered non-negotiable by the fact that it is subject to acceleration. This means that a provision for acceleration of the due date upon default does not destroy the negotiability of the instrument, provided the instrument otherwise meets the requirements of Article 3, such as being an unconditional promise to pay a fixed amount of money. The note in question promises to pay a fixed sum, is payable to order, and is undated but implies a fixed due date that can be accelerated. The acceleration clause, by itself, does not make the payment obligation uncertain in a way that would defeat negotiability under Nebraska’s adoption of the UCC. Therefore, the note remains negotiable.

The scenario involves a promissory note that is payable to a specific person, “Alice Smith,” and contains a clause that makes its payment dependent on the occurrence of a future event: “the successful completion of the new Lincoln Bypass construction project.” Under UCC Article 3, a negotiable instrument must be payable to order or to bearer and must be payable on demand or at a definite time. A promise to pay that is subject to a condition precedent, meaning payment is contingent upon an event that may or may not occur, renders the instrument non-negotiable. The clause “provided that payment is subject to the successful completion of the new Lincoln Bypass construction project” is a clear example of such a condition. Therefore, the note is not a negotiable instrument because it is not payable at a definite time, as its payment is uncertain and contingent on an external event. This lack of certainty violates the requirements for negotiability under Nebraska law, which follows UCC Article 3. The fact that the bypass project is eventually completed does not retroactively make the instrument negotiable from its inception.

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder under UCC Article 3, as adopted in Nebraska. A negotiable instrument must meet specific criteria to qualify, including being payable to order or bearer, for a fixed amount of money, and on demand or at a definite time. Furthermore, it 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 specific UCC exceptions. In this scenario, the promissory note contains a clause stating, “The maker agrees to pay all costs of collection, including reasonable attorney’s fees, if this note is not paid when due.” While the UCC permits reasonable attorney’s fees as part of collection costs, the inclusion of this specific clause does not fundamentally alter the unconditional nature of the promise to pay a fixed sum of money. Nebraska law, consistent with UCC § 3-104(a)(1), defines a negotiable instrument as a promise or order to pay a fixed amount of money, with or without other charges or interest. The attorney’s fees provision is generally considered an ancillary obligation that does not destroy negotiability. Therefore, if the note otherwise meets the requirements of negotiability, it remains a negotiable instrument. A holder who takes the instrument for value, in good faith, and without notice of any claim or defense against it is a holder in due course. A maker of a negotiable instrument generally cannot assert personal defenses, such as breach of contract or failure of consideration, against an HDC. However, real defenses, such as material alteration or discharge in insolvency proceedings, can be asserted against anyone, including an HDC. The question asks about the enforceability of the note against the maker by a subsequent holder who acquired it in good faith and for value, assuming the note was properly negotiated. Since the attorney’s fees clause does not prevent the note from being a negotiable instrument, and assuming no other defects, the subsequent holder, if they qualify as an HDC, can enforce the note against the maker, and the maker cannot raise personal defenses related to the underlying transaction. The correct answer is that the subsequent holder can enforce the note, subject to any real defenses.

The core issue revolves around the enforceability of a promissory note containing a confession of judgment clause. Under Nebraska law, specifically as interpreted through UCC Article 3 and related case law, a clause that allows a creditor to confess judgment against a debtor without prior notice or an opportunity for the debtor to present a defense generally renders the instrument non-negotiable. This is because such a clause violates the requirement of a definite sum of money payable, as it introduces an element of contingent liability and bypasses the ordinary legal process for determining liability. While UCC § 3-104(a) defines negotiable instruments, certain clauses can destroy negotiability. A confession of judgment clause, by its nature, can alter the rights and obligations of the parties in a way that is inconsistent with the unconditional promise to pay a fixed sum. Therefore, a note containing such a clause, even if otherwise in the form of a promissory note, cannot be treated as a negotiable instrument under UCC Article 3. This means that a holder in due course would not take the instrument free of defenses, and the instrument itself would not be subject to the streamlined rules of Article 3 for transfer and enforcement. The enforceability of the underlying debt may still exist, but it would be governed by general contract law, not the special provisions of the UCC for negotiable instruments.

The core issue here is whether the instrument qualifies as a negotiable instrument under UCC Article 3, as adopted in Nebraska. For an instrument to be negotiable, it must contain an unconditional promise or order to pay a fixed amount of money, payable on demand or at a definite time, payable to order or to bearer, and if it is an order to pay, it must identify with reasonable certainty the person to pay. In this scenario, the instrument is a draft drawn by a bank on itself. Nebraska’s UCC § 3-104(g) defines a draft that is drawn on a bank and payable on demand as a check. The instrument here is payable “on presentation,” which is equivalent to “on demand.” It specifies a fixed amount of money, “$5,000,” and is made payable to “the order of Anya Sharma.” The critical element is the phrase “subject to the conditions set forth in the accompanying collateral agreement.” This phrase introduces a condition precedent to payment, meaning payment is not absolute but contingent upon the fulfillment of terms in another agreement. Under UCC § 3-104(a)(1) and § 3-106, an instrument is not negotiable if it contains an express condition to payment. The reference to “the conditions set forth in the accompanying collateral agreement” makes the promise to pay conditional. Therefore, the instrument is not a negotiable instrument.

The scenario involves a negotiable instrument that was originally payable to “The Order of Amelia Finch.” When Amelia Finch endorsed the instrument in blank by simply signing her name on the back, the instrument became bearer paper. According to UCC § 3-205, a blank endorsement converts an order instrument into bearer paper. Bearer paper is then payable to whoever is in possession of it, regardless of their identity. Therefore, when Marcus stole the instrument, he became the lawful possessor and holder of the bearer paper. Subsequently, Marcus negotiated the instrument to Clara by mere delivery, as UCC § 3-201(b) states that negotiation of bearer paper requires only delivery. Clara, as a holder in due course (assuming she took the instrument for value, in good faith, and without notice of any claim or defense), would generally take the instrument free from most defenses and claims of ownership that Amelia might have against Marcus. However, the question asks about the validity of the negotiation from Marcus to Clara. Since the instrument was bearer paper at the time Marcus delivered it to Clara, the negotiation by delivery was valid under Nebraska law, which follows UCC Article 3. Amelia’s claim against Marcus for theft does not invalidate the negotiation from Marcus to Clara, as Clara, if she qualifies as a holder in due course, can enforce the instrument against the obligor. The core issue is the transfer of bearer paper.

Under Nebraska Revised Statutes § 28-1-201(b)(20), a holder in due course (HOC) is a holder who takes an instrument if it is taken for value; in good faith; and without notice that it is overdue or has been dishonored or of any defense or claim to it on the part of any person. When a negotiable instrument is transferred by negotiation, the transferee acquires whatever rights the transferor had. However, if the transferee qualifies as a holder in due course, they take the instrument free from all claims to it on the part of the second party and all defenses of any party to the instrument with whom the holder has not dealt, except for certain real defenses specified in the UCC. Real defenses, such as infancy, duress, illegality of the type that nullifies the obligation, or fraud in the execution, can be asserted against even a holder in due course. Personal defenses, such as breach of contract, lack of consideration, or fraud in the inducement, are cut off by a holder in due course. In this scenario, the promissory note was originally issued by Kaelen to Beatrice for the purchase of antique furniture. Beatrice then negotiated the note to Corbin. Corbin took the note for value and in good faith. Beatrice had failed to deliver the furniture as promised, which would constitute a personal defense (breach of contract) for Kaelen against Beatrice. However, since Corbin is a holder in due course, he takes the note free from this personal defense. Therefore, Kaelen cannot assert the defense of breach of contract against Corbin. The UCC, as adopted in Nebraska, prioritizes the free flow of commerce by protecting holders in due course from personal defenses, ensuring that negotiable instruments can be readily transferred and relied upon.

The scenario involves a promissory note that was transferred by indorsement. The critical issue is whether the indorsement was restrictive and, if so, what effect it has on the negotiation of the instrument. Under UCC Article 3, a restrictive indorsement, such as “Pay to the order of [Payee] only,” or “For deposit only,” limits further negotiation of the instrument. When an instrument is indorsed restrictively, a subsequent holder who is not the indorsee takes the instrument subject to the restriction. In this case, the indorsement “Pay to the order of Eleanor Vance, for deposit only” is a restrictive indorsement. This means that Eleanor Vance can deposit the check into her account, but she cannot further negotiate it to another party for value or as a holder in due course. Therefore, when Eleanor Vance attempts to indorse the note to Finnigan O’Malley, Finnigan cannot become a holder in due course because the instrument’s negotiability was terminated by the restrictive indorsement. The indorsement “for deposit only” is a specific type of restrictive indorsement that directs the payment of the instrument to a particular purpose or to a particular bank for deposit. Any subsequent holder who takes the instrument after such a restrictive indorsement, without the restriction being fulfilled, cannot acquire the rights of a holder in due course. The UCC, as adopted in Nebraska, specifies that a restrictive indorsement does not prevent further transfer or negotiation, but it may prevent a transferee from becoming a holder in due course. Specifically, UCC § 3-206 states that if an indorsement is restrictive, the payer or drawee is not required to pay the instrument if the payment is not consistent with the indorsement. More importantly for negotiation, a person who takes an instrument with a restrictive indorsement cannot become a holder in due course. Therefore, Finnigan O’Malley, taking the instrument after Eleanor Vance’s restrictive indorsement, is subject to any defenses that could be asserted against Eleanor Vance, and he cannot claim the protected status of a holder in due course.

The scenario involves a promissory note that is payable “on demand” and contains a clause allowing the maker to defer payment if crop prices fall below a certain threshold. Under UCC Article 3, as adopted in Nebraska, a promise to pay that is subject to a condition precedent, meaning payment is contingent upon an event that may or may not occur, is generally not considered a negotiable instrument. Specifically, UCC § 3-104(a)(3) requires that an instrument be payable without condition except as authorized by the article. While UCC § 3-105(a)(1) permits a promise to pay to be unconditional even though it is subject to a statement of any transaction from which the instrument arose, or to state that it is secured or unsecured, it does not permit conditions that affect the duty to pay. The deferral clause based on crop prices is a condition that can prevent the note from being payable on demand or at a definite time, thus violating the unconditional promise requirement for negotiability. The instrument is therefore not a negotiable instrument.

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder under UCC Article 3, as adopted in Nebraska. A negotiable instrument must meet specific requirements to be considered such, including being payable on demand or at a definite time, and containing an unconditional promise or order to pay a sum certain in money. The instrument in question is a promissory note, which is a type of negotiable instrument. For a party to be a holder in due course, they must take the instrument for value, in good faith, and without notice of any defense or claim to the instrument. If a party qualifies as an HDC, they are generally protected from all defenses except real defenses, which include infancy, duress, illegality of the type that nullifies the obligation, fraud in the execution, discharge in insolvency proceedings, and accommodation parties. 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, Mr. Abernathy purchased the note from Ms. Gable. To determine if Abernathy is an HDC, we assess if he took the note for value, in good faith, and without notice. Assuming Abernathy paid value (which is implied by the purchase) and acted in good faith, the crucial element is notice. If Abernathy knew about the underlying dispute between Gable and the maker, he would not be an HDC. However, the question states he had no knowledge of the “specific details” of the dispute. This phrasing is critical. UCC § 3-302(b) states that a holder cannot be an HDC if the holder had notice of an asserted defense or claim. Notice can be actual knowledge or reason to know. If Abernathy was aware of the existence of a dispute, even without knowing the specifics, he might be deemed to have notice of a defense. The scenario implies he was aware of a dispute, making it plausible he had notice of a defense. Therefore, he would likely not be an HDC. If Abernathy is not an HDC, he takes the note subject to all defenses that were available to the maker against the original payee (Ms. Gable). The maker’s defense of fraudulent inducement (being tricked into signing the note due to misrepresentations about the business venture) is a personal defense. Since Abernathy likely is not an HDC, he cannot cut off this personal defense. The maker can assert the defense of fraudulent inducement against Abernathy. The calculation is conceptual: HDC status determines whether personal defenses are cut off. If Abernathy is not an HDC, the maker’s personal defense of fraud in the inducement is valid against Abernathy. Thus, the maker can refuse payment.

The core issue here is whether the instrument qualifies as a negotiable instrument under UCC Article 3, specifically as adopted in Nebraska. For an instrument to be negotiable, it must contain an unconditional promise or order to pay a fixed amount of money, payable on demand or at a definite time, payable to order or to bearer, and must not state any other undertaking or instruction by the party giving the promise or order to do any act in addition to the payment of money. In this scenario, the promissory note contains a clause stating that the maker will pay the principal sum of \$10,000.00 to the order of Ms. Eleanor Vance. However, it also includes a clause stating, “The payment of this note is subject to the successful completion of the irrigation system upgrade at the maker’s farm, as certified by Agri-Solutions Inc.” This conditionality, where payment is contingent upon an external event (successful completion of the upgrade and certification), renders the promise not unconditional. Under UCC § 3-104(a), an instrument must contain an unconditional promise or order. A promise or order is conditional if it states an obligation to do any act in addition to the payment of money, or if it states that the promise or order is subject to any condition. The certification by Agri-Solutions Inc. is an external condition precedent to payment, thus making the promise conditional and destroying negotiability. Therefore, the instrument is not a negotiable instrument.

The scenario involves a draft, which is a type of negotiable instrument. A draft is an order by one party (the drawer) to another party (the drawee) to pay a specified sum of money to a third party (the payee). In this case, the document is drawn by Ms. Albright on “The First National Bank of Omaha” (the drawee) and made payable to Mr. Chen (the payee). The key issue is whether the instrument is properly payable. Under UCC Article 3, a draft is a negotiable instrument if it is 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 containing no other promise, order, obligation, or power except as authorized by Article 3. The phrase “upon satisfactory completion of the building project” introduces a condition. For an order to pay to be unconditional, it must not be subject to any contingency other than the passage of time or the happening of a collateral event. A condition precedent to payment, such as satisfactory completion of a project, renders the instrument non-negotiable. While the instrument may still be a valid contract, it loses its status as a negotiable instrument under UCC Article 3, meaning it cannot be negotiated free from defenses that might be available against the drawer. Therefore, The First National Bank of Omaha is not obligated to pay the draft merely because it was presented by Mr. Chen. The bank’s obligation, if any, would depend on its separate agreement with Ms. Albright, not on the negotiable instrument status of the document. The UCC specifically addresses conditions in Section 3-104(a)(1), which requires an unconditional promise or order. A condition precedent, like the satisfactory completion of a project, violates this requirement.

Under Nebraska Revised Statutes § 28-1-201(b)(20), a holder in due course (HDC) is a holder of a negotiable instrument who takes the instrument: (1) for value; (2) in good faith; and (3) without notice that the instrument is overdue or has been dishonored or of any defense against or claim to the instrument on the part of any person. For a purchaser to take for value, they must have given consideration sufficient to support a simple contract. Nebraska Revised Statutes § 3-303(a) specifies that value is given for a negotiable instrument if the holder takes the instrument for immediate performance of a money obligation or for the remittance of money. In the scenario provided, the bank accepted the promissory note as collateral for a pre-existing debt owed by the transferor. Under Nebraska law, taking an instrument as security for a pre-existing debt constitutes taking for value. Therefore, the bank meets the “for value” requirement of being a holder in due course. The question hinges on whether the bank had notice of any defenses or claims. Since the facts state the bank had no knowledge of any issues, it also meets the good faith and lack of notice requirements. Consequently, the bank qualifies as a holder in due course.

The core concept here is the distinction between a holder in due course (HDC) and a mere holder of a negotiable instrument, particularly concerning defenses available against payment. Under UCC Article 3, as adopted in Nebraska, a person who takes an instrument for value, in good faith, and without notice of any claim or defense against it is an HDC. An HDC takes the instrument free from most real defenses (like forgery, material alteration, infancy, duress, illegality, and discharge in insolvency) but is subject to personal defenses (like breach of contract, fraud in the inducement, lack of consideration, or undue influence). In this scenario, the promissory note is negotiable. However, the critical fact is that Beatrice had notice of the potential dispute regarding the quality of the goods before she acquired the note. Specifically, she was informed by Arthur that the stereo system was defective and that Arthur intended to raise this as a defense against payment. This knowledge prevents Beatrice from qualifying as a holder in due course because she did not take the instrument in good faith and without notice of a defense. Therefore, Arthur can assert the defense of breach of warranty against Beatrice. Since Beatrice is not an HDC, she is subject to the same defenses that Arthur could have asserted against the original payee, the electronics retailer. The retailer’s breach of warranty constitutes a personal defense that is effective against a holder who is not an HDC.

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder under UCC Article 3, as adopted in Nebraska. A negotiable instrument is transferred by endorsement and delivery. When a person takes an instrument for value, in good faith, and without notice of any defense or claim to the instrument, they become a holder in due course. An HDC takes the instrument free from most real defenses, such as infancy, duress, illegality of a type that nullifies the obligation, and fraud in the factum (or fraud that induces the obligor to sign the instrument with neither knowledge nor reasonable opportunity to learn of its character or essential terms). However, an HDC is subject to personal defenses, such as breach of contract, lack of consideration, or fraud in the inducement. In this scenario, the promissory note is a negotiable instrument. Ms. Albright, a bona fide purchaser for value, acquired the note without notice of any issues. The defense of fraud in the inducement, where Mr. Henderson was tricked into signing the note by misrepresentations about the investment’s profitability, is a personal defense. Therefore, Ms. Albright, as an HDC, can enforce the note against Mr. Henderson, despite the fraudulent inducement. The UCC provisions in Nebraska, specifically mirroring the Uniform Commercial Code, protect HDCs from personal defenses to promote the free negotiability of commercial paper.

The core issue revolves around the negotiability of a draft that contains a clause allowing the drawer to alter the interest rate based on future market conditions. Under UCC Article 3, specifically Nebraska’s adoption of it, a negotiable instrument must contain an unconditional promise or order to pay a fixed amount of money. A fixed amount is generally understood to be a sum that is ascertainable at the time the instrument is issued. A clause that permits the drawer to unilaterally change the interest rate based on an external, fluctuating market condition introduces uncertainty and contingency into the amount payable. This kind of provision, which allows for modification of the payment amount at the discretion of one party or based on an unstated external event, typically destroys negotiability. The UCC permits variable interest rates if they are based on a stated U.S. government bond or a rate described in the instrument itself, as per \(3-112(b)\). However, a clause that allows the drawer to adjust the rate based on unspecified “market conditions” is too vague and subjective, making the exact amount of money payable uncertain at the time of issuance. Therefore, such a draft would not qualify as a negotiable instrument under UCC Article 3, as it fails the “fixed amount” requirement.