Under Missouri’s adoption of UCC Article 3, a holder in due course (HOC) takes an instrument free from most defenses, including claims of another party to the instrument and defenses of a kind that the law generally prohibits asserting against a holder in due course. However, certain real defenses, such as infancy, duress, illegality of the transaction, and discharge in insolvency proceedings, can be asserted even against an HOC. For a party to qualify as an HOC, they must take the instrument for value, in good faith, and without notice that it is overdue or has been dishonored or that there is any defense or claim to it on the part of any person. If a negotiable instrument is transferred without endorsement, the transferee does not become a holder, let alone a holder in due course, even if they paid value and took in good faith. This is because negotiation of an order instrument requires endorsement, and a bearer instrument must be taken by delivery. Without proper negotiation, the transferee takes the instrument subject to all claims and defenses. In this scenario, the instrument was an order instrument, requiring endorsement. Since it was not endorsed, the transfer was incomplete. Therefore, the transferee, even if they met the other criteria for HOC status, could not claim HOC protection against the maker’s defenses. The protection afforded to an HOC is a creature of statute and hinges on the proper negotiation of the instrument.

Under Missouri’s Uniform Commercial Code (UCC) Article 3, a person who signs a negotiable instrument is an “accommodating party” if they sign the instrument in any capacity for another party to the instrument with the intention of lending their name and credit to that party. This accommodation can be for the benefit of the maker, drawer, acceptor, or even another accommodation party. The UCC provides that an accommodation party is liable in the capacity in which they sign, but they have a right of recourse against the party accommodated. This means that if the accommodation party is required to pay the instrument, they can seek reimbursement from the party for whom they lent their credit. The UCC explicitly states that “an accommodation party is not liable to the party accommodated.” This is a key protection for the accommodation party. Therefore, if Ms. Albright signs a promissory note as a co-maker to help her cousin, Mr. Vance, obtain a loan from the First National Bank of St. Louis, and Mr. Vance is the primary obligor, Ms. Albright is an accommodation party. If Ms. Albright is forced to pay the note to the bank, she cannot recover the amount paid from Mr. Vance because he is the accommodated party.

The core issue here revolves around the concept of “holder in due course” (HDC) status and the defenses available against an HDC. Under UCC Article 3, as adopted in Missouri, a person who takes an instrument for value, in good faith, and without notice of any claim or defense against it is a holder in due course. However, certain defenses are “real defenses” which can be asserted even against an HDC. Forgery is a real defense, meaning it can be raised against anyone, including an HDC. In this scenario, the promissory note was materially altered by adding the late fee clause without the maker’s consent. Material alteration is also considered a real defense under UCC § 3-305(a)(2) and § 3-407. This defense is effective against a holder in due course, except in the case of a fraudulent and material alteration. However, the alteration here, while material, is not described as fraudulent in its inception. The UCC also provides that an issuer is not liable on an instrument if it is not delivered (UCC § 3-309), but delivery is presumed. The question of whether the note was “issued” implies delivery. The crucial point is that the material alteration, which changes the obligation of the maker, can be asserted as a defense against an HDC. Therefore, the maker can assert the defense of material alteration against Amelia, even if she qualifies as a holder in due course. The fact that the note was made in Missouri is relevant as UCC Article 3 is state law. The explanation of why the other options are incorrect lies in the nature of defenses against an HDC. Payment and discharge are typically defenses against a holder, but an HDC takes free of such defenses unless they have notice. Lack of consideration is a personal defense, which is cut off by HDC status. Therefore, only a real defense, such as material alteration or forgery, can be asserted against an HDC.

The core issue here is determining whether the instrument qualifies as a negotiable instrument under UCC Article 3, as adopted in Missouri. For an instrument to be negotiable, it must meet several criteria, 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. In this scenario, the phrase “subject to the terms and conditions of the collateral agreement dated January 15, 2023” creates a contingency. This language makes the payment obligation conditional upon the performance or terms outlined in the separate collateral agreement. Such a condition destroys the negotiability of the instrument because the holder’s right to payment is not solely based on the instrument itself but is tied to an external document and its stipulations. Under Missouri law, as per UCC § 3-104, an instrument that is subject to any other writing, other than as provided in this section, is not negotiable. The inclusion of a reference to another agreement that dictates terms of payment or performance renders the promise conditional. Therefore, the instrument is not a negotiable instrument and cannot be enforced by a holder in due course.

Under Missouri law, specifically UCC Article 3, a holder in due course (HOC) is a holder who takes an instrument if it is: 1) an order instrument payable to bearer or identified to the holder; 2) the holder is in possession of it; 3) it is taken for value; 4) in good faith; and 5) without notice that it is overdue or has been dishonored or that there is any defense or claim to it on the part of any person. The scenario describes a promissory note for $5,000 payable to “cash” which is a bearer instrument. The note was originally issued by Bartholomew, who later discovered the underlying transaction was fraudulent. Amelia purchased the note from the original payee, Cedric, who was the fraudulent party. Amelia paid $4,800 for the note. Amelia had no knowledge of the fraud at the time of purchase. The value given for the note was $4,800, which is considered “value” under UCC 3-303. Amelia took the note in good faith and without notice of any defense or claim. Therefore, Amelia qualifies as a holder in due course. As a holder in due course, Amelia takes the instrument free from all defenses of any party to the instrument with whom the holder has not dealt, except for certain real defenses listed in UCC 3-305(a)(1). Fraud in the inducement, as described in the scenario, is a personal defense and is cut off by a holder in due course. Therefore, Bartholomew cannot assert the fraud defense against Amelia.

The scenario describes a situation involving a negotiable instrument where the maker’s signature is forged. Under Missouri law, specifically UCC Article 3, a forged signature is wholly inoperative. This means that the forged signature does not transfer any rights to the instrument or create any liability for the person whose signature was forged. Consequently, the purported maker, Ms. Eleanor Vance, is not bound by the instrument. The holder of the instrument, Mr. Silas Croft, cannot enforce it against Ms. Vance. The question of who bears the loss is typically determined by who dealt with the forger. In this case, the bank that paid the instrument on the forged endorsement would likely be responsible for the loss, as they failed to obtain a valid endorsement from the payee. However, the direct liability for Ms. Vance is non-existent due to the forgery. The core principle is that a signature must be genuine to bind the purported signer. Any instrument bearing a forged signature lacks the essential element of authorization from the named party. Therefore, Ms. Vance is not obligated to honor the note.

The core concept here is the distinction between a holder in due course (HDC) and a mere holder, and how the rights of an HDC are superior to those of a holder in certain situations involving defenses. A negotiable instrument is transferred by negotiation. Negotiation occurs by delivery if the instrument is payable to bearer, or by indorsement and delivery if it is payable to a specific person. An indorsement is a signature, other than that of a maker, drawer, or acceptor, that alone or accompanied by other words is made on an instrument for the purpose of negotiating the instrument, restricting payment of the instrument, or completing it, or on a paper affixed to the instrument for that purpose. A special indorsement specifies the person in whose favor it is made. A blank indorsement is made by an indorser that is not special or is made by a bearer instrument. In Missouri, under UCC Article 3, a person to whom an instrument is transferred, and who takes it for value, in good faith, and without notice of any claim of the instrument or defense against it, is a holder in due course. If an instrument is specially indorsed, the special indorsee becomes a holder. If it is then indorsed in blank, it becomes payable to bearer. If it is then specially indorsed again, it becomes payable to the special indorsee. The question describes a scenario where a check payable to “Cash” is transferred by delivery. A check payable to “Cash” is a bearer instrument. Therefore, it can be negotiated by mere delivery. The initial transfer to Mr. Abernathy by delivery makes him a holder. When Mr. Abernathy then specially indorses the check to Ms. Bell, he is effectively making the instrument payable to Ms. Bell. Ms. Bell, by taking the instrument for value, in good faith, and without notice of any defect or defense, would become a holder in due course. However, the question focuses on the status of Ms. Bell after receiving the instrument, and the nature of the indorsement. The crucial point is that Mr. Abernathy, by writing “Pay to the order of Ms. Bell” and signing it, has specially indorsed the instrument. This transforms it from a bearer instrument (payable to Cash, negotiated by delivery) into an instrument payable to a specific person (Ms. Bell), which can then be negotiated by Ms. Bell’s indorsement and delivery. The initial transfer to Abernathy was valid by delivery. The subsequent transfer to Bell was by special indorsement and delivery. Thus, Ms. Bell is a holder. The scenario describes a check originally payable to “Cash.” Under UCC § 3-109(a)(3) (as adopted in Missouri), an instrument is payable to bearer if it states that it is payable to bearer or to the order of bearer, or to a fictitious person or to any other indicated person not representing the actual person. A check payable to “Cash” is treated as payable to bearer. Therefore, it can be negotiated by delivery alone. Mr. Abernathy received the check by delivery, making him a holder. When Mr. Abernathy indorsed the check by writing “Pay to the order of Ms. Bell” and signing his name, he made a special indorsement. A special indorsement converts a bearer instrument into an instrument payable to a specific person. Thus, after Mr. Abernathy’s indorsement, the check is payable to Ms. Bell. To negotiate the instrument further, Ms. Bell would need to indorse it. Therefore, Ms. Bell is a holder of the instrument. The question asks about Ms. Bell’s status after Abernathy’s special indorsement. She is a holder, and if she meets the other criteria (value, good faith, no notice), she could be a holder in due course. The core of the question is the effect of the special indorsement on the instrument’s negotiability and Ms. Bell’s status. Calculation: 1. Instrument is payable to “Cash.” Under UCC § 3-109(a)(3), this is a bearer instrument. 2. Bearer instruments are negotiated by delivery. Mr. Abernathy receives it by delivery, becoming a holder. 3. Mr. Abernathy specially indorses the instrument to Ms. Bell by writing “Pay to the order of Ms. Bell” and signing. 4. A special indorsement converts a bearer instrument into an instrument payable to the specified person (Ms. Bell). 5. Therefore, Ms. Bell is a holder of the instrument. The final answer is \( \text{Holder} \).

The scenario involves a promissory note payable to “Bearer” which was endorsed in blank by the original payee. A holder in due course (HDC) status is determined by fulfilling specific criteria outlined in UCC Article 3, particularly regarding taking the instrument for value, in good faith, and without notice of any defense or claim. In Missouri, as under the UCC generally, a blank endorsement converts an instrument payable to order into an instrument payable to bearer. Consequently, possession of the instrument is sufficient to establish standing to enforce it. The question hinges on whether the subsequent holder, who received the note after it was endorsed in blank, can qualify as a holder in due course. To achieve HDC status, the holder must have taken the instrument without notice of any claims or defenses against it. The fact that the note was originally issued for a fraudulent purpose by the maker, and that the current holder knew of this fraud at the time of acquisition, directly prevents them from meeting the “without notice” requirement. Therefore, even though the instrument is bearer paper due to the blank endorsement, and the holder possesses it, the holder’s knowledge of the underlying fraud bars them from HDC status. This means the maker can assert their defenses against this holder. The key concept here is that a holder in due course takes free of most defenses, but a holder who has notice of a defense cannot be an HDC. The Missouri UCC, specifically in sections analogous to UCC § 3-302 and § 3-305, defines these rights and limitations.

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder under Missouri’s Uniform Commercial Code (UCC) Article 3. A party seeking to enforce an instrument as an HDC must take the instrument (1) for value, (2) in good faith, and (3) without notice of any claim to it or defense against it. In this scenario, the instrument was an overdue promissory note. Missouri UCC § 3-302(a)(2) defines a holder in due course as a holder of an instrument if the instrument is taken when it is overdue or in default with respect to a payment of principal or interest. An instrument is overdue when the day after the due date has passed. Since the note was due on June 1st and presented for payment on June 5th, it was overdue. Therefore, the bank, by taking an overdue instrument, cannot qualify as a holder in due course. Consequently, all defenses available to the maker against the original payee are also available against the bank. The defense of failure of consideration is a real defense, meaning it can be asserted against any holder, including an HDC, but more importantly, it can be asserted against a holder who is not an HDC. Because the bank is not an HDC, the maker can assert the defense of failure of consideration.

The core issue revolves around the concept of holder in due course (HDC) status and the defenses available against an HDC. Under Missouri law, which largely follows UCC Article 3, a person who takes an instrument for value, in good faith, and without notice of any claim or defense to the instrument is a holder in due course. However, certain defenses are “real defenses,” meaning they can be asserted even against an HDC. Forgery is a prime example of a real defense. If a signature on an instrument is forged, that instrument is generally void and cannot be enforced by anyone, including an HDC. The UCC specifically addresses this in Section 3-305(a)(1)(A), which states that the obligation of an obligor is subject to a defense of a kind that would be available in a contract for a simple contract, and this includes forgery. In this scenario, the promissory note was initially validly executed by Ms. Gable. However, Mr. Finch, without Ms. Gable’s authority, altered the principal amount of the note before negotiating it to Mr. Sterling. This alteration, specifically the increase in the principal amount, constitutes a material alteration. Under UCC 3-407(a), a material alteration of an unauthorized signature or an incomplete instrument can discharge an obligation. More importantly, under UCC 3-407(b), if other authorized terms are materially altered, the instrument may be enforced according to its original tenor by a holder in due course. However, the crucial point here is that Mr. Finch’s act of increasing the principal amount without Ms. Gable’s consent is effectively a forgery of her signature to that increased amount. Therefore, Ms. Gable can assert the defense of forgery to avoid liability on the note as altered. Mr. Sterling, even if he were an HDC, cannot enforce a note that is void due to forgery. The UCC’s provisions on defenses, particularly real defenses like forgery, override the protections afforded to HDCs in such circumstances. The question hinges on whether the alteration is considered a forgery of Ms. Gable’s signature for the increased amount, which it is, thus rendering the note unenforceable against her in its altered form.

The scenario involves a negotiable instrument that was initially issued in Missouri. The instrument is a draft payable to “cash” and is signed by the drawer, indicating it is an order to pay. The UCC, adopted in Missouri as Article 3, defines a draft as a draft that is payable to bearer or to order. Since the draft is payable to “cash,” it is considered payable to bearer. When a bearer instrument is transferred by delivery, the transfer is effective. The question asks about the legal status of the holder, Ms. Anya Sharma, who received the instrument from Mr. Ben Carter. Mr. Carter obtained the instrument from the original payee, Mr. David Lee, who was the drawer. The critical element here is whether Mr. Carter was a holder in due course (HDC). The facts state that Mr. Carter knew the instrument was issued for a gambling debt, which is generally considered an illegal consideration. Knowledge of an illegality of consideration is a defense against payment. Therefore, Mr. Carter likely did not take the instrument for value or in good faith, and thus is not an HDC. Consequently, Ms. Sharma, who received the instrument from Mr. Carter, cannot be a holder in due course either, as she can only acquire the rights of her transferor, Mr. Carter. Since Mr. Carter was subject to the defense of illegality of consideration, Ms. Sharma is also subject to this defense. Under Missouri law, an instrument taken for a gambling debt can be enforced only by a holder in due course. As Ms. Sharma is not an HDC, the maker, Mr. Elias Vance, has a defense against her claim. The instrument’s negotiability is not in question; it is a bearer instrument. The issue is the enforceability against the maker when the holder is not an HDC and the instrument was issued for an illegal consideration. The maker can assert the defense of illegality of consideration against anyone who is not an HDC.

The scenario describes a negotiable instrument, specifically a promissory note, that is payable to a specific individual, Elara Vance. The core issue is whether a subsequent holder, who received the note after its maturity date, can enforce it against the maker, Mr. Abernathy. Under Missouri’s Uniform Commercial Code (UCC) Article 3, specifically concerning negotiation and holder in due course status, a transferee who takes an instrument after its due date generally takes it subject to all defenses and claims that are available against the transferor. This is because taking an instrument after maturity signals a potential problem or lack of good faith, preventing the transferee from being a holder in due course (HDC). An HDC takes an instrument for value, in good faith, and without notice that it is overdue or dishonored or of any defense or claim to it. Since the note was due on June 1, 2023, and Mr. Abernathy received it on July 15, 2023, he received it after maturity. Therefore, he cannot claim HDC status. As a result, he is subject to any defenses Mr. Abernathy might have against the original payee, Elara Vance, such as failure of consideration or fraud in the inducement. However, the question asks if Mr. Abernathy can enforce the note, implying whether he has the right to collect. Even without HDC status, a holder can still enforce an instrument, but they are subject to defenses. The question does not present any defenses Mr. Abernathy has. The ability to enforce is distinct from the ability to enforce as an HDC free from defenses. A holder can enforce the instrument according to its terms unless a defense is established. Therefore, Mr. Abernathy, as a holder, can enforce the note, but any defenses Elara Vance’s original agreement might have allowed Mr. Abernathy to raise would still be valid. The question is framed around enforceability, not the absence of defenses. Therefore, Mr. Abernathy can enforce the note, albeit subject to any applicable defenses.

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, an HDC takes an instrument free from most defenses that are personal between the original parties, but not from real defenses. A real defense is one that can be asserted against any holder, including an HDC. Forgery is universally recognized as a real defense because a forged signature is generally void and cannot create liability. Therefore, even if Ms. Albright qualifies as an HDC, she cannot enforce a note that bears a forged maker’s signature. The UCC specifically addresses this in Section 3-305(a)(1)(A), which states that an HDC takes subject to defenses of any party to the instrument that arise from the contract under which the instrument was issued or from which the issuer’s defense of forgery of the issuer’s signature is available. In Missouri, as in other states that have adopted UCC Article 3, this principle holds true. The fact that the note was made in Missouri is relevant to jurisdiction and governing law, but the fundamental principles of negotiable instruments law regarding forgery as a real defense are consistent. The question is designed to test the understanding of the distinction between real and personal defenses and the protection afforded to an HDC.

The scenario involves a negotiable instrument that was originally payable to order but was later restrictively endorsed. A restrictive endorsement, such as “Pay to the order of Agnes, for deposit only,” limits the further negotiation of the instrument. Under Missouri’s UCC Article 3, specifically regarding restrictive endorsements, a person who takes an instrument with notice of a restrictive endorsement generally cannot become a holder in due course (HDC) if they fail to adhere to the terms of the restriction. Agnes, by endorsing the check to Bartholomew with a simple endorsement, did not fulfill the condition of the restrictive endorsement “for deposit only.” Bartholomew, by accepting the check under these circumstances, cannot claim HDC status because the restrictive endorsement put him on notice of the condition. Therefore, the bank, which received the check from Bartholomew and deposited it into his account, is also subject to the restriction. Since the bank facilitated the deposit without Agnes’s endorsement being properly completed according to the restriction, the bank cannot be a holder in due course and is liable for conversion or breach of warranty. The UCC § 3-206 in Missouri addresses the effect of restrictive endorsements. An intermediary bank or a bank that takes the instrument for collection is discharged from its obligation to pay the instrument if it pays the instrument in accordance with the restriction. However, if the bank does not act in accordance with the restriction, it may be liable. In this case, the bank accepting the deposit of a restrictively endorsed instrument without further endorsement that complies with the restriction is not protected. The bank’s action of allowing Bartholomew to deposit a check restrictively endorsed “for deposit only” to Agnes’s account into Bartholomew’s account, without Agnes’s proper endorsement to Bartholomew or directly for deposit into Agnes’s account, means the bank did not act in accordance with the restriction. Consequently, the bank is not discharged and remains liable.

No calculation is required for this question. This question tests the understanding of the interplay between a holder in due course status and the defenses available against them under UCC Article 3, specifically as adopted in Missouri. A holder in due course (HDC) takes an instrument free from all defenses of any party to the instrument with whom the holder has not dealt, except for real defenses. Real defenses are a limited set of defenses that can be asserted even against an HDC. These typically include infancy, illegality of a type that renders the obligation void, fraud in the factum (real fraud), discharge in insolvency proceedings, and certain types of forgery or material alteration. 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 Missouri, as in other states, the UCC codifies these principles. Therefore, when evaluating a claim by a holder in due course, one must distinguish between real and personal defenses. If a defense is personal, the HDC prevails. If it is a real defense, the HDC’s claim is subject to that defense. The scenario presented involves a negotiable instrument acquired by an individual who likely qualifies as a holder in due course. The key is to identify which of the potential defenses raised by the maker would be effective against such a holder.

The core issue here is whether the instrument qualifies as a negotiable instrument under UCC Article 3, as adopted in Missouri. For an instrument to be negotiable, it must meet several criteria, 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 Master Lease Agreement dated January 15, 2023” renders the promise to pay conditional. UCC § 3-104(a)(1) requires that a negotiable instrument be an “unconditional promise or order.” UCC § 3-106(b)(1) states that a promise or order is conditional if it states an obligation to do any act in addition to the payment of money, or if all or part of the promise or order is subject to, or governed by, another writing. The reference to the Master Lease Agreement, which likely contains terms beyond mere payment, makes the payment contingent upon adherence to that separate agreement. Therefore, the promissory note is not negotiable. The fact that the note is payable to a specific person, “Eleanor Vance,” and is signed by the maker, “Arthur Finch,” are elements of a negotiable instrument, but the conditionality overrides these. Missouri law, following the UCC, strictly enforces the negotiability requirements.

The core issue revolves around the enforceability of a promissory note that was materially altered after its issuance. Under Missouri’s Uniform Commercial Code (UCC) Article 3, specifically concerning negotiable instruments, a holder in due course (HDC) takes an instrument free from most defenses that are not apparent on the face of the instrument. However, the UCC also carves out exceptions for certain defenses. A material alteration that changes the contract of any party is a defense against a holder not in due course. For an HDC, a material alteration is generally a defense against payment, but there’s a crucial exception: if the alteration was made by the holder of the instrument, it is not a defense against a holder in due course. Conversely, if the alteration was made by someone other than the holder, or if the alteration was unauthorized and fraudulent, it can be a defense. In this scenario, the note was altered by adding “with interest at 10% per annum” after it was signed by Ms. Albright. This is a material alteration because it changes the obligation of the maker. The critical factor is who made the alteration and whether the current holder is a holder in due course. If the alteration was made by the original payee, and the current holder acquired the note with knowledge of this alteration, they would not be an HDC and the alteration would be a defense. However, if the current holder acquired the note without notice of the alteration and gave value, they would be an HDC. The UCC, specifically in \(400.3-305(b)\) in Missouri’s adoption, states that an instrument that is altered is enforceable by a holder in due course according to its original tenor. This means an HDC can enforce the instrument as it was originally written, before the alteration. If the alteration was fraudulent and made by the holder, it would discharge any party whose contract was not an unconditional promise to pay, but an HDC can still enforce it according to its original tenor. The question implies the note was originally payable without interest. The alteration added interest. An HDC can enforce the note for the principal amount without interest. Therefore, the holder in due course can enforce the note according to its original tenor, which means for the principal amount without the added interest.

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 Missouri. A key aspect of HDC status is taking the instrument for value, in good faith, and without notice of any claim or defense. If a party qualifies as an HDC, they take the instrument free from most personal defenses, but not from real defenses. Real defenses, such as infancy, duress, illegality, and discharge in insolvency proceedings, can be asserted even against an HDC. Personal defenses, on the other hand, such as breach of contract, lack of consideration, or fraud in the inducement, are cut off by an HDC. In this scenario, the promissory note was originally given for the purchase of a flawed antique automobile. The seller’s misrepresentation regarding the car’s condition constitutes fraud in the inducement, which is a personal defense. The buyer’s subsequent discovery of the flaws and the seller’s failure to rectify them would typically allow the buyer to assert this defense against the original payee. However, if the bank, acting as the current holder, acquired the note for value, in good faith, and without notice of the fraud in the inducement, it would be a holder in due course. As an HDC, the bank would be protected from the personal defense of fraud in the inducement. Therefore, the bank can enforce the note against the buyer, notwithstanding the misrepresentation concerning the automobile’s condition, provided the bank meets all the requirements of a holder in due course. The UCC, specifically Article 3 as implemented in Missouri, delineates these protections.

This question probes the concept of presentment warranties under UCC Article 3, specifically as adopted in Missouri. Presentment warranties are made by a person who obtains payment or acceptance of a draft, or who transfers an instrument for collection. These warranties are designed to protect the party to whom the instrument is presented. Under UCC § 3-417(a), a person who, with respect to an instrument, presents it for acceptance or payment makes certain warranties to a drawee or acceptor that is entitled to payment or acceptance, and to any other person who in good faith pays the instrument. These warranties include that 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, and that the instrument has not been altered. If a presenter breaches these warranties, the party who paid or accepted the instrument may recover damages. In this scenario, the instrument presented by Mr. Abernathy was forged. A forged signature is generally not effective as the signature of the person whose name is on it, and therefore the presenter is not entitled to enforce the instrument. Consequently, the presentment warranty that the presenter is entitled to enforce the instrument is breached. Missouri law, following the Uniform Commercial Code, places the risk of loss from a forged indorsement on the party who ultimately bears the loss, which in this case is the bank that paid the instrument, as the presenter warranted they were entitled to enforce it.

In Missouri, under UCC Article 3, the concept of a holder in due course (HDC) is central to the enforceability of negotiable instruments against subsequent parties. A party qualifies as an HDC if they take an instrument for value, in good faith, and without notice of any claim or defense. The scenario involves a promissory note initially issued by Ms. Albright to Mr. Benson. Mr. Benson then negotiates this note to Ms. Chen. To determine if Ms. Chen is an HDC, we must examine these three criteria. First, value was given, as Ms. Chen purchased the note. Second, good faith is presumed unless evidence suggests otherwise; there’s no indication of bad faith. Third, and critically, Ms. Chen must not have had notice of any defenses Ms. Albright might have against Mr. Benson. The question states Ms. Chen received the note after its due date. Under Missouri law, an instrument that is taken after it is overdue is generally not considered taken without notice of a claim or defense. Specifically, UCC § 3-304(a)(2) states that a purchaser has notice of a claim or defense if the instrument is so overdue that there is a known risk of dishonor. While the exact amount of interest due is not provided, the fact that the note is past its due date implies a potential for dishonor or the assertion of defenses by the maker. Therefore, Ms. Chen, by taking the note after its due date, likely had notice of a potential defense, preventing her from achieving HDC status. Consequently, Ms. Albright can assert any defenses she had against Mr. Benson against Ms. Chen. The UCC does not provide a specific numerical threshold for “overdue” that automatically negates HDC status beyond the due date itself, but the passage of time beyond the due date creates a presumption of notice.

The scenario involves a negotiable instrument that was originally payable to “Cash” and then endorsed in blank by the payee. When a negotiable instrument is endorsed in blank, it becomes payable to bearer. According to Missouri Revised Statutes Chapter 400 (UCC Article 3), a person in possession of an instrument payable to bearer is a holder. A holder in due course (HDC) takes an instrument free from most defenses and claims that are available to the parties to the instrument. To qualify as an HDC, a person must 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 it on the part of any person. In this case, Anya took possession of the check, which was endorsed in blank, making it bearer paper. She paid value for it by giving the drawer a valid invoice for services rendered. There is no indication that Anya acted in bad faith or had any notice of any defenses or claims against the instrument. Therefore, Anya is a holder in due course. As an HDC, Anya is entitled to enforce the instrument even if the drawer had a defense against the original payee. The drawer’s defense of failure to render services is a personal defense. Personal defenses are generally cut off by an HDC. Anya’s status as a holder in due course allows her to enforce the instrument against the drawer, despite the drawer’s claim that the services were not rendered.

The question probes the concept of holder in due course (HDC) status and its impact on defenses against payment on a negotiable instrument, specifically under Missouri law which follows the Uniform Commercial Code (UCC) Article 3. 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 claim to the instrument or defense against it. In this scenario, the bank accepted the promissory note as collateral for a pre-existing debt owed by the payee. Under UCC § 3-303(a)(1), which is adopted in Missouri, taking an instrument as satisfaction of or as collateral for a pre-existing claim constitutes taking for value. The bank’s actions of taking the note and providing a credit to the payee’s account, even if it was a provisional credit, demonstrates they took it for value. Assuming the bank acted in good faith and had no notice of any defenses (like fraud in the inducement or lack of consideration) that the maker might have against the payee, the bank would likely qualify as a holder in due course. A holder in due course takes the instrument free from all defenses of any party to the instrument with whom the holder has not dealt except for certain real defenses enumerated in UCC § 3-305(a)(1). Fraud in the inducement, where a party is tricked into signing an instrument by misrepresentation of the underlying facts, is generally a personal defense and not a real defense. Therefore, if the bank is an HDC, it can enforce the instrument against the maker despite the maker’s claim of fraud in the inducement. The scenario specifies that the bank provided a credit to the payee’s account, which is a form of value. The critical element is the absence of notice of defenses. If the bank had no knowledge of the payee’s misrepresentations to the maker, it would be a holder in due course. The question asks about the bank’s ability to enforce the note. Since fraud in the inducement is a personal defense, it is cut off by a holder in due course. The bank’s acceptance of the note as collateral for a pre-existing debt is sufficient value under UCC § 3-303. Therefore, the bank can enforce the note against the maker, assuming good faith and lack of notice of defenses.

The core issue here revolves around the concept of “holder in due course” (HDC) status and its implications for defenses against payment on a negotiable instrument. Under UCC Article 3, an HDC takes an instrument free from most defenses that a maker or drawer could assert against the original payee. However, certain defenses, known as “real defenses,” can be asserted even against an HDC. These real defenses are typically related to the fundamental validity of the obligation or the instrument itself. Examples include infancy, duress, illegality of a type that nullifies the obligation, fraud in the factum, and discharge in insolvency proceedings. Personal defenses, such as breach of contract, failure of consideration, or fraud in the inducement, are generally cut off by an HDC. In this scenario, the underlying transaction involved a fraudulent scheme where the seller misrepresented the quality of the goods. This constitutes fraud in the inducement, which is a personal defense. Since the bank took the note for value, in good faith, and without notice of any claim or defense against it, it qualifies as a holder in due course. Therefore, the bank, as an HDC, is not subject to the personal defense of fraud in the inducement. The maker of the note cannot avoid payment to the bank based on the seller’s misrepresentation. The UCC provisions in Missouri, mirroring the general UCC framework, protect HDCs from such personal defenses to promote the free negotiability of commercial paper. The fact that the bank is located in Missouri and the note was executed in Missouri reinforces the applicability of Missouri’s adoption of UCC Article 3. The note’s terms, specifying it’s payable in Missouri, further solidifies jurisdiction. The question tests the distinction between real and personal defenses and the protections afforded to a holder in due course under UCC Article 3.

The scenario involves a promissory note that contains a clause allowing the holder to accelerate payment upon the occurrence of certain events. Specifically, the note states that the entire principal balance becomes due and payable “upon the maker’s default in any payment hereunder.” This type of clause is a common acceleration clause found in negotiable instruments. Under Missouri’s Uniform Commercial Code (UCC) Article 3, specifically regarding negotiable instruments, an instrument is payable on demand if it states that it is payable “at will” or “on demand” or otherwise indicates that it is payable at the option of the holder. While this note isn’t explicitly payable on demand, the acceleration clause effectively grants the holder the option to demand immediate payment upon a specified event of default. The critical question is whether this acceleration clause, tied to default in payment, renders the instrument non-negotiable. Missouri UCC § 400.3-109(c) states that a term providing for acceleration of payment does not prevent a note from being payable on demand or a definite time. Therefore, the acceleration clause, as described, does not destroy the negotiability of the instrument. The note still meets the requirements of being a promise to pay a fixed amount of money, payable on demand or at a definite time, and payable to order or bearer, assuming other requirements are met. The acceleration clause simply provides a mechanism for the holder to demand payment sooner than the stated maturity date if a default occurs, but it does not make the payment terms indefinite or contingent on an event outside the maker’s control in a way that would impair negotiability.

No calculation is required for this question. The core concept tested here is the legal effect of a qualified indorsement on a negotiable instrument under UCC Article 3, specifically as adopted in Missouri. A qualified indorsement, such as “without recourse,” limits the liability of the indorser. By indorsing “without recourse,” the indorser essentially states that they are transferring their rights in the instrument but are not guaranteeing payment if the instrument is dishonored by the maker or drawee. This means the qualified indorser is not liable to the holder for the dishonor of the instrument. They are still liable for warranties of good faith and title, but not for the solvency of the primary obligor. Therefore, if a promissory note indorsed “without recourse” is later dishonored by the maker, the qualified indorser is not obligated to pay the holder.

The question tests the understanding of the concept of a holder in due course (HDC) and the defenses available against payment of a negotiable instrument under Missouri law, specifically UCC Article 3. A person is a holder in due course if they take an instrument that is apparently complete and regular on its face; is not overdue or dishonored; takes it in good faith and for value; and has no notice of any claim to the instrument or defense against it. In Missouri, as per RSMo § 400.3-305, certain defenses are personal and cannot be asserted against an HDC, while others are real defenses that can be asserted. The scenario involves a promissory note that was initially procured by fraud in the inducement, which is a personal defense. However, the note was subsequently transferred to a third party, Mr. Sterling, who paid value for it, took it in good faith, and without notice of the fraud. Therefore, Mr. Sterling qualifies as a holder in due course. Personal defenses, such as fraud in the inducement, are cut off when the instrument is held by an HDC. Real defenses, such as forgery or material alteration, would still be available against an HDC. Since the only defense mentioned is fraud in the inducement, and Mr. Sterling is an HDC, the maker of the note, Ms. Albright, cannot assert this defense against Mr. Sterling. The UCC, as adopted in Missouri, provides that an HDC takes the instrument free from all defenses of any party to the instrument with whom the holder has not dealt except for those real defenses enumerated in § 400.3-305(a)(1). Fraud in the inducement is not a real defense. Therefore, Ms. Albright is obligated to pay the note to Mr. Sterling.

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder. Under Missouri law, which largely follows UCC Article 3, a person can become an HDC by taking an instrument for value, in good faith, and without notice of any defense or claim against it. A negotiable instrument is generally taken subject to real defenses, which can be asserted against anyone, including an HDC. Fictitious payee situations, where a check is made payable to a person who has no intention of receiving payment, are treated under the UCC as if the payee’s indorsement is effective. However, this does not extend to situations where the drawer’s signature is forged. A forged signature is wholly inoperative and cannot be ratified. Therefore, if the original drawer’s signature on the check was forged, the subsequent holder, even if an HDC, cannot enforce the instrument against the drawer. The question states that Bartholomew forged the drawer’s signature on a check issued by AgriCorp. A forged signature is a real defense that can be asserted against any holder, including a holder in due course. Therefore, AgriCorp can assert the defense of forgery against any attempt to enforce the instrument.

In Missouri, under UCC Article 3, a person who accepts an instrument for value, in good faith, and without notice of any defense or claim to the instrument is a holder in due course (HDC). To qualify as an HDC, the instrument must be negotiable, signed by the maker or drawer, contain an unconditional promise or order to pay a fixed amount of money, be payable on demand or at a definite time, and be payable to order or to bearer. Furthermore, the holder must take the instrument without notice that it is overdue or has been dishonored, or that there is any defense or claim to it on the part of any person. The concept of “notice” is crucial. Notice can be actual knowledge or knowledge of facts that would cause a reasonable person to make an inquiry. A holder who takes an instrument with knowledge of a forgery of a signature, other than the signing signature, or knowledge that the instrument was altered, would not be considered to have taken it in good faith without notice of a defense or claim, thus precluding HDC status. For instance, if a holder receives a check where the payee’s endorsement has been forged, and the holder has actual knowledge of this forgery or is aware of circumstances that would strongly suggest a forgery (e.g., the payee’s signature looks significantly different from a known valid signature), they cannot be a holder in due course. The UCC defines good faith as honesty in fact and the observance of reasonable commercial standards of fair dealing. Taking an instrument with knowledge of a forged endorsement directly violates these standards. Therefore, an instrument taken with knowledge of a forged endorsement cannot be held by a holder in due course, as the holder has notice of a defense or claim.

The core issue revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder. Under Missouri’s Uniform Commercial Code (UCC) Article 3, a holder in due course takes an instrument free from all defenses except for certain real defenses. Personal defenses, such as breach of contract or lack of consideration, are generally cut off by an HDC. Real defenses, however, can be asserted even against an HDC. These typically include fraud in the factum (fraud that induces the obligor to sign an instrument believing it to be something else entirely), forgery, illegality of a type that renders the obligation void, duress that renders the obligation void, discharge in insolvency proceedings, and material alteration of the instrument. In this scenario, Mr. Abernathy’s claim of fraud relates to the underlying purpose and value of the contract, which constitutes fraud in the inducement. Fraud in the inducement is a personal defense, not a real defense. Therefore, if Ms. Bell qualifies as a holder in due course, she takes the note free from Mr. Abernathy’s defense of fraud in the inducement. To be an HDC, Ms. Bell must have taken the note for value, in good faith, and without notice of any claim or defense against it. Assuming these conditions are met, her status as an HDC would shield her from Mr. Abernathy’s defense.

The core concept here revolves around the enforceability of a promise to pay and the specific requirements for negotiability under UCC Article 3, as adopted in Missouri. 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. The inclusion of “subject to the terms and conditions of the loan agreement dated January 15, 2023” renders the promise conditional. Under UCC Section 3-104(a)(1), a negotiable instrument must contain an unconditional promise or order. UCC Section 3-106(b)(1) clarifies that a promise or order is conditional if it states that it is subject to or governed by another writing. Therefore, the promissory note issued by Ms. Albright is not a negotiable instrument because its payment is explicitly tied to the terms of the separate loan agreement, making the promise conditional. This condition prevents it from meeting the requirements for negotiability under Missouri law, which follows the UCC framework. Consequently, it cannot be negotiated by endorsement and delivery to a holder in due course, nor can it be enforced by a holder against the maker without regard to defenses the maker might have against the original payee. The instrument is merely a contractual promise to pay, governed by contract law, rather than a negotiable instrument governed by Article 3 of the Uniform Commercial Code.