Under Maine’s Uniform Commercial Code (UCC) Article 3, the concept of “holder in due course” (HDC) is central to the enforceability of negotiable instruments against subsequent parties. To achieve HDC status, a holder must take an instrument that is (1) negotiable, (2) signed by the maker or drawer, (3) payable on demand or at a definite time, (4) payable to order or bearer, (5) for a specified amount of money, and (6) without notice of any claim to it or defense against it. Furthermore, the holder must take the instrument for value and in good faith. Good faith, as defined by UCC § 1-201(20), means honesty in fact and the observance of reasonable commercial standards of fair dealing. Notice of a claim or defense includes actual knowledge, receipt of notice, or reason to know from all the facts and circumstances known to the person at the time in question. In this scenario, while the instrument itself appears negotiable and was taken for value by Ms. Anya Sharma, her knowledge that the original payee, Mr. Ben Carter, had previously received a notice of dishonor for a similar transaction with the drawer, Mr. David Miller, constitutes notice of a potential defense or claim. This knowledge would prevent Ms. Sharma from being a holder in due course because she had reason to know of a defect in the instrument or the underlying transaction. Consequently, Mr. Miller can assert his defenses against Ms. Sharma, as she does not possess the protected status of an HDC.

The core issue 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, as adopted in Maine, a holder in due course takes an instrument free from all defenses of any party to the instrument with whom the holder has not dealt, except for real defenses. Real defenses, such as infancy, duress, illegality, and fraud in the factum, can be asserted even against an HDC. Personal defenses, like breach of contract or lack of consideration, are cut off by an HDC. In this scenario, the promissory note was initially issued by Ms. Albright to “Sunshine Builders Inc.” for home renovation services. Ms. Albright’s claim that Sunshine Builders Inc. performed shoddy work and failed to complete the project constitutes a breach of contract, which is a personal defense. When Sunshine Builders Inc. negotiated the note to “Coastal Bank” before maturity and without notice of any defense, Coastal Bank acquired the instrument. Assuming Coastal Bank took the note for value, in good faith, and without notice of Ms. Albright’s claims or defenses, it qualifies as a holder in due course. Therefore, Coastal Bank takes the note free from Ms. Albright’s personal defense of breach of contract. Ms. Albright’s obligation to pay Coastal Bank is not discharged by Sunshine Builders Inc.’s failure to perform.

The core issue here is whether a holder in due course status can be maintained when a negotiable instrument is transferred after a material alteration. Under Maine’s Uniform Commercial Code (UCC) Article 3, specifically § 3-407, a holder in due course (HDC) can enforce an altered instrument according to its original tenor if the alteration was not fraudulent. However, if the alteration was fraudulent, the HDC can only enforce the instrument as originally written, or if the alteration was not fraudulent but still material, the HDC can enforce it as altered. A material alteration is defined as one that changes the contract of any party. In this scenario, the change from $500 to $5,000 is undeniably a material alteration. The question is whether it was fraudulent. Without evidence that the alteration was made with the intent to defraud, the presumption is generally against fraud. Maine law, consistent with the UCC, distinguishes between fraudulent and non-fraudulent alterations. If the alteration by Silas was not fraudulent, the HDC, Ms. Vance, can enforce the instrument according to its original tenor, which was $500. If the alteration was fraudulent, the instrument is discharged as to any party whose contract is thereby changed, unless that party assents to the alteration. However, the UCC § 3-307(b) states that if a subsequent holder in due course takes the instrument, they may enforce it according to its original tenor. Therefore, Ms. Vance, as a holder in due course of the instrument originally issued for $500, can enforce it for that original amount, despite the material, but not necessarily fraudulent, alteration. The fact that Silas altered it does not automatically negate Ms. Vance’s HDC status or her ability to recover the original amount, assuming she took the instrument for value, in good faith, and without notice of any claim or defense. The question implicitly assumes Ms. Vance is a holder in due course. The UCC § 3-407(b) provides that if an instrument is materially altered, a holder in due course can enforce it according to its original tenor. The critical point is that the HDC’s right is to the original tenor, not the altered tenor, if the alteration was fraudulent. If the alteration was not fraudulent, the HDC can enforce it as altered. However, the most protective stance for the original maker, and the most common outcome in such cases when fraud is not proven or is ambiguous, is enforcement according to the original tenor for an HDC. Therefore, Ms. Vance can enforce the instrument for $500.

The question revolves around the concept of a holder in due course (HDC) and the defenses that can be asserted against such a holder under UCC Article 3, as adopted in Maine. A negotiable instrument is taken by a holder in due course if it is taken (1) for value, (2) in good faith, and (3) without notice that it is overdue or dishonored or of any defense or claim to it on the part of any person. Maine law, like the UCC, categorizes defenses into real defenses and personal defenses. Real defenses are those that can be asserted against any holder, including an HDC, while personal defenses are generally not effective against an HDC. In this scenario, the promissory note was originally issued by Ms. Anya Sharma to Mr. Silas Croft for the purchase of a vintage sailboat. However, the sailboat was discovered to be structurally unsound and not as represented, constituting a breach of contract and potentially a defense of fraud in the inducement. Ms. Sharma’s defense of fraud in the inducement is a personal defense. Mr. Benedict Thorne acquired the note from Mr. Croft. To be an HDC, Mr. Thorne must have taken the note for value, in good faith, and without notice of any defense. Assuming Mr. Thorne acquired the note for value and in good faith, the crucial element is notice. If Mr. Thorne had actual knowledge of Ms. Sharma’s defense (the unsound sailboat and misrepresentation) or had knowledge of facts and circumstances that would lead a reasonable person to inquire further into the validity of the note or its underlying transaction, he would not be considered to have taken without notice. The fact that the note was acquired shortly after its issuance and that the underlying transaction involved a significant purchase like a sailboat might raise questions for a prudent purchaser, especially if there were any unusual circumstances surrounding the transfer. However, without specific facts indicating Mr. Thorne’s actual knowledge or circumstances that would constitute constructive notice of the fraud in the inducement, the default presumption is that he is an HDC. Therefore, the defense of fraud in the inducement, being a personal defense, would be cut off against Mr. Thorne if he qualifies as an HDC. The question asks about the effect of the defense, implying whether it can be raised against the holder. Since fraud in the inducement is a personal defense, it is ineffective against a holder in due course.

The core concept here revolves around the enforceability of a promise to pay when the instrument contains an additional undertaking. Under Maine’s Uniform Commercial Code (UCC) Article 3, specifically § 3-104, a negotiable instrument must contain an unconditional promise or order to pay a fixed amount of money, and nothing else. An additional undertaking or instruction is generally considered a disqualifying factor for negotiability. In this scenario, the promissory note includes a clause promising to pay the stated sum *and* to deliver a specific antique grandfather clock. This additional promise to deliver a tangible good is an undertaking beyond the payment of money. Therefore, the instrument fails to meet the requirements of a negotiable instrument under UCC § 3-104 because it contains more than just a promise to pay money. Consequently, it cannot be enforced as a negotiable instrument by a holder in due course, even if it were otherwise properly negotiated. The UCC’s strict requirements for negotiability are designed to ensure that instruments can circulate freely in commerce, and including collateral promises or obligations disrupts this purpose.

The scenario involves a promissory note that is payable to “Bearers” and is not dated. Under Maine’s Uniform Commercial Code (UCC) Article 3, specifically referencing principles found in UCC § 3-104 and related sections concerning the requirements for negotiable instruments, an instrument that is payable to bearer is generally negotiable. The absence of a specific date of issue does not automatically render an instrument non-negotiable if it otherwise meets the criteria. UCC § 3-113(a) states that an instrument is payable to bearer if it is payable to the order of “cash,” “cashier’s check,” or other indicated to a bank, “money,” or any other indication that does not name a specific payee or indicate that it is not an order instrument. In this case, “Bearers” functions similarly to “bearer” or a similar designation that makes the instrument payable to whoever possesses it. Furthermore, UCC § 3-113(b) addresses undated instruments, stating that an instrument not payable on demand is payable on demand if it is undated. However, the core of negotiability here hinges on the “bearer” designation. The critical factor for negotiability is whether the instrument is payable to bearer or to order. Since the note explicitly states “Pay to the order of Bearers,” it is a bearer instrument. The UCC does not require a specific date for an instrument to be negotiable, though the absence of a date can affect when it is due if it’s not payable on demand. The question is about the *negotiability* of the instrument, not its immediate enforceability or maturity date. Therefore, the instrument is negotiable because it is payable to bearer.

The scenario involves a promissory note that contains an acceleration clause. An acceleration clause allows the holder of the note to declare the entire unpaid balance immediately due and payable upon the occurrence of a specified event. In this case, the event is the maker’s failure to pay an installment when due. Maine law, as reflected in UCC Article 3, generally permits such clauses as long as they are clear and do not render the instrument non-negotiable. A key aspect of negotiability is the certainty of payment. While an acceleration clause introduces a contingency for the *timing* of payment, it does not affect the *obligation* to pay the principal amount. The note specifies a fixed principal amount and a maturity date, and the acceleration clause merely provides for an earlier maturity date under specific circumstances. Therefore, the note remains negotiable. The fact that the note is secured by collateral in Maine does not impact its negotiability under UCC Article 3, which focuses on the terms of the instrument itself, not its security. The presence of a provision for attorney’s fees upon default also does not destroy negotiability, as it relates to collection costs rather than the principal sum. The core of negotiability rests on the unconditional promise to pay a fixed sum of money. The acceleration clause, by its nature, accelerates the payment obligation, but it does not make the promise conditional in a way that would defeat negotiability.

The scenario describes a situation involving a promissory note that is initially payable to a specific individual, Eleanor Vance. The critical factor here is the endorsement and delivery of the note. UCC § 3-201(b) in Maine, as adopted from the Uniform Commercial Code, states that if an instrument is payable to an identified person, the person becomes the holder of the instrument if the person obtains possession of the instrument. Eleanor Vance, as the payee, is the initial holder. When she endorses the note in blank and delivers it to her brother, Bartholomew Vance, Bartholomew becomes the holder of the instrument. A blank endorsement converts the instrument into bearer paper, meaning it is payable to whoever possesses it. Therefore, Bartholomew, by possessing the note endorsed in blank, is a holder. The question asks about the status of the instrument *after* Bartholomew receives it. Since Eleanor endorsed it in blank and delivered it to Bartholomew, he is now the holder. The subsequent action of Bartholomew delivering the note to his friend, Candace, without further endorsement, means Candace also becomes a holder, as bearer paper can be transferred by mere possession. Thus, the instrument remains negotiable and is held by Candace. The calculation is conceptual: Initial state (Payable to Eleanor) + Blank Endorsement by Eleanor + Delivery to Bartholomew = Bartholomew is Holder (Bearer Paper) + Delivery to Candace = Candace is Holder (Bearer Paper). The core concept tested is the effect of a blank endorsement and delivery on the negotiability and holder status of an instrument under UCC Article 3. A blank endorsement makes the instrument payable to bearer, and possession of bearer paper establishes holder status.

The scenario involves a promissory note that contains a clause allowing for acceleration of the due date upon the occurrence of a specified event, namely the maker’s default on a separate loan agreement. Under Maine’s Uniform Commercial Code (UCC) Article 3, specifically concerning the negotiability of an instrument, the presence of such a clause does not destroy negotiability. UCC § 3-108(b)(2) (Maine Revised Statutes Title 11, § 3-108(b)(2)) states that 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 at the will of the holder, or in no time at all. However, UCC § 3-104(a)(2) (Maine Revised Statutes Title 11, § 3-104(a)(2)) defines a negotiable instrument as one that is payable “on demand or at a definite time.” An acceleration clause, which makes the instrument payable earlier than the stated due date upon the occurrence of a specified event, is permissible and does not render the payment term indefinite. The rationale is that the event, while uncertain, is fixed and determinable. The maker’s default on another obligation is a common example of such an event. Therefore, the note remains a negotiable instrument despite the acceleration clause. The question tests the understanding of what constitutes a “definite time” for payment under UCC Article 3, specifically how acceleration clauses affect negotiability.

The scenario involves a promissory note that is payable “on or before January 1, 2025.” Under Maine’s Uniform Commercial Code (UCC) Article 3, specifically referencing § 3-108(a), an instrument that states it is payable “on demand” or at sight is payable on demand. However, an instrument that states it is payable “on or before” a specific date is generally considered payable on the date specified, or at an earlier date chosen by the maker. The UCC permits flexibility in payment timing when such a clause is present. The key is that the instrument is not payable *only* on the specified date but rather allows for earlier payment. Therefore, the note is payable on demand, meaning the holder can demand payment at any time after its issuance, or it is payable on January 1, 2025, or any date prior to that. This flexibility makes it payable on demand, as the maker has the option to pay earlier. The concept of “on demand” payment is broad and encompasses instruments where the payment date is not fixed to a single future point but allows for earlier settlement at the discretion of the obligor or upon the holder’s request. This contrasts with instruments payable only on a specific, fixed date.

The core issue here is whether the instrument qualifies as a negotiable instrument under UCC Article 3, specifically focusing on the “unconditional promise or order” requirement and the absence of additional undertakings or instructions. Maine law, like other states, follows UCC Article 3. A negotiable instrument must contain an unconditional promise or order to pay a fixed amount of money, payable on demand or at a definite time, to order or to bearer, and not stating any other undertaking or instruction by the party promising or ordering payment to do any act in addition to the payment of money. In this scenario, the “Promissory Note” contains several clauses that deviate from these requirements. The clause stating “This note is secured by a mortgage on the property located at 123 Pine Street, Portland, Maine, and the terms of the mortgage are incorporated herein by reference” makes the promise conditional. While referencing security is common, incorporating the terms of the mortgage by reference means that the payment obligation is subject to the conditions and covenants within that mortgage agreement. UCC § 3-104(a)(1) requires an unconditional promise. UCC § 3-106(b)(1) states that a promise is not made conditional by the fact that it is accompanied by a statement of fact, but it is conditional if it refers to another writing that creates an obligation or power with respect to the payment of money. By incorporating the mortgage terms, the note implicitly subjects the payment to those terms, which could include covenants, default provisions, or other obligations beyond a simple payment of money. Furthermore, the clause “Upon default, the holder may accelerate all payments and pursue any remedies available under Maine law, including foreclosure of the aforementioned mortgage” is an additional undertaking or instruction beyond the mere payment of money. While acceleration clauses are generally permissible if they relate to payment, the explicit mention of pursuing “any remedies available under Maine law, including foreclosure” broadens the scope beyond a simple promise to pay a fixed sum. UCC § 3-104(a)(1) explicitly states that a negotiable instrument must not state “any other undertaking or instruction by the party promising or ordering payment to do any act in addition to the payment of money.” The inclusion of a directive to pursue specific legal remedies, especially those tied to collateral and foreclosure, transforms the instrument from a pure promise to pay into a more complex agreement that may not be readily transferable as a negotiable instrument under Article 3. Therefore, the instrument is not a negotiable instrument.

The scenario describes a promissory note that is payable on demand. Under Maine’s Uniform Commercial Code (UCC) Article 3, specifically § 3-108, a note payable on demand is considered due immediately upon its creation. This means that the statute of limitations for bringing an action to enforce the note begins to run from the date of issue. Therefore, if the note was issued on January 15, 2020, the cause of action for non-payment accrued on that date. Maine’s general statute of limitations for contract actions, as outlined in 14 M.R.S. § 752, is six years. Consequently, any legal action to enforce the note must be commenced within six years from January 15, 2020. This period would expire on January 15, 2026. The UCC also provides for a ten-year statute of limitations for actions to enforce a note payable at a definite time or in installments, but this does not apply to demand instruments. For instruments payable on demand, the UCC § 3-304(a)(1) implies that the cause of action accrues upon demand, but the general rule for demand notes is that they are due immediately upon issuance for statute of limitations purposes, unless otherwise specified. Given the absence of any specific payment terms other than “on demand,” the accrual is immediate for limitations purposes.

The scenario involves a promissory note that is not payable on demand or at a definite time, as it lacks a specified payment date or a condition that triggers payment. Under Maine’s Uniform Commercial Code (UCC) Article 3, specifically concerning negotiable instruments, a key requirement for negotiability is that the instrument must be payable on demand or at a definite time. An instrument that is payable only upon the occurrence of an uncertain event, such as the sale of a specific piece of property if that sale’s timing is not guaranteed, does not meet this requirement. While the note might represent a valid contractual obligation, its lack of a definite time of payment prevents it from being classified as a negotiable instrument under UCC Article 3. This classification is crucial because it affects the ability of holders in due course to take the instrument free from certain defenses. Therefore, the note’s negotiability is compromised by the absence of a definite payment term.

The core issue here revolves around the concept of “presentment warranties” under UCC Article 3, specifically concerning the transfer of a negotiable instrument. Presentment warranties are made by a person who transfers an instrument for payment or collection, or by a person who obtains payment of the instrument. These warranties are made to any person who pays or accepts the instrument. Maine law, consistent with the Uniform Commercial Code, outlines these warranties. The relevant warranties include that the presenter is entitled to enforce the instrument or is authorized to obtain payment on behalf of a person entitled to enforce the instrument, and that the instrument has not been altered. Furthermore, the presenter warrants that they have no knowledge that the signature of the issuer is unauthorized. When a holder presents a check for payment, they are implicitly warranting that they are entitled to payment and that the instrument has not been materially altered. If a check is forged, the presenter has breached the warranty that they are entitled to enforce the instrument. The UCC § 3-417(a) and § 3-416(a) detail these warranties. Specifically, § 3-417(a)(1) states that a person who transfers an instrument for consideration warrants to the transferee that the instrument has not been altered. § 3-417(a)(2) warrants that the transferor is a person entitled to enforce the instrument or authorized to obtain payment on behalf of a person entitled to enforce the instrument. § 3-417(a)(3) warrants that the transferor has no knowledge that the signature of the purported issuer is unauthorized. In this scenario, the check was presented for payment with a forged drawer’s signature. The bank that paid the check, acting as the drawee bank, is a person entitled to enforce the instrument against the presenter. The presenter, by offering the check for payment, warrants that the drawer’s signature is genuine. Since the signature was forged, this warranty is breached. The bank that paid the check can recover from the presenter for breach of this warranty. The UCC § 3-418 also addresses payment by mistake, allowing a payor bank to recover payment if the payment was made by mistake, subject to certain exceptions. However, the presentment warranty is the primary basis for recovery in cases of forged signatures. The measure of damages for breach of a presentment warranty is typically the amount of the instrument, as the warrantor has essentially guaranteed the validity of the instrument. Therefore, the bank that paid the forged check can recover the full amount of the check from the person who presented it for payment.

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder under Maine’s Uniform Commercial Code (UCC) Article 3. A party qualifies as an HDC 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 without notice of any claim or defense against it. Maine UCC § 3-305(a)(1) outlines that an HDC takes the instrument free of most claims to it and most defenses of any party to the instrument. However, certain real defenses, which go to the validity of the instrument itself, can be asserted even against an HDC. Maine UCC § 3-305(a)(2) lists these real defenses, including infancy, duress that nullifies assent, fraud that nullifies assent, discharge in insolvency proceedings, and discharge by a physically disabling alteration. Personal defenses, 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 issued by Mr. Abernathy to Ms. Gable. Ms. Gable then negotiated the note to Mr. Harrison. Mr. Harrison took the note without notice of any issues and for value, thus qualifying as a holder in due course. Mr. Abernathy’s defense is that Ms. Gable fraudulently induced him to sign the note by misrepresenting the quality of the antique clock he purchased. This type of fraud, where the maker understands the nature of the instrument they are signing but is deceived about the underlying transaction, is considered “fraud in the inducement.” Under Maine UCC § 3-305(a)(2), fraud in the inducement is a personal defense, not a real defense. Therefore, Mr. Harrison, as a holder in due course, takes the note free from this defense. Mr. Abernathy’s obligation to pay the note to Mr. Harrison remains. The calculation is conceptual: the value of the note is the face amount, and the defense is invalid against an HDC.

The core issue here revolves around the concept of “holder in due course” (HDC) status and the defenses available against an HDC. Under Maine’s Uniform Commercial Code (UCC) Article 3, specifically concerning negotiable instruments, a holder in due course takes an instrument free from most defenses that a party to the instrument might have against the original payee. However, certain real defenses can be asserted even against an HDC. These real defenses are typically those that go to the validity of the instrument itself or the maker’s capacity to contract. Examples include infancy, duress, fraud in the execution (or “real fraud”), illegality of the transaction, 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 negotiable instrument is a promissory note. The maker, Mr. Abernathy, claims that the payee, Ms. Gable, made fraudulent misrepresentations about the quality of the antique furniture he purchased, which was the consideration for the note. This type of misrepresentation, where the maker is induced to sign the note based on false statements about the underlying transaction, constitutes “fraud in the inducement.” Fraud in the inducement is a personal defense, not a real defense. Therefore, if Ms. Gable negotiated the note to Mr. Birch, and Mr. Birch qualifies as a holder in due course, Mr. Abernathy cannot assert the fraud in the inducement defense against Mr. Birch. To be an HDC, Mr. Birch must have taken the note for value, in good faith, and without notice that it was overdue or had been dishonored or that there was any defense against it. Assuming Mr. Birch meets these criteria, his HDC status shields him from Mr. Abernathy’s personal defense.

The scenario involves a draft that is payable on demand and has been presented for payment. The question revolves around the concept of discharge of the drawer’s liability. Under UCC Article 3, specifically in Maine, the drawer of a draft is discharged from liability if the draft is presented for payment and the drawee pays the draft in good faith and in accordance with reasonable commercial standards. This discharge occurs even if the payment is made under a forged endorsement on the draft, provided the drawee acted in good faith and followed reasonable commercial standards. The UCC generally protects drawees who pay in good faith, even if there’s a defect in the chain of endorsements, unless the drawee has specific knowledge of the defect or fails to exercise ordinary care. The payee’s ability to recover from the drawee is a separate issue from the drawer’s discharge. The drawer’s obligation is to pay the draft if it’s properly presented and dishonored, or if the drawee pays it in a manner that does not discharge the drawer. In this case, the drawee’s payment, even with a forged endorsement, discharges the drawer because the drawee acted in good faith and according to commercial standards. The drawer’s liability is extinguished by the drawee’s proper payment.

The scenario involves a promissory note that is not payable to order or to bearer, as it is made payable “to the order of the estate of the late Bartholomew Finch.” Under Maine UCC § 3-109, an instrument is payable to order if it is payable to the order of an identified person or to two or more persons jointly or severally, or to a successor of the payee. Crucially, an instrument that is payable to an estate is not payable to order or to bearer, rendering it non-negotiable. Consequently, it cannot be transferred by negotiation under UCC § 3-201. Instead, it is governed by the law applicable to the assignment of contract rights, as per UCC § 3-203(d). An assignee of such an instrument takes it subject to all defenses and claims that could be asserted against the assignor. Therefore, any claims or defenses available against the original payee, Bartholomew Finch’s estate, would also be available against an assignee, such as Silas Croft, who acquired the note. This is a fundamental distinction between negotiable instruments and simple contract rights. Maine law, following the Uniform Commercial Code, emphasizes the importance of specific language for negotiability. The phrase “to the order of” is a key requirement for order paper. When this is directed to a non-entity like an estate, it fails to meet the statutory definition of a payable-to-order instrument.

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder, particularly in the context of a negotiable instrument governed by UCC Article 3, as adopted in Maine. A party who takes a negotiable instrument for value, in good faith, and without notice of any claim or defense to the instrument is generally afforded HDC status. This status shields the HDC from most personal defenses that the maker or drawer could assert against the original payee. Maine’s UCC, like other states, defines these defenses. Among the defenses listed in UCC § 3-305, those that are real defenses (or universal defenses) can be asserted even against an HDC. These typically include infancy, duress, illegality that nullifies the obligation, fraud in the factum (real fraud), discharge in insolvency proceedings, and alteration that is material and fraudulent. Personal defenses, on the other hand, such as breach of contract, failure of consideration, or fraud in the inducement, are generally cut off by an HDC. In this scenario, Bartholomew issues a note to Clara. Clara then negotiates the note to David. David is aware that Bartholomew has a dispute with Clara regarding a separate contract. This awareness is crucial. UCC § 3-302(a)(2)(iii) defines a holder in due course as one who takes the instrument without notice of any defense or claim of any party. Bartholomew’s dispute with Clara, if it gives rise to a defense against the note, constitutes a claim or defense. David’s knowledge of this dispute means he cannot claim HDC status because he had notice of a potential defense or claim. Therefore, David takes the note subject to any defenses Bartholomew may have against Clara. Since Bartholomew’s defense is based on Clara’s alleged breach of the separate contract, this is a personal defense. However, because David is not an HDC, he cannot enforce the note against Bartholomew to the extent of Bartholomew’s valid personal defenses. The question asks what Bartholomew can assert against David. Since David is not an HDC, Bartholomew can assert any defense that would be available against Clara, including the personal defense of breach of contract, which would reduce or eliminate his liability on the note. Therefore, Bartholomew can assert his breach of contract claim against David.

The scenario involves a negotiable instrument, specifically a promissory note, and the concept of holder in due course (HDC) status under UCC Article 3, as adopted in Maine. To qualify as an HDC, a holder must take the instrument for value, in good faith, and without notice of any claim or defense. In this case, Elara received the note as a gift. A gift does not constitute “value” as required by UCC § 3-302(a)(2). Value is typically given through performance of an antecedent debt, a security interest, or by taking the instrument in payment of or as security for an antecedent debt. Simply receiving an instrument as a gift, without any consideration or exchange, means Elara did not take the note for value. Therefore, she cannot be a holder in due course. Even if she took it in good faith and without notice, the lack of value is a fatal flaw to HDC status. Without HDC status, Elara takes the note subject to all defenses and claims that would be available against the original payee, including the maker’s defense of lack of consideration for the original promise.

No calculation is required for this question as it tests conceptual understanding of the Uniform Commercial Code (UCC) as adopted in Maine regarding negotiable instruments and the concept of holder in due course. Specifically, it probes the requirements for a party to achieve holder in due course status and the implications of a defense against such a holder. Under UCC Article 3, a holder in due course (HDC) takes an instrument free of most defenses and claims of other parties. To qualify as an HDC, a person must take the instrument (1) for value, (2) in good faith, and (3) without notice that the instrument is overdue or dishonored or that there is any defense or claim to it. If these conditions are met, the holder takes the instrument free from personal defenses, such as breach of contract or fraud in the inducement. Real defenses, however, such as forgery or material alteration, can be asserted even against an HDC. The question asks about the impact of a defense that is not a real defense. Therefore, if a party takes a negotiable instrument for value, in good faith, and without notice of any defense, they will be an HDC and can enforce the instrument against the drawer or maker, even if there was a personal defense involved in the original transaction. This protection is a cornerstone of commercial paper, facilitating its free circulation in commerce. Maine has adopted the UCC with provisions consistent with Article 3.

The core issue here is the concept of negotiability and the effect of a restrictive endorsement on a negotiable instrument. Under UCC Article 3, a negotiable instrument must contain an unconditional promise or order to pay a fixed amount of money, payable on demand or at a definite time, payable to order or bearer, and not stating any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money. A restrictive endorsement, such as “Pay to the order of Evelyn Reed only,” attempts to limit the transfer or payment of the instrument. According to UCC § 3-206, a person taking an instrument under an indorsement that is restrictive, as defined in § 3-206(b) or (d), is subject to the limitations of the indorsement unless the indorser receives the instrument in payment of an antecedent obligation of the indorser, or takes the instrument for value or in satisfaction of a claim against the indorser, or makes an agreement with the indorser specifying the terms of the indorsement. In this scenario, Evelyn Reed’s endorsement “Pay to the order of Evelyn Reed only” is a restrictive endorsement that limits further negotiation. When she then indorses it to Finnigan, Finnigan is subject to the restriction. However, the question implies Finnigan is seeking to enforce the instrument. Finnigan, by taking the instrument with the restrictive endorsement, is on notice of the restriction. If Finnigan were to negotiate it further, the subsequent holder would be bound by the restriction unless they qualified as a holder in due course without notice of the restriction, which is not the case here as the restriction is evident. The key point is that the endorsement “Pay to the order of Evelyn Reed only” makes the instrument payable only to Evelyn Reed. When Evelyn Reed then indorses it to Finnigan, Finnigan cannot further negotiate the instrument to anyone else because the restriction on Evelyn’s endorsement is still in effect. Finnigan, having received the instrument subject to the restriction, can only receive payment himself or deposit it into his own account. He cannot become a holder in due course by further negotiation, nor can he transfer the instrument to a third party who would then be able to enforce it against the drawer or any prior indorser. Therefore, Finnigan cannot properly negotiate the instrument to a third party.

The question centers on the concept of discharge of a party from liability on a negotiable instrument under UCC Article 3, specifically focusing on discharge by payment and the effect of a holder’s failure to present the instrument for payment. In Maine, as in other states adopting the Uniform Commercial Code, Article 3 governs negotiable instruments. A party secondarily liable, such as an indorser, is discharged if the instrument is presented for payment in a timely manner and that payment is refused, and then proper notice of dishonor is given. However, if the instrument is due on demand, it must be presented within a reasonable time after the party becomes liable on the instrument. For a check, a reasonable time is generally considered to be 30 days after the date of issue or 30 days after the date of any indorsement, whichever is later. If an instrument is not presented for payment within this reasonable time, and the bank on which it is drawn has no funds to pay it at the time of presentment but has funds sufficient to pay it at the time of discharge, the drawer is discharged to the extent of the loss caused by the delay. An indorser is discharged if presentment for payment is made, or if notice of dishonor is given to the indorser, or if the instrument is discharged under UCC § 3-601. Specifically, UCC § 3-605(b) addresses discharge by impairment of recourse or collateral. However, the scenario here focuses on the delay in presentment. If a party, like an indorser, is discharged due to the holder’s failure to present the instrument for payment within a reasonable time, and this failure leads to the drawer’s discharge, the indorser is also discharged. In this case, the note was due on demand. The holder failed to present it for payment within a reasonable time after the maker became liable. This failure to present for payment within a reasonable time discharged the indorser, as per UCC § 3-415(a) and the general principles of discharge under UCC § 3-601, which encompasses discharge by operation of law or other provisions of Article 3. The maker is discharged if the instrument is presented for payment, and the holder fails to exercise rights against the principal obligor or collateral. In this scenario, the delay in presentment for payment of a demand instrument, coupled with the maker’s subsequent insolvency, means the holder’s failure to present within a reasonable time discharges the indorser. The maker’s discharge from liability is not the primary issue here; rather, it is the indorser’s discharge due to the holder’s inaction. The indorser is discharged if the holder fails to present the instrument for payment within a reasonable time after the party becomes liable on the instrument. This is particularly true when the delay causes prejudice to the indorser. The maker’s insolvency after the point where presentment should have occurred, but did not, means the indorser is discharged because the holder did not preserve their recourse against the maker by timely presentment. Therefore, the indorser is discharged from liability.

The scenario describes a draft that is payable on demand because it states “on presentation.” Under Maine’s UCC Article 3, specifically § 3-108(a), a promise or order is payable on demand if it states that it is payable on presentation or on demand, or otherwise indicates that it is payable at the will of the holder. The fact that the draft is drawn on a bank does not automatically make it payable at a definite time. The drawer’s instruction to the bank to pay a specified amount to the payee is the core of the instrument. Since no specific date or event is mentioned for payment, it is considered payable on demand. The question tests the understanding of what constitutes a demand instrument under UCC Article 3, which is crucial for determining when a holder can demand payment and the applicable statute of limitations. Maine follows the general principles of UCC Article 3 regarding the classification of instruments as payable on demand or at a definite time.

The scenario presented involves a negotiable instrument that was originally payable to a specific individual, Anya Sharma. The key legal principle at play here is the effect of a restrictive endorsement on the subsequent negotiation of a negotiable instrument under Maine’s Uniform Commercial Code (UCC) Article 3. When a negotiable instrument is endorsed “Pay to Anya Sharma only,” this constitutes a restrictive endorsement that significantly limits how the instrument can be further negotiated. Specifically, under UCC § 3-206, an instrument endorsed restrictively can only be negotiated to a person who pays or applies the value consistent with the restriction. In this case, the restriction is “only” to Anya Sharma. Therefore, any subsequent attempt to negotiate the instrument to a third party, such as a bank or another individual, without Anya Sharma’s direct involvement or endorsement in a manner that honors the restriction, would render that negotiation ineffective. The bank’s action of crediting the account of a third party who presented the instrument, without Anya Sharma’s endorsement or a clear indication that the funds were being applied for her benefit as specified by the restriction, would not constitute a valid negotiation to that third party. The instrument remains payable to Anya Sharma, and the bank’s action would likely not discharge the liability of the parties on the instrument with respect to Anya Sharma. The concept of “holder in due course” status is also relevant; a holder who takes an instrument with notice of a restrictive endorsement cannot be a holder in due course if they fail to adhere to the restriction. Maine’s UCC Article 3 governs these transactions, emphasizing the importance of proper endorsement and negotiation to ensure valid transfer of rights.

The scenario describes a situation where a promissory note, payable to “Bear Claw Lumber Co.,” is transferred by Bear Claw Lumber Co. to “Pine Ridge Sawmill” via a simple endorsement without specifying a payee. This type of endorsement, which only contains the signature of the endorser, is known as a “special endorsement” if a payee is named, or a “blank endorsement” if no payee is named. In this case, since no new payee is named, it functions as a blank endorsement. A holder of an instrument endorsed in blank can convert it into a special endorsement by writing over the blank endorsement any name as payee. This conversion does not affect the negotiability of the instrument. Under Maine UCC § 3-205, a blank endorsement makes the instrument payable to bearer. Therefore, any subsequent holder in due course can take the instrument, and the ability to negotiate it further is not diminished by the initial blank endorsement. The core concept being tested is the effect of a blank endorsement on the negotiability of an instrument and the rights of a subsequent holder. The fact that Pine Ridge Sawmill did not write a name over the endorsement is permissible and does not alter the instrument’s negotiability or its status as a bearer instrument. The subsequent holder can treat the instrument as payable to bearer.

The scenario involves a promissory note that is payable to a specific individual, Elara Vance, and contains a clause that makes its payment contingent upon a future event – the successful completion of the new bridge construction project in Portland, Maine. Under UCC Article 3, for an instrument to be negotiable, it must contain an unconditional promise or order to pay a fixed amount of money. 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 it is subject to or governed by another writing. In this case, the payment of the note is explicitly tied to the completion of the bridge, which is an event that may or may not occur. This contingency renders the promise to pay conditional, thus destroying the negotiability of the instrument. Maine law, following UCC Article 3, requires an unconditional promise for an instrument to qualify as a negotiable instrument. Therefore, because the note’s payment is dependent on the bridge construction, it is not a negotiable instrument under Maine’s adoption of UCC Article 3.

The scenario involves a promissory note that is payable to “bearer” and is not dated. Under Maine UCC Article 3, specifically concerning the negotiability of instruments, the absence of a date on a note payable to bearer does not affect its negotiability. A negotiable instrument must contain an unconditional promise or order to pay a fixed amount of money, payable on demand or at a definite time, payable to order or to bearer, and not stating any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money. Since the note is payable to bearer, it is payable to anyone in possession of it who can claim it. The lack of a date means it is considered to be payable on demand. The key is that the instrument itself contains all the necessary elements for negotiability, and the UCC provides rules for resolving ambiguities like the absence of a date. Therefore, the note remains a negotiable instrument.

The scenario presented involves a negotiable instrument, specifically a promissory note, that contains an acceleration clause. Maine law, following UCC Article 3, governs such instruments. An acceleration clause allows the holder of the note to demand immediate payment of the entire outstanding balance upon the occurrence of a specified event. In this case, the event is the maker’s default on any installment payment. The question asks about the legal effect of the maker’s failure to pay the October installment. Under UCC § 3-108(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 at the option of a holder, or when no time for payment is stated. However, an instrument that states a fixed due date for payment, or a fixed time after sight or acceptance for payment, is payable at a definite time. An acceleration clause, such as the one present, does not make the instrument non-negotiable. Instead, it means the instrument is payable on demand if the acceleration event occurs. The default on the October installment triggers the acceleration clause, making the entire unpaid principal immediately due and payable at the option of the holder. This is a fundamental aspect of how acceleration clauses function in commercial paper, allowing for prompt recourse upon default. The key concept here is that the acceleration clause, while specifying a condition for early payment, does not render the payment terms indefinite in a way that would destroy negotiability. Rather, it provides a mechanism for the holder to accelerate the maturity date upon the occurrence of a specified event, which is the maker’s default.

The core issue revolves around the concept of “holder in due course” (HDC) status and its implications for the enforceability of a negotiable instrument against a maker who has a defense. Under UCC Article 3, specifically in Maine, a holder in due course takes an instrument free of most defenses and claims of the obligor. However, certain defenses, known as “real defenses,” can be asserted even against an HDC. These real defenses are typically related to the validity of the instrument itself or the capacity of the obligor. Examples include infancy, duress, illegality of the transaction, or fraudulent misrepresentation that induces the obligor to sign the instrument with neither knowledge nor reasonable opportunity to obtain knowledge of its character or essential terms. In this scenario, Mr. Abernathy signed a promissory note for a rare antique clock. He believed he was signing a receipt for a demonstration. This constitutes fraudulent misrepresentation of the nature of the instrument, which is a real defense. Even if Ms. Bellweather acquired the note for value, in good faith, and without notice of any claim or defense (thereby qualifying as a holder in due course), she cannot enforce the note against Mr. Abernathy because of this real defense. The UCC generally prioritizes protecting makers from such fundamental fraud that goes to the very nature of the obligation they are undertaking. Therefore, Mr. Abernathy can assert this defense.