Under Indiana law, specifically Indiana Code § 26-1-3.1-405, an instrument is not made irregular by the fact that it is undated, or bears a contrary statement or indorsement, or is otherwise not payable on demand nor at a definite time. However, for an instrument to be negotiable, it must contain certain elements. One crucial element is a promise or order to pay a fixed amount of money. The scenario describes a note that is payable “upon the death of Bartholomew Higgins.” The Uniform Commercial Code (UCC), as adopted in Indiana, defines a “definite time” for payment. Indiana Code § 26-1-3.1-108 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 option of a holder, or if no time for payment is stated. Conversely, an instrument is payable at a definite time if it is payable on passage of a specified period after sight or after date, or at a fixed period after the occurrence of a specified event capable of being ascertained with certainty. The occurrence of a death, while certain to happen eventually, is not an event that can be ascertained with certainty as to its exact timing. Therefore, a note payable “upon the death of Bartholomew Higgins” is not payable at a definite time. This lack of a definite time for payment, or payment on demand, renders the instrument non-negotiable under Indiana’s UCC Article 3. The note’s characterization as a promissory note is secondary to its negotiability.

The core issue revolves around the negotiability of a draft and the enforceability of a holder in due course status under Indiana’s Uniform Commercial Code (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, and payable to order or to bearer. In this scenario, the draft explicitly states “subject to the terms and conditions of the construction contract dated January 15, 2023.” This reference to an external agreement, which may contain covenants or conditions that affect the payment obligation, renders the promise or order conditional. Under UCC § 3-104(a)(1) as adopted in Indiana, a draft must be an unconditional promise or order. A promise or order is conditional if it states that it is subject to or governed by another writing, or that it is to be paid only out of a particular fund or source, except as provided in this section. The inclusion of “subject to the terms and conditions of the construction contract” directly triggers this exclusion, making the instrument non-negotiable. Consequently, even if a party acquires the instrument for value, in good faith, and without notice of any claim or defense (the requirements for a holder in due course under UCC § 3-302), they cannot claim holder in due course status if the instrument itself is not negotiable. Therefore, the draft is not a negotiable instrument, and the holder cannot enforce it free from defenses that would be available in an action by the payee. The relevant Indiana statute is Indiana Code § 26-1-3.1-104, which defines negotiable instruments and outlines the requirements for negotiability, including the absence of conditions beyond those permitted by the section.

The core issue here is determining whether a purported negotiable instrument contains an unconditional promise or order. Indiana law, following UCC Article 3, requires a writing to contain an unconditional promise or order to pay a fixed amount of money, to be negotiable. The phrase “subject to the terms and conditions of the loan agreement” renders the promise conditional. This is because it ties the payment obligation to the existence and terms of another agreement, meaning the maker’s liability is not solely determined by the instrument itself but also by the underlying loan agreement. Such a reference, if it mandates compliance with terms beyond merely identifying the source of funds or payment, makes the promise conditional and thus non-negotiable. Specifically, Indiana Code § 26-1-3.1-104(a) defines a negotiable instrument as an unconditional promise or order to pay a fixed amount of money, if it is payable to bearer or to order, and is payable on demand or at a definite time, and does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money. The reference to “subject to the terms and conditions of the loan agreement” goes beyond merely identifying the source of funds or a place of payment, as it potentially imposes additional obligations or limitations on the payer based on that separate agreement. This makes the promise conditional.

The scenario involves a promissory note endorsed in blank and stolen. Under Indiana law, specifically UCC Article 3, a holder in due course (HDC) takes an instrument free from most defenses and claims, except for a limited set of real defenses. However, the critical issue here is whether the thief, or anyone deriving title through the thief, can be a holder in due course. For a person to be a holder in due course, they must take the instrument for value, in good faith, and without notice of any claim or defense. A thief, by definition, does not acquire title to the instrument, and therefore cannot pass good title to another party, even if that party otherwise meets the HDC requirements. The UCC states that a thief has no rights in the instrument, and thus cannot be a holder. Consequently, any subsequent transferee from the thief also cannot acquire rights in the instrument, and therefore cannot become a holder in due course. This is because the thief’s possession is wrongful from the outset, and this defect in title is a real defense that can be asserted against any subsequent possessor, including someone who otherwise might qualify as an HDC. Therefore, the thief cannot transfer good title, and any subsequent holder, even one who paid value and acted in good faith without notice, cannot enforce the note against the original maker. The maker can assert the defense of theft against any possessor of the note.

The scenario involves a promissory note that contains an acceleration clause. An acceleration clause allows the holder of the note to declare the entire unpaid balance immediately due and payable upon the occurrence of a specified event, such as a default in payment. In Indiana, as governed by UCC Article 3, such clauses are generally enforceable. The note states that upon failure to pay any installment when due, the entire principal sum shall become immediately due and payable at the option of the holder. This is a standard conditional acceleration clause. The critical element here is whether the note’s terms are sufficiently definite to be considered a negotiable instrument. Indiana Code § 26-1-3.1-104(a) defines a negotiable instrument as an unconditional promise or order to pay a fixed amount of money, if it is payable to bearer or to order, and if it is payable on demand or at a definite time. The acceleration clause, by its nature, does not make the promise to pay conditional in the sense that it destroys negotiability. Instead, it relates to the time of payment. The note promises to pay a fixed amount ($10,000) and is payable at a definite time (in installments over five years). The acceleration clause modifies the time of payment upon a specific event, but the underlying obligation to pay the $10,000 remains. Therefore, the note, despite containing the acceleration clause, still meets the requirements for negotiability under Indiana law. The holder can indeed declare the entire amount due upon default.

The scenario involves a promissory note that is payable to “bearer” as specified on its face. Under Indiana Code § 26-1-3.1-109, an instrument is payable to bearer if it states that it is payable to bearer or to a specific person or bearer, or if it does not name a payee, or if it is payable to cash or to order of cash, or to a fictitious payee, or to any other indication that does not purport to name a payee. Once an instrument is payable to bearer, it remains so until it is specially indorsed. A special indorsement is one that names the specific person to whom or to whose order the instrument is to be payable. A bearer instrument can be negotiated by mere delivery. In this case, the note is initially payable to bearer. When it is delivered to Ms. Albright without any indorsement, it is validly negotiated because delivery alone is sufficient for bearer paper. Therefore, Ms. Albright becomes a holder. The subsequent indorsement by Ms. Albright to Mr. Chen is a special indorsement because it names a specific payee. After this special indorsement, the note becomes payable to Mr. Chen’s order and can only be negotiated by his indorsement. Since the question states the note was delivered to Ms. Albright without any indorsement, and it was originally payable to bearer, the delivery itself constitutes a valid negotiation.

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder, specifically under Indiana law which follows the Uniform Commercial Code (UCC) Article 3. A person qualifies as a holder in due course if they take an instrument that is (1) negotiable, (2) authenticated by the obligor, (3) payable to bearer or to identified person, (4) for value, (5) in good faith, and (6) without notice of any claim or defense against it or of any impropriety in its issuance or negotiation. In this scenario, the promissory note is for a specific sum, payable on demand, and signed by the maker, thus meeting the requirements of a negotiable instrument. The transfer to Ms. Albright was for value (the antique clock) and in good faith. The critical point is whether she had notice of the prior fraud. Since she took the note on its face value, without any knowledge of the misrepresentation made by Mr. Silas to Mr. Abernathy, she is presumed to have taken it without notice. Under UCC § 3-305, an HDC 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 like forgery, fraud in the execution, material alteration, infancy, illegality, duress, or discharge in insolvency proceedings. Fraud in the inducement, as committed by Mr. Silas, is a personal defense and is not available against an HDC. Therefore, Ms. Albright, as an HDC, can enforce the note against Mr. Abernathy.

The question revolves around the concept of presentment warranties under UCC Article 3, specifically as adopted in Indiana. Presentment warranties are made by a presenter of an instrument and are designed to protect the party to whom the instrument is presented. Indiana Code § 26-1-3.01-417 outlines these warranties. When an instrument is presented for payment or acceptance, the presenter warrants to the drawee or acceptor 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. Additionally, the presenter warrants that the instrument has not been altered and that the presenter has no knowledge that the signature of the purported drawer is unauthorized. In this scenario, Ms. Gable, as the presenter of the forged check to the bank, implicitly warrants that she is entitled to enforce the instrument and that the drawer’s signature is not unauthorized. The bank, as the drawee, can then seek recourse against Ms. Gable for breach of these warranties. The crucial point is that these warranties are made upon presentment, regardless of whether the presenter had actual knowledge of the forgery. The liability is strict for breach of these warranties. Therefore, the bank can recover from Ms. Gable.

In Indiana, under UCC Article 3, a draft that is accepted by a bank becomes a bank draft. When a bank accepts a draft, it becomes primarily liable for its payment. This acceptance is an unconditional promise by the bank to pay the draft as presented. The question involves a scenario where a check, which is a type of draft on a bank, is presented to a bank for acceptance. The bank, by stamping “Accepted” and signing it, has made a formal acceptance. Under Indiana law, specifically referencing the Uniform Commercial Code as adopted in Indiana, this acceptance generally binds the bank to pay the instrument according to its terms, even if the drawer had insufficient funds or attempted to stop payment. The UCC distinguishes between a bank’s certification of a check and its acceptance of a draft. While certification of a check is a specific form of acceptance, the general principles of acceptance under UCC Article 3 apply. The key is that the bank’s act of acceptance creates primary liability. The UCC defines acceptance as the bank’s signed engagement to pay an dishonored draft. In this case, the draft is a check, and the bank’s “Accepted” stamp coupled with a signature constitutes such an engagement. Therefore, the bank is obligated to pay the holder in due course, regardless of subsequent events that might otherwise affect the drawer’s liability or the bank’s obligation on an unaccepted check. The UCC, as codified in Indiana, emphasizes the finality of a bank’s acceptance of a draft.

In Indiana, under UCC Article 3, a holder in due course (HDC) takes an instrument free from most defenses and claims that a prior party could assert against the original payee. To qualify as an HDC, a holder must take the instrument for value, in good faith, and without notice of any claim or defense. Notice includes actual knowledge, receipt of notice, or reason to know from all the facts and circumstances known to the person at the time of acquisition. If a negotiable instrument is transferred in the ordinary course of business and the transferee has no knowledge of any defect or infirmity in the title of the transferor, the transferee is presumed to be a holder in due course. However, if a party acquires an instrument with knowledge that it is overdue or dishonored, or that it has been previously dishonored, they cannot be an HDC. Furthermore, if a party has notice of a defense or claim against payment of the instrument, such as a defense of illegality or fraud in the inducement, they are also disqualified from HDC status. The UCC defines “value” broadly, including performance of the promise for which the instrument was issued or security given for it. Good faith is defined as honesty in fact and the observance of reasonable commercial standards of fair dealing. The concept of “notice” is crucial; a holder is on notice if they know or have reason to know of a defect, even if they do not actively seek it out. For instance, if a note is clearly marked “void” or if the circumstances surrounding its negotiation strongly suggest a problem, a transferee would likely be deemed to have notice. The UCC also specifies that taking an instrument for less than its face value might, in some circumstances, be evidence of a lack of good faith or notice, though it is not determinative on its own. Indiana law, following the UCC, adheres to these principles for determining HDC status, ensuring commercial stability and facilitating the free transferability of negotiable instruments within the state.

The core concept here revolves around the distinction between a holder in due course (HDC) and a mere holder of a negotiable instrument, particularly concerning defenses against payment. Under Indiana law, as governed by UCC Article 3, a holder in due course takes an instrument free from all defenses of any party to the instrument with whom the holder has not dealt, except for real defenses. Real defenses are those that can be asserted against any holder, including an HDC. Examples of real defenses include infancy, duress that nullifies assent, fraud that induces the inducement of an instrument, discharge in insolvency proceedings, and any other discharge of which the holder has notice when taking the instrument. Personal defenses, on the other hand, are generally cut off by an HDC. These include breach of contract, failure of consideration, and fraud in the inducement. In this scenario, the forged signature of the maker on the note renders the instrument void from its inception. A forged signature is a real defense, meaning it can be asserted against anyone, including a holder in due course. Therefore, even if Ms. Albright qualifies as an HDC, she cannot enforce the note against the estate of Mr. Henderson because the note itself is fundamentally invalid due to the forgery. The forged signature invalidates the instrument for all purposes and is a defense that cannot be overcome by HDC status.

Under Indiana law, specifically Indiana Code § 26-1-3.1-305, 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 those that can be asserted against any holder, including an HDC. These real defenses are specifically enumerated and include infancy, duress that nullifies the obligation, fraud that nullifies the obligation, discharge in insolvency proceedings, and any other discharge of which the holder has notice when taking the instrument. For a defense to be considered “fraud that nullifies the obligation,” it must be fraud in the factum, meaning the maker did not know the nature of the instrument they were signing or were induced to sign it by a fraudulent representation of its character or essential terms. Fraud in the inducement, where the maker knows they are signing a note but is deceived about the underlying transaction, is a personal defense and not assertable against an HDC. In the scenario presented, Ms. Albright signed a promissory note, which she believed was a receipt for a small loan from Mr. Finch. She was unaware she was signing a negotiable instrument for a substantial amount. This misrepresentation goes to the very nature of the instrument itself, making it fraud in the factum. Therefore, this defense is a real defense and can be asserted against anyone, including an HDC.

Under Indiana law, specifically as governed by UCC Article 3, the concept of a holder in due course (HDC) is crucial for determining the rights of a party who takes possession of a negotiable instrument. 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 has been dishonored or that there is a defense against or claim to it on the part of any person. Indiana Code § 26-1-3.3-302 outlines these requirements. Let’s consider a scenario to illustrate the application of these principles. Suppose Amelia draws a check payable to the order of Ben. Ben owes Clara a debt and, in satisfaction of that debt, indorses the check and delivers it to Clara. Clara accepts the check, believing it is a valid payment. Unbeknownst to Clara, Amelia had a valid defense against Ben, such as fraud in the inducement, which would have allowed Amelia to refuse payment to Ben. However, Clara had no knowledge of this dispute between Amelia and Ben when she received the check. Clara deposited the check into her account, and the bank credited her account with the amount. The bank, acting as a collecting bank and potentially as a holder, must also meet the HDC requirements. If the bank credited Clara’s account, it has generally given value. Assuming the bank acted in good faith and had no notice of Amelia’s defense against Ben, the bank would likely be considered a holder in due course. This status would allow the bank to enforce the instrument against Amelia despite Amelia’s defense against Ben, as the HDC takes the instrument free from most defenses. The key is the absence of notice and the giving of value.

In Indiana, under UCC Article 3, a holder in due course (HDC) takes an instrument free from most defenses and claims that a prior party could assert against the original payee. To qualify as an HDC, a person must take an instrument that is (1) negotiable, (2) taken for value, (3) taken in good faith, and (4) taken without notice that it is overdue or dishonored or that there is any defense or claim against it. The scenario describes a check endorsed in blank and stolen. The thief then fraudulently sells the check to an unsuspecting individual, Mr. Abernathy, in exchange for a valuable antique watch. Mr. Abernathy presents the check for payment. The critical element here is whether Mr. Abernathy took the instrument for value. Indiana law, mirroring the UCC, defines “value” in the context of negotiable instruments. Taking an instrument in satisfaction of or as security for a pre-existing claim or debt constitutes taking for value. More importantly, giving an instrument for an antecedent obligation or incurring an irrevocable commitment constitutes value. In this case, Mr. Abernathy gave an antique watch in exchange for the check. The exchange of a tangible item of value for the instrument satisfies the “for value” requirement. The good faith and lack of notice are presumed unless the contrary is proven. The defense of theft by the thief is a real defense, but it is generally cut off by a holder in due course. Since Mr. Abernathy gave value (the watch), took in good faith, and had no notice of any defect, he likely qualifies as a holder in due course. Therefore, the original drawer’s defense of theft by the thief would not be available against Mr. Abernathy.

The core issue here revolves around the enforceability of a promissory note that was transferred after its due date. Under Indiana law, as governed by UCC Article 3, a promissory note is generally negotiable. However, the rights of a holder in due course (HDC) are crucial. To qualify as an HDC, a holder must take the instrument for value, in good faith, and without notice of any defense or claim against it. Crucially, an instrument that is overdue cannot be taken by a holder in due course. The due date of the note was June 1, 2023. The transfer to Ms. Albright occurred on August 15, 2023, which is after the due date. Therefore, Ms. Albright cannot be a holder in due course. As a result, she takes the note subject to any defenses that the maker, Mr. Peterson, could assert against the original payee, Ms. Gable. Mr. Peterson’s defense of failure of consideration is a real defense, meaning it can be asserted against any holder, including a holder who is not an HDC. Since Ms. Albright is not an HDC due to the late transfer, Mr. Peterson can raise the defense of failure of consideration. Consequently, Ms. Albright cannot enforce the note against Mr. Peterson.

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder. Under Indiana law, as codified by UCC Article 3, an instrument taken by a holder in due course is subject to only a limited set of real defenses. Personal defenses, such as breach of contract or failure of consideration, are generally cut off by an HDC. However, fraud in the essence (or fraud in the factum) is a real defense. This occurs when a party is induced to sign an instrument without knowledge of its character or essential terms. In this scenario, Elias, a novice in financial matters, was led to believe he was signing a simple loan agreement, not a negotiable instrument payable to bearer. He did not know he was signing a promissory note and was unaware of its essential terms regarding payment. This constitutes fraud in the essence. Therefore, Elias can assert this real defense against any holder, including a subsequent holder who otherwise qualifies as a holder in due course. The fact that the instrument is payable to bearer simplifies negotiation, but it does not negate the real defense of fraud in the essence. The UCC explicitly lists fraud in the essence as a defense that can be asserted against an HDC (see Indiana Code § 26-1-3.3-305(a)(1)(A)). The other options describe personal defenses which would be cut off by an HDC.

The core issue here is whether a holder in due course status can be maintained when a negotiable instrument is transferred without proper endorsement. Under Indiana law, as codified by UCC Article 3, a holder in due course (HDC) takes an instrument free of most defenses and claims. However, to be a holder, one must possess the instrument and be a payee or a holder of a bearer instrument, or a holder of an order instrument that has been specially endorsed to them. An instrument payable to order is negotiated by delivery with any necessary indorsement. If an instrument is payable to an identified person and is transferred for value by delivery alone, the transferee acquires rights to enforce the instrument, but this transfer is only a “shelter” transfer. The transferee becomes a holder only upon obtaining the necessary indorsement. Until that indorsement is supplied, the transferee is not a holder and therefore cannot be a holder in due course, even if they otherwise meet the HDC requirements (value, good faith, and notice). The UCC specifically states that if an order instrument is transferred for value by delivery alone, the transferee acquires rights to enforce the instrument, but the transfer is not a negotiation. The transferee has the right to obtain the transferor’s indorsement. However, until the indorsement is made, the transferee is not a holder. This is a critical distinction. Therefore, the inability to claim holder in due course status arises from the failure to complete the negotiation process by obtaining the necessary indorsement. The explanation does not involve any calculations.

The core issue revolves around whether a promissory note, which includes a clause allowing for the acceleration of the due date upon the occurrence of certain events, still qualifies as a negotiable instrument under Indiana’s Uniform Commercial Code (UCC) Article 3. Indiana Code § 26-1-3.1-104(a) defines a negotiable instrument as an unconditional promise or order to pay a fixed amount of money, payable on demand or at a definite time, to order or to bearer. The key to this question lies in the interpretation of “unconditional promise” and “definite time.” Indiana Code § 26-1-3.1-105(a) clarifies that a promise or order is unconditional unless it states an express condition to payment or the instrument itself is subject to, or governed by, another writing. However, § 26-1-3.1-108(b) specifically addresses acceleration clauses. It states that an instrument is payable at a definite time if it is payable on stated installments, or on or before a specified date, or at a fixed period after a stated date, or at a fixed period after sight. Crucially, § 26-1-3.1-108(b)(2) provides that an instrument may be payable at a definite time even though it contains a clause permitting acceleration of the date of payment. Therefore, a clause that allows for acceleration of the due date upon the maker’s default or insolvency does not destroy the negotiability of the instrument, as the occurrence of these events triggers a definite future point in time for payment, even if that time is not precisely known at the outset. The instrument remains payable at a definite time because the acceleration event, when it occurs, fixes the payment date. The UCC’s intent is to promote commerce by recognizing instruments with common commercial practices, and acceleration clauses are widely used. The note’s negotiability is preserved because the acceleration clause does not introduce uncertainty about the *existence* of the obligation to pay, but rather about the *timing* of that payment, and the UCC specifically permits this.

The core concept tested here is the definition of a negotiable instrument under UCC Article 3, specifically focusing on the “unconditional promise or order” requirement and the “fixed amount of money” requirement, as adopted and interpreted by Indiana law. A check is generally a negotiable instrument. However, certain conditions or additional undertakings can destroy its negotiability. In this scenario, the phrase “subject to the terms and conditions of the separate agreement dated October 15, 2023” creates a condition precedent and links the payment to the performance of that separate agreement. This makes the promise to pay conditional, thereby rendering the instrument non-negotiable. Under Indiana Code § 26-1-3.1-104(a), a negotiable instrument must contain an unconditional promise or order. Indiana Code § 26-1-3.1-105(a) clarifies 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 it states that the promise or order is subject to or governed by another writing. The reference to the “separate agreement” directly invokes this provision. Therefore, the instrument is not a negotiable instrument.

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder. Under Indiana law, as governed by UCC Article 3, a person who takes an instrument for value, in good faith, and without notice of any claim or defense is generally afforded HDC status. This status shields the HDC from most personal defenses that the maker or drawer might have against the original payee. Such personal defenses include breach of contract, lack of consideration, or fraud in the inducement. However, certain real defenses are available against *any* holder, including an HDC. These real defenses typically involve issues that go to the validity of the instrument itself, such as forgery, material alteration, or fraud in the factum (i.e., the maker was tricked into signing what they thought was something else entirely). In the given scenario, the promissory note was signed by Mr. Abernathy, who believed he was signing a lease agreement for agricultural equipment in Indiana. This misrepresentation of the nature of the instrument constitutes fraud in the factum. Fraud in the factum is a real defense under Indiana law (and generally under UCC Article 3). Consequently, even if Ms. Bellweather qualifies as a holder in due course, she takes the instrument subject to Mr. Abernathy’s real defense of fraud in the factum. Therefore, Mr. Abernathy can successfully assert this defense against Ms. Bellweather to avoid payment.

The core concept here revolves around the holder in due course (HDC) status and the defenses available against such a holder under Indiana law, specifically as governed by UCC Article 3. An HDC takes an instrument free from all defenses of any party to the instrument with whom the holder has not dealt, except for certain real defenses. Real defenses are those that can be asserted against any holder, including an HDC. Fictitious payee situations, where a drawer issues an instrument to a payee who is not intended to have an interest in it, are typically handled by the rule that the instrument is payable to the person to whom the drawer delivers it, meaning the intended recipient, even if fictitious, is the payee. However, if the drawer’s intent was for the instrument to be paid to a specific person, but that person is mistakenly identified or a fraudster impersonates them, the instrument may still be negotiable. In this scenario, the maker’s claim of fraud in the inducement, where they were tricked into signing the note by misrepresentations about its purpose or value, is a personal defense. Personal defenses are generally cut off by an HDC. Real defenses, on the other hand, include things like forgery, material alteration, fraud in the execution (or “real fraud”), discharge in insolvency proceedings, or a defense of infancy, extreme duress, or illegality of the transaction that renders the obligation void. Fraud in the inducement, as presented, is not a real defense and therefore cannot be asserted against an HDC. The UCC, as adopted in Indiana, defines a holder in due course based on taking the instrument for value, in good faith, and without notice of any claim or defense. Since Ms. Albright meets these criteria, she can enforce the note against Mr. Henderson despite his claim of fraud in the inducement. The UCC’s treatment of fictitious payees is complex, but in this instance, the fraud relates to the inducement to sign, not the identity of the payee as a fictitious person intended to be defrauded from the outset.

The scenario involves a promissory note that is transferred by endorsement. The core issue is determining when the transferee acquires the rights of a holder in due course (HDC). Under Indiana law, as codified by UCC Article 3, a holder in due course takes an instrument free from certain defenses and claims. 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 has been dishonored or of any defense or claim to it on the part of any person. In this case, the note was originally due on June 1st. By the time Amelia received the note on June 15th, the due date had already passed. Indiana Code § 26-1-3.3-302(a)(1) specifies that a holder takes an instrument “when it is taken for value, in good faith, and without notice of any claim or defense against it.” Crucially, for a time instrument, notice that it is overdue is a disqualifying factor for HDC status. A time instrument is overdue when the date of payment has passed. Since the note was due on June 1st and Amelia acquired it on June 15th, she had notice that it was overdue. Therefore, Amelia cannot be a holder in due course. This means she takes the note subject to any defenses that the maker, Bartholomew, could have asserted against the original payee, Clara. The fact that Amelia paid value and acted in good faith is irrelevant once notice of the overdue status is established.

In Indiana, under UCC Article 3, a holder in due course (HDC) takes an instrument free from most defenses and claims that a prior party could assert against the original payee. To achieve HDC status, a person must take the instrument for value, in good faith, and without notice that it is overdue or dishonored or that it has any defense or claim against it. The scenario involves a promissory note. The original payee, “Prairie Goods Inc.,” is owed money by “Cornfield Farms LLC.” Cornfield Farms has a defense to payment, specifically a breach of contract by Prairie Goods Inc. The note is then transferred to “Hoosier Investments Co.” Hoosier Investments Co. purchased the note from Prairie Goods Inc. for a price less than its face value, which constitutes taking for value. The critical element is whether Hoosier Investments Co. had notice of Cornfield Farms’ defense. The question states that Hoosier Investments Co. purchased the note *after* Cornfield Farms had sent a letter to Prairie Goods Inc. alleging the breach of contract and stating their intention to stop payment. This letter, sent directly to the transferor (Prairie Goods Inc.) and clearly communicating the existence of a defense, would generally provide notice of the defense to any subsequent purchaser of the note. Therefore, Hoosier Investments Co. had notice of the defense at the time of acquisition. Since having notice of a defense disqualifies a holder from being a holder in due course, Hoosier Investments Co. is not an HDC. Consequently, Hoosier Investments Co. takes the note subject to Cornfield Farms’ defense of breach of contract. The question asks about the rights of Hoosier Investments Co. against Cornfield Farms. Because Hoosier Investments Co. is not an HDC, it can only assert rights that its transferor, Prairie Goods Inc., had. Prairie Goods Inc. would be subject to Cornfield Farms’ defense. Therefore, Hoosier Investments Co. cannot enforce the note against Cornfield Farms due to the valid defense.

Under Indiana law, specifically Indiana Code § 26-1-3.1-305, 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 defenses are designed to protect makers from severe forms of fraud or incapacity. Examples of real defenses include infancy, duress that nullifies assent, fraud that induces the inducement of the instrument, and discharge in insolvency proceedings. Fictitious payee situations, where the issuer of a check intends to pay a nonexistent person or entity, are generally handled under the concept of improper negotiation rather than a real defense against a subsequent holder. The UCC, as adopted in Indiana, provides specific rules for such scenarios, often allocating the loss to the drawer or the first party to take the instrument from the forger if the drawer’s negligence substantially contributed to the forgery. Therefore, a claim of a fictitious payee, while a valid defense against a holder who is not an HDC, is not a real defense that can defeat the claim of an HDC. The question asks which of the listed defenses is *not* a real defense. Infancy, fraud in the factum (which is a type of fraud that induces the inducement), and discharge in bankruptcy are all recognized real defenses. The issue of a fictitious payee, however, is typically resolved through rules concerning negotiation and potential drawer negligence, not as a real defense available against an HDC.

The scenario involves a promissory note issued by a company in Indiana, which is governed by Indiana’s adoption of the Uniform Commercial Code (UCC) Article 3. The question tests the understanding of when a holder in due course (HDC) status is lost due to notice of a defense or claim. Indiana Code § 26-1-3.3-302 defines a holder in due course, and § 26-1-3.3-303 outlines what constitutes value. Crucially, § 26-1-3.3-304 addresses notice of a claim or defense. A holder receives notice if they have actual knowledge, receive notice from another source, or have reason to know from all the facts and circumstances known to them at the time that the instrument is overdue, has been dishonored, or that there is an adverse claim or defense. In this case, when Ms. Albright received the note, she was aware of the ongoing litigation concerning the underlying contract. This actual knowledge of a defense to payment on the note, specifically the potential breach of contract claim that could be asserted against the original payee, prevents her from qualifying as a holder in due course. Therefore, she takes the instrument subject to any defenses that could be asserted against the original payee. The fact that the note was negotiated to her for value before maturity and in good faith is insufficient to overcome the actual notice of the defense.

The scenario involves a promissory note that is payable to a specific payee, “Aurora Ventures,” but it is also stamped with the restrictive endorsement “For Deposit Only, First National Bank of Indiana.” Under Indiana law, specifically UCC § 3-206, a depositary bank that takes an instrument endorsed with a restrictive endorsement for deposit is a holder for value and must apply any value given with respect to the instrument in accordance with the endorsement. In this case, the endorsement directs the funds to be deposited only. If the bank fails to follow the restrictive endorsement and instead allows the funds to be withdrawn by someone other than for deposit into the designated account or to satisfy a debt owed to the bank, it may be liable for conversion or breach of trust. However, the question asks about the effect of the restrictive endorsement on the negotiability of the instrument and the rights of subsequent transferees. A restrictive endorsement does not, in itself, affect the negotiability of the instrument. An instrument remains negotiable even with a restrictive endorsement. The restriction affects the rights of the parties involved, particularly the depositary bank. A bank taking the instrument for deposit is generally protected if it acts in accordance with the restriction. Subsequent transferees who take the instrument with notice of the restriction are also bound by its terms. In this specific scenario, the bank’s action of crediting the account of “Apex Solutions” directly, rather than depositing it for Aurora Ventures or as per the “For Deposit Only” instruction, potentially breaches the restrictive endorsement. However, the core question is about the *negotiability* and the *rights of subsequent holders*. The restrictive endorsement “For Deposit Only” is a common type of restrictive endorsement. It does not prevent the instrument from being negotiated. The UCC, as adopted in Indiana, allows for instruments to be restrictive endorsed and still remain negotiable. The restriction impacts how the instrument must be handled by those who take it, particularly a depositary bank. A bank that takes an instrument for deposit under a restrictive endorsement must apply any value given for the instrument in accordance with the endorsement. If the bank pays the instrument in contravention of the restriction, it may be liable. However, the negotiability itself is not destroyed. The instrument can still be transferred. The restriction dictates the *manner* of payment or deposit. Therefore, the instrument remains negotiable, and a holder in due course could still take it, but the holder would be subject to any defenses arising from the restrictive endorsement, particularly if the holder had notice of the restriction. The correct understanding is that the restrictive endorsement does not destroy negotiability, but it does impose obligations on the depositary bank and potentially subsequent holders with notice.

Under Indiana law, specifically Indiana Code Title 26, Article 3 (Uniform Commercial Code – Commercial Paper), the concept of presentment is crucial for the enforcement of certain negotiable instruments. Presentment is a demand made upon the maker of a note or the drawee of a draft for acceptance or payment. For a holder in due course (HOC) to recover on a note, presentment is generally not required unless the instrument itself specifies it. However, if a party is seeking to recover damages for dishonor, presentment is a prerequisite. In the scenario provided, the note is payable on demand. Under UCC § 3-501, presentment for payment is required to charge the drawer or endorser of a draft, but not the maker of a note. The maker’s obligation is to pay upon the terms of the note, and a separate demand is not typically a condition precedent to their liability, absent specific terms in the note. Therefore, the maker of the note is liable without prior presentment. The question tests the understanding of when presentment is a necessary step for enforcing an instrument against the primary obligor, distinguishing it from situations where it’s needed to charge secondary parties. Indiana’s adoption of the UCC aligns with the general principles that the maker of a note is primarily liable and their obligation accrues upon issuance or maturity, not contingent on a formal demand unless explicitly stated.

The scenario describes a draft that is payable to a specific person, “Ms. Anya Sharma,” and contains a clear unconditional promise to pay a stated sum of money. The critical element for negotiability is whether the draft is payable “on demand or at a definite time.” The phrase “on or about October 15, 2024” introduces an element of uncertainty regarding the exact payment date. Under Indiana Code \(3-304(a)(2)\), a promise to pay is not for a definite time if it is contingent upon an event that may or may not happen. While “on or about” suggests an approximate date, it does not constitute a “definite time” in the strict sense required for negotiability under UCC Article 3. The UCC generally requires a specific date or a date that can be precisely determined without reference to external, uncertain events. Therefore, the inclusion of “on or about” renders the time of payment indefinite, impacting the instrument’s negotiability. This affects the ability of subsequent holders to take the instrument free from certain defenses. The core concept being tested is the “definite time” requirement for negotiability, which is a foundational principle of UCC Article 3 as adopted in Indiana. A negotiable instrument must contain an unconditional promise to pay a fixed amount of money, payable on demand or at a definite time, and payable to order or to bearer. The “definite time” element is crucial because it provides certainty for parties involved in the commercial paper ecosystem, allowing for predictable transfer and enforcement. An instrument that is not payable at a definite time may still be enforceable as a contract, but it loses its status as a negotiable instrument and the associated protections and advantages.

The core issue revolves around the enforceability of a promissory note containing a clause that allows the maker to prepay the principal amount without penalty, but also includes a provision for a variable interest rate tied to a benchmark index plus a fixed spread. Under Indiana law, as codified by UCC Article 3, for an instrument to be a negotiable instrument, it must contain an unconditional promise to pay a fixed amount of money. While the principal amount is fixed, the inclusion of a variable interest rate tied to an external index, even with a fixed spread, generally does not destroy negotiability as long as the rate can be determined from the instrument itself or by reference to a publicly available source. Indiana Code § 26-1-3.1-104(a)(1) defines a negotiable instrument as an unconditional promise or order to pay a fixed amount of money. Indiana Code § 26-1-3.1-112 addresses interest, stating that a rate of interest that cannot be calculated by reference to a stated rate, index, or formula may not be enforced. However, the UCC permits variable rates of interest if they are tied to a stated rate, index, or formula. The key is whether the “fixed amount of money” can be determined at the time of payment. A rate tied to a publicly available index plus a fixed spread is generally considered calculable. The question, however, focuses on the impact of the prepayment clause. A clause that permits prepayment of the principal does not affect the negotiability of the instrument. The ability of the maker to pay early does not make the amount due uncertain; it merely provides an option. Therefore, the note remains negotiable. The explanation of the correct answer is that the provision for prepayment does not alter the fixed sum due at maturity or the calculability of the interest, thus preserving the instrument’s negotiability under Indiana’s adoption of UCC Article 3.

The scenario involves a promissory note issued in Indiana, governed by Indiana’s adoption of UCC Article 3. The note states it is payable “on demand or, if no demand is made, then on December 31, 2024.” This language creates an ambiguity regarding the exact maturity date. Under Indiana Code § 26-1-3.1-108(b)(2), an instrument that states it is payable on demand or at a definite time, but also contains a provision that makes it payable on demand or at a different definite time, is payable on demand. The UCC prioritizes the demand provision when such a conflict exists, effectively treating the instrument as a demand instrument. Therefore, the note is payable on demand. When a note is payable on demand, the statute of limitations for bringing an action to enforce it begins to run at the time of issuance, or in this case, the earliest possible time demand could be made. Indiana Code § 26-1-3.1-304(a)(2) states that for a demand instrument, the statute of limitations begins to run at the time of issuance. However, a more specific rule for demand instruments under UCC § 3-304(a)(2) and its Indiana counterpart, Indiana Code § 26-1-3.1-304(a)(2), provides that for an instrument payable on demand, the limitations period begins to run at the time of issuance, or if the instrument is antedated, at the time it is antedated. In the absence of antedating, the earliest point demand could be made is upon issuance. Therefore, the statute of limitations for enforcement would commence from the date of issuance.