The scenario involves a negotiable instrument that is not payable to order or to bearer. Under UCC Article 3, as adopted in Iowa, an instrument that is payable “to a specified person” without further qualification is generally considered a non-negotiable instrument, unless it meets specific exceptions or is otherwise classified. Specifically, if an instrument is made payable only to a named payee, such as “Pay to the order of Jane Doe” or simply “Pay to Jane Doe,” it lacks the required words of negotiability (“to order” or “to bearer”) to be a negotiable instrument under UCC § 3-104(a). Such an instrument would be treated as a simple contract for payment, and its transfer would be governed by contract law rather than the rules of commercial paper. Therefore, the instrument in question, payable only to a specified person without the magic words of negotiability, is not a negotiable instrument.

The core issue here is the enforceability of a draft against a party who did not sign it, but whose name appears on the instrument. Under Iowa Code Section 554.3301, a person entitled to enforce an instrument is the holder of the instrument, a non-holder in possession of the instrument who has the rights of a holder, or a person not in possession of the instrument who is entitled to enforce the instrument. However, to be entitled to enforce an instrument, a party must be in possession of the instrument and be the named payee or a transferee. A signature is generally required to establish liability on an instrument under Iowa Code Section 554.3401, which states that a person is not liable on an instrument unless the person signs the instrument or is represented by an agent who signs the instrument. While an agent can bind a principal, the agent must have authority to do so, and the principal must be identified or identifiable. In this scenario, Bartholomew’s name appears on the draft, but he did not sign it, nor is there any indication that he authorized anyone to sign it on his behalf or that he ratified its creation. Therefore, Bartholomew is not liable on the draft. The question is designed to test the understanding that mere mention of a name on an instrument does not create liability without a signature or other form of authorization or ratification.

The scenario describes a promissory note that contains a clause allowing the maker to prepay the principal amount at any time without penalty. This type of clause does not affect the negotiability of the instrument. Under UCC Article 3, as adopted in Iowa, an instrument is negotiable if it is a writing that contains 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. A promise to pay a fixed amount of money is not rendered non-negotiable by the fact that the instrument provides for prepayment of the principal, either at a fixed discount or at a fixed premium, or with the consent of the holder. Iowa Code Section 554.3104(1)(a) and its accompanying comments confirm that prepayment provisions do not destroy negotiability. The note in question is a writing, contains a promise to pay a fixed amount of money (assuming the stated amount is fixed), is payable at a definite time (or on demand, if not specified otherwise), and is payable to order or bearer (implied by the context of negotiability). The prepayment clause is a permitted term that does not violate the requirements for negotiability. Therefore, the note remains a negotiable instrument.

The scenario involves a negotiable instrument that has been transferred by indorsement. The core issue is determining the rights of a holder in due course (HDC) when the instrument is subject to a defense arising from a consumer credit transaction. Under Iowa Code Section 554.3302, a holder in due course takes an instrument free of most defenses and claims. However, Iowa Code Section 537.3404, which is part of Iowa’s Consumer Credit Code, specifically addresses the transfer of consumer credit contracts and related negotiable instruments. This section provides that a holder of a negotiable instrument arising from a consumer credit sale or lease, even if the holder is a holder in due course, is subject to all claims and defenses of the consumer-debtor that could be asserted against the seller or lessor arising from the sale or lease. This means that the consumer’s right to assert defenses against the original seller or lessor is preserved against subsequent holders of the instrument, including HDCs. Therefore, despite potentially meeting the criteria for HDC status, the holder in this case cannot enforce the instrument against the maker if the maker has a valid defense against the original payee related to the underlying consumer transaction. The defense of failure to deliver conforming goods is a fundamental defense that would be available against the original payee. Since Iowa law specifically preserves such defenses against even an HDC in consumer credit transactions, the maker can assert this defense.

The core concept here revolves around the discharge of a party from liability on a negotiable instrument under Iowa’s UCC Article 3. Specifically, it addresses the scenario where a holder unjustifiably impairs the collateral securing an instrument. Iowa Code Section 554.3605(e) states that if a holder unjustifiably impairs collateral for a negotiable instrument, the drawer or indorser is discharged to the extent of the impairment. Unjustifiable impairment of collateral occurs when the holder fails to exercise reasonable care in preserving collateral or fails to take necessary steps to preserve rights against a party secondarily liable on the instrument. In this case, the collateral was a valuable piece of farm equipment. By failing to maintain the equipment, allowing it to deteriorate and significantly decrease in value, the holder, Farmer Giles, has unjustifiably impaired the collateral. The impairment is the difference between the value of the collateral if it had been properly maintained and its current depreciated value. If the equipment was worth $50,000 when the note was issued and would have retained that value with proper maintenance, but due to neglect is now only worth $20,000, the impairment is $30,000. This impairment directly reduces the amount for which the indorser, Ms. Peterson, can be held liable. Therefore, Ms. Peterson is discharged from liability to the extent of the $30,000 impairment. The remaining balance on the note is $40,000. Since the impairment ($30,000) is greater than the outstanding balance, Ms. Peterson is discharged from all liability on the instrument.

The scenario presented involves a draft drawn by a party in Iowa on a bank in Illinois, payable to a payee also in Iowa. Under UCC Article 3, specifically Iowa’s adoption of the Uniform Commercial Code, the governing law for the interpretation and enforcement of negotiable instruments is generally determined by the law of the jurisdiction where the instrument is issued or, in the case of drafts, where the drawee bank is located, unless otherwise specified by agreement. However, the question focuses on the enforceability of the instrument as a negotiable instrument. For an instrument to be a negotiable instrument, it must meet several requirements, including being an unconditional promise or order to pay a fixed amount of money, payable on demand or at a definite time, and payable to order or to bearer. The critical element here is the “order” to pay. In this case, the instrument is a draft, which is an order to pay. The fact that it is drawn by an Iowa resident on an Illinois bank does not, by itself, prevent it from being a negotiable instrument. The Uniform Commercial Code, as adopted by Iowa (and mirroring the UCC generally), defines a draft as an order to pay. The location of the drawer, drawee, and payee are relevant for choice of law in certain disputes, but the fundamental negotiability is determined by the instrument’s form and content. Therefore, the instrument, as described, can be considered a negotiable instrument.

The scenario involves a negotiable instrument, specifically a draft, that was altered after issuance. Under Iowa’s UCC Article 3, specifically Iowa Code § 554.3407, an unauthorized and material alteration of a negotiable instrument can discharge any party whose obligation is affected by the alteration unless that party assented to the alteration. A material alteration is one that changes the contract of any party. Examples include changing the number or amount of the parties, adding to the instrument an unauthorized admission of liability, or changing the instrument into a negotiable instrument. In this case, the payee’s name was changed, which is a material alteration. The question is whether the drawer, who issued the draft, is discharged from liability on the altered instrument. Iowa Code § 554.3407(2)(a) states that if an altered instrument is enforced against a person who is not a discharged party, the person may enforce the instrument according to its original tenor. However, the question here is about the discharge of the drawer. Iowa Code § 554.3407(2)(b) addresses the effect of a material alteration on a party who did not assent. It states that if an instrument has been materially altered, the instrument may be enforced according to its original tenor by a holder in due course, but the obligation of any other party that was not a party to the alteration is discharged. Since the drawer did not assent to the alteration and the alteration was material (changing the payee), the drawer’s obligation on the altered draft is discharged. The holder can only enforce the draft according to its original tenor against the drawer if the holder is a holder in due course. However, the question asks about the drawer’s liability on the *altered* instrument. The alteration effectively discharges the drawer from liability on the instrument as it was presented after alteration. The holder would need to pursue the party who made the alteration or seek recourse on the original debt.

The core issue here is whether the instrument qualifies as a negotiable instrument under UCC Article 3, specifically concerning the “sum certain” requirement and the possibility of acceleration. Iowa Code §554.3104(1) 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. Iowa Code §554.3104(3) further clarifies that an instrument is payable at a definite time even if it is payable earlier than the stated date on the happening of a specified event. The presence of an acceleration clause, which allows the holder to demand payment earlier than the stated maturity date upon the occurrence of a specified event (like default), does not destroy negotiability as long as the acceleration is tied to a specific event. In this case, the note is payable “on demand or, if no demand is made, on December 31, 2025.” This structure presents a potential issue. A true “on demand” instrument is payable immediately upon its creation. However, the inclusion of a specific future date, December 31, 2025, alongside the “on demand” clause creates an ambiguity regarding the definite time of payment. For an instrument to be payable at a definite time, it must be payable at a specified time or times. A note payable “on demand” is generally considered payable immediately. When a note is payable “on demand or at a definite time,” the “on demand” aspect typically prevails, meaning it’s payable immediately. However, the phrasing here suggests a choice between two payment terms: either on demand, or at a definite future date if no demand is made. This dual phrasing, particularly the “if no demand is made” qualification for the definite date, makes the time of payment uncertain. The instrument is not solely payable on demand, nor is it solely payable at a definite time. The acceleration provision, while generally permissible, is tied to a condition (default) that is not inherently linked to the certainty of the payment date itself in a way that resolves the initial ambiguity. The instrument must be unequivocally payable at a definite time or on demand. The combination of “on demand” and a specific future date with a conditional element (“if no demand is made”) renders the payment time uncertain, thus failing the “definite time” requirement for negotiability. Therefore, it is not a negotiable instrument.

The core issue here is determining the liability of parties on a negotiable instrument when there’s a question of proper authorization. In Iowa, as under UCC Article 3, a person signing a negotiable instrument on behalf of another without proper authority can be personally liable. However, the instrument itself may be enforced against the represented person if the signature is ratified. The question centers on whether the instrument is enforceable against the purported signer personally, or against the entity they claimed to represent. Consider a scenario where Mr. Abernathy, a managing partner of “Prairie Holdings LLC,” a limited liability company in Iowa, signs a promissory note as “Abernathy, Managing Partner” payable to “AgriCorp.” However, Abernathy was not authorized by Prairie Holdings LLC’s operating agreement to incur debt of this nature without a majority vote of the other partners. AgriCorp, unaware of this internal restriction, accepts the note. Subsequently, the other partners of Prairie Holdings LLC discover the note and, rather than repudiating it, they continue to operate the business as usual, benefiting from the funds obtained through the note, and make several interest payments on it. This conduct can be construed as ratification of Abernathy’s unauthorized signature. Under Iowa Code Section 554.3-403(a), an unauthorized signature is one made without actual, implied, or apparent authority. If a signature is unauthorized, the purported signer is not liable if they signed in a representative capacity for which they were not authorized. However, Section 554.3-404(a) provides that an unauthorized signature is effective as the signature of the drawer or maker if the party against whom it is asserted has ratified it or is precluded from denying it. Ratification can occur through conduct that affirms the transaction. In this case, Prairie Holdings LLC’s continued operation and making of interest payments, despite knowing of the unauthorized nature of Abernathy’s signature relative to the operating agreement, constitutes ratification. Therefore, the note is enforceable against Prairie Holdings LLC. Abernathy’s personal liability is secondary to the liability of the entity he purported to represent, especially given the ratification. The question asks about the enforceability against the entity.

The core concept here revolves around the holder in due course (HDC) status and the defenses available against an HDC under UCC Article 3, as adopted in Iowa. An HDC takes an instrument free from most defenses, but not from “real” defenses. Real defenses are those that can be asserted against any holder, including an HDC. Among the real defenses listed in UCC § 3-305(a)(1) are infancy, duress that nullifies assent, illegality of the transaction that nullifies assent, and fraud that induces the obligor to sign the instrument with neither knowledge nor reasonable opportunity to obtain knowledge of its character or its essential terms. Personal defenses, such as breach of contract, failure of consideration, or fraud in the inducement, are generally cut off by an HDC. In this scenario, the forged signature of Mr. Henderson on the note constitutes a real defense. UCC § 3-303(a)(1) states that a signature is not effective if it is not that of the party sought to be charged. UCC § 3-305(a)(1)(A) explicitly lists “a defense of the obligor that arises from fraud that induced the obligor to sign the instrument with neither knowledge nor reasonable opportunity to obtain knowledge of its character or its essential terms” and UCC § 3-305(a)(1)(B) lists “a defense of the obligor that by provision of law nullifies the obligation of defense.” A forged signature is generally considered a real defense because the purported obligor never actually assented to the obligation. Therefore, Ms. Gable, despite being a holder in due course, cannot enforce the note against Mr. Henderson because his signature was forged. The UCC’s framework prioritizes the protection of individuals from obligations they never genuinely undertook.

The scenario presented involves a negotiable instrument where the payee’s name is left blank. Under Iowa’s adoption of UCC Article 3, specifically concerning incomplete instruments, the holder of a negotiable instrument that is incomplete in any respect is empowered to complete it by filling in the blanks. This authority is broad, but it is subject to the crucial limitation that the instrument must be completed in accordance with any authority given by the party making it. If an instrument is filled in otherwise than strictly in accordance with the authority given, the holder can only enforce it as completed if the holder is a holder in due course. However, if the instrument is filled in without any authority, the party making it is not liable on the instrument. In this specific case, the instrument was delivered with the payee’s name blank, and the holder, without any express or implied authority from the drawer, filled in their own name. This act of filling in the blank without authority, and then asserting rights on the instrument, directly implicates the provisions regarding the completion of incomplete instruments. The drawer, who delivered the instrument in blank, did not grant any authority to the holder to fill in their own name. Therefore, the holder’s action of completing the instrument by inserting their own name without authority renders the instrument unenforceable by the holder against the drawer, as the drawer never authorized such completion. The drawer is discharged from liability on this instrument due to the unauthorized completion.

The scenario presented involves a negotiable instrument that was originally payable to “bearer.” Under Iowa Code Section 554.3109, an instrument is payable to bearer if it states that it is payable to bearer or to the order of bearer, or if it does not state a payee or the sole payee is an address or the instrument otherwise indicates that no person is the payee. Furthermore, if an instrument is payable to bearer, it can be negotiated by a simple transfer of possession. The crucial point here is that the initial designation as “bearer” paper dictates the method of negotiation. Even though the instrument was later endorsed in blank by its holder, this endorsement does not alter its fundamental character as bearer paper. A bearer instrument remains bearer paper until it is specially endorsed. A special endorsement requires the instrument to be endorsed to a specific person, thereby changing its status to order paper. Since no special endorsement occurred, the instrument continued to be payable to bearer. Therefore, any subsequent holder who lawfully possesses the instrument is entitled to enforce it, irrespective of any blank endorsements. The principle at play is that a blank endorsement on bearer paper does not convert it into order paper; it simply reinforces its bearer status. The negotiation is completed by delivery. The question tests the understanding of how an instrument initially designated as bearer paper is negotiated and how endorsements affect this status.

The question concerns the enforceability of a promissory note with a conditional promise, specifically whether it qualifies as a negotiable instrument under UCC Article 3, as adopted in Iowa. A key requirement for negotiability is that the promise to pay must be unconditional. In this scenario, the payment of the note is explicitly contingent upon the successful completion of the construction project by a specific date. This conditionality means the note is not for a fixed amount payable at a definite time, nor is it payable to order or to bearer. Instead, it functions as a contract for performance. Iowa Code Section 554.3104 defines a negotiable instrument, and a crucial element is the unconditional promise or order to pay. The phrase “provided that the construction project is completed on or before December 31, 2024” introduces a condition precedent to payment. If the project is not completed by that date, the maker’s obligation to pay is discharged, or at least significantly altered, based on the contract’s terms. This makes the payment uncertain and dependent on an external event not solely related to the passage of time or the occurrence of an event certain to happen. Therefore, the instrument fails the unconditional promise requirement for negotiability. It is an enforceable contract, but not a negotiable instrument that can be freely transferred by endorsement and delivery with the rights of a holder in due course. The value of the note is not fixed, as completion of the project is a prerequisite.

No calculation is required for this question. The scenario presents a situation involving a negotiable instrument that has been transferred through several parties. The core issue is determining the rights of the final holder, particularly concerning a defense that might have been available against an earlier holder. Under UCC Article 3, specifically concerning the rights of a holder in due course (HDC), a holder who takes an instrument for value, in good faith, and without notice of any claim or defense against it generally takes the instrument free of most defenses. However, certain defenses, known as “real defenses,” can be asserted even against an HDC. These real defenses are enumerated in UCC § 3-305(a)(1) and include, among others, infancy, duress, illegality of the type that nullifies the obligation, and fraud in the factum. Fraud in the factum occurs when a party is induced to sign an instrument by a fraudulent representation that the signer did not know or have a reasonable opportunity to know was the instrument being signed. In contrast, fraud in the inducement, where a party is induced to sign by a fraudulent promise or misrepresentation about the underlying transaction, is a personal defense and is generally cut off by an HDC. In this case, the initial payee, Bartholomew, was defrauded by Clara into believing the instrument was a receipt for services rendered, not a promissory note. This constitutes fraud in the factum because Clara misrepresented the nature of the instrument itself. Bartholomew did not know he was signing a promissory note. Therefore, this defense is a real defense. When Bartholomew indorsed the note to Amelia, and Amelia subsequently negotiated it to David, the critical question is whether David qualifies as a holder in due course. Assuming David took the instrument for value, in good faith, and without notice of Bartholomew’s defense (which is implied by the question’s focus on the defense itself), David would normally take free of personal defenses. However, because Bartholomew’s defense is fraud in the factum, it is a real defense that can be asserted against any holder, including an HDC. Therefore, David cannot enforce the instrument against Bartholomew. The UCC’s treatment of real defenses is designed to protect parties who were fundamentally misled about the very nature of the document they signed.

The core issue revolves around the negotiability of a draft that contains a clause allowing for acceleration of the due date. Under UCC Article 3, specifically Iowa Code Section 554.3104(a), 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. While a clause permitting acceleration does not, in itself, render a promise conditional for the purposes of negotiability, the specific wording here is crucial. The phrase “or sooner if the undersigned shall deem himself insecure” introduces a subjective condition. UCC Section 3-109(c) states that a definite time includes a time when an event occurs or on the happening of which the maker or drawer is entitled to anticipate payment. However, the “deem himself insecure” clause, as interpreted under commercial law principles, often introduces an element of uncertainty that can be seen as making the time of payment conditional on the subjective satisfaction of the maker or drawer, thus destroying negotiability. This is distinct from clauses that allow for acceleration upon objective events like default or bankruptcy. The rationale is that the holder of the instrument cannot be certain of the payment date, as it depends on the maker’s internal judgment. Therefore, a draft containing such a subjective insecurity clause is generally not considered a negotiable instrument under UCC Article 3. The calculation, in this context, is not numerical but conceptual: Does the clause violate the “definite time” requirement by introducing subjective conditionality? Yes, the “deem himself insecure” clause does.

The scenario involves a promissory note that was transferred by endorsement and delivery. The original payee, Ms. Anya Sharma, endorsed the note in blank by simply signing her name on the back. This blank endorsement converts the note into a bearer instrument. Subsequently, Mr. Ben Carter, who received the note from Ms. Sharma, added his name above Ms. Sharma’s signature, thereby converting the blank endorsement into a special endorsement. According to Iowa Code Section 554.3205, a blank endorsement is one that is made by an indorsement on a security that does not identify the person to whom it makes it payable. A blank endorsement makes the instrument payable to bearer. A special indorsement specifies the person to whom the instrument is payable. If an instrument is payable to bearer and becomes payable to a specified person, it is then payable to the person specified. Once converted to a special endorsement, the instrument can only be further negotiated by special endorsement. Therefore, Mr. Carter, by special endorsing the note to “Pay to the order of Ms. Clara Davis,” made it payable to Ms. Davis. Ms. Davis, to negotiate the instrument, must then endorse it specially or in blank. If Ms. Davis endorses it in blank, it becomes bearer paper again. If she endorses it specially, it remains order paper. The question asks how the instrument can be negotiated after Ms. Davis receives it. Since Ms. Davis received it via a special endorsement from Mr. Carter, it is payable to her order. To negotiate an instrument payable to order, the holder must deliver it to the indorsee and the indorsee must indorse it. Thus, Ms. Davis can negotiate it by endorsing it and delivering it to a new holder. This endorsement can be either special or blank. If she endorses it specially to someone else, that person must then endorse it to negotiate it further. If she endorses it in blank, it becomes bearer paper and can be negotiated by delivery alone. Therefore, any endorsement by Ms. Davis, followed by delivery, will effect negotiation. The question implies further negotiation by Ms. Davis. The most comprehensive way to describe negotiation by Ms. Davis is through endorsement and delivery.

The scenario involves a negotiable instrument that was originally payable to “order” but was later specially indorsed in blank. Under Iowa Code Section 554.3205, a holder of a negotiable instrument may convert a blank indorsement into a special indorsement by writing over the signature of the indorser in any name for any purpose. However, the reverse is not true; a special indorsement cannot be converted into a blank indorsement. The initial indorsement by Prairie Ridge Farms to Cedar Creek Bank was a special indorsement because it specified the payee (Cedar Creek Bank). Subsequently, the cashier of Cedar Creek Bank, acting on behalf of the bank, indorsed the instrument by simply signing their name. This constitutes a blank indorsement. Once an instrument is indorsed in blank, it becomes payable to bearer and may be negotiated by delivery alone. Any subsequent holder, including Ms. Gable, can then negotiate the instrument by delivery. The fact that Ms. Gable’s indorsement was a special indorsement to “Iowa State Bank” does not alter the status of the instrument as bearer paper after the blank indorsement by Cedar Creek Bank’s cashier. Therefore, Iowa State Bank, as the holder of an instrument indorsed in blank by Cedar Creek Bank, can negotiate it by mere delivery. The question asks about the negotiation of the instrument by Iowa State Bank. Since the instrument was indorsed in blank by Cedar Creek Bank, it is bearer paper. Bearer paper is negotiated by delivery. Thus, Iowa State Bank can negotiate the instrument by delivery.

The scenario involves a promissory note that is initially payable to “bearer” and then endorsed in blank by the payee, “Alice.” A holder in due course (HIC) status requires, among other things, that the instrument be negotiated. Negotiation of an instrument payable to bearer occurs by delivery. Negotiation of an instrument payable to a specific person occurs by delivery with any necessary indorsement. Since Alice indorsed the note in blank, it became payable to bearer. Therefore, subsequent transfer by delivery to “Bob” constitutes a negotiation. Because Bob took the instrument for value, in good faith, and without notice of any claim or defense, he qualifies as a holder in due course. A holder in due course takes the instrument free from all claims to it on the part of the maker and all defenses of any party to the instrument with it that are not real defenses. Therefore, Bob can enforce the note against the maker, regardless of any personal defenses the maker might have against Alice. The critical concept here is the effect of a blank indorsement on an instrument originally payable to bearer, and how that affects subsequent negotiation and the rights of a holder in due course. Iowa Code § 554.3205 addresses instruments payable to bearer, and Iowa Code § 554.3302 defines a holder in due course, including the requirements for taking the instrument. The transfer by delivery after a blank indorsement is a key element in establishing the chain of negotiation for bearer paper.

The question revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder under UCC Article 3, as adopted in Iowa. A holder in due course takes an instrument free from all defenses of any party to the instrument with whom the holder has not dealt, except for certain real defenses. Real defenses are those that can be asserted even against an HDC. Among the options provided, discharge in insolvency proceedings is considered a real defense. This means that if the maker of a note has been discharged in bankruptcy, that discharge can be raised against an HDC who acquired the note after the discharge. Other defenses, such as lack of consideration or a breach of contract, are generally personal defenses and are cut off by HDC status. The scenario describes a note made by Ms. Anya Sharma to Mr. Boris Petrov, which was subsequently negotiated to Ms. Clara Davies. If Ms. Sharma has been discharged in insolvency proceedings concerning this note, this discharge is a real defense that Ms. Davies, even as an HDC, cannot overcome. Therefore, Ms. Sharma can raise the defense of discharge in insolvency proceedings against Ms. Davies. The calculation, in this context, is conceptual rather than numerical. It involves identifying the type of defense and its effect on an HDC. The core principle is that real defenses persist against HDCs, while personal defenses do not.

The scenario involves a promissory note payable to the order of “The Cedar Rapids Gazette” which is an entity. Under Iowa Code Section 554.3103(1)(b), an instrument is payable to order if it is payable to the order of an identified person or to an identifiable person that identifies the payee with sufficient certainty. The note is made payable to “The Cedar Rapids Gazette,” which is a clearly identified legal entity. Therefore, the note is a negotiable instrument payable to order. The subsequent endorsement by “The Cedar Rapids Gazette” by its authorized representative, Ms. Anya Sharma, acting as the President, is a valid negotiation under Iowa Code Section 554.3201(1), which states that negotiation of an instrument payable to order requires delivery of the instrument with any necessary indorsement. Since the instrument is payable to order, it requires endorsement for negotiation. The fact that Ms. Sharma is the President of the Cedar Rapids Gazette provides her with the authority to endorse the instrument on behalf of the entity. Thus, the note is properly negotiated.

The core issue here revolves around the concept of presentment warranties under UCC Article 3, specifically as adopted in Iowa. When an instrument is transferred for value, the transferor warrants to the transferee that they have no knowledge of any insolvency proceeding in which the drawer or maker is involved. This warranty is crucial for protecting transferees from acquiring instruments from parties who are unlikely to be able to honor them. In this scenario, Mr. Henderson transferred the note to Ms. Albright for value. At the time of transfer, Mr. Henderson had actual knowledge that the maker, Mr. Peterson, had filed for bankruptcy. This knowledge directly breaches the presentment warranty against insolvency proceedings. Therefore, Ms. Albright, as the transferee, has a claim against Mr. Henderson for this breach. The measure of damages would typically be the amount of the instrument that becomes uncollectible due to the insolvency, or the consideration paid, whichever is less, but the core principle is the warranty breach.

The scenario involves a promissory note that is payable on demand. Under Iowa Code Section 554.3108(1), a instrument is payable on demand if it states that it is payable on demand, at sight, or when otherwise expressed to be payable on presentation. An instrument that is not dated is also considered payable on demand. In this case, the note explicitly states it is payable “upon presentation,” which is equivalent to “on demand” or “at sight.” Therefore, the holder of the note can properly present it for payment at any time after its issuance. The fact that the maker, Mr. Abernathy, moved to Nebraska does not alter the demand nature of the instrument or the holder’s right to present it for payment. The UCC, as adopted in Iowa, governs such instruments, and the obligation to pay arises upon proper presentment. The question tests the understanding of what constitutes a demand instrument under UCC Article 3, as applied in Iowa. The key is the language “upon presentation” which triggers the demand payment provision.

The core issue revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder under UCC Article 3, as adopted in Iowa. A negotiable instrument is generally taken free of all defenses and claims of any party with which the holder has not been a party, except for certain real defenses. Real defenses are those that can be asserted against any holder, including an HDC. Among the defenses listed in UCC § 3-305(a)(1), infancy, duress that nullifies the obligation, fraud that induces the party to sign the instrument with neither knowledge nor reasonable opportunity to obtain knowledge of its character or its essential terms, and discharge in insolvency proceedings are considered real defenses. Usury, however, is generally a personal defense, meaning it can be asserted against a holder who is not an HDC but not against an HDC. In this scenario, the note was made by a resident of Iowa, and the governing law is therefore Iowa’s UCC Article 3. The bank, by purchasing the note for value, in good faith, and without notice of any claim or defense, qualifies as a holder in due course. Therefore, the bank can enforce the note against the maker despite the usury defense, as usury is not a real defense under UCC § 3-305(a)(1). The specific Iowa Code provisions related to usury, if any, would be relevant in a different context, but for the purpose of enforcing a negotiable instrument by an HDC, the UCC’s classification of defenses is paramount.

Under Iowa Code Section 554.3302, a holder in due course (HDC) takes an instrument free from all defenses of any party to the instrument with whom the holder has not dealt, except for real defenses. Real defenses are a limited set of defenses that can be asserted even against an HDC. These typically include infancy, duress, illegality of the transaction, fraud in the execution (or “real fraud”), and discharge in insolvency proceedings. Personal defenses, such as breach of contract, lack of consideration, or fraud in the inducement, are cut off by an HDC. In this scenario, the note was originally issued for a gambling debt, which is considered illegal in Iowa and therefore constitutes a real defense under Iowa law. Even though the bank acquired the note for value, in good faith, and without notice of any claim or defense (thus appearing to be an HDC), the underlying illegality of the note’s creation is a real defense that can be asserted against the bank. Therefore, the bank cannot enforce the note against the maker.

The scenario describes a situation involving a negotiable instrument that was altered after issuance. Under Iowa Code Chapter 554, Article 3 (Uniform Commercial Code), specifically regarding negotiable instruments, a holder in due course (HDC) of an instrument that has been materially altered may enforce it according to its original tenor. However, if the alteration is fraudulent and the holder is not an HDC, the holder cannot enforce the instrument at all. In this case, the instrument was originally for \$5,000 and was fraudulently altered to \$15,000. The bank, as a holder, took the instrument for value and in good faith, making it a holder in due course. Therefore, the bank can enforce the instrument according to its original tenor, which is \$5,000. The UCC specifies that a holder in due course is not subject to defenses that arose after the holder became an HDC, except for real defenses. A fraudulent material alteration is generally a real defense against a holder who is not an HDC. However, for an HDC, the rule is that they can enforce the instrument as originally issued. The amount of the instrument is a material term. The question is whether the bank, as an HDC, can enforce the altered amount or the original amount. UCC § 3-407(b) states that if an instrument is issued with a fraudulent and material alteration, the instrument is enforceable according to its original tenor. This applies to a holder in due course. Therefore, the bank can enforce the instrument for \$5,000.

The scenario involves a negotiable instrument that was altered after its issuance. Under Iowa’s UCC Article 3, specifically concerning fraudulent and unauthorized transactions, a holder in due course (HDC) of an instrument that has been materially altered is generally entitled to enforce the instrument according to its original tenor. A material alteration is defined as one that changes the contract of any party to the instrument. In this case, the principal amount of the note was increased from $5,000 to $15,000. This change in the principal amount is a material alteration because it significantly changes the obligation of the maker. However, for an HDC to be able to enforce the instrument according to its original tenor, the alteration must have been fraudulent. The question states that the alteration was made by an unauthorized party and was fraudulent. Therefore, the HDC can enforce the instrument for the original amount of $5,000. The HDC cannot enforce the instrument for the altered amount of $15,000 because the alteration was material and fraudulent. The HDC also cannot be denied enforcement altogether, as the law provides for enforcement according to the original tenor in such cases. The concept of a holder in due course protects good-faith purchasers of negotiable instruments from certain defenses, but this protection is limited when the instrument has been materially and fraudulently altered. Iowa Code Section 554.3307 addresses the effect of an unauthorized signature or alteration, and specifically for a holder in due course, it allows enforcement according to the original tenor if the alteration was both fraudulent and material. The original tenor refers to the terms of the instrument as it was before the alteration.

The core issue here is whether the indorsement by the payee, Silas, on the back of the draft constituted a qualified indorsement, thereby limiting his liability. Under Iowa Code Section 554.3202, a qualified indorsement is one that is made “without recourse” or using similar language indicating an intent to disclaim liability. Silas’s indorsement, “Pay to the order of Willow Creek Bank, Silas,” is a simple unqualified indorsement. In Iowa, as in most jurisdictions following UCC Article 3, an unqualified indorsement generally makes the indorser liable to subsequent holders in the event of dishonor. This liability is secondary and arises if the instrument is dishonored by the maker or drawee and the proper steps of presentment and notice of dishonor are taken. Therefore, Willow Creek Bank, as a holder in due course, can seek recourse against Silas when the draft is dishonored by the issuer, Barnaby. The absence of “without recourse” or equivalent language is determinative.

The scenario involves a promissory note that contains a clause for additional interest if payment is not made by a specific date. This type of clause, which specifies a different rate of interest upon default, does not affect the negotiability of the instrument under UCC Article 3, as adopted in Iowa. Iowa Code Section 554.3104(1)(a) defines a negotiable instrument as an unconditional promise to pay a fixed amount of money, if payable on demand or at a definite time. The presence of an acceleration clause or a clause that adds interest upon default does not render the promise conditional for the purposes of negotiability. The core promise to pay a fixed amount remains. The additional interest is a consequence of default, not a condition precedent to payment itself. Therefore, the note is still a negotiable instrument. The calculation here is conceptual: the presence of the default interest clause does not alter the fundamental negotiability of the note as a promise to pay a fixed sum at a definite time, subject to a penalty for late payment.

Under Iowa Code Chapter 554, Article 3 (Uniform Commercial Code), 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 holder 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. If a negotiable instrument is transferred by negotiation, the transferee acquires whatever rights the transferor had. However, if the instrument is transferred by assignment, the assignee takes subject to all defenses and claims that could be asserted against the assignor. In this scenario, the promissory note was transferred by assignment to Ms. Gable. An assignment does not confer HDC status. Therefore, Ms. Gable, as an assignee, is subject to any defenses that the maker, Mr. Henderson, could have raised against the original payee, Mr. Finch. Mr. Henderson’s defense of fraud in the inducement is a real defense that can be asserted against any holder, including an assignee, unless the assignee qualifies as an HDC. Since the transfer was an assignment, Ms. Gable does not acquire HDC status and is subject to Mr. Henderson’s defense. The note is therefore enforceable against Mr. Henderson only to the extent of the value he received, which is zero in this case, as the note was given for a nonexistent debt.

The core issue revolves around the enforceability of a draft that contains an acceleration clause and is payable “on demand or, if no demand is made, then on December 31, 2025.” Under Iowa Code § 554.3108(1), 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 does not state any time of payment. An instrument that is otherwise payable on demand is not rendered nonnegotiable by a provision for acceleration of payment. Iowa Code § 554.3104(1)(c) requires an instrument to be payable “on demand or at a definite time.” The phrase “on demand or, if no demand is made, then on December 31, 2025” creates a conditional payment event for the definite time. However, UCC Article 3, as adopted in Iowa, generally permits acceleration clauses. The critical point is whether the instrument’s payment terms are sufficiently definite. A payment due “on demand” is considered a definite time for the purpose of negotiability. The addition of a later fixed date if no demand is made does not invalidate the demand feature, nor does the acceleration clause itself. The instrument is payable at the option of the holder (on demand), which satisfies the demand requirement of negotiability. The subsequent fixed date, contingent on no demand, does not make the payment indefinite in a way that destroys negotiability. Therefore, the draft is negotiable.