The core issue here revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder under Kansas law, specifically UCC Article 3. A negotiable instrument is taken by a holder in due course if it is taken for value, in good faith, and without notice of any claim to the instrument or defense against it. Kansas UCC § 84-3-305(a)(1) outlines the defenses that can be asserted against a holder in due course. Real defenses, which are available against all holders, including HDCs, are enumerated in § 84-3-305(a)(1). These include infancy, duress that nullifies the obligation, fraud that nullifies the obligation, discharge in insolvency proceedings, and such other incapacity, or illegality of the transaction, as nullifies the obligation of the obligor. Personal defenses, which are generally not available against an HDC, include breach of contract, failure of consideration, and fraud in the inducement. In this scenario, the note was procured through fraudulent misrepresentation regarding the quality of the goods sold, which constitutes fraud in the inducement. This is a personal defense, not a real defense. Therefore, since Ms. Gable is presumed to be a holder in due course (having taken the note for value and in good faith, with no indication of notice of defenses), she takes the instrument free from personal defenses. The Kansas UCC, as adopted, does not alter this fundamental principle of holder in due course status. The obligation to pay the note remains, as the defense of fraud in the inducement is not a real defense that can be asserted against an HDC.

The Uniform Commercial Code (UCC) Article 3 governs negotiable instruments. A key concept is the holder in due course (HDC). To qualify as an HDC, a holder must take an instrument that is (1) negotiable, (2) issued or transferred for value, (3) in good faith, and (4) without notice of any claim or defense against it or of any irregularity in connection with it. Kansas, like other states, has adopted variations of the UCC. In Kansas, the concept of “value” for purposes of HDC status is broad, encompassing antecedent debts and security interests. The question centers on the notice element. A person has notice of a claim or defense if the person has actual knowledge of it, receives notice of it, or has reason to know of it from all the facts and circumstances known to the person at the time in question. Knowledge that a fiduciary has negotiated an instrument in payment of or as security for his own debt is notice of a claim of breach of duty. Here, the bank’s loan officer, Ms. Evans, knew that the promissory note was being transferred to secure Mr. Abernathy’s personal debt. This knowledge directly relates to a potential breach of fiduciary duty by Mr. Abernathy in his dealings with his company, Abernathy Corp. Therefore, the bank had notice of a claim against the instrument, preventing it from becoming a holder in due course. The UCC § 3-302(a)(2) and Kansas Annotated Statutes § 84-3-302(a)(2) define the requirements for a holder in due course, and the “notice” provision under § 3-302(a)(2)(v) and Kansas Annotated Statutes § 84-3-302(a)(2)(E) is critical here. The bank’s knowledge that the instrument was pledged as security for a personal debt of the fiduciary, Mr. Abernathy, constitutes notice of a claim of breach of duty.

The scenario involves a promissory note that is payable to “bearer” and is then physically transferred without endorsement. Under UCC Article 3, as adopted in Kansas, a negotiable instrument payable to bearer is transferred by mere possession. The UCC defines “bearer” as a person in control of an instrument that is payable to bearer. Kansas Statute 84-3-201(b) states that “If an instrument is payable to bearer, it is negotiated by delivery alone.” Delivery is defined in UCC Article 1, adopted by Kansas as 84-1-201(a)(15), as “voluntary transfer of possession.” Therefore, when the note payable to bearer is delivered to Ms. Anya Sharma, she becomes the lawful holder. The question of whether the note is “order” paper or “bearer” paper is crucial. Since it explicitly states “pay to the order of bearer,” it is bearer paper. For bearer paper, negotiation requires only delivery. No endorsement is necessary for a transfer of rights to be effective. Thus, Anya Sharma, having received possession through voluntary transfer, is the holder entitled to enforce the instrument. The principal sum of the note, \$5,000, and the interest rate of 6% per annum are relevant to the amount due but do not affect the method of negotiation or the right to enforce. The absence of a specific maturity date means it is payable on demand under UCC 84-3-108(a).

The core issue here revolves around the negotiability of a draft that contains a promise to pay a fixed sum of money but also includes a condition precedent. Under UCC Article 3, specifically Kansas Statute § 84-3-104(a), a negotiable instrument must contain an unconditional promise or order to pay a fixed amount of money. A promise or order is conditional if it states an obligation to do any act in addition to the payment of money, or if it states that the promise or order is subject to any other undertaking or overrule by persons who are not on the instrument. In this scenario, the draft explicitly states that payment is contingent upon the successful completion of the architectural review and approval by the City of Wichita Planning Department. This condition directly impacts the unconditional nature of the promise to pay. The inclusion of this requirement means the issuer’s obligation to pay is not solely based on the passage of time or the occurrence of a definite event, but rather on the fulfillment of a specific, external condition. Therefore, the instrument, as presented, fails to meet the criteria for negotiability under UCC Article 3 because the promise to pay is conditional. The presence of a condition precedent renders the instrument non-negotiable, meaning it cannot be transferred by endorsement and delivery in a manner that would grant a holder in due course the rights afforded by Article 3.

The core issue revolves around whether the instrument is a negotiable instrument under UCC Article 3, as adopted in Kansas. Specifically, we examine if it meets the requirements of 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 instrument states “Pay to the order of Anya Sharma, or her estate, the sum of Five Thousand Dollars ($5,000.00), upon the satisfactory completion of her doctoral dissertation.” The phrase “upon the satisfactory completion of her doctoral dissertation” makes the payment contingent on an event that is not certain to occur and is not a simple reference to a separate writing. This contingency violates the “unconditional” requirement of UCC § 3-104(a)(1). The promise to pay is conditional upon the dissertation’s satisfactory completion, which is not a sum certain in money, nor is it payable on demand or at a definite time as required by UCC § 3-104(a)(2). Furthermore, the inclusion of “or her estate” does not inherently destroy negotiability if the instrument otherwise meets all requirements, but the conditionality is the fatal flaw. Because the payment is contingent on an external event, it is not a negotiable instrument. Therefore, it cannot be enforced as a negotiable instrument by a holder in due course.

The question revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder under Kansas law, specifically UCC Article 3. A negotiable instrument is transferred to a holder in due course if it is taken for value, in good faith, and without notice of any claim or defense. Under Kansas law, certain defenses are considered “real defenses” and are generally available against any holder, including an HDC, while others are “personal defenses” and are not. The scenario describes a promissory note that was originally obtained by fraud in the inducement, a defense that is typically considered personal. However, the note was subsequently acquired by Ms. Anya Sharma, who is presented as an HDC because she took the note for value (paying $8,000 for a $10,000 note), in good faith, and without notice of any defenses. The critical element is whether the fraud in the inducement can be asserted against Ms. Sharma. Kansas UCC § 84-3-305(a)(2) specifies that an HDC takes the instrument free of all defenses except those provided in § 84-3-305(a)(1), which lists real defenses. Fraud in the inducement, while a defense to the original contract, is not listed as a real defense under UCC § 84-3-305(a)(1). Real defenses include infancy, duress that nullifies assent, illegality that nullifies assent, and such incapacity, duress, or illegality as to the transaction of the parties that nullifies assent, and discharge in insolvency proceedings. Fraud in the inducement, which relates to the misrepresentation of facts that persuade a party to enter into a contract, is a personal defense. Therefore, Ms. Sharma, as an HDC, takes the note free of this defense, and she can enforce the note for its full face value against the maker, Mr. Ben Carter. The calculation is not mathematical but conceptual: an HDC is subject to real defenses, not personal defenses. Fraud in the inducement is a personal defense. Thus, the HDC can enforce the note.

The scenario involves a negotiable instrument that has been materially altered after its issuance. Under Kansas law, specifically UCC § 3-407, a holder in due course (HDC) can enforce an altered instrument according to its original tenor if the alteration was fraudulent and material. However, if the alteration was not fraudulent, the instrument is enforceable only according to its original tenor. A fraudulent alteration is one made with the intent to deceive or defraud. A material alteration is one that changes the contract of any party to the instrument. In this case, the addition of “with interest at 10% per annum” to the principal amount of \$5,000, which was originally payable without interest, constitutes a material alteration. The critical question is whether this alteration was fraudulent. Since the question states the alteration was made “without intent to defraud,” it was not a fraudulent alteration. Therefore, under UCC § 3-407(b), the instrument is enforceable only according to its original tenor. The original tenor was \$5,000 without interest. Thus, the payee can recover the original principal amount of \$5,000.

The core issue here is whether the endorsement of the note by Elara, a minor, affects its negotiability and the rights of a subsequent holder. Under UCC Article 3, as adopted in Kansas, a negotiable instrument must be payable to order or to bearer. A payee’s capacity to contract is generally irrelevant to the instrument’s initial negotiability. However, a contract entered into by a minor is typically voidable at the minor’s option. In this scenario, Elara’s endorsement, while potentially voidable by her, is still a valid endorsement for the purpose of transferring whatever rights she possesses in the instrument. UCC § 3-203(b) states that the right to enforce an instrument is transferable by negotiation. Even if Elara can later disaffirm her endorsement, the transfer to Finn is effective until she chooses to disaffirm. Finn, as a holder who took the instrument without notice of any defense or claim, would generally be a holder in due course (HDC) if all other requirements are met. A defense of infancy, however, is a personal defense, not a real defense, and is cut off against an HDC. Therefore, Finn can enforce the instrument against the maker, even if Elara’s endorsement was voidable. The fact that the note was originally made payable to Elara is significant; her endorsement is necessary to transfer the instrument by order. The question hinges on whether the voidable nature of a minor’s endorsement prevents a subsequent holder from enforcing the instrument. Kansas law, consistent with UCC Article 3, prioritizes the transferability of instruments. A voidable act by a minor does not automatically render the instrument non-negotiable or prevent transfer. Finn’s ability to enforce hinges on Elara’s endorsement being sufficient for negotiation and his status as an HDC, which would cut off her personal defense of infancy.

The scenario involves a negotiable instrument, specifically a promissory note, that has been transferred. The core issue is whether the transferee, a bank in Kansas, can enforce the instrument against the maker, Mr. Abernathy, despite a prior dispute between the original parties. Kansas law, following UCC Article 3, defines a holder in due course (HIDC) as a holder who takes an instrument that is (1) negotiable, (2) signed by the maker or drawer, (3) payable to bearer or to order, (4) for a sum certain, (5) for value, (6) in good faith, and (7) without notice of any claim or defense against it or of any irregularity on its face. In this case, the note is negotiable. The bank took the note for value (by crediting Mrs. Gable’s account), in good faith, and without notice of the alleged failure of consideration or the dispute with Mr. Abernathy. Therefore, the bank likely qualifies as a holder in due course. A holder in due course takes the instrument free from all defenses of any party to the instrument with whom the holder has not dealt, except for real defenses. Personal defenses, such as failure of consideration, are cut off by a holder in due course. Since Mr. Abernathy’s defense is failure of consideration, which is a personal defense, and the bank is a holder in due course, the bank can enforce the note against Mr. Abernathy. The amount of the note is $5,000. The bank credited Mrs. Gable’s account with $4,500, representing the value given for the note. This value is sufficient for HIDC status.

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder under UCC Article 3, as adopted in Kansas. A negotiable instrument is taken by a holder in due course if it is taken: (1) for value; (2) in good faith; and (3) without notice that it is overdue or dishonored or of any defense against or claim to the instrument. If an instrument is so incomplete as to call for a statement, signature, or other element of completion, the instrument is not a negotiable instrument until completed. However, if a signature is on an incomplete instrument, it may be enforced against the signer in the manner and to the extent as if it had been completed by the signer unless it is filled in contrary to authority. In this scenario, the promissory note was incomplete when signed by Elias, as the amount payable was blank. When Elias signed the note, he gave it to Fiona with the understanding that she would fill in the amount of $5,000. Fiona, however, fraudulently filled in the amount as $15,000. This constitutes a material alteration. Under UCC § 3-407(b), if an instrument is issued with a signature on it but incomplete, and it is then completed or altered, the altered instrument is enforceable as completed or altered against any person who, for value and without notice of the alteration, became a holder of the instrument. However, UCC § 3-407(c) states that an instrument that is altered by the issuer of the instrument is not enforceable. More importantly, UCC § 3-407(a) defines alteration as (1) the making of an unauthorized change in an instrument that modifies, adds to, or deletes from it the obligation of a party; or (2) an unauthorized completion of an incomplete instrument. A party is not liable on an instrument that was altered by fraud. UCC § 3-305(a)(1)(ii) provides that the obligation of a party with a defense of “fraud that induced the party to make the promise” is not subject to enforcement against that party. This is a real defense, not a personal defense, and is therefore good against a holder in due course. Elias signed an incomplete instrument, and Fiona fraudulently completed it with an amount far exceeding their agreement, thereby altering the instrument and committing fraud in the inducement. Elias’s defense of fraud in the inducement is a real defense that can be asserted against any holder, including a holder in due course. Therefore, Elias is not liable for the $15,000.

The scenario involves a promissory note that was originally payable to “bearer.” Under UCC Article 3, as adopted in Kansas, a note payable to bearer is negotiated by transfer of possession alone. The initial transfer from the maker to the payee, who is identified as “bearer,” creates a bearer instrument. When this bearer instrument is subsequently transferred, the transfer of possession is sufficient to effect negotiation, regardless of whether the transfer is accompanied by an endorsement. Therefore, if the note was delivered to Ms. Anya Sharma, who is the bearer, by the maker, Mr. Elias Vance, then Anya is a holder. If Anya then transfers the note to Mr. Kai Sterling by simply handing it to him, Kai becomes a holder. The question asks what is required for Kai to become a holder. Since the instrument is a bearer instrument, only delivery is necessary for negotiation. Thus, Kai becomes a holder upon delivery of the note to him.

The scenario involves a negotiable instrument, specifically a check, drawn by a Kansas resident, Mr. Abernathy, payable to a fictitious payee, “Cash” (which is generally treated as payable to bearer). The instrument is then endorsed in blank by Mr. Abernathy and subsequently stolen. The thief then negotiates the instrument to Ms. Croft, who is unaware of the theft. The core issue is whether Ms. Croft can obtain good title to the instrument. Under UCC Article 3, as adopted in Kansas, an instrument payable to bearer is negotiated by delivery. Since Mr. Abernathy’s endorsement in blank made the check payable to bearer, and Ms. Croft took the instrument for value and in good faith, she qualifies as a holder in due course (HDC). Kansas law, following UCC § 3-302, defines an HDC as a holder who takes an instrument (1) for value, (2) in good faith, and (3) without notice that it is overdue or dishonored or that there is a defense or claim to it. Ms. Croft’s lack of knowledge of the theft and her giving value are established. Therefore, she takes free of any claims of ownership by Mr. Abernathy. The critical point is that a bearer instrument is negotiated by mere delivery, and the thief, having possession, can effectively deliver it. Ms. Croft’s good faith and value acquisition shield her from Mr. Abernathy’s claim of ownership stemming from the theft. The fact that the payee was fictitious does not alter the bearer status once endorsed in blank.

The scenario involves a promissory note that is not payable to order or to bearer, but instead specifies payment to a named individual, “Ms. Elara Vance.” Under Kansas law, specifically UCC Article 3, a negotiable instrument must contain an unconditional promise or order to pay a fixed amount of money, payable to order or to bearer, on demand or at a definite time, and payable to, or to the order of, two or more persons not partners, or to a single person or any combination of persons. The absence of “to order” or “to bearer” language is critical. Kansas UCC § 3-104(a) defines a negotiable instrument, and § 3-109(b) clarifies that an instrument that is not payable to order or to bearer is not negotiable. While the instrument may still be a valid contract, it loses its special status as a negotiable instrument, meaning it cannot be negotiated by endorsement and delivery, nor can it be taken by a holder in due course. The question asks about the legal status of this instrument in Kansas. Because the instrument is payable only to a specific named person and lacks the words “to order” or “to bearer,” it fails to meet the negotiability requirements of UCC § 3-104(a)(1). Therefore, it is not a negotiable instrument.

The scenario involves a negotiable instrument that contains an acceleration clause. An acceleration clause permits the holder of the instrument to declare the entire unpaid balance due and payable immediately upon the occurrence of a specified event or condition. Kansas law, as codified in UCC Article 3, addresses the negotiability of instruments containing such clauses. Specifically, UCC § 3-108(a) states that an instrument is payable on demand if it states that it is payable on demand, at sight, or on presentation. UCC § 3-108(b) further clarifies that an instrument that is not payable on demand is payable at a definite time if it is payable on or before a stated date or at a fixed period after sight or after a stated date. The presence of an acceleration clause does not, in itself, render the time of payment indefinite for the purposes of negotiability, provided the acceleration is triggered by a specific event or condition that is objectively determinable. In this case, the acceleration is triggered by the maker’s default on a separate, unrelated loan. This event, while external, is an objectively ascertainable condition. Therefore, the instrument remains negotiable because the acceleration clause does not introduce impermissible indefiniteness to the payment terms under Kansas UCC Article 3. The key is that the event is factual and not subject to the discretion of the maker or holder in a way that would obscure the payment time.

In Kansas, 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 that it is overdue or dishonored or that it contains any unauthorized signature or alteration or that any defense or claim exists against it. The scenario describes a promissory note payable to “Prairie Farms Cooperative.” The note was later transferred by endorsement to “AgriCorp Solutions.” AgriCorp Solutions provided value for the note by crediting its account with the face amount of the note, which constitutes value. The question hinges on whether AgriCorp Solutions had notice of any defenses. The fact that the note was issued for seed purchases, and there were ongoing disputes between Prairie Farms Cooperative and its customers regarding the quality of those seeds, is crucial. If AgriCorp Solutions had actual knowledge of these disputes, or if the circumstances were such that its knowledge would be imputed (e.g., the disputes were widely publicized and easily discoverable), then it would not be considered to have taken the note without notice. The UCC defines “notice” broadly. A person has notice of a fact if they have actual knowledge of it, receive notice of it, or have reason to know it exists from all the facts and circumstances known to them at the time. In this case, the widespread nature of the seed disputes, if known or reasonably knowable by AgriCorp Solutions at the time of acquiring the note, would prevent it from being a holder in due course. Therefore, AgriCorp Solutions would take the note subject to the defenses of the maker, such as breach of warranty related to the seed quality. The UCC, specifically Kansas Statutes Annotated (KSA) § 84-3-302, outlines the requirements for holder in due course status. The question tests the application of the “without notice” element of HDC status.

The core issue here is whether the holder of the instrument can enforce it against the drawer, considering the instrument’s characteristics. A draft is an order to pay. If a draft is payable “on demand or at a definite time” and is made payable to “order” or “bearer,” it is a negotiable instrument under UCC Article 3. The instrument in question is a check, which is a draft drawn on a bank and payable on demand. The UCC defines “order” as a direction to pay that is not conditional. The phrase “provided that the account is in good standing” introduces a condition precedent to payment. Under Kansas law, as reflected in UCC § 3-104(a), an instrument must be an unconditional promise or order to pay a fixed amount of money to be negotiable. A condition precedent, such as the account being in good standing, generally renders an instrument non-negotiable because it makes the promise or order conditional. Therefore, the check, by including this condition, fails to meet the requirements for negotiability under Article 3. Consequently, the holder cannot enforce it as a negotiable instrument against the drawer, but rather as a simple contract claim.

The core issue revolves around the negotiability of a draft and the implications of a restrictive endorsement. Under Kansas UCC Article 3, a draft is generally negotiable if it is 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 draft in question is a time draft, payable 90 days after sight. It is made payable “to the order of Clara Bell.” This satisfies the basic requirements for negotiability. The critical element is the endorsement: “Pay to the order of David Chen only.” This language, “only,” is interpreted under UCC § 3-206 as a restriction on further negotiation. Specifically, it constitutes a “for deposit only” type of restriction, meaning that any subsequent holder who takes the instrument in breach of the restriction cannot become a holder in due course. However, the UCC does not make the instrument non-negotiable. Instead, it limits who can enforce the instrument. A subsequent holder who takes the instrument in accordance with the restriction may become a holder in due course, but a holder who takes in violation of the restriction takes subject to the claim of the endorser. In this scenario, David Chen is the immediate endorsee. The question asks about the status of the instrument as negotiable. The restriction does not destroy negotiability; it merely affects the rights of subsequent transferees. Therefore, the instrument remains negotiable, but the endorsement imposes a condition on further transfer.

The scenario involves a negotiable instrument that was originally payable to “bearer.” Under UCC Article 3, specifically Kansas’s adoption of it, a bearer instrument is payable to anyone in possession of it. The critical element here is the subsequent endorsement. When a bearer instrument is specially endorsed, it generally becomes payable to the person named in the special endorsement and then to that person’s order. However, the UCC also provides that if an instrument payable to bearer is endorsed in blank, it remains payable to bearer. A special endorsement specifies the person to whom the instrument is to be paid, whereas a blank endorsement does not. In this case, the note was initially payable to bearer. It was then specially endorsed to Elias Thorne. After Thorne’s special endorsement, the instrument became payable to Elias Thorne or his order. The subsequent endorsement by Thorne to Silas Croft, which is described as a blank endorsement (by not naming a specific payee), would then convert the instrument back to bearer paper. Therefore, Silas Croft, as the holder in possession of an instrument payable to bearer, can negotiate it by mere delivery. The question asks who is entitled to enforce the instrument. Since Silas Croft is in possession of a bearer instrument, he is the rightful holder and can enforce it. The calculation is conceptual: Bearer Instrument + Special Endorsement to A = Payable to A or Order. Payable to A or Order + Blank Endorsement by A = Bearer Instrument. Silas Croft possesses a bearer instrument.

The core issue here is whether the instrument qualifies as a negotiable instrument under Kansas UCC Article 3. A key requirement for negotiability is that the instrument must be payable “on demand or at a definite time.” K.S.A. 84-3-104(a)(2). The phrase “within thirty days after the death of my father, Bartholomew ‘Barty’ Higgins” creates an uncertainty regarding the exact payment date. While the death of a person is a singular event, the precise timing of that event is not fixed or ascertainable at the time the instrument is issued. This contingency makes the payment date dependent on an event whose occurrence is not predictable, thus failing the “definite time” requirement. Therefore, the instrument is not a negotiable instrument. The explanation of why the other options are incorrect is as follows: Option b is incorrect because a promise to pay “upon the successful completion of the current fiscal year” also introduces a contingency that makes the payment date uncertain, failing the definite time requirement. Option c is incorrect because a promise to pay “on or about October 15, 2024” is generally considered to be payable on demand under K.S.A. 84-3-108(a), as “on or about” is often interpreted as a statement of intent rather than a definitive date, but it’s still a more definite time than the death of a person. Option d is incorrect because a promise to pay “one year from the date of this instrument” clearly specifies a definite time for payment, satisfying the requirement.

The scenario involves a promissory note payable to “bearer” and endorsed in blank. Under UCC Article 3, as adopted in Kansas, a negotiable instrument payable to bearer is negotiated by mere delivery. However, once an instrument payable to bearer is specially indorsed, it becomes payable to the special indorsee and can only be negotiated by indorsement of the special indorsee. In this case, the note was initially payable to bearer. The first indorsement by Ms. Gable was in blank, meaning it was still payable to bearer. However, the subsequent special indorsement by Mr. Henderson to Ms. Albright made the instrument payable to Ms. Albright. For Ms. Albright to negotiate the instrument further, she must indorse it. Mr. Diaz, who took possession of the note without Ms. Albright’s indorsement, does not have the right to negotiate it. Therefore, Mr. Diaz’s attempt to transfer the note to Ms. Chen by mere delivery is ineffective for negotiation. The note remains the property of Ms. Albright.

The scenario involves a draft payable to a fictitious payee. Under Kansas law, specifically UCC § 3-110, a negotiable instrument is payable to an order of a person if it is payable to the order of an identified person. If an instrument is payable to an identified person, it is payable to that person. However, if an instrument is payable to a fictitious person, and the drawer or maker does not intend it to be paid to that fictitious person, it is generally considered payable to bearer. This is often referred to as the “fictitious payee rule.” In this case, the drawer intentionally made the draft payable to “Cash.” The UCC treats instruments payable to “Cash” or to “the order of Cash” as payable to bearer. This is because “Cash” is not an identified person. Therefore, the draft is payable to bearer. A holder in due course of an instrument payable to bearer takes it free of defenses and claims of others, except for certain real defenses. When a check is made payable to “Cash,” it is bearer paper. This means possession is sufficient to negotiate and transfer the instrument. The subsequent endorsement by the bank teller, who is not the intended payee and likely not authorized to endorse on behalf of “Cash,” does not alter the bearer nature of the instrument. The bank, by paying the instrument, is deemed to have taken it for value and in good faith, and without notice of any defense or claim of a right to payment. Thus, the bank qualifies as a holder in due course.

The scenario involves a promissory note that contains a clause allowing the holder to accelerate the payment of the entire outstanding balance upon default. This acceleration clause is a common feature in negotiable instruments. Kansas law, as reflected in UCC Article 3, generally upholds such clauses. When a note is accelerated, the entire principal amount becomes due immediately. If the note was originally for $50,000 and the maker had paid $15,000, the remaining principal balance would be $50,000 – $15,000 = $35,000. In addition to the principal, the note also specifies an interest rate of 8% per annum. When acceleration occurs, interest typically accrues on the accelerated principal balance from the date of default until the date of payment. Assuming the default occurred on January 1st and the acceleration notice was issued on February 1st of the same year, and no partial payments were made during that month, the interest for that period would be calculated on the remaining principal. The interest for one month would be \( \$35,000 \times 0.08 \times \frac{1}{12} = \$233.33 \). Therefore, the total amount due upon acceleration, without considering any late fees or other potential charges not mentioned, would be the remaining principal plus the accrued interest, totaling \( \$35,000 + \$233.33 = \$35,233.33 \). This illustrates the concept of acceleration and how interest continues to accrue on the accelerated amount, a critical aspect of commercial paper enforceability under Kansas UCC Article 3.

The core issue here is whether the instrument qualifies as a negotiable instrument under UCC Article 3, as adopted in Kansas. A key requirement for negotiability is that the instrument must be payable “on demand or at a definite time” (K.S.A. 84-3-104(a)(2)). The phrase “as soon as possible, but no later than December 31, 2025” introduces an element of uncertainty regarding the exact payment date. While “as soon as possible” is common in commercial dealings, it generally does not meet the “definite time” standard for negotiability because the exact time of performance is not ascertainable from the instrument itself. The inclusion of a specific end date (“no later than December 31, 2025”) does not cure this defect; it merely sets an outer limit. A definite time requires a fixed, known date or a date ascertainable by reference to a fixed, known period of time or event. The “as soon as possible” clause renders the payment time contingent and not definite, thereby preventing the instrument from being a negotiable instrument under K.S.A. 84-3-104. Consequently, it cannot be negotiated under the rules of Article 3, and the holder cannot enforce it as a holder in due course.

The scenario involves a promissory note that is payable to “bearer.” Under UCC § 3-109, a promise or order is payable to bearer if it states that it is payable to bearer or to the order of bearer, or to a fictitious payee, or otherwise indicates that the possessor of the promise or order is entitled to payment. The note in question is made payable to “Cash.” In Kansas, as in other states adopting the UCC, an instrument payable to “Cash” is generally considered to be payable to bearer. This is because “Cash” is not a specific identified person. Therefore, possession of the note by any individual, regardless of how they acquired it, would entitle them to payment. The fact that Ms. Albright took possession of the note without knowledge of its prior history or any claims against it is relevant to holder in due course status, but the fundamental issue here is the instrument’s negotiability and to whom it is payable. Since it is payable to bearer, it can be negotiated by delivery alone. The question asks about the instrument’s negotiability and transferability. Because it is payable to bearer, it can be transferred by mere delivery. The subsequent endorsement by Ms. Albright is not strictly necessary for transfer, though it might be relevant for establishing holder in due course status or for providing a chain of title if it were payable to a named payee. However, for the purpose of determining who can enforce it, its bearer status is paramount. The note is a negotiable instrument because it is in writing, signed by the maker, contains an unconditional promise to pay a fixed amount of money, and is payable on demand or at a definite time. The critical element for transferability in this context is its payable-to-bearer status.

The scenario describes a promissory note that contains a clause allowing the holder to accelerate the payment of the entire outstanding balance if the maker defaults on any installment payment. This type of clause is commonly referred to as an acceleration clause. Under UCC Article 3, specifically Kansas Statute Annotated § 84-3-108(a), an instrument is payable on demand if it states that it is payable “on demand,” “at sight,” or “when otherwise stated.” However, an instrument that contains a provision for acceleration of payment on a condition is still a negotiable instrument if the condition is not indefinite. An acceleration clause that triggers upon default of an installment payment is a common and valid condition that does not render the instrument non-negotiable. The key is that the acceleration is tied to a specific event, the default on an installment, which is a determinable event. Therefore, the note remains negotiable despite the acceleration clause. The question asks about the negotiability of the instrument. The existence of an acceleration clause, as described, does not destroy negotiability.

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, 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. These are typically related to the fundamental validity of the instrument itself or the capacity of the parties. Examples include infancy, duress that nullifies assent, fraud that nullifies assent, discharge in insolvency proceedings, and illegality of the transaction that nullifies assent. Personal defenses, on the other hand, such as breach of contract, lack of consideration, or fraud in the inducement, are generally cut off by an HDC. In this scenario, the forged signature of the maker, Mr. Abernathy, is a real defense. Forgery of a necessary signature, as provided in K.S.A. 84-3-305(a)(1)(A), renders the instrument void and is a defense that can be asserted against any person, including a holder in due course. Therefore, Ms. Gable, as the purported maker, can raise the defense of forgery against any holder, even one who otherwise qualifies as a holder in due course, because the instrument itself was never validly issued by her. The UCC specifically lists forgery of a signature as a real defense that cannot be cut off by an HDC.

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder under UCC Article 3, as adopted in Kansas. A negotiable instrument is taken by a holder in due course if it is taken (1) for value; (2) in good faith; and (3) without notice that it is overdue or dishonored or of any defense or claim to it on the part of any person. If a party is an HDC, they take the instrument free from most defenses, including all personal defenses. However, real defenses, such as infancy, duress, illegality of a type that nullifies the obligation, or fraud in the factum, can be asserted even against an HDC. In this scenario, the promissory note was issued by Ms. Albright to Mr. Peterson. Mr. Peterson then negotiated the note to Ms. Chen. Ms. Chen claims to be a holder in due course. The defense Ms. Albright seeks to raise is that she was induced to sign the note by Mr. Peterson’s fraudulent misrepresentation about the nature of the transaction – specifically, that it was a receipt for a donation, not a legally binding loan agreement. This type of misrepresentation, where the maker did not understand the nature or terms of the instrument they were signing due to the deception, constitutes fraud in the factum. Fraud in the factum is a real defense, which is effective against all persons, including a holder in due course. Therefore, Ms. Chen, even if she otherwise qualifies as an HDC, cannot enforce the note against Ms. Albright if the fraud in the factum defense is established. The question asks about the enforceability of the note, and since fraud in the factum is a real defense, it can be asserted against any holder, including an HDC.

The core issue here is the enforceability of a negotiable instrument when presented for payment after a significant alteration. Kansas law, consistent with UCC Article 3, addresses the rights of holders in due course (HDC) versus ordinary holders when an instrument has been altered. A holder in due course takes an instrument free from most defenses, including those arising from a material alteration, *unless* the HDC had actual knowledge of the alteration or knowledge of facts that would make their conduct in taking the instrument bad faith. However, an HDC can only enforce the instrument according to its original tenor if the alteration was fraudulent. If the alteration was not fraudulent but merely unauthorized (e.g., a mistake), the HDC can enforce it as altered. In this scenario, the alteration from $500 to $5,000 is material and likely fraudulent, as it significantly changes the obligation. A holder who is not an HDC, like Ms. Gable, is subject to all defenses, including material alteration. Therefore, Ms. Gable, as a holder not in due course, can only enforce the instrument according to its original tenor, which was $500. The calculation is straightforward: the original amount is $500, and that is the amount enforceable by a non-HDC against the drawer. The crucial concept is that a holder not in due course is subject to defenses, and material alteration is a real defense that can be asserted against such a holder. The UCC, as adopted in Kansas, distinguishes between the rights of an HDC and a holder who does not meet the HDC criteria. For a holder not in due course, the instrument’s enforceability is limited by any defenses available against the original payee or a prior holder, including the defense of material alteration. The alteration here from $500 to $5,000 is a fraudulent and material alteration. Consequently, Ms. Gable, not being a holder in due course, can only recover the original amount of the instrument.

Under Kansas law, specifically UCC Article 3, a person who takes an instrument for value, in good faith, and without notice that the instrument is overdue or that there is a defense against or claim to the instrument is a holder in due course (HDC). The concept of “value” for an instrument is broadly defined. UCC § 3-303(a) states that value is given if the holder takes the instrument for the benefit of the person who negotiated it, or if the holder takes the instrument as payment of or security for a pre-existing claim, or if the holder gives a negotiable instrument or irrevocable commitment to a third person as payment for the instrument. In this scenario, the promissory note was given as payment for a pre-existing debt owed by the drawer to the payee. This constitutes giving value under UCC § 3-303(a)(1) as it is payment for a pre-existing claim. Furthermore, the prompt states that the payee took the note in good faith and without notice of any defenses. Therefore, the payee qualifies as a holder in due course. A holder in due course takes the instrument free from all defenses of any party to the instrument with whom the holder has not dealt, except for certain real defenses enumerated in UCC § 3-305(a)(1). Since the payee had no prior dealings with the maker and the presented defense (lack of consideration) is a personal defense, the payee, as an HDC, can enforce the instrument. The value given is the discharge of the pre-existing debt, which is a valid form of consideration for taking the instrument.

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder. Under UCC Article 3, specifically in Kansas, an HDC takes an instrument free from most personal defenses, but not from real defenses. A forged signature is a real defense, meaning it can be asserted against anyone, including an HDC. The UCC generally states that no one can obtain rights to a signature that is not their own, and a forged signature is wholly inoperative. Therefore, even if the note was transferred through multiple parties and ultimately held by an HDC, the fact that the original maker’s signature was forged means the maker has a real defense and is not obligated to pay the instrument. The principle that a forged signature is void ab initio (void from the beginning) is paramount. This means the instrument is considered a nullity from its inception, and subsequent transferees, regardless of their good faith or payment of value, cannot acquire rights to it. This is a fundamental aspect of negotiable instrument law designed to protect makers from unauthorized obligations.