The scenario involves a promissory note that contains a clause stating it is “subject to the terms of the agreement dated January 15, 2023, between the maker and the payee.” Under South Dakota Codified Law § 57A-3-104(a), a negotiable instrument must contain an unconditional promise or order to pay a fixed amount of money. Section 57A-3-106(b)(i) clarifies that a promise or order is conditional if it states that it is subject to or governed by another writing. The inclusion of the phrase “subject to the terms of the agreement” explicitly makes the promise to pay contingent upon the terms of that separate agreement. This incorporation by reference renders the promise conditional, thus destroying the negotiability of the instrument. While the note might still be enforceable as a contract, it cannot be treated as a negotiable instrument under Article 3 of the Uniform Commercial Code as adopted in South Dakota. Therefore, it does not qualify as a negotiable instrument.

The scenario describes a negotiable instrument, specifically a promissory note, that contains an acceleration clause. Under South Dakota Codified Law § 57A-3-108(a), an instrument is payable on demand if it states that it is payable “on demand” or “at sight,” or otherwise indicates that it is payable at the option of a holder, or when no time for payment is stated. However, an instrument may also be payable on demand if it contains an acceleration clause. An acceleration clause allows the holder to declare the entire unpaid balance due and payable immediately upon the occurrence of a specified event. In this case, the event is the maker’s failure to make any scheduled payment. Such a clause does not affect the negotiability of the instrument because it does not make the payment sum uncertain; rather, it relates to the time of payment. South Dakota law, mirroring the Uniform Commercial Code, permits instruments to be payable on demand if they contain such clauses, as long as the principal and interest amounts are determinable. The note is still a negotiable instrument because it is a signed promise to pay a fixed amount of money ($50,000) on demand, with interest, and the acceleration clause only affects the timing of payment, not the certainty of the amount.

The scenario involves a promissory note that contains a clause allowing the maker to prepay the principal amount without penalty. Under South Dakota Codified Law § 57A-3-104(a), a negotiable instrument must contain an unconditional promise or order to pay a fixed amount of money. Prepayment clauses, if they do not alter the fixed amount of money due or the time of payment in a way that makes it contingent, do not typically destroy negotiability. The key is whether the prepayment is at the option of the maker and does not introduce additional obligations or contingencies that would render the promise conditional. In this case, the note is for a fixed sum, payable on demand or at a definite time, and the prepayment is an option for the maker. The South Dakota UCC, like the Uniform Commercial Code generally, permits such prepayment clauses as they do not make the promise to pay uncertain or conditional in a manner that would defeat negotiability. Therefore, the note, despite the prepayment clause, can still be a negotiable instrument as it meets the other requirements of being a signed writing, containing an unconditional promise to pay a fixed amount of money, payable on demand or at a definite time, and payable to order or bearer.

The core issue revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder under South Dakota’s UCC Article 3. Specifically, the question probes the distinction between real defenses (which can be asserted against an HDC) and personal defenses (which generally cannot). In this scenario, a promissory note was initially executed for a legitimate business purpose. However, the note was subsequently procured through fraudulent misrepresentation concerning the underlying goods’ quality, a situation that constitutes fraud in the inducement. Fraud in the inducement is classified as a personal defense, not a real defense. Real defenses, such as forgery or material alteration of the instrument, can defeat even an HDC’s claim. Personal defenses, like fraud in the inducement, breach of warranty, or failure of consideration, are generally cut off by a holder who takes the instrument for value, in good faith, and without notice of any defect or claim. Since the note was acquired for value and without notice of the fraud in the inducement, the holder qualifies as a holder in due course. Therefore, the holder in due course can enforce the instrument despite the fraud in the inducement, as this is a personal defense. The UCC, as adopted in South Dakota, explicitly outlines these defenses.

The scenario involves a negotiable instrument that was originally payable to “order” and was then specially indorsed. A special indorsement, as defined under South Dakota Codified Law (SDCL) Chapter 57A-3, specifies a particular person to whom the instrument is payable. When an instrument is specially indorsed, it becomes payable only to that named indorsee. If a subsequent holder then writes “Pay to any bank or banker or clearing house” above the special indorsement, this constitutes a restrictive indorsement for deposit. However, a restrictive indorsement for deposit does not convert a specially indorsed instrument back into a bearer instrument. The special indorsement’s requirement that the instrument be paid to the named indorsee remains paramount. Therefore, the subsequent holder who wrote “Pay to any bank or banker or clearing house” cannot negotiate the instrument further by mere delivery, as the special indorsement still dictates that payment must be made to the specifically named individual. The instrument, after the special indorsement, requires the indorsee’s indorsement to be further negotiated. The attempt to negotiate it by delivery after the “Pay to any bank or banker or clearing house” indorsement, which itself follows a special indorsement, is ineffective for further negotiation by someone other than the special indorsee. The question hinges on the effect of a restrictive indorsement for deposit on an instrument that has already been specially indorsed. Under SDCL 57A-3-205, a restrictive indorsement includes “For deposit only.” While such an indorsement typically restricts payment to the indorser or deposit, it does not alter the requirement for the signature of the special indorsee for further negotiation. The key is that the special indorsement dictates the payee, and a subsequent restrictive indorsement, even if it appears to facilitate deposit, does not eliminate the need for the special indorsee’s signature to transfer rights.

The core issue in this scenario revolves around the concept of “shelter” in negotiable instruments law, specifically as it applies to holder in due course (HIDC) status. Under UCC § 3-203(b), a person who takes an instrument “under the shelter” of a holder in due course (HDC) acquires the same rights as that HDC, even if the transferee themselves does not qualify as an HDC. This principle allows an instrument to retain its HDC qualities as it passes through various hands. However, this shelter doctrine does not apply to a person who was a party to fraud or illegality affecting the instrument. In this case, while Ms. Albright qualifies as an HDC because she took the note for value, in good faith, and without notice of any defense or claim, Mr. Bell is attempting to use the shelter doctrine. Mr. Bell was directly involved in the fraudulent inducement of the original note from Ms. Gable. Because Mr. Bell was a party to the fraud that induced the instrument, he cannot benefit from the shelter doctrine, even though he acquired the instrument from an HDC (Ms. Albright). Therefore, Ms. Gable can assert her defenses against Mr. Bell. The UCC § 3-305(a)(2) explicitly states that an HDC takes the instrument free of most defenses, but this protection is not transferable to someone who was previously involved in the underlying fraud.

The core issue here is determining whether the instrument qualifies as a negotiable instrument under UCC Article 3, specifically as adopted in South Dakota. For an instrument to be negotiable, it must meet several criteria, including being an unconditional promise or order to pay a fixed amount of money, payable on demand or at a definite time, and payable to order or to bearer. In this scenario, the inclusion of “subject to the terms and conditions of the collateral agreement dated January 15, 2023” creates a significant contingency. UCC § 3-104(a)(1) requires the promise or order to be unconditional. When an instrument “refers to another record for rights regarding the promise or order,” it generally renders the promise or order conditional. The phrase “subject to the terms and conditions” explicitly links the payment obligation to the collateral agreement, meaning the payer’s obligation to pay might be altered or even excused by the terms of that separate agreement. This reference makes the payment dependent on external factors governed by the collateral agreement, thus failing the unconditional requirement for negotiability. Therefore, the instrument is not a negotiable instrument under South Dakota law.

The scenario involves a promissory note that is payable to order but is then transferred by delivery without endorsement. Under South Dakota Codified Law § 57A-3-201(b), a transfer of an instrument, whether or not the transfer is a negotiation, requires delivery. If the instrument is payable to order, the transferee acquires rights to enforce the instrument only if the transfer includes any necessary indorsement. If a transferor transfers an instrument for value, the transferee has a specifically enforceable right to the transferor’s indorsement. However, until the indorsement is supplied, the transferee has only the rights of a holder in due course if the transferee was a holder in due course. But, the transferee is not a holder. A holder is defined in South Dakota Codified Law § 57A-1-201(b)(21) as the person in possession of a negotiable instrument that is payable either to bearer or, if payable to order, to the person in possession. Since the note was payable to order and was not indorsed, the transferee, Ms. Anya Sharma, is not a holder. Therefore, Ms. Sharma cannot enforce the instrument in her own name under South Dakota Codified Law § 57A-3-301. She can only enforce it if she can obtain the necessary indorsement from Mr. Ben Carter, or if she can prove she is entitled to payment by other means, which is not indicated. The question asks what is required for Ms. Sharma to enforce the instrument. The crucial missing element for her to be a holder and thus entitled to enforce is the indorsement.

In South Dakota, 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 has been dishonored or that it contains any unauthorized signature or alteration or that any claim to it exists. The scenario describes a promissory note that was originally issued for a legitimate business transaction between Ms. Anya Sharma and Mr. Ben Carter. Mr. Carter subsequently negotiated the note to Ms. Clara Davies. Ms. Davies, when she acquired the note, was aware of a potential dispute between Anya and Ben regarding the quality of goods supplied, but she did not have actual knowledge that the note was dishonored or that a defense to payment existed. The key is whether her awareness of a dispute constitutes notice of a defense. UCC § 3-302 defines “notice” as having actual knowledge of the fact or receiving notification of the fact or from all the facts and circumstances known to the person at the time in question, has reason to know the fact. Merely hearing of a dispute, without more information indicating a breach of contract that would give rise to a defense, does not automatically equate to notice of a defense. Unless Ms. Davies had reason to know that the dispute would result in a valid defense against payment on the note, she can still be considered an HDC. Since the facts state she did not have actual knowledge of a dishonor or a defense, and only knew of a “potential dispute,” she meets the requirements for HDC status. Therefore, she takes the note free from Anya Sharma’s potential defenses arising from the underlying transaction.

The core issue here is whether the instrument qualifies as a negotiable instrument under South Dakota Codified Law (SDCL) Chapter 57A-3, specifically focusing on the “sum certain” requirement and the concept of “negotiability” when additional obligations are attached. A negotiable instrument must contain an unconditional promise or order to pay a sum certain in money and nothing else, except as allowed by SDCL 57A-3-104. The instrument in question is a promissory note. It promises to pay a principal sum of $10,000. However, it also includes a clause requiring the maker to pay an additional 10% of the net profits of the maker’s “Prairie Bison Ranching” business annually for five years, in addition to interest. This additional obligation is not a promise to pay a sum certain in money. While it relates to money, it is contingent upon the profitability of a business and is not a fixed or determinable amount at the time of issuance. SDCL 57A-3-104(a)(1) defines a negotiable instrument as an unconditional promise or order to pay a sum certain in money. SDCL 57A-3-104(c) states that an instrument which is otherwise a negotiable instrument is not made nonnegotiable by the fact that it also contains a promise or order to do any of the following: (1) to pay interest or a stated installment of interest; (2) to pay a sum certain due to acceleration on a condition; (3) to pay a sum certain due to confession of judgment; or (4) to pay a sum certain due to collection costs or attorney’s fees. The additional obligation to pay 10% of net profits does not fall under any of these exceptions. It is an obligation to pay a variable amount based on business performance, which is not a “sum certain” as required for negotiability under UCC Article 3. Therefore, the instrument is not a negotiable instrument.

The scenario describes a situation where a negotiable instrument, specifically a promissory note, is transferred. The key issue is whether the transferee, Ms. Anya Sharma, qualifies as a holder in due course (HDC) under South Dakota law, which largely follows the Uniform Commercial Code (UCC) Article 3. For Ms. Sharma to be an HDC, the note must be negotiable, she must have taken it for value, in good faith, and without notice of any defense or claim against it. The note is a written promise to pay a fixed sum of money, payable on demand, to order, and contains no other promise or obligation. Thus, it is a negotiable instrument. Ms. Sharma gave value by agreeing to forgo her claim against Mr. Silas Croft for a prior debt. She took the note in good faith, as there is no indication of dishonesty or a lack of honesty in fact. Crucially, she took the note without notice of any defense or claim. Mr. Croft’s knowledge of the underlying dispute between the original parties (the maker and the payee) is imputed to him, but not necessarily to Ms. Sharma, who is a subsequent transferee. The critical factor is whether Ms. Sharma had actual knowledge or reason to know of the maker’s defense. The facts state she had no notice of any such defense. Therefore, she meets all the requirements to be a holder in due course. The maker’s defense (lack of consideration) is a real defense, which is generally cut off by a holder in due course. However, if Ms. Sharma is not an HDC, the maker can assert this defense against her. Since she meets the criteria for HDC status, the maker cannot assert the defense of lack of consideration against her. The question asks about the maker’s ability to assert this defense. Because Ms. Sharma is a holder in due course, the maker’s defense is cut off.

The scenario involves a promissory note that is payable on demand. Under South Dakota Codified Law § 57A-3-108(a), a instrument is payable on demand if it states that it is payable on demand, at sight, or on presentation, or otherwise indicates that it is payable at the option of a holder. In this case, the note explicitly states “Payable on demand.” This designation triggers the special rules for demand instruments. When an instrument is payable on demand, the statute of limitations for enforcement begins to run at the time of issuance, or if the instrument is a certificate of deposit, at the time of a demand for payment. For promissory notes payable on demand, South Dakota Codified Law § 57A-3-118(b) establishes that the statute of limitations for enforcement is the earlier of ten years after demand for payment, or thirty years after the date of the instrument. Since the note was issued on January 15, 2010, and no demand for payment has been made, the thirty-year period from the date of issuance is the relevant benchmark for the absolute time limit. Therefore, the latest possible date for enforcement, absent a prior demand, is January 15, 2040.

The scenario involves a promissory note that is payable on demand. Under South Dakota Codified Law (SDCL) Chapter 57A-3 (UCC Article 3), a demand instrument is considered due and payable immediately upon its creation. Therefore, the statute of limitations for enforcement begins to run from the date of issue. For a demand instrument, the statute of limitations for bringing an action to enforce the instrument is generally ten years after the date of demand, or ten years after the date of issue if no demand has been made. However, SDCL § 57A-3-118(b) specifies that for an instrument payable on demand, an action to enforce the instrument must be commenced within ten years after the demand for payment is made, or if no demand for payment is made, within ten years after the instrument became due. Since the note is payable on demand and no specific demand date is provided, the ten-year period commences from the date of issue. Thus, if the note was issued on January 15, 2010, and no demand was made, the statute of limitations for enforcement would expire on January 15, 2020. Any action brought after this date would be barred. The question asks about the enforceability of the note in a South Dakota court if an action is commenced on January 20, 2020. Since January 20, 2020, is after January 15, 2020, the action would be time-barred.

The scenario involves a negotiable instrument that was altered after its issuance. Under South Dakota Codified Law § 57A-3-407, a holder in due course (HDC) can enforce an altered instrument according to its original tenor if the alteration was fraudulent. However, if the alteration was not fraudulent, or if the holder is not an HDC, the instrument can only be enforced according to its original tenor. In this case, the principal amount of the promissory note was increased from \$5,000 to \$15,000. This is a material alteration because it changes the obligation of the party. Assuming the alteration was fraudulent, an HDC could enforce it for the original \$5,000. If the holder is not an HDC, or if the alteration was not fraudulent, the instrument is enforceable only for the original \$5,000. The question asks what the holder can enforce if the alteration was fraudulent and the holder is an HDC. Therefore, the holder can enforce the instrument for its original tenor, which is \$5,000.

The scenario describes a situation involving a negotiable instrument that has been materially altered after issuance. Under South Dakota Codified Law § 57A-3-407, a holder in due course of a materially altered instrument can enforce it according to its original tenor. A material alteration is defined as an alteration that changes the contract of any party. In this case, the face amount of the note was changed from \$5,000 to \$15,000. This is a material alteration because it changes the obligation of the maker. However, the question specifies that Ms. Albright is a holder in due course. A holder in due course takes an instrument free of most defenses and claims that a holder not in due course would be subject to. One of the key protections afforded to a holder in due course is the ability to enforce a materially altered instrument as originally issued, provided the alteration was fraudulent. The question implies the alteration was fraudulent by stating it was “changed.” Therefore, Ms. Albright can enforce the note as it was originally written, which was for \$5,000. The calculation is straightforward: the original amount of the note is the amount a holder in due course can enforce after a material alteration.

The core issue here is whether the document presented to Silas by the collector from North Dakota qualifies as a negotiable instrument under South Dakota’s UCC Article 3. For an instrument to be negotiable, it must meet several criteria, including being an unconditional promise or order to pay a fixed amount of money, payable on demand or at a definite time, and payable to order or to bearer. SDCL § 33-3-104(a) outlines these requirements. In this scenario, the document specifies payment “upon the successful completion of the Black Hills gold rush,” which is an event that is not certain to occur or to occur within a reasonable time. This makes the payment term contingent and not payable on demand or at a definite time. Such a contingency violates the definiteness of time requirement for negotiability. Therefore, the instrument is not a negotiable instrument under South Dakota law. The collector’s attempt to enforce it as such would fail. The instrument might be a valid contract or assignment, but it lacks the specific qualities that would allow it to circulate as commercial paper with the protections afforded by Article 3.

The core concept here revolves around the rights of a holder in due course (HDC) and the defenses that can be asserted against them. Under UCC Article 3, as adopted in South Dakota, an 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. Examples of real defenses include infancy, duress, fraud in the execution (or “theft by deception”), illegality of a type that nullifies the obligation, and discharge in insolvency proceedings. Personal defenses, on the other hand, such as breach of contract, failure of consideration, or fraud in the inducement, are generally cut off by an HDC. In this scenario, the note was originally issued for a legitimate business purpose. However, it was subsequently altered by increasing the principal amount without the maker’s consent. This alteration constitutes a material alteration of the instrument. While a material alteration generally discharges the party whose obligation was altered, UCC § 3-407(a) provides that an altered instrument may be enforced according to its original tenor. However, a party who assents to the alteration is bound by it. The crucial point is whether the subsequent holder, Mr. Abernathy, qualifies as a holder in due course and whether the alteration is a real or personal defense. The alteration of the principal amount without the maker’s consent is a material alteration. Under UCC § 3-407(b), if an instrument is issued with a blank that is then filled in, and the instrument is subsequently altered, the instrument may be enforced according to its original tenor. However, if the alteration is fraudulent, the fraudulent alterer cannot enforce the instrument. Furthermore, UCC § 3-407(c) states that an instrument that is altered fraudulently and to the detriment of a party is enforceable against the alterer, but not against any other party who does not assent to the alteration. The key defense available to Ms. Carlson against Mr. Abernathy, even if he were an HDC, would be related to the fraudulent alteration of the instrument, which is considered a real defense under UCC § 3-305(a)(2). Specifically, fraud in the factum (or fraud in the execution) is a real defense. While this is not precisely fraud in the execution, a fraudulent material alteration is often treated similarly in its effect against a party who did not consent. The alteration changed the fundamental obligation of Ms. Carlson. Therefore, Ms. Carlson can assert the defense that the instrument was materially and fraudulently altered, and that she did not assent to this alteration. The UCC, as adopted in South Dakota, allows for enforcement according to the original tenor, but the fraudulent nature of the alteration prevents enforcement of the altered amount against a non-consenting party. Mr. Abernathy, even as an HDC, cannot enforce the altered amount against Ms. Carlson because the alteration is a real defense. He can, however, enforce the instrument according to its original tenor, as the alteration did not affect the original terms of the note. The question asks what Ms. Carlson can assert against Mr. Abernathy. She can assert that the note is enforceable only according to its original tenor because of the material and fraudulent alteration to which she did not assent. Calculation: Original Principal Amount: \(P_{original}\) Altered Principal Amount: \(P_{altered}\) \(P_{altered} > P_{original}\) UCC § 3-407(b) and (c) regarding fraudulent and material alteration. Defense of material alteration is a real defense under UCC § 3-305(a)(2). An HDC takes free of personal defenses but not real defenses. Ms. Carlson did not assent to the alteration. The instrument is enforceable against Ms. Carlson according to its original tenor, not the altered tenor. Therefore, Ms. Carlson can assert that the instrument is enforceable only according to its original tenor.

The core concept here revolves around the holder in due course (HDC) status and the defenses available against a holder not in due course. Under South Dakota Codified Law (SDCL) Chapter 57A-3, a holder in due course takes an instrument free of most defenses and claims. However, certain real defenses, such as infancy, duress, illegality of the type that nullifies criminal usury, or discharge in insolvency proceedings, can be asserted even against an HDC. Personal defenses, like breach of contract or failure of consideration, are generally cut off by HDC status. In this scenario, the promissory note was initially issued by Mr. Abernathy to Ms. Gable. Ms. Gable then negotiated the note to Mr. Henderson. The critical point is whether Mr. Henderson qualifies as a holder in due course. To be an HDC, he must take the instrument for value, in good faith, and without notice of any claim or defense against it. The explanation provided does not indicate that Mr. Henderson had any notice of the underlying dispute between Abernathy and Gable regarding the quality of the services. Assuming Mr. Henderson took the note for value and in good faith, he would likely be an HDC. Therefore, the defense of failure of consideration, which is a personal defense, would not be available against Mr. Henderson. Mr. Abernathy would still be obligated to pay the note to Mr. Henderson. The question asks what defense Abernathy *could* successfully assert against Henderson. Since Abernathy’s defense is failure of consideration, a personal defense, and assuming Henderson is an HDC, Abernathy cannot successfully assert this against Henderson.

The scenario describes a promissory note that is payable to a specific individual, Elara Vance, and is not made payable to bearer or to order. Under South Dakota Codified Law § 57A-3-104(a), a negotiable instrument must be payable to bearer or to order to be a negotiable instrument. A promise to pay a fixed amount of money, if it is not payable to bearer or order, is generally considered a simple contract for the payment of money, not a negotiable instrument governed by Article 3 of the Uniform Commercial Code. Therefore, the note’s lack of “to order” or “to bearer” language prevents it from qualifying as a negotiable instrument under South Dakota law. This distinction is crucial because negotiable instruments benefit from certain legal protections and presumptions, such as the holder in due course doctrine, which are not available for non-negotiable instruments. The fact that the note is payable on demand and signed by the maker are necessary but not sufficient conditions for negotiability. The critical missing element is the proper designation of the payee.

The core issue revolves around the concept of a holder in due course (HDC) and the defenses available against payment of a negotiable instrument under South Dakota’s Uniform Commercial Code (UCC) Article 3. A party claiming HDC status must acquire the instrument (1) for value, (2) in good faith, and (3) without notice of any claim to it or defense against it. In this scenario, the instrument is a draft. The initial negotiation of the draft from the drawer to the payee involved a misrepresentation concerning the underlying goods, which constitutes a fraudulent inducement. Fraud in the inducement is a personal defense. A holder in due course takes the instrument free from all defenses except real defenses. Fraud in the execution, where the nature of the instrument itself is misrepresented, is a real defense. However, misrepresenting the value or quality of goods is fraud in the inducement. Since the bank acquired the draft for value, in good faith, and without notice of the fraud in the inducement prior to its maturity, it qualifies as a holder in due course. Therefore, the bank is entitled to payment from the drawee bank despite the drawer’s defense of fraud in the inducement. The UCC § 3-305(a)(2) specifies that an HDC takes free of claims to the instrument and defenses of any party to the instrument with whom the holder has not had dealings, except for real defenses. Fraud in the inducement is not a real defense under UCC § 3-305(a)(2).

The scenario involves a promissory note that is payable to “cash” or bearer. Under South Dakota Codified Law (SDCL) Chapter 39-1, instruments payable to bearer are negotiable by delivery alone. The key concept here is how a holder in due course (HDC) status is affected by the manner of negotiation. An instrument payable to bearer is negotiated by its physical delivery to another party. The fact that the note was “endorsed” by the payee, while not strictly necessary for bearer paper, does not invalidate the negotiation. The subsequent holder, Ms. Albright, took possession of the note under circumstances that would generally qualify her as a holder in due course, assuming she met the other criteria (e.g., took in good faith, for value, without notice of any defense or claim). Since bearer paper requires only delivery for negotiation, and the note was physically transferred to Ms. Albright, the negotiation is valid. The question hinges on whether the method of transfer (delivery) is sufficient for negotiation of bearer paper under South Dakota law, which it is. The presence of an endorsement, while common for order paper, does not negate the bearer nature of the instrument. Therefore, the negotiation is effective.

This scenario involves a negotiable instrument that was originally payable to a specific payee but was later altered. The key legal principle here, as governed by South Dakota Codified Law § 36-3-407, is the effect of a fraudulent and material alteration on a holder in due course (HDC). A holder in due course takes an instrument free of most defenses and claims, but this protection is not absolute. Specifically, an HDC cannot enforce an altered instrument if the alteration is both material and fraudulent. A material alteration is one that changes the contract of any party to the instrument. A fraudulent alteration is one made with the intent to deceive. In this case, the alteration from “one thousand dollars” to “ten thousand dollars” is undeniably material as it changes the amount payable. Assuming the alteration was made with fraudulent intent by the person who negotiated the instrument to Ms. Gable, she would not be able to enforce the instrument as altered. However, she would still be able to enforce the instrument according to its original tenor, which was for one thousand dollars, provided she meets the other requirements of being a holder in due course (e.g., taking for value, in good faith, and without notice of any defense or claim). The question asks what she can enforce. She cannot enforce the altered amount of ten thousand dollars because the alteration was material and fraudulent. She can enforce the original amount of one thousand dollars, but only if she qualifies as a holder in due course and the original tenor is discernible. The scenario states she acquired it for value and in good faith, and the original tenor is legible. Therefore, she can enforce the instrument for the original sum.

The scenario describes a promissory note that was originally payable to “Bearer.” Under South Dakota Codified Law § 57A-3-201, negotiation of an instrument payable to bearer occurs by delivery. Delivery simply means voluntary transfer of possession. The question then states that Mr. Abernathy “endorsed the note by signing his name on the back.” An endorsement is a signature on an instrument, other than by the maker or drawer, for the purpose of negotiation, payment, or restricting payment. When an instrument is payable to bearer, a special endorsement (e.g., “Pay to the order of X”) converts it to an instrument payable to the order of the named person. However, a blank endorsement (simply signing one’s name) on a bearer instrument does not change its character; it remains payable to bearer. Therefore, even after Mr. Abernathy signed his name on the back, the note continued to be payable to bearer. Consequently, any subsequent holder could negotiate the instrument by mere delivery, without needing a further endorsement from the current possessor. The crucial point is that a blank endorsement on a bearer instrument does not make it an order instrument. The UCC distinguishes between negotiation by delivery (for bearer instruments) and negotiation by delivery with endorsement (for order instruments). Since the note was payable to bearer and the endorsement was blank, it remained a bearer instrument, negotiable by delivery alone.

The scenario presented involves a negotiable instrument that was initially properly issued but subsequently altered. Specifically, the amount payable was increased. Under South Dakota Codified Law (SDCL) Chapter 3-4, which governs negotiable instruments, a holder in due course (HDC) of an instrument that has been materially altered without their assent is generally entitled to enforce the instrument according to its original tenor. However, if the alteration was made by the HDC, or if the HDC took the instrument with notice of the alteration, their rights would be different. In this case, the question implies the alteration occurred after the instrument left the hands of the original obligor and before it reached the current holder, who is presumed to be an HDC unless otherwise specified. The crucial point is that the instrument was originally valid and then altered. SDCL § 3-407 addresses the effect of alteration. If a holder in due course takes an instrument that has been materially altered, they can enforce it according to its original terms. The alteration of the amount payable is a material alteration. Therefore, the holder in due course can only recover the original amount. The original amount was \( \$500.00 \).

The core issue here is whether the instrument qualifies as a negotiable instrument under South Dakota’s UCC Article 3. For an instrument to be negotiable, it must meet several criteria, including being an unconditional promise or order to pay a fixed amount of money, payable on demand or at a definite time, and payable to order or to bearer. South Dakota Codified Law (SDCL) § 36-3-104 outlines these requirements. The phrase “subject to the terms and conditions of the loan agreement dated January 15, 2023” introduces a contingency that makes the promise to pay conditional, not unconditional. This conditionality violates the unconditional promise requirement of negotiability. Specifically, SDCL § 36-3-106(a) states that a promise or order is unconditional unless it states an express condition to payment, or the instrument states that it is subject to or governed by another writing. In this scenario, the note explicitly states it is “subject to the terms and conditions of the loan agreement,” which directly implicates SDCL § 36-3-106(a)(ii). Therefore, the instrument is not a negotiable instrument.

The core issue here is determining whether the instrument qualifies as a negotiable instrument under UCC Article 3, as adopted in South Dakota. For an instrument to be negotiable, it must meet several criteria, including being an unconditional promise or order to pay a fixed amount of money, payable on demand or at a definite time, and payable to order or to bearer. In this scenario, the document states “pay to the order of whoever holds this note,” which satisfies the “payable to order” requirement. However, the phrase “subject to the conditions set forth in the accompanying agreement” introduces a contingency that makes the promise to pay conditional. UCC Section 3-104(a)(1) explicitly states that a negotiable instrument must contain an unconditional promise or order. A promise or order is conditional if it states that it is subject to or governed by another writing. The reference to an “accompanying agreement” for conditions clearly falls under this prohibition. Therefore, the instrument is not negotiable.

The core issue revolves around the negotiability of a draft that contains a clause permitting the acceleration of payment. Under UCC Article 3, as adopted in South Dakota, a promise or order to pay a fixed amount of money is negotiable if it is payable on demand or at a definite time and is payable to order or to bearer. Crucially, UCC § 3-104(a)(2) states that a draft is negotiable if it is an unconditional promise or order to pay a fixed amount of money, payable on demand or at a definite time. UCC § 3-108(b) clarifies that an instrument is payable at a definite time if it is payable on stated dates or at a fixed period after a stated date, or at a time readily ascertainable in the future. The inclusion of an acceleration clause, which allows the holder to declare the entire instrument due and payable prior to the stated maturity date upon the occurrence of a specified event (like default), does not destroy negotiability. This is because the acceleration event, once it occurs, makes the time of payment definite. UCC § 3-108(b)(2) explicitly states that an instrument is payable at a definite time if it is payable “on acceleration.” Therefore, a draft that includes a clause allowing for acceleration upon default remains negotiable. The scenario describes a draft with such a clause, making it a negotiable instrument.

The scenario involves a negotiable instrument that is payable to order. Under South Dakota Codified Law (SDCL) Chapter 3-3, a negotiable instrument payable to order is negotiated by delivery with any necessary indorsement. The question asks about the validity of the negotiation to Elara. Since the instrument is payable to “the order of Beatrice,” it is an order instrument. For an order instrument to be effectively negotiated, it must be delivered to the transferee and must be indorsed by the person to whom it is payable. In this case, Beatrice is the person to whom the instrument is payable. The problem states that Clara, who is not the payee, delivered the instrument to Elara without Beatrice’s indorsement. Therefore, the negotiation from Clara to Elara is not effective. The instrument is still considered to be in the possession of Beatrice, or it has been transferred without proper negotiation. SDCL § 3-301 defines the rights of a holder. A holder is a person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession. Elara is not in possession of an instrument that is payable to her, nor is she in possession of an instrument payable to bearer. The instrument is payable to Beatrice, and Beatrice has not indorsed it. Therefore, Elara does not become a holder in due course or even a holder of the instrument. The transfer to Elara is merely a transfer of possession without the necessary legal steps for negotiation of an order instrument. This means that Elara cannot enforce the instrument against the obligor. The correct classification of the transfer to Elara is that it is a transfer of possession, but not a negotiation that vests holder status in Elara.

The core issue here revolves around the negotiability of a draft that contains a promise to pay a fixed amount but also includes a condition precedent to payment. Under South Dakota Codified Law (SDCL) Chapter 3-104, 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 that payment is subject to, or governed by, the terms of another writing, or if it states that payment is to be made only upon the occurrence of a specified event or the occurrence of a specified event not certain of occurrence. In this scenario, the draft explicitly states that payment is contingent upon the successful completion of the construction project. This makes the promise to pay conditional, thereby destroying its negotiability. The instrument is not a negotiable instrument because the promise to pay is not unconditional. SDCL § 3-104(a)(1) requires an unconditional promise or order. SDCL § 3-104(b)(1) defines a conditional promise or order as one subject to or governed by another writing or dependent on the occurrence of a specified event not certain of occurrence. The mention of “upon successful completion of the Black Hills bridge construction project” clearly indicates a contingency. Therefore, the instrument is a non-negotiable instrument, often treated as a simple contract.

The core issue revolves around the proper endorsement of a negotiable instrument for transfer and the subsequent rights of a holder in due course (HDC). Under South Dakota Codified Law (SDCL) Chapter 3-3, a negotiable instrument must be transferred by delivery with any necessary indorsement. When an instrument is payable to an identified person, such as “Pay to the order of Anya Sharma,” it requires Anya Sharma’s indorsement to negotiate it. Without her indorsement, the instrument is merely a bearer instrument if it can be negotiated by delivery alone, or it is not properly negotiated if it requires a specific indorsement. In this scenario, the note is payable to “Anya Sharma or bearer.” This creates a dual payable option. If it is treated as payable to Anya Sharma, her indorsement is required for negotiation. If it is treated as payable to bearer, it can be negotiated by delivery alone. SDCL § 3-109(a)(1) states that an instrument is payable to bearer if it states that it is payable to bearer or to the order of bearer or to a fictitious person or to any other indicated person not named as payee. SDCL § 3-109(a)(2) states an instrument is payable to bearer if it does not name a payee or the sole payee is an identified in an instrument of the preceding subsection. However, when an instrument is payable to “Anya Sharma or bearer,” the holder has the option to treat it as payable to Anya Sharma or as payable to bearer. To become a holder in due course, one must take the instrument for value, in good faith, and without notice of any claim or defense. When the note is delivered to Vikram Singh without Anya Sharma’s indorsement, and it is stated as payable to “Anya Sharma or bearer,” Vikram Singh can treat it as payable to bearer. If Vikram Singh takes the instrument for value, in good faith, and without notice of any defense against it or claim to it on the part of any person, he would qualify as a holder in due course. The critical element is whether the instrument’s form, as delivered to Vikram Singh, allows for negotiation by delivery alone. Since it is payable to “Anya Sharma or bearer,” it can be negotiated by delivery, and if the other HDC requirements are met, Vikram Singh would be an HDC. Therefore, Vikram Singh can enforce the instrument against the maker, even if the maker has a defense against Anya Sharma.