The core issue revolves around the negotiability of an instrument. For an instrument to be negotiable under UCC Article 3, it must contain certain essential elements, including a promise to pay a fixed sum of money, payable on demand or at a definite time, and payable to order or to bearer. The instrument in question states, “I promise to pay to the order of Ms. Anya Sharma, or her assigns, the sum of five thousand United States dollars ($5,000.00) upon the satisfactory completion of her doctoral dissertation, or by December 31, 2025, whichever occurs first.” The phrase “or her assigns” is crucial. Under UCC § 3-109(b), a promise to pay to “A and/or B” or to “A or B” is not payable to order or bearer unless it is payable to an identified person or persons. However, a promise to pay to “A or his assigns” is generally interpreted as payable to order. The conditionality of payment, “upon the satisfactory completion of her doctoral dissertation,” makes the payment due date uncertain and contingent on an event that may not occur. UCC § 3-108(a) requires that an instrument be payable on demand or at a definite time. A definite time is one that is readily ascertainable. A payment contingent upon the satisfactory completion of a dissertation is not a definite time. While there is an alternative definite date of December 31, 2025, the instrument’s negotiability is jeopardized by the presence of alternative payment terms, one of which is not a definite time. UCC § 3-104(a)(2) requires the instrument to be payable “on demand or at a definite time.” The inclusion of a condition precedent to payment (“upon the satisfactory completion of her doctoral dissertation”) renders the payment event uncertain and not tied to a definite time, thereby destroying negotiability. Even though there is an alternative definite date, the presence of the conditional term makes the entire instrument non-negotiable from its inception. Therefore, the instrument is not a negotiable instrument under Texas law, which follows UCC Article 3.

Under Texas law, specifically UCC Article 3, the concept of a holder in due course (HDC) is crucial for determining the rights of a party who takes possession of a negotiable instrument. To qualify as an HDC, a holder must take the instrument for value, in good faith, and without notice that it is overdue or has been dishonored or that any defense or claim to it exists. If a holder meets these criteria, they take the instrument free from most defenses that the maker or drawer could assert against the original payee, such as breach of contract or fraud in the inducement. However, certain real defenses, like forgery or material alteration, can still be asserted against an HDC. In this scenario, Ms. Anya Patel purchased a promissory note from Mr. Ben Carter. The note was for $10,000, payable to Mr. Carter. Ms. Patel paid $9,500 for the note. She had no knowledge that Mr. Carter had obtained the note from the maker, Mr. David Rodriguez, through fraudulent misrepresentation regarding the quality of goods sold. Mr. Rodriguez is now refusing to pay Ms. Patel. Since Ms. Patel gave value ($9,500 is considered value for the $10,000 note), took the note in good faith (no indication of bad faith is provided), and had no notice of Mr. Rodriguez’s defense (fraudulent misrepresentation) at the time of acquisition, she qualifies as a holder in due course. As an HDC, Ms. Patel takes the note free from Mr. Rodriguez’s defense of fraud in the inducement. Therefore, Mr. Rodriguez is obligated to pay Ms. Patel the full amount of the note, which is $10,000.

The scenario involves a negotiable instrument that was altered. UCC Article 3, as adopted in Texas, addresses the effect of unauthorized alterations on negotiable instruments. Specifically, UCC § 3-407 governs the rights of a holder in due course (HDC) when an instrument has been materially and fraudulently altered. A material alteration is one that changes the contract of any party. A fraudulent alteration is one made with the intent to deceive. In this case, the principal amount of the note was increased from $10,000 to $15,000. This is a material alteration because it changes the obligation of the maker. Assuming the alteration was made by the payee, Ms. Anya Sharma, with the intent to deceive the maker, Mr. Ben Carter, then the instrument is considered fraudulently altered. Under UCC § 3-407(b), if an instrument is fraudulently altered, a holder who is not an HDC can enforce the instrument according to its original tenor. However, if the holder *is* an HDC, the effect is different. UCC § 3-407(c) states that if an instrument is fraudulently altered, an HDC can enforce the instrument according to its terms as altered. This means the HDC can collect the full amount as it appears after the alteration. The question asks about the rights of an HDC who takes the instrument *after* the alteration. Therefore, the HDC, Ms. Chloe Davis, can enforce the instrument for the altered amount of $15,000, provided she meets the requirements of being a holder in due course (taking for value, in good faith, and without notice of any defense or claim). The prompt implies she is an HDC. The original tenor of the note was $10,000. The altered tenor is $15,000. An HDC can enforce the instrument as altered.

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder. A negotiable instrument, to be taken by an HDC, must meet specific requirements, including being payable to bearer or order, being signed, containing an unconditional promise or order to pay a fixed amount of money, not stating any other undertaking or instruction, and being payable on demand or at a definite time. Furthermore, the instrument must be taken for value, in good faith, and without notice of any claim or defense. In this scenario, the promissory note is payable to “cash,” which makes it payable to bearer. It is signed by Elara, contains an unconditional promise to pay a fixed sum, and is payable on demand. The critical factor is whether Liam took the note in good faith and without notice of any defect or defense. Elara’s statement that she “had a feeling something wasn’t quite right” with the underlying transaction, coupled with the fact that Liam is a business associate of the original payee and the note was transferred shortly after its creation, raises questions about his good faith and notice. However, Texas law, specifically under UCC § 3-302, defines good faith as honesty in fact and the observance of reasonable commercial standards of fair dealing. Mere suspicion or a “feeling” is generally not sufficient to constitute notice of a defense or claim unless it rises to the level of knowledge or willful ignorance. Since the question states Liam had no actual knowledge of any defense or claim, and there’s no indication he deliberately avoided such knowledge, he would likely be considered an HDC. As an HDC, Liam takes the instrument free from most defenses, including personal defenses like breach of contract or fraud in the inducement, which Elara’s situation suggests. Real defenses, such as forgery or material alteration, would still be available, but Elara’s claim of a flawed underlying agreement is a personal defense. Therefore, Liam, as an HDC, can enforce the note against Elara. The amount Liam paid, $4,500 for a $5,000 note, is also not so disproportionate as to necessarily indicate a lack of good faith, especially given it was a demand note and the transfer was prompt. The Texas Business and Commerce Code § 3.302(a)(2) defines a holder in due course as a holder that takes the instrument: (1) for value; (2) in good faith; and (3) without notice of any claim to the instrument or that it is overdue or dishonored or of any defense or claim in recoupment of any party. The explanation confirms Liam meets these criteria under Texas law, allowing him to enforce the note.

The core issue here revolves around the concept of negotiability and the holder in due course (HDC) status under UCC Article 3, as adopted in Texas. A negotiable instrument must contain an unconditional promise or order to pay a fixed amount of money, payable on demand or at a definite time, to order or to bearer, and must not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money. In this scenario, the promissory note contains a clause stating that the maker agrees to pay the principal sum plus “any and all attorney’s fees and court costs incurred by the holder in connection with the enforcement of this note.” Under UCC § 3-104(a)(1), a negotiable instrument must be an unconditional promise to pay a fixed amount of money. While Texas law, specifically Texas Business and Commerce Code § 3.104(a)(1), has historically been interpreted to allow for the inclusion of attorney’s fees in a negotiable instrument without destroying its negotiability, this is contingent on the clause being a consequence of default and not a condition precedent to payment. The phrase “any and all attorney’s fees and court costs incurred by the holder in connection with the enforcement of this note” is a common stipulation for collection costs upon default. Such a clause, when tied to the enforcement of the note due to the maker’s failure to pay, is generally considered an ancillary obligation that does not render the promise to pay conditional for the purposes of negotiability. Therefore, the note, despite this clause, can still be considered negotiable. Furthermore, for a holder to attain HDC status, they must take the instrument (1) for value, (2) in good faith, and (3) without notice of any claim or defense against it. Assuming Ms. Anya purchased the note for value, in good faith, and without notice of any defenses the maker might have, she would qualify as an HDC. An HDC takes the instrument free from most defenses, including defenses of the maker against the original payee, such as breach of contract or failure of consideration. However, certain real defenses, like infancy, duress, illegality, or discharge in insolvency proceedings, can be asserted even against an HDC. The scenario does not suggest any such real defenses are present. Therefore, Ms. Anya, as an HDC, would be entitled to enforce the note against the maker for the full amount, including the stipulated attorney’s fees and court costs if she incurs them in enforcement, as these are part of the contractual obligation. The question asks about the enforceability of the note by Ms. Anya. Since the note is negotiable and she likely qualifies as an HDC, she can enforce it against the maker for the full amount due, including any reasonable attorney’s fees and court costs incurred in collection, as permitted by the note’s terms and Texas law.

The question revolves around the concept of a holder in due course (HDC) and the defenses available against payment of a negotiable instrument under Texas UCC Article 3. A party seeking to enforce an instrument as an HDC must take the instrument for value, in good faith, and without notice of any defense or claim. The scenario describes a situation where a promissory note was originally issued for a fraudulent purpose, which constitutes a real defense (fraud in the factum). A real defense is generally available against all holders, including an HDC. Personal defenses, such as breach of contract or lack of consideration, are generally not available against an HDC. In this case, the underlying transaction was fraudulent from its inception, meaning the maker was deceived about the nature of the instrument they were signing, which is fraud in the factum. This is a real defense that can be asserted even against a holder who otherwise qualifies as a holder in due course. Therefore, even though a holder took the note for value and in good faith, they are still subject to the real defense of fraud in the factum because the maker did not know they were signing a negotiable instrument, but rather believed it to be something else entirely. This is a fundamental principle in negotiable instruments law, distinguishing between real and personal defenses.

The scenario describes a promissory note where the maker, Silas, is obligated to pay a sum of money to the payee, Elara. The note contains a clause stating that if Silas defaults on any installment payment, the entire outstanding balance becomes immediately due and payable at Elara’s option. This type of clause is known as an acceleration clause. Under Texas Business and Commerce Code Section 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 will of the holder. However, the same section also specifies that an instrument may be payable on demand even if it contains a statement of acceleration. The key here is that the acceleration is triggered by a specific event of default (failure to pay an installment), and the holder has the option to declare the entire amount due. This does not make the instrument inherently payable on demand in the general sense that it is always due at the holder’s whim without a triggering event. Instead, it creates a condition that, upon occurrence and the holder’s election, makes the full amount due. Therefore, the note is not payable on demand for purposes of negotiability simply due to the acceleration clause. It is a time instrument that matures early upon the occurrence of the specified default and the holder’s election. The negotiability of the instrument is not destroyed by this clause, as it is a common and permissible feature of negotiable instruments under UCC Article 3, as adopted in Texas. The question asks about the *nature* of the payment obligation in relation to negotiability, and the acceleration clause, while impacting the timing of full payment upon default, does not render the instrument payable on demand in a way that would typically be considered to destroy its negotiability under Texas law. The note is a time instrument that can become due earlier than its stated final maturity date due to the acceleration clause.

The core concept here revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder under Texas law, specifically UCC Article 3. A negotiable instrument, such as a promissory note, can be transferred to an HDC who takes the instrument for value, in good faith, and without notice of any defense or claim. Once an instrument is held by an HDC, most personal defenses that would be available against the original payee are cut off. However, certain real defenses, such as infancy, duress, illegality of the transaction, or discharge in insolvency proceedings, can be asserted even against an HDC. In this scenario, the original maker, Ms. Anya Sharma, has a defense related to the fundamental illegality of the underlying transaction for which the note was given, which is a real defense. This real defense is generally not cut off by negotiation to an HDC. Therefore, even if Mr. Ben Carter qualifies as an HDC, Ms. Sharma can still assert the illegality of the gambling debt as a defense against enforcement of the note. The UCC, as adopted in Texas, classifies illegality as a real defense that can be asserted against any holder, including an HDC. The fact that the note was payable “on demand” and negotiated shortly after issuance does not alter the nature of this defense. The explanation focuses on the distinction between real and personal defenses and their enforceability against an HDC under Texas UCC Article 3.

The core issue here is whether a subsequent holder of the instrument can enforce it against the drawer, considering the drawer’s claim of a material alteration. Under Texas Business and Commerce Code Section 3.407, a holder in due course (HDC) can enforce an altered instrument according to its original tenor, or if the alteration was fraudulent and the holder is not an HDC, the instrument is discharged. However, the question specifies that the alteration was made by “a party with no right to enforce the instrument,” which is crucial. For a holder to be a holder in due course, they must take the instrument for value, in good faith, and without notice of any defense or claim, including a claim of alteration. If the holder had notice of the alteration before acquiring the instrument, they cannot be an HDC. The scenario implies the alteration occurred before negotiation to the current holder. If the holder is not an HDC, they are subject to the defense of material alteration. A material alteration is one that changes the contract of any party. Here, the increase in the principal amount from $5,000 to $15,000 is undoubtedly a material alteration. If the holder is not an HDC, they can only enforce the instrument according to its original tenor, which was $5,000. The question asks about the ability to enforce the instrument *as altered*. Since the alteration was material and made by someone other than the holder, and assuming the holder acquired it with knowledge of the alteration or it was apparent, the holder cannot enforce it as altered. If the holder acquired it without notice of the alteration and it was not apparent, they might be an HDC and could enforce it according to its original tenor. However, the question focuses on enforcement *as altered*. The drawer’s liability is limited to the original amount if the holder is not an HDC and had notice, or if the holder is not an HDC and the alteration was material. The question implies a scenario where the holder is not an HDC or had notice. Therefore, the holder can only enforce the instrument for the original amount.

The core issue revolves around the concept of “holder in due course” (HDC) and the defenses available against such a holder under UCC Article 3, as adopted in Texas. A party seeking to qualify as an HDC must take an instrument that is apparently complete and regular on its face, without notice of any claim or defense, for value, and in good faith. In this scenario, the promissory note was originally issued by Bexar Enterprises to “Cash” for an unspecified amount. The subsequent transfer to Amparo, who received it as collateral for a pre-existing debt owed by “Cash,” raises questions about whether Amparo took the instrument for value. Under Texas UCC § 3-303, taking an instrument as security for a pre-existing claim constitutes taking for value. However, Amparo’s knowledge of the underlying dispute between Bexar Enterprises and “Cash” regarding the note’s consideration is critical. If Amparo had notice of Bexar Enterprises’ defense (failure of consideration) at the time of taking the note, Amparo would not be a holder in due course. The question implies Amparo was aware of the potential issues surrounding the note’s origin, specifically the dispute over the promised services. Therefore, Amparo is likely subject to Bexar Enterprises’ defense of failure of consideration. The UCC categorizes defenses into real defenses (which can be asserted against any holder, including an HDC) and personal defenses (which cannot be asserted against an HDC). Failure of consideration is generally a personal defense. However, if the holder lacks HDC status due to notice, personal defenses become available. Since Amparo likely had notice of the defense, Bexar Enterprises can assert the failure of consideration. The note’s initial lack of a specific payee and the subsequent dispute over consideration prevent Amparo from being an HDC, thus allowing the defense.

The scenario involves a promissory note that is payable “on demand.” Under Texas Business and Commerce Code Section 3.302, 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 the instrument is overdue or that there is any defense or claim against it. In this case, the note is payable on demand. For an instrument payable on demand, it is considered overdue at the time it is issued or transferred if it is taken after the holder has had notice that the demand for payment has been made. Texas Business and Commerce Code Section 3.304(a)(2) states that a purchaser has notice that an instrument is overdue if the purchaser has notice that the time for payment of the instrument has passed. For demand instruments, this generally means the purchaser has notice that a demand for payment has been made. Without any indication that a demand for payment had been made prior to its transfer to the credit union, the credit union cannot be considered to have notice that the instrument was overdue. Therefore, the credit union, having acquired the note for value and in good faith, without notice of any defenses or claims, would be a holder in due course.

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses available against an HDC under UCC Article 3, as adopted in Texas. 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. Section 3.305 of the Texas Business and Commerce Code outlines the claims in recoupment and defenses that can be asserted against a holder, distinguishing between real defenses (which can be asserted against an HDC) and personal defenses (which generally cannot). Fraud in the factum, or 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, is a real defense. In this scenario, Mr. Henderson was tricked into signing the promissory note, believing it to be a different document entirely. This constitutes fraud in the factum because he lacked knowledge of the instrument’s true nature. Therefore, this real defense is effective against an HDC, even one who purchased the note for value and without notice of the fraud. The fact that Ms. Gable purchased the note for value and without notice of the fraud establishes her status as a holder in due course. However, her HDC status does not shield her from real defenses. Consequently, Mr. Henderson can assert the defense of fraud in the factum against Ms. Gable.

The scenario involves a negotiable instrument that was originally payable to “order” of a specific payee. The critical event is the endorsement by the original payee, followed by a subsequent endorsement that is phrased as “Pay to the order of [New Payee] only.” This latter endorsement, by including the word “only,” effectively restricts the negotiability of the instrument. Under Texas Business and Commerce Code Section 3-110(d), an instrument payable to an order is payable to the order of the person identified in the instrument. However, Section 3-206 addresses restrictive indorsements. While an indorsement “for deposit only” or “for collection” is a restrictive indorsement that does not prevent further negotiation, an indorsement that purports to transfer rights to a specified person but also states restrictions on the rights of the transferee, such as “pay to X only,” is generally considered to have the effect of a restrictive indorsement that may prevent further negotiation by the indorsee in due course. Specifically, Texas law, following the UCC, treats an indorsement that limits payment to a specific person as a form of restriction that alters the nature of the instrument’s transferability. Therefore, the instrument, after the “pay to the order of [New Payee] only” indorsement, is no longer freely negotiable by subsequent holders. It becomes effectively payable only to the named new payee, or their authorized representative, and any further negotiation would likely be subject to the restriction, potentially making subsequent transferees holders in due course only if they can demonstrate compliance with the restriction or if the restriction is deemed ineffective to prevent further negotiation under specific UCC exceptions not present here. The presence of “only” is key to this restriction.

The question revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder under Texas law, specifically as governed by UCC Article 3. A party seeking HDC status must acquire the instrument without notice of any defense or claim and in good faith for value. In this scenario, the promissory note was originally issued by Ms. Anya Sharma to “The Jazz Club” for the purchase of sound equipment. The Jazz Club subsequently endorsed the note in blank and it was stolen before it could be negotiated to a third party. Mr. Ben Carter found the stolen note and, without any knowledge of its theft or any claims against it, paid value for it and took possession. The critical issue is whether the theft of the instrument, which was endorsed in blank, constitutes a real defense that can be asserted against Mr. Carter, even if he otherwise qualifies as a holder in due course. Under UCC § 3-305(a)(1)(ii) and Texas Business and Commerce Code § 3.305(a)(1)(ii), a holder in due course takes the instrument free of defenses of any party to the instrument with whom the holder has not dealt, except for certain real defenses. Forgery and material alteration are typically real defenses. However, a theft of an instrument that was properly executed and then endorsed in blank does not generally render the instrument void ab initio or create a defense against a subsequent HDC who took it without notice of the theft. The thief’s possession was wrongful, but the subsequent negotiation to Carter, who acted in good faith and for value, without notice, cures the defect in title. The defense of “illegality of the transaction” is usually a personal defense, not a real defense, unless the illegality makes the instrument void. The defense of “discharge of which the holder has notice” is also not applicable here as Carter had no notice. The defense of “lack of capacity” is also not raised. Therefore, the theft itself, when the instrument was already endorsed in blank, does not prevent Carter from being a holder in due course against the maker, Ms. Sharma, and she cannot assert the theft as a defense. The defense that would be available to Ms. Sharma is if Mr. Carter had notice of the theft or if the instrument was never properly negotiated, but finding an instrument endorsed in blank and paying value for it constitutes proper negotiation. The most pertinent real defense that could be raised by Ms. Sharma against a holder in due course would be if the instrument itself was void, such as in cases of extreme fraud in the factum or forgery of her signature. Since the note was properly executed by Ms. Sharma and endorsed in blank by the Jazz Club, the theft of the instrument after endorsement in blank does not create a real defense for Ms. Sharma against a subsequent holder in due course like Mr. Carter. The correct answer is the assertion that Ms. Sharma cannot assert the theft as a defense against Mr. Carter.

The scenario describes a situation where a promissory note is transferred. The key legal principle here is the holder in due course (HDC) status and its effect on defenses. Under Texas Business and Commerce Code Section 3.305, 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. The defenses that are subject to the HDC’s rights are generally personal defenses, such as breach of contract, failure of consideration, or fraud in the inducement. Real defenses, which can be asserted even against an HDC, include issues like infancy, duress, illegality, and fraud in the factum (i.e., the maker did not know they were signing a negotiable instrument or did not understand its nature). In this case, the original maker, Ms. Anya Sharma, has a defense based on fraudulent misrepresentation regarding the nature of the transaction, which is fraud in the factum. This type of defense is a real defense. Therefore, even though Mr. Ben Carter is likely a holder in due course because he took the instrument for value, in good faith, and without notice of any claim or defense, his HDC status does not cut off this real defense. Consequently, Ms. Sharma can assert the fraud in the factum defense against Mr. Carter. The note’s status as a negotiable instrument is established by its unconditional promise to pay a fixed sum of money on demand or at a definite time, payable to order or bearer, and containing no other undertaking or instruction by the maker except as authorized by UCC Article 3. The transfer to Mr. Carter appears to be a negotiation, as it was made by endorsement and delivery, and he meets the requirements of taking for value, in good faith, and without notice. However, the nature of the defense is paramount in determining its enforceability against an HDC.

The scenario describes a promissory note that contains a clause allowing the maker to prepay the principal amount at any time, without penalty. Under Texas law, specifically UCC § 3-104, a negotiable instrument must contain an unconditional promise or order to pay a fixed amount of money. UCC § 3-104(a)(1) states that a negotiable instrument must contain an unconditional promise or order to pay. UCC § 3-104(f) defines a note as a promise that the maker of the note promises to pay. The right of prepayment is a common feature in commercial paper and does not, by itself, render the promise conditional. UCC § 3-104(a)(1) is satisfied because the promise to pay is not made subject to an external event or condition beyond the maker’s control; rather, it is an option granted to the maker. Therefore, the inclusion of a prepayment privilege does not destroy the negotiability of the note. The core requirement for negotiability is an unconditional promise to pay a fixed amount of money, and the ability to prepay does not alter the fundamental obligation to pay the specified sum, only the timing at the maker’s discretion.

The question revolves around the concept of a holder in due course (HDC) and the defenses available against them under UCC Article 3, as adopted in Texas. A party seeking to qualify as an HDC must take the instrument for value, in good faith, and without notice of any defense or claim. Here, the negotiable instrument is a promissory note. The critical element is whether the transferee, “SecureFinance Corp.,” had notice of the maker’s defense. The maker, Mr. Abernathy, claims a material alteration of the note after its execution, specifically the unauthorized increase of the principal amount from \(50,000\) to \(75,000\). This constitutes a real defense under UCC § 3-305(a)(2) (formerly § 3-305(2)(d)). A holder in due course generally takes the instrument free from all defenses except those specifically enumerated as real defenses. Material alteration is one such real defense. However, for SecureFinance Corp. to be an HDC, it must have acquired the note without notice of this defense. The scenario states that SecureFinance Corp. purchased the note from the original payee, “Reliable Lending Inc.,” and at the time of purchase, SecureFinance Corp. had actual knowledge that the note had been materially altered, as evidenced by its internal memo documenting the discrepancy. This actual knowledge prevents SecureFinance Corp. from being a holder in due course. Therefore, Mr. Abernathy can assert the real defense of material alteration against SecureFinance Corp. The question asks what claim SecureFinance Corp. can enforce against Mr. Abernathy. Since SecureFinance Corp. is not an HDC, it takes the instrument subject to Mr. Abernathy’s defenses. Specifically, regarding the altered amount, Mr. Abernathy is only liable for the original amount of the note, which was \(50,000\), because the alteration was material and he did not assent to it. The UCC § 3-407(b) states that if an instrument is materially altered, the alteration can be enforced according to its original terms by a holder in due course. However, since SecureFinance Corp. is not an HDC, it cannot enforce the altered amount. It can only enforce the note according to its original terms, which is \(50,000\).

The question concerns the enforceability of a promissory note with a conditional promise. Under Texas law, specifically UCC § 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 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 condition. In this scenario, the note explicitly states that payment is contingent upon the satisfactory completion of the construction project, which is an external condition. This conditionality renders the promise to pay not unconditional. Therefore, the instrument fails to meet the requirements of a negotiable instrument under UCC Article 3, and as such, it cannot be enforced as a negotiable instrument against subsequent holders in due course or even by the original payee if the condition is not met. The fact that the note specifies a due date and is signed by the maker are necessary but not sufficient conditions for negotiability when an unconditional promise is absent. The correct classification is that it is not a negotiable instrument.

The scenario involves a promissory note that contains a clause allowing the maker to prepay the principal amount without penalty, but only if the prepayment is made “from the proceeds of the sale of the maker’s primary residence.” This is a form of conditional promise. Under Texas law, specifically as reflected in UCC Article 3, a negotiable instrument must contain an unconditional promise or order to pay a fixed amount of money. While a promise to pay is generally unconditional, it can become conditional if it states an obligation to do any act in addition to the payment of money. The UCC § 3-104(a)(1) definition of a negotiable instrument requires an unconditional promise. Texas Business and Commerce Code § 3-104(a)(1) mirrors this, stating that a “draft” or “note” is a negotiable instrument if it is an unconditional promise or order to pay. Section 3-106(a) clarifies that a promise is unconditional unless it states an obligation to do any act in addition to the payment of money. However, Section 3-106(b)(1) provides an exception, stating that a promise is not made conditional by the fact that it is subject to a statement of fact or refers to a separate agreement for rights as to recourse or collateral. More importantly, Section 3-106(b)(2) states that a promise is not made conditional by the fact that it is subject to a prepayment, acceleration, or cancellation if the prepayment, acceleration, or cancellation is at the option of the maker, or is at the option of the holder and is limited to a definite time or the occurrence of a specified event. In this case, the prepayment is at the option of the maker, but it is conditioned on a specific event: the proceeds from the sale of the maker’s primary residence. This specific condition, tied to a particular event outside the maker’s absolute control and not merely an option to pay early, renders the promise conditional. The instrument is therefore not negotiable because the promise to pay is contingent upon the occurrence of a specific event (sale of the primary residence) and is not merely an optional prepayment. The negotiability of an instrument hinges on the certainty of the promise to pay. The inclusion of this specific contingency, even though it’s at the maker’s discretion to initiate, makes the payment obligation dependent on an external event, thereby failing the unconditional promise requirement for negotiability under UCC Article 3 as adopted in Texas.

The scenario involves a negotiable instrument, specifically a promissory note, that has been altered. Under Texas Business and Commerce Code Section 3.407, a holder in due course is subject to defenses, but a holder in due course can enforce the instrument according to its original tenor if the instrument has been materially altered. A material alteration is one that changes the contract of any party to the instrument. In this case, the payee’s name was changed from “Acme Corp.” to “Acme Corp. and Associates.” This alteration changes the identity of the payee, which is a material alteration. However, the question specifies that the alteration was made by a party *other than* a holder in due course and *without* the assent of the party whose obligation is affected. The original maker, Mr. Henderson, is not liable on the altered instrument according to its altered terms. He is only liable according to its original tenor, which was \( \$10,000 \). The holder in due course, Ms. Albright, can enforce the note against Mr. Henderson for the original amount of \( \$10,000 \). She cannot enforce it for the altered amount of \( \$15,000 \). Therefore, Ms. Albright can enforce the note against Mr. Henderson for the original tenor, which is \( \$10,000 \).

Under Texas law, specifically UCC Article 3, a holder in due course (HDC) takes an instrument free from most defenses and claims that a prior party could assert against the original payee. To qualify as an HDC, a person must take an instrument that is (1) negotiable, (2) signed by the maker or drawer, (3) a draft or note, (4) for value, (5) in good faith, and (6) without notice that the instrument is overdue or dishonored or that there is a defense or claim against it. In this scenario, Amelia purchased the note from Brenda. The note itself is a negotiable instrument as it is a written promise to pay a fixed amount of money on demand. Amelia paid value for the note by giving Brenda $8,500, which is less than its face value but still constitutes value. The crucial element is whether Amelia took the note in good faith and without notice of any defenses. The fact that Brenda was a known collector of distressed debt and Amelia was aware of Brenda’s business practices, which might involve acquiring notes at a discount due to underlying issues, raises a question about Amelia’s good faith and notice. However, simply knowing Brenda acquires distressed debt does not automatically impute notice of a specific defense to Amelia regarding this particular note. Unless Amelia had actual knowledge, reason to know, or knowledge of facts that would lead a reasonable person in her position to inquire further about potential defenses (like a breach of contract between the original parties), she can still be considered to have taken without notice. The prompt states Amelia had no actual knowledge of any defect or defense. Therefore, assuming no other facts suggest otherwise, Amelia meets the requirements of a holder in due course. As an HDC, Amelia takes the note free from the defense of failure of consideration that the maker, Carlos, might have against Brenda.

The scenario involves a negotiable instrument, specifically a promissory note, that has been transferred. The core issue is determining the rights of the transferee, Elara, against the maker, Finn. Under Texas Business and Commerce Code, Article 3, the rights of a holder in due course (HDC) are paramount. To qualify as an HDC, Elara must have taken the instrument for value, in good faith, and without notice of any claim or defense. The note was for $10,000 and was transferred by endorsement. Finn, the maker, has a defense of fraud in the inducement, which is a personal defense. Personal defenses are generally cut off against an HDC. Elara paid $9,500 for the note, which constitutes value. There is no indication that Elara acted in bad faith or had notice of Finn’s defense at the time of taking the note. Therefore, Elara likely qualifies as an HDC. As an HDC, Elara takes the instrument free from all defenses of any party to the instrument with whom the holder has not dealt except for real defenses. Fraud in the inducement is a personal defense, not a real defense. Real defenses, such as infancy, duress, or material alteration, would still be available against an HDC. Since Finn’s defense is fraud in the inducement, and Elara is likely an HDC, Finn cannot assert this defense against Elara. Thus, Finn is obligated to pay the full amount of the note to Elara. The amount Elara paid for the note ($9,500) does not limit her recovery; an HDC can recover the full face amount of the instrument.

The scenario involves a promissory note that was originally payable to “Bearer” and was subsequently endorsed in blank by the original payee, Mr. Alistair Finch. A promissory note payable to order or bearer becomes payable to bearer if it is endorsed in blank. Texas Business and Commerce Code Section 3.109(a)(2) states that an instrument is payable to bearer if it is payable to “cash,” “cashier’s check,” or other indicated to the order of bearer, or to a fictitious person or to any other entity not possessing the capacity to sue. Section 3.205(b) further clarifies that an endorsement in blank specifies no particular endorsee and makes the instrument payable to bearer. Therefore, after Mr. Finch’s blank endorsement, the note became a bearer instrument. A holder of a bearer instrument is entitled to payment upon its possession, regardless of whether they are the rightful owner, unless the holder is a thief or the instrument is otherwise improperly in their possession, which is not indicated here. Ms. Clara Bell, as the current possessor of the note endorsed in blank, is a holder. The maker of the note, Ms. Beatrice Gable, is obligated to pay the holder in due course or any holder entitled to enforce the instrument. Since the note is now a bearer instrument due to the blank endorsement, possession is sufficient to establish entitlement to payment.

The core issue revolves around the enforceability of a promissory note that contains a clause allowing the holder to accelerate the entire balance upon any default, even a minor one. Under Texas Business and Commerce Code Section 3.104, a negotiable instrument must contain an unconditional promise to pay a fixed amount of money. While acceleration clauses are generally permissible and do not destroy negotiability, the specific wording of the clause is critical. If the acceleration is triggered by a condition that is not solely related to the passage of time or the happening of a specified event, it might render the promise conditional. However, acceleration upon “any default” is a common and generally accepted form of acceleration that does not make the promise to pay conditional in a way that destroys negotiability. The Texas UCC, like the Uniform Commercial Code, permits acceleration at the will of the holder or upon the occurrence of a contingency. The key is that the acceleration is tied to the debtor’s obligation to pay. Therefore, a note promising to pay a fixed sum on a date certain, but allowing acceleration of the entire unpaid balance upon any default by the maker, remains a negotiable instrument. The obligation to pay is fixed at the time of issuance; the acceleration merely changes the timing of that payment. This is distinct from a promise to pay if certain conditions are met, which would render the instrument non-negotiable. The question tests the understanding of what constitutes an “unconditional promise” in the context of acceleration clauses under UCC Article 3, as adopted in Texas. The presence of a clause allowing acceleration upon any default does not make the promise conditional in a manner that defeats negotiability.

In Texas, under UCC Article 3, a holder in due course (HDC) takes an instrument free from most defenses that a party to the instrument might have against the original payee. However, certain real defenses are always available against any holder, including an HDC. These real defenses are specifically enumerated in UCC § 3-305(a)(1) and include issues such as infancy, duress, illegality of the transaction, and fraud in the factum. Fraud in the factum occurs when a party is induced to sign an instrument without knowing its character or essential terms, believing it to be something else entirely. Conversely, fraud in the inducement, where a party is persuaded to sign an instrument based on false representations about the underlying transaction, is a personal defense and is cut off by an HDC. In this scenario, the misrepresentation was about the value and quality of the antique furniture, which pertains to the inducement to enter the contract, not the nature of the instrument itself. Therefore, the purported buyer’s defense is fraud in the inducement, which is a personal defense. Since the promissory note was properly negotiated to an HDC, the HDC takes the note free from this personal defense.

The scenario involves a negotiable instrument, specifically a promissory note, that has been transferred. The core issue is determining the rights of the holder, particularly concerning defenses against payment. The note was originally made by Elara to Finn. Finn then indorsed the note in blank and delivered it to Greta. Subsequently, Greta, who was aware that Elara had a valid defense against Finn (breach of contract), negotiated the note to Hugo by special indorsement. Hugo, however, did not have knowledge of Elara’s defense against Finn when he took the note. Under Texas UCC Article 3, a holder in due course (HDC) takes an instrument free from most defenses, including personal defenses like breach of contract. 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 of any defense or claim against it. In this case, Hugo took the note for value (implied by negotiation). He took it without notice of any overdue status or dishonor. Crucially, Hugo also took the note without notice of Elara’s defense against Finn. Even though Greta knew about the defense, her knowledge is not imputed to Hugo unless he acquired the instrument from Greta in a manner that would make him a successor in interest to her rights, which is not the case here; he acquired it through a separate negotiation. The fact that Greta knew of the defense is irrelevant to Hugo’s HDC status. Therefore, Hugo, having met the requirements of value, good faith, and lack of notice, is a holder in due course. As an HDC, Hugo takes the note free from Elara’s personal defense of breach of contract against Finn. This means Elara cannot assert that defense against Hugo.

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder. Under Texas Business and Commerce Code § 3.305, a holder in due course takes an instrument free from all defenses except for certain real defenses. Among these real defenses is fraud in the factum, which occurs when a party is induced to sign an instrument without knowledge or reasonable opportunity to learn of its character or essential terms. This is distinct from fraud in the inducement, where a party knows what they are signing but is misled about the underlying transaction. In this scenario, Ms. Albright was presented with a document she believed to be a rental agreement but was, in fact, a promissory note. She did not know she was signing a negotiable instrument and had no reasonable opportunity to discover its true nature. Therefore, fraud in the factum is a real defense that can be asserted against any holder, including an HDC. The UCC distinguishes between real defenses, which can be asserted against all holders, and personal defenses, which cannot be asserted against an HDC. Fraud in the factum is a real defense. The question asks about defenses available against an HDC. Since Ms. Albright was deceived about the very nature of the document she signed, this constitutes fraud in the factum, a real defense that defeats the claim of an HDC.

The core issue revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder. Under Texas Business and Commerce Code § 3.305, a holder in due course takes an instrument free of most defenses and claims. However, certain real defenses, such as infancy, duress, illegality, and discharge in insolvency proceedings, can be asserted even against an HDC. The scenario describes a promissory note where the maker, Mr. Abernathy, claims he was induced to sign by fraudulent misrepresentation concerning the note’s purpose. This type of fraud, known as fraud in the inducement, is generally a personal defense and is cut off by a holder in due course. Fraud in the factum, where the maker is deceived about the nature of the instrument itself, is a real defense. Since Mr. Abernathy understood he was signing a promissory note, even if the underlying reason was misrepresented, it constitutes fraud in the inducement. Therefore, a holder in due course, such as the bank in this case, would take the note free of this defense. The bank, having acquired the note for value, in good faith, and without notice of any defense, qualifies as an HDC. Consequently, the bank can enforce the note against Mr. Abernathy, notwithstanding the fraudulent inducement. The UCC’s policy is to promote the free negotiability of commercial paper, and allowing fraud in the inducement to be a defense against an HDC would undermine this objective.

The scenario involves a promissory note that contains an acceleration clause and a provision for attorney’s fees upon default. Under Texas Business & Commerce Code, specifically Article 3 of the Uniform Commercial Code (UCC), a negotiable instrument must contain an unconditional promise to pay a fixed amount of money. An acceleration clause, which allows the holder to demand payment of the entire amount due upon a specified event (like default), does not render the promise conditional because the principal amount is fixed and the acceleration is triggered by a specific event, not an external contingency. Similarly, a provision for attorney’s fees upon default is generally considered a permissible additional term that does not destroy negotiability. These provisions relate to the consequences of default rather than the initial promise to pay. Therefore, the note, despite these clauses, still meets the requirements for negotiability under Texas law, provided other conditions like being in writing, signed by the maker, and payable on demand or at a definite time, are met. The question asks about the negotiability of the instrument, and the presence of these clauses does not prevent it from being a negotiable instrument.

The core issue here is whether the instrument qualifies as a negotiable instrument under UCC Article 3, specifically focusing on the “unconditional promise or order” requirement. For an instrument to be negotiable, the promise or order to pay must not be subject to any undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money. In this scenario, the promissory note states that payment is “subject to the satisfactory completion of the construction project as certified by the engineer.” This conditionality means that payment is contingent upon an external event (satisfactory completion and certification), which directly violates the unconditional requirement of UCC § 3-104(a)(1). The reference to a specific project and the need for certification by a third party introduces an external condition that makes the promise conditional. Therefore, the instrument is not a negotiable instrument. This lack of negotiability means that it cannot be transferred by endorsement and delivery in a way that would grant a holder in due course status under Article 3. The UCC’s definition of a negotiable instrument is strict to ensure free negotiability in commerce. Any clause that makes payment dependent on an external event or a collateral agreement typically destroys negotiability. The Texas Business and Commerce Code, adopting UCC Article 3, adheres to these principles.