Under Washington’s Uniform Commercial Code (UCC) Article 3, a holder in due course (HDC) takes an instrument free from most defenses and claims that a prior party might have against the instrument. To achieve HDC status, a person must take the instrument for value, in good faith, and without notice of any claim or defense. The scenario involves a promissory note originally issued by Alistair Finch to Bella Corp. for the purchase of specialized industrial equipment. Bella Corp. negotiated the note to Caspian Bank. Prior to this negotiation, Alistair Finch discovered that the equipment was fundamentally defective and did not meet the contractual specifications, providing him with a defense against payment to Bella Corp. This defense is a real defense, specifically a defense of failure of consideration, which is generally available against a holder not in due course. Caspian Bank, however, took the note for value (as it likely purchased the note from Bella Corp. at a discount) and in good faith. The critical question is whether Caspian Bank had notice of Alistair’s defense. If Caspian Bank had no notice of the defect or the dispute between Alistair and Bella Corp. at the time it acquired the note, it would be considered a holder in due course. The fact that the note was for specialized industrial equipment, while potentially raising questions about due diligence for a sophisticated financial institution, does not inherently constitute notice of a defense under UCC § 3-302. Unless there is evidence that Caspian Bank knew or had reason to know of the equipment’s defects or Alistair’s dispute with Bella Corp., it would likely qualify as a holder in due course. Therefore, Caspian Bank would take the note free from Alistair’s defense of failure of consideration. The concept of shelter, where a holder who derives title from an HDC can also be an HDC, is not directly applicable here as the question focuses on Caspian Bank’s status. The UCC § 3-305 outlines the defenses available against a holder in due course, and failure of consideration is generally not a defense against an HDC.

Under Washington’s Uniform Commercial Code (UCC) Article 3, a negotiable instrument is a promise or order to pay a fixed amount of money, if it is payable to bearer or to order at the time it is issued or first possessed by a holder, if it is payable on demand or at a definite time, and if it is not an express undertaking to do any act in addition to the payment of money. An instrument that is payable to a specific person and does not contain words of negotiability, such as “or order” or “or bearer,” is generally not negotiable. Such an instrument may be transferable by assignment, but it does not possess the characteristics of a negotiable instrument under UCC Article 3, which are designed to facilitate the free circulation of commercial paper. The absence of “or order” or “or bearer” is a critical defect that prevents the instrument from being a negotiable instrument. Washington law, consistent with the UCC, requires these specific phrases to ensure that the instrument is payable to anyone who becomes its lawful holder, thereby promoting its negotiability. If an instrument is not negotiable, it cannot be enforced by a holder in due course, and defenses that would be cut off against such a holder remain available against an assignee. Therefore, the phrasing “Payable to Amelia Reyes” without further indication of negotiability renders the instrument non-negotiable.

The scenario describes a negotiable instrument, specifically a promissory note, that has been transferred. The core issue is whether the transferee, Ms. Anya Sharma, is a holder in due course (HDC) under Washington’s Uniform Commercial Code (UCC) Article 3. To be an HDC, a holder must take the instrument for value, in good faith, and without notice of any defense or claim against it. In this case, Ms. Sharma took the note as a gift, meaning she did not give value. UCC § 3-303(a) defines “value” for purposes of taking an instrument. A donee, or recipient of a gift, does not provide value. Therefore, Ms. Sharma cannot be a holder in due course. If she is not an HDC, she takes the note subject to all defenses and claims that would be available in an action on the simple contract, including the maker’s defense of lack of consideration. Since Ms. Sharma is not an HDC, the maker’s defense of lack of consideration is effective against her. Consequently, the maker is not obligated to pay the note to Ms. Sharma.

The scenario involves a promissory note that was transferred by endorsement and delivery. The key issue is whether the transferee, a bank, qualifies as a holder in due course (HDC) under Article 3 of the Uniform Commercial Code (UCC), as adopted in Washington. For a transferee to be an HDC, the instrument must be negotiable, taken for value, in good faith, and without notice of any defense or claim. The note itself appears to meet the requirements of a negotiable instrument: it is a signed writing, promises to pay a fixed amount of money, payable on demand or at a definite time, and payable to order. The bank took the note for value by giving credit for the deposit of the note, which constitutes value under UCC § 3-303(a)(1) as it is performance of the promise for which the instrument was transferred. The bank also acted in good faith, as there is no indication of dishonesty or a lack of honest belief in the validity of the transaction. Crucially, the bank had no notice of any defenses or claims against the note. The fact that the original payee, “Melody Makers Inc.,” was later found to have engaged in fraudulent practices does not, by itself, impart notice to the bank at the time of the transfer. The knowledge of the fraud is acquired after the bank took possession of the note. Therefore, the bank qualifies as a holder in due course. As an HDC, the bank takes the instrument free from all defenses of any party to the instrument with whom the holder has not dealt, except for certain real defenses like forgery or material alteration, none of which are present here. The defense of fraud in the inducement, which is typically a personal defense, is cut off by the HDC status. The bank can enforce the note against the maker, Mr. Abernathy, despite Melody Makers Inc.’s fraud.

The core issue here revolves around the concept of negotiability and the effect of a restrictive endorsement on a negotiable instrument. Under Washington’s UCC Article 3, specifically concerning endorsements, a restrictive endorsement generally puts a subsequent holder on notice of the endorser’s rights or claims. An endorsement “for deposit only” is a classic example of a restrictive endorsement. When a check is endorsed “Pay to the order of First National Bank, for deposit only, to the account of Anya Sharma,” this endorsement limits the bank’s ability to transfer the instrument to anyone other than itself for the purpose of depositing it into Anya Sharma’s account. If the bank then attempts to cash this check for a third party, it is acting contrary to the restriction. The UCC provides that a person who takes an instrument with notice of a restrictive endorsement cannot be a holder in due course (HDC) with respect to that restriction. Therefore, the bank, by attempting to cash the check for a third party, is not acting as a holder in due course and is subject to any defenses or claims Anya Sharma might have against the original payee or any prior endorser. The UCC does not permit a restrictive endorsement to be disregarded by a subsequent holder, especially when the restriction is clear and unambiguous. The bank’s action of cashing the check for a third party, rather than depositing it, constitutes a breach of the restrictive endorsement’s terms, and the bank would be liable for conversion or wrongful payment. The initial payee’s instruction to deposit into Anya Sharma’s account is a valid restriction that binds subsequent holders.

The scenario involves a promissory note that contains an acceleration clause. An acceleration clause allows the holder of the note to demand immediate payment of the entire outstanding balance upon the occurrence of a specified event, such as a default in payment. In Washington, as governed by UCC Article 3, such a clause does not render the instrument non-negotiable. The key to negotiability under UCC § 3-104 is that the instrument must contain an unconditional promise to pay a fixed amount of money, payable on demand or at a definite time, and payable to order or to bearer. An acceleration clause, by its nature, does not alter the fundamental promise to pay a fixed sum; it merely affects the timing of when that payment can be demanded. The UCC specifically addresses clauses that affect payment timing. Under UCC § 3-108(b), an instrument is payable at a definite time if it is payable on stated installments or at a definite time. An acceleration clause does not make the time indefinite in a way that destroys negotiability. Instead, it provides a mechanism for changing the due date under certain conditions. The presence of an acceleration clause does not introduce contingencies that make the amount payable uncertain or the payment date indefinite for the purpose of determining negotiability. Therefore, a note with an acceleration clause can still be a negotiable instrument under Washington law, provided all other requirements of UCC Article 3 are met.

The core issue revolves around the proper presentment of a negotiable instrument and the consequences of failing to present it to the correct party under Washington’s UCC Article 3. When a promissory note is made payable to a specific individual, Elara Vance, and then indorsed in blank by her, it becomes payable to bearer. However, the subsequent special indorsement by Finn Abernathy to “Pacific Bank” converts it back to a specially indorsed instrument. For Pacific Bank to enforce the instrument against the maker, it must present the instrument for payment. Under Washington Revised Code (RCW) 62A.3-501(a), presentment is required to charge the drawer or indorser of a draft, but not the maker of a note. However, to charge the maker of a note, presentment is not strictly required for liability but is necessary to trigger the accrual of interest and the right to collect attorney’s fees and costs if specified in the note, as per RCW 62A.3-118(d). The question implies a scenario where Pacific Bank seeks to recover from the maker, Mr. Silas Croft, who has a defense. While the note is payable to bearer after Elara’s blank indorsement, Finn’s special indorsement to Pacific Bank means Pacific Bank is the holder entitled to enforce it. If the note specifies that interest and attorney’s fees are payable, and presentment is made to the maker, Silas Croft, at his place of business in Seattle, Washington, and he fails to pay, then interest and attorney’s fees would accrue from the date of presentment. If presentment is not made, Silas Croft would still be liable for the principal amount of the note, but the accrual of interest and the right to collect attorney’s fees and costs would not be triggered by the failure to pay upon presentment. The question asks what Pacific Bank can enforce against Silas Croft if it presents the note to him at his place of business in Seattle, Washington, and he refuses to pay. Silas Croft, as the maker, is primarily liable. The UCC generally allows for recovery of the principal amount, and if the instrument provides for it, interest and attorney’s fees upon dishonor. Presentment to the maker is the act that establishes dishonor for the purpose of triggering these additional remedies. Therefore, Pacific Bank can enforce the principal amount, plus any specified interest and attorney’s fees, assuming these are included in the note’s terms and the refusal to pay upon proper presentment constitutes dishonor. The calculation is not numerical but conceptual: Principal Amount + Specified Interest + Specified Attorney’s Fees = Enforceable Amount upon Dishonor after Presentment.

The core issue revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder under Washington’s UCC Article 3. A negotiable instrument is transferred to a holder in due course if it is transferred for value, in good faith, and without notice of any claim or defense. In this scenario, the promissory note is transferred by endorsement and delivery. The initial transaction between Ms. Anya Sharma and Mr. Ben Carter involved a fraud in the inducement, which is a personal defense. Personal defenses are generally cut off when an instrument is held by an HDC. However, the question states that the note was transferred after its stated maturity date. According to Revised Article 3 of the Uniform Commercial Code, as adopted in Washington, a transferee who takes an instrument after its due date is generally not a holder in due course. Specifically, Revised UCC § 3-302(a)(2) states that an instrument is overdue if it is taken after the date on which payment is due. If an instrument is overdue, the transferee takes it with notice of the overdue status, which prevents them from qualifying as a holder in due course, even if they otherwise meet the criteria of taking for value and in good faith. Consequently, the transferee in this case would be subject to all the defenses that were available against the original payee, Ms. Sharma, including the defense of fraud in the inducement. Therefore, the transferee cannot enforce the note against Mr. Carter, as the defense of fraud in the inducement remains.

The core issue here is whether a holder in due course status can be established under Washington’s UCC Article 3 when a negotiable instrument contains a reference to a separate agreement that imposes additional obligations on the maker. Under UCC § 3-106(a), an instrument is payable in a fixed amount of money if it does not state “any other undertaking or instruction by the person promising payment to do any act in addition to the payment of money.” A reference to another writing that merely states the rights or obligations of the maker or drawer with respect to collateral, or acceleration clauses, does not affect negotiability. However, if the reference creates an obligation or condition on the promise to pay, it can render the instrument non-negotiable. In this scenario, the promissory note explicitly states it is subject to the terms of a separate “Service Level Agreement” which dictates the conditions under which payment can be withheld or adjusted. This creates a condition precedent or an external obligation directly tied to the payment itself, rather than a mere recital of the transaction or rights related to collateral. Therefore, the note is not for a fixed amount payable in money because the payment obligation is contingent upon the performance and terms outlined in the Service Level Agreement. Consequently, the holder cannot be a holder in due course because the instrument itself is not negotiable under UCC § 3-104(a). A holder in due course requires the instrument to be negotiable.

The core concept tested here is the holder in due course (HDC) status and its implications regarding defenses against payment on a negotiable instrument, specifically in the context of Washington’s adoption of UCC Article 3. For a party to qualify as a holder in due course, they must take the instrument for value, in good faith, and without notice that it is overdue or has been dishonored or that there is a defense or claim to it. In this scenario, the initial negotiation of the note from Ms. Anya Sharma to Mr. Ben Carter for a pre-existing debt constitutes taking for “value” under UCC § 3-303(a)(2). However, the critical element for HDC status is the absence of notice. Mr. Carter’s awareness of the ongoing dispute between Ms. Sharma and the manufacturer regarding the defective goods, which directly relates to the underlying obligation for which the note was given, constitutes notice of a defense. UCC § 3-302(a)(1) defines a holder in due course as a holder that takes the instrument under the rules stated in § 3-303. UCC § 3-302(a)(2) states that a holder does not become a holder in due course if the instrument is taken with notice of any defense or claim. Mr. Carter’s knowledge of the dispute means he had notice of a potential defense (failure of consideration or breach of warranty) that Ms. Sharma might raise against the manufacturer. Therefore, he cannot be a holder in due course. As a result, he takes the instrument subject to all defenses available against the original payee (the manufacturer), including the defense of breach of warranty concerning the goods.

The scenario involves a promissory note that contains a clause allowing for acceleration of the due date upon the occurrence of certain events, specifically a material adverse change in the financial condition of the maker, Mr. Silas Croft. Under Washington’s Uniform Commercial Code (UCC) Article 3, specifically concerning negotiable instruments, the presence of such an acceleration clause does not inherently destroy negotiability, provided it is not contingent upon an event that is uncertain or subject to the will of the maker. UCC § 3-108(b)(2) explicitly states that a promise to pay is not made uncertain by a term that accelerates payment upon a condition, provided the condition is not within the control of the obligor or is an event that is generally expected to occur. A “material adverse change” in financial condition is a common contractual term, but its interpretation can be subjective. However, the UCC generally permits such clauses as they relate to the obligor’s ability to perform or the creditor’s risk. The key is whether the acceleration is triggered by an event that is objectively determinable or a standard that, while potentially subjective in its application, is a recognized commercial practice for assessing risk. In this case, the acceleration is tied to the maker’s financial health, which is a factor directly related to the risk of non-payment. Therefore, the note can still be a negotiable instrument. The UCC prioritizes certainty of payment, and while subjective interpretation of “material adverse change” might lead to disputes, it does not, by itself, render the instrument non-negotiable under Article 3. The negotiability is preserved because the acceleration is triggered by a condition related to the maker’s financial status, which is a common and accepted basis for adjusting payment terms in commercial transactions.

The core issue here is whether the endorsement by Kaito, an individual who is not a party to the original instrument, can operate as a negotiation under UCC Article 3 as adopted in Washington. UCC § 3-204 defines a “special indorsement” as one that identifies the person to whom it makes the instrument payable, and an “unqualified indorsement” means that the indorser has no liability beyond what is imposed by the instrument itself. When an instrument is payable to order, it requires the indorsement of the payee. If an instrument is payable to bearer, it can be negotiated by delivery alone. However, in this scenario, the promissory note is explicitly payable to the order of “Amelia Chen.” Kaito, not being Amelia Chen, cannot effect a negotiation by merely writing “Pay to the order of ‘The Rockers’ Kaito” on the back. UCC § 3-201(b) states that if an instrument is payable to an identified person, it may be issued, transferred, or indorsed to that identified person. An instrument that is payable to an identified person cannot be negotiated except by the indorsement of the identified person. Kaito’s endorsement, even if it specifies a payee, is not the indorsement of the original payee (Amelia Chen). Therefore, the transfer to “The Rockers” is not a negotiation that vests “The Rockers” with the rights of a holder in due course or even a holder. Instead, it is likely a mere assignment of the underlying contract rights, or at best, a transfer of possession without negotiation. The instrument remains payable to Amelia Chen, and only her endorsement, or an endorsement in her name by an authorized representative, would constitute a negotiation. Kaito’s endorsement, lacking authority or being the endorsement of the named payee, is insufficient to negotiate the instrument.

The scenario describes a negotiable instrument that has been materially altered. Under Washington’s Uniform Commercial Code (UCC) Article 3, specifically RCW 62A.3-407, a holder in due course (HDC) can enforce an altered instrument according to its original tenor if the alteration was not fraudulent. However, if the alteration was fraudulent, the instrument is discharged as to any party whose contract was not continued. A fraudulent material alteration is one made with the intent to deceive and change the obligation of a party. In this case, the alteration of the payee’s name from “Riverbend Construction” to “Riverbend Properties” and the increase in the amount from \$5,000 to \$15,000 are material. The key question is whether the alteration was fraudulent. Without evidence of intent to deceive or defraud on the part of the holder who made the alteration, it is presumed not to be fraudulent. Therefore, the HDC can enforce the instrument according to its original tenor, which means for the original amount of \$5,000, payable to the original payee, “Riverbend Construction.” The alteration is a defense against payment of the altered amount or to a different payee, but an HDC can still recover the original amount if the alteration was not fraudulent. The question asks about the enforceability against the drawer, and under RCW 62A.3-407(b), a holder in due course can enforce the instrument according to its original tenor even if it has been materially and fraudulently altered. However, the question implies the alteration was made by a party to the instrument, and we must consider the impact of the alteration on the drawer’s liability. If the alteration was fraudulent, the drawer’s obligation is discharged. If not fraudulent, the drawer is still liable for the original tenor. The most nuanced aspect is when the alteration is material but not fraudulent. In such a case, the instrument can be enforced according to its original tenor. The scenario does not provide evidence of fraud, so the default is that it is not fraudulent. Therefore, the HDC can enforce it for the original amount.

The scenario involves a promissory note that was originally made payable to “Cash” and then indorsed in blank by the maker before delivery to a subsequent holder, Ms. Anya Sharma. A holder in due course (HDC) status requires taking the instrument for value, in good faith, and without notice of any claim or defense. In Washington, as governed by UCC Article 3, an instrument payable to bearer is negotiated by delivery. When an instrument is indorsed in blank, it becomes payable to bearer. Ms. Sharma took possession of the note after it was indorsed in blank by the maker. To qualify as an HDC, she must demonstrate that she took the note for value, in good faith, and without notice of any defense or claim. The question asks about the potential defenses available against Ms. Sharma. Under UCC § 3-305, an HDC takes the instrument free from all defenses of any party to the instrument with whom the holder has not dealt, except for certain real defenses. Real defenses are those that can be asserted against anyone, including an HDC. Examples of real defenses include infancy, duress, illegality of the type that voids the obligation, and fraud in the execution. Personal defenses, such as breach of contract, failure of consideration, or fraud in the inducement, are generally cut off by an HDC. In this case, the maker’s defense is that the note was issued as part of a fraudulent scheme to induce the maker into a fictitious investment. This type of fraud, where the maker is induced to sign the instrument by a misrepresentation of its character or essential terms, constitutes fraud in the execution, which is a real defense. Therefore, this defense can be asserted against Ms. Sharma, even if she is an HDC.

The scenario involves a promissory note that contains an acceleration clause and a statement of collateral. Under Washington’s UCC Article 3, a promise to pay is for a fixed amount of money even if it is payable in installments or subject to acceleration. The presence of an acceleration clause, which allows the holder to demand immediate payment of the entire outstanding balance upon the occurrence of a specified event, does not destroy the negotiability of the instrument. Similarly, a statement that the instrument is secured by collateral does not affect negotiability. The key is that the promise to pay is unconditional and for a fixed sum. Washington’s Revised Code of Washington (RCW) 62A.3-104(a) defines a negotiable instrument as an unconditional promise or order to pay a fixed amount of money, payable on demand or at a definite time, and payable to order or to bearer. The acceleration clause in the note makes the payment due at a definite time (upon the occurrence of the specified event), and the mention of collateral is merely a reference to security and does not impose any condition on the payment itself. Therefore, the note remains negotiable.

The question probes the concept of a holder in due course (HDC) and the defenses available against such a holder under Article 3 of the Uniform Commercial Code (UCC), as adopted in Washington. A holder in due course takes an instrument free from all defenses except for certain real defenses. Real defenses are those that can be asserted against any holder, including an HDC. Fictitious payee situations, where a person signs an instrument payable to a person who is not intended to have an interest in it, often fall under the category of forgery or an instrument issued in a fraudulent scheme. Under UCC § 3-305(a)(1), an HDC is subject to defenses of a party to the instrument that are real defenses. A common real defense is forgery of the instrument or the signature of the maker. In this scenario, since Elara forged Marcus’s signature to create the promissory note, this constitutes a real defense that can be asserted against any holder, including an HDC. Therefore, Marcus can assert the defense of forgery against any holder of the note, regardless of whether they qualify as a holder in due course. The fact that the note was subsequently transferred to a holder in due course does not extinguish Marcus’s right to raise the defense of forgery, as it is a real defense under UCC § 3-305(a)(2).

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder under Washington’s Uniform Commercial Code (UCC) Article 3. 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 against it. Washington’s UCC § 3-302 defines these requirements. The scenario describes a promissory note endorsed to “Cash” and then negotiated to Ms. Anya Sharma. Ms. Sharma’s knowledge of the underlying dispute between the original maker, Mr. Ben Carter, and the original payee, “The Music Emporium,” is crucial. If Ms. Sharma had actual knowledge or reason to know of the breach of contract that formed the basis of Mr. Carter’s defense, she would not be a holder in due course. The UCC § 3-305 outlines real defenses that are generally good against all holders, including HDCs, such as infancy, duress, illegality, and discharge in insolvency proceedings. Personal defenses, like breach of contract or failure of consideration, are generally not good against an HDC. However, the question implies Ms. Sharma might have had notice. Washington UCC § 3-302(a)(2) states that a holder takes the instrument “with notice of any defense or claim against it.” If Ms. Sharma was aware of the ongoing dispute regarding the faulty instruments, this constitutes notice of a defense. Therefore, she would not be a holder in due course and would be subject to Mr. Carter’s defense of breach of contract. The question asks about the enforceability of the note against Mr. Carter, given Ms. Sharma’s potential notice. Since she likely had notice of the defense, the note is not enforceable against Mr. Carter by her.

The core issue here revolves around whether a subsequent holder of a negotiable instrument can enforce it against a party who has a defense against an earlier holder, particularly when that defense is based on a lack of delivery. Under UCC Article 3, specifically concerning defenses against holders, Section 3-305(a)(2) enumerates real defenses that can be asserted against any holder, including a holder in due course. Lack of delivery, when it is a complete absence of negotiation or transfer, is generally considered a real defense under UCC 3-305(a)(2) as it negates the obligor’s intent to be bound. This is distinct from a “delivery for a special purpose” (e.g., escrow), which would be a personal defense under UCC 3-305(a)(2) and generally not available against a holder in due course. The scenario describes a check that was never intended to be delivered or negotiated, implying a complete absence of intent to transfer possession and create an obligation. Therefore, any holder, even one who acquired the check for value and in good faith (a holder in due course), would be subject to the defense of lack of delivery by the drawer. The fact that the check was found and then endorsed to a third party does not cure the initial defect of non-delivery, which is a real defense. The UCC distinguishes between real and personal defenses, and lack of effective delivery is a real defense that can be raised against any holder, including a holder in due course.

The scenario involves a promissory note that contains a clause allowing for acceleration of the due date upon the occurrence of certain events. Specifically, the note states that the entire balance becomes due immediately if the maker “ceases to be employed by Evergreen Industries.” This type of clause is generally permissible under UCC Article 3, provided it does not render the sum payable uncertain. The UCC permits acceleration clauses that are tied to events that are not within the exclusive control of the debtor, as long as they do not fundamentally alter the nature of the promise to pay a definite sum. In Washington, as under the Uniform Commercial Code, a note payable “on demand” or “at a definite time” is negotiable. An acceleration clause that makes the note payable “at a definite time” or “earlier at the option of the holder” is valid. The condition of ceasing employment is an event that can trigger acceleration. The UCC, in Revised Article 3, specifically addresses acceleration clauses. Section 3-108(b)(2) states that a promise to pay is for a sum certain even though it is to be paid “before maturity at the option of the holder.” While the specific trigger here is tied to an event, the underlying principle is that the holder can demand payment earlier. The key is whether this condition makes the payment obligation so uncertain as to defeat negotiability. The UCC’s approach is to be liberal in recognizing negotiability. The event of ceasing employment is an external event that the maker has some control over, but it’s not solely at their discretion to avoid. The UCC permits acceleration upon the occurrence of events that are not solely within the maker’s control. The phrasing “ceases to be employed by Evergreen Industries” is a condition that can occur, making the note payable earlier at the holder’s option. This does not inherently make the sum payable uncertain in a way that would destroy negotiability under Washington’s adoption of UCC Article 3. Therefore, the note remains negotiable.

The core issue here revolves around the concept of holder in due course (HDC) status and the defenses available against such a holder under Washington’s Uniform Commercial Code (UCC) Article 3. A person qualifies as a holder in due course if the instrument is taken for value, in good faith, and without notice of any claim or defense against it. In this scenario, the promissory note was originally issued by Ms. Anya Sharma to “Acme Innovations Inc.” for a landscaping project. Acme Innovations Inc. then negotiated the note to Mr. Ben Carter. The critical point is whether Mr. Carter had notice of Ms. Sharma’s defense (the alleged fraudulent misrepresentation by Acme Innovations Inc.) at the time he acquired the note. Washington’s UCC § 3-302 defines a holder in due course. Washington’s UCC § 3-305 outlines the claims in recoupment and defenses that are available against a holder, distinguishing between those that cut off the right to enforce the instrument (real defenses) and those that do not (personal defenses). Fraud in the inducement, as alleged by Ms. Sharma, is generally considered a personal defense, meaning it is cut off by an HDC. However, fraud in the factum (or fraud that induces the obligor to sign the instrument with neither knowledge nor reasonable opportunity to learn of its character or its essential terms) is a real defense that can be asserted even against an HDC. The question hinges on Mr. Carter’s knowledge. If Mr. Carter had actual knowledge of Acme’s alleged misrepresentation, or if he acted in bad faith by deliberately closing his eyes to the truth, he would not be an HDC. However, merely hearing rumors or having a general suspicion about Acme’s business practices, without more concrete evidence of fraud in the factum or specific knowledge of the misrepresentation concerning this particular transaction, may not be sufficient to prevent him from achieving HDC status, especially if the note appears regular on its face and was acquired for value. In this case, Mr. Carter purchased the note for 90% of its face value, which is considered taking for value. He did not have actual knowledge of the fraud. The information he received from Mr. David Lee was vague and related to “general business practices” of Acme, not a specific, documented fraud in the inducement or factum regarding Ms. Sharma’s note. Therefore, without evidence that Mr. Carter knew about the specific misrepresentation made to Ms. Sharma or that he acted in bad faith by ignoring readily available information that would have revealed the fraud, he likely qualifies as a holder in due course. As an HDC, Mr. Carter takes the instrument free from all defenses of any party to the instrument with whom the holder has not dealt, except for those real defenses enumerated in UCC § 3-305(a)(1). Fraud in the inducement is a personal defense that is cut off by an HDC. Thus, Ms. Sharma cannot assert the fraud in the inducement defense against Mr. Carter.

The core issue revolves around the enforceability of a promissory note that has been altered after its issuance. Under Washington’s Uniform Commercial Code (UCC) Article 3, specifically concerning negotiable instruments, a holder in due course (HDC) generally takes an instrument free from most defenses, except for certain real defenses. However, a material alteration of an instrument can affect its enforceability. A material alteration is defined as an alteration that changes the contract of any person against whom enforcement is sought. Examples include changing the date, the amount payable, or the parties involved. When an instrument is materially altered without the assent of all parties liable thereon, it is voidable by the party who did not assent. However, an HDC can enforce the instrument according to its original tenor. In this scenario, the note was originally for $5,000 and was later altered to $7,500 without the maker’s consent. This is a material alteration. If the current holder is an HDC, they can enforce the note, but only according to its original tenor, which was $5,000. This is because the alteration makes the instrument voidable by the maker as to the altered amount, but an HDC’s rights are preserved to the original terms. The UCC § 3-407(b) states that if an instrument is materially altered, the alteration does not discharge any party unless the holder assents to the alteration. However, if the alteration is made by the holder, the instrument is discharged. If the alteration is made by someone else, the instrument is still enforceable according to its original tenor by an HDC. The key is that the HDC’s rights are limited to the original terms when a material alteration occurs. The calculation is straightforward: the original amount of the note was $5,000. The holder in due course can enforce the note only to this original amount. Original Tenor = $5,000

The scenario involves a promissory note that was initially payable to “cash” and then endorsed in blank by the payee. When a negotiable instrument is endorsed in blank, it becomes payable to bearer. Under UCC Article 3, a person in possession of an instrument payable to bearer is a holder. A holder in due course (HDC) takes the instrument free from most defenses and claims that a party to the instrument might have. To qualify as an HDC, a holder must take the instrument for value, in good faith, and without notice of any claim or defense against it. In this case, Ms. Anya possesses the note, and it is payable to bearer due to the blank endorsement. She acquired it from Mr. Ben, who received it as payment for a pre-existing debt owed by the original maker. Acquiring an instrument for a pre-existing debt constitutes taking for value under UCC § 3-303(a)(1). Assuming Ms. Anya acted in good faith and without notice of any defenses, she would be considered an HDC. The original maker’s defense of fraud in the inducement, while valid against Mr. Ben, is generally cut off by an HDC. Therefore, Ms. Anya can enforce the note against the maker. The crucial element here is the status of the instrument as bearer paper after the blank endorsement, making possession sufficient to establish a prima facie right to payment, and Anya’s status as a potential HDC. The question tests the understanding of blank endorsements, bearer paper, the definition of value for HDC status, and the effect of HDC status on defenses.

The core concept here revolves around the liability of an agent who signs a negotiable instrument on behalf of a principal without clearly indicating their agency status. Under Washington’s UCC Article 3, specifically RCW 62A.3-402, an unauthorized signature is generally not binding on the purported signer unless they ratify it or are precluded from denying it. However, this question probes a more nuanced scenario: an authorized agent signing in a manner that doesn’t clearly disclose the principal. When an agent signs a negotiable instrument in their own name, but the instrument also shows that the signature is on behalf of someone else, or that the agent is signing in a representative capacity, the agent is not liable on the instrument. This is true even if the agent has not added their own name to the signature. The key is that the instrument itself provides sufficient indication of the representative capacity. In this case, the check clearly states “for the estate of Arthur Pendelton” above the signature of Guinevere. This notation serves as sufficient evidence that Guinevere was signing in a representative capacity for the estate, thereby negating her personal liability on the check. The fact that she did not add “by Guinevere, representative” or similar language is not fatal to this defense, as the reference to the estate is present on the instrument itself. The instrument must clearly indicate that the signature is made in a representative capacity. The phrase “for the estate of Arthur Pendelton” directly fulfills this requirement by identifying the principal and the capacity in which Guinevere signed.

The scenario involves a promissory note that contains a clause allowing the holder to accelerate the entire unpaid balance upon the occurrence of certain events, specifically the maker’s insolvency. Washington’s UCC Article 3, specifically RCW 62A.3-108(b), defines an instrument as 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, an instrument that contains a term providing for acceleration on the happening of an event described in RCW 62A.3-104(a)(3) is still a negotiable instrument. RCW 62A.3-104(a)(3) states that a promise or order is unconditional unless it states an express condition to payment. A term providing for acceleration on the occurrence of a definite event, such as insolvency, does not make the promise conditional in a way that destroys negotiability. The key is whether the event is within the control of the maker or is a predictable occurrence. Insolvency, while potentially triggered by the maker’s actions, is often considered a sufficiently definite event for acceleration clauses in commercial paper. Therefore, the acceleration clause based on insolvency does not render the note non-negotiable. The note, being payable to order and containing an unconditional promise to pay a fixed amount, remains negotiable.

The core issue here is whether a holder in due course status can be maintained when the instrument itself contains a notation that fundamentally alters its negotiability. Under UCC Article 3, specifically Revised Article 3, a negotiable instrument must contain an unconditional promise or order to pay a fixed amount of money. The presence of a notation that refers to another agreement or states that it is subject to or governed by another agreement can render the promise or order conditional, thereby destroying negotiability. For example, a statement that the instrument is “subject to the terms of the purchase agreement” or “as per the contract dated…” typically makes the promise conditional because the terms of that other agreement might affect the amount payable or the time of payment. If the instrument is not negotiable, then the holder cannot qualify as a holder in due course, even if they took the instrument for value, in good faith, and without notice of any claim or defense. Without holder in due course status, the holder takes the instrument subject to all defenses and claims that could be asserted against the original payee. In this scenario, the notation “as per contract 12345” on the back of the promissory note, which is a form of a negotiable instrument, explicitly links the payment obligation to the terms of that separate contract. This linkage makes the promise to pay conditional, as the contract could contain provisions that alter the payment amount, timing, or even the right to payment itself. Consequently, the note ceases to be a negotiable instrument under UCC § 3-104(a). Because the note is no longer negotiable, the subsequent holder, even if they acquired it for value and in good faith, cannot attain holder in due course status under UCC § 3-302. Therefore, the holder is subject to any defenses that the maker of the note could raise against the original payee, including the defense of failure of consideration or breach of contract related to the underlying transaction. The UCC’s policy is to promote the free circulation of negotiable instruments, but this freedom is predicated on the instrument’s clarity and unconditional nature. A notation that integrates another document’s terms undermines this clarity and certainty.

The scenario involves a promissory note that was transferred by endorsement. The original payee, Ms. Anya Sharma, endorsed the note in blank by signing her name on the back. This conversion of a specially endorsed instrument (if it had been endorsed to a specific person) or an order instrument into a bearer instrument is governed by UCC 3-205(b) in Washington. A blank endorsement makes the instrument payable to bearer. Subsequently, Mr. Ben Carter took possession of this bearer instrument. According to UCC 3-301, a person in possession of an instrument is entitled to enforce it if the person is the holder of the instrument. Since the note became payable to bearer after Ms. Sharma’s blank endorsement, any subsequent holder in possession, like Mr. Carter, is deemed a holder and can enforce the instrument, regardless of whether he is a holder in due course or has any other title to it, as long as he is in possession. The question asks who is entitled to enforce the note. Because the note was endorsed in blank, it became payable to bearer. Therefore, the person in possession of the bearer instrument, Mr. Ben Carter, is entitled to enforce it.

The scenario involves a negotiable instrument that has been altered. Specifically, the amount payable has been changed from $500 to $5,000. Under UCC Article 3, particularly in Washington, a holder in due course (HDC) who takes an instrument that has been completed fraudulently, but not materially altered, may enforce it according to its original tenor. However, if the alteration is material and fraudulent, an HDC can only enforce the instrument against a party who made, accepted, or drawer of the instrument, according to the instrument’s tenor at the time of the fraudulent alteration. In this case, the alteration of the amount from $500 to $5,000 is a material alteration. Since the question specifies that the alteration was fraudulent, and the bank is considered an HDC, the bank can only enforce the instrument against the drawer for the original amount of $500. The UCC § 3-407(b) states that if an instrument is issued for negotiation and then fraudulently altered by the holder, the alteration does not change the liability of the issuer or any other party. The bank, as a holder in due course, is subject to this rule. Therefore, the bank can only recover the original amount.

In Washington, under UCC Article 3, a holder in due course (HDC) takes an instrument free from most defenses and claims that a prior party could assert against the original payee. To qualify as an HDC, a person must take an instrument that is (1) negotiable, (2) issued or transferred for value, (3) in good faith, and (4) without notice of any claim or defense against it. The scenario involves a promissory note that was originally made by Mr. Abernathy to Ms. Bell. Ms. Bell then indorsed the note in blank and negotiated it to Mr. Clark. Mr. Clark, in turn, negotiated the note to Ms. Davis. The critical element here is whether Ms. Davis had notice of any defenses. The fact that the note was past due when Ms. Davis acquired it is significant. Under Revised Article 3, a person has notice that an instrument is overdue if the person has notice that the instrument is dishonored or notice of any other fact which takes the action inconsistent with the obligation of an obligor or of an agent or attorney in fact. More specifically, a purchaser has notice that an instrument is overdue if the purchaser has notice that the instrument is payable on demand and the purchaser has notice that the instrument has been presented without honor, or that the instrument is overdue if the purchaser has notice that the instrument is payable at a definite time and the purchaser has notice that the instrument is overdue. In this case, the note was due on June 1st. Ms. Davis acquired it on July 15th. This is more than 90 days after the due date, which under UCC 3-304(a)(2) generally constitutes notice that the instrument is overdue. Therefore, Ms. Davis is not a holder in due course because she took the instrument with notice that it was overdue. Consequently, Mr. Abernathy can assert any defenses he may have against Ms. Bell against Ms. Davis.

The scenario involves a promissory note that is payable “on demand.” Under Washington’s Uniform Commercial Code (UCC) Article 3, specifically concerning negotiable instruments, a demand instrument is generally considered payable immediately upon its creation or upon presentation to the maker. The question focuses on the timing of when the statute of limitations begins to run for a demand instrument. UCC § 3-118(b) in Washington (which mirrors the general UCC provision) states that the statute of limitations for a demand instrument is the earlier of: (1) ten years after the demand for payment is made, or (2) thirty years after the date of the instrument. Since no demand has been made in this scenario, the statute of limitations has not yet begun to run based on a demand. The thirty-year period from the date of the instrument is the outer limit. Therefore, the statute of limitations has not expired. The core concept here is the accrual of the cause of action for a demand instrument, which typically occurs upon demand, but is subject to a statutory maximum period from the instrument’s date.

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder under UCC Article 3, as adopted in Washington. A party is a holder in due course if the instrument is negotiable, the holder is in possession of the instrument, the instrument is taken for value, in good faith, and without notice of any claim or defense. In this scenario, the promissory note is negotiable. However, the critical element is notice of a defense. The agreement between Ms. Albright and Mr. Chen explicitly states that the note is void if the specified services are not rendered. This constitutes a real defense, specifically a defense of illegality or, more broadly, a defense that the underlying obligation of the promise was conditional and the condition was not met, rendering the note unenforceable even by an HDC. When Mr. Chen negotiates the note to Ms. Davis, Ms. Davis is aware of the agreement’s terms and the condition precedent. This knowledge prevents her from qualifying as a holder in due course because she has notice of a defense to payment. Therefore, Ms. Albright can assert the defense that the condition precedent to payment was not satisfied. The UCC generally preserves real defenses against all holders, including those who might otherwise qualify as HDCs. However, since Ms. Davis had actual notice of the condition and the potential for its failure, she cannot take free of this defense. The defense of failure of condition precedent is a fundamental aspect of contract law that carries over to negotiable instruments when a holder is not a holder in due course. Washington’s adoption of UCC Article 3, particularly concerning defenses, aligns with this principle, meaning Ms. Albright is not obligated to pay the note to Ms. Davis.