The scenario involves a promissory note that is payable to “bearer” and is not dated. Under Wisconsin’s version of UCC Article 3, specifically § 401.301, an instrument is payable to bearer if it states that it is payable to bearer or to a specific person or bearer. The note here states “Pay to the order of Bearer,” which clearly makes it bearer paper. For an instrument that is otherwise a negotiable instrument but is undated, § 403.113(2) provides that the holder may fill in the date. If the holder does not fill in the date, the instrument is considered to be dated at the time it was issued. However, the critical factor for determining the effect of the undated nature on negotiation and enforcement is not the absence of a date itself, but rather whether the instrument can be negotiated and enforced. An undated note payable to bearer is negotiable. The holder can negotiate it by delivery alone, as per § 403.201(1). The fact that it is undated does not prevent negotiation by delivery. Furthermore, under § 403.305(1), a holder in due course takes the instrument free of defenses except for certain real defenses. The maker’s argument that the note is invalid because it is undated and therefore not properly negotiated is incorrect. The holder can negotiate bearer paper by mere delivery, and the absence of a date does not invalidate the instrument’s negotiability or the ability of a holder to negotiate it. The UCC permits the holder to date an undated instrument or treats it as dated at issue. Therefore, the note is validly negotiated by delivery.

The scenario involves a promissory note that was originally payable to “bearer.” Under UCC Article 3, as adopted in Wisconsin, a note payable to bearer is negotiated by delivery alone. If the holder of such a note then indorses it specially to a named individual, such as “Pay to the order of Anya Sharma,” the instrument becomes order paper. Subsequent negotiation of order paper requires both indorsement by Anya Sharma and delivery. If Anya Sharma simply delivers the note to someone else without her indorsement, the transferee does not become a holder in due course, nor do they acquire rights as a holder in due course. The transferee would only acquire the rights of the transferor. Since Anya Sharma did not indorse the note, the delivery to Ben Carter does not constitute a negotiation that would transfer the rights of a holder in due course. Therefore, Ben Carter cannot enforce the note against the maker under the rights of a holder in due course, even if he took it for value and in good faith. The original holder’s right to enforce the note against the maker remains, but the transfer to Ben Carter was incomplete for full negotiation of order paper.

Under Wisconsin’s version of UCC Article 3, a holder in due course (HDC) takes an instrument free from most defenses that could be asserted against a holder who is not an HDC. However, certain real defenses, which go to the validity of the instrument itself, can be asserted even against an HDC. These real defenses are enumerated in UCC § 3-305(a)(1). They include defenses such as infancy, duress, illegality of the transaction that nullifies the obligation, 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), and discharge in insolvency proceedings. In the given scenario, the note was procured through fraud in the inducement. Fraud in the inducement occurs when a party is persuaded to sign an instrument by false representations about the underlying transaction, but the party understands the nature of the instrument they are signing. This is generally a personal defense, not a real defense. Therefore, if Beatrice qualifies as a holder in due course, she takes the note free from the defense of fraud in the inducement. To be an HDC, Beatrice must have taken the note for value, in good faith, and without notice of any claim or defense against it. Assuming Beatrice meets these criteria, the defense of fraud in the inducement, being a personal defense, is cut off.

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder. Under Wisconsin’s UCC Article 3, a person who takes an instrument for value, in good faith, and without notice of any claim or defense is generally protected from most personal defenses. However, real defenses, such as fraud in the factum, infancy, or discharge in insolvency proceedings, can be asserted even against an HDC. In this scenario, the forged signature of Ms. Gable renders the note void ab initio as to her. A forged signature is generally a real defense. Since the note was void as to Ms. Gable from its inception due to the forgery, it cannot be made valid by subsequent negotiation. Therefore, Mr. Henderson, even if he were a holder in due course, cannot enforce the instrument against Ms. Gable because the underlying obligation is a nullity due to the forgery. The question of whether Mr. Henderson is a holder in due course is secondary to the fact that the instrument itself is fundamentally flawed with respect to Ms. Gable’s participation. The UCC specifically states that a holder in due course takes the instrument free of defenses except for those listed as real defenses. Forgery of a signature is a real defense.

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder. Under Wisconsin’s UCC Article 3, specifically Wis. Stat. § 403.305, 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 real defenses. Real defenses, which can be asserted even against an HDC, include infancy, duress, illegality, and fraud in the factum. Fraud in the factum occurs when a party is induced to sign an instrument with neither knowledge nor reasonable opportunity to learn of its character or essential terms. This is distinct from fraud in the inducement, where a party knows the nature of the instrument but is deceived about collateral matters. In this scenario, Mr. Abernathy was aware he was signing a promissory note, but was misled about the purpose and terms of the loan, which constitutes fraud in the inducement. Therefore, this defense is personal and cannot be asserted against an HDC. The bank, having purchased the note for value, in good faith, and without notice of any claim or defense, qualifies as an HDC. Consequently, the bank can enforce the note against Mr. Abernathy despite the fraud in the inducement.

The scenario involves a promissory note that was negotiated to a holder in due course (HDC). Under Wisconsin’s Uniform Commercial Code (UCC) Article 3, an HDC takes an instrument free from all defenses of any party to the instrument with whom the holder has not dealt, except for certain real defenses. The question asks about the enforceability of the note against the maker, Mr. Alistair Finch, by the subsequent holder, Ms. Beatrice Vance, who acquired the note after it was dishonored. First, we must determine if Ms. Vance qualifies as a holder in due course. To be an HDC, a holder must take the instrument (1) for value, (2) in good faith, and (3) without notice that it is overdue or dishonored or that there is a defense or claim against it. The facts state that Ms. Vance purchased the note for its face value shortly after its due date, and crucially, she had knowledge that the note had already been dishonored by the maker. This knowledge of dishonor prevents her from meeting the “without notice” requirement for HDC status. Therefore, Ms. Vance is a holder, but not a holder in due course. Since Ms. Vance is not an HDC, she takes the note subject to any defenses that Mr. Finch could assert against the original payee, Mr. Silas Croft. The facts indicate that Mr. Finch’s reason for dishonoring the note was the failure of Mr. Croft to deliver the antique grandfather clock as promised, which constituted the sole consideration for the note. This failure of consideration is a personal defense, not a real defense. Wisconsin UCC § 403.305(1) states that an HDC takes free of personal defenses. However, a holder who is not an HDC, like Ms. Vance, is subject to such personal defenses. Because Ms. Vance is a holder but not an HDC, and Mr. Finch has a valid personal defense (failure of consideration), the note is not enforceable by Ms. Vance against Mr. Finch. The UCC § 403.305(2) outlines real defenses which would be effective even against an HDC, such as infancy, duress, or fraud in the execution. Failure of consideration is not among these real defenses. Thus, the personal defense of failure of consideration is available to Mr. Finch against Ms. Vance.

The scenario involves a draft drawn in Wisconsin, payable in Illinois, and accepted by a party in Indiana. Under UCC Article 3, as adopted in Wisconsin, the law governing the rights and obligations of the parties to a negotiable instrument is generally determined by the law of the jurisdiction where the instrument is issued or where the relevant event occurs. For the issue of whether the draft is properly payable and the rights of a holder in due course, the law of the place of payment is often controlling. In this case, the draft is payable in Illinois. Therefore, Illinois law will govern the interpretation of the draft’s negotiability and the rights of holders. The question of whether a holder can recover the full face amount of the instrument, despite a defense, hinges on whether the holder qualifies as a holder in due course (HDC). To be an HDC, a holder must take the instrument for value, in good faith, and without notice of any defense or claim. If the holder took the instrument with knowledge of the drawer’s financial distress or the underlying dispute, they would not be a holder in due course and would be subject to defenses. Assuming the holder acquired the instrument for value and in good faith, and had no notice of any defect, they would be entitled to enforce the instrument according to its terms, even against the drawer’s defense of a failure of consideration, provided that defense is not one that can be asserted against an HDC. The UCC, as adopted by Wisconsin and generally across states, protects HDCs from certain defenses. The explanation focuses on the conflict of laws principles applicable to negotiable instruments and the requirements for holder in due course status.

The scenario describes a promissory note that is payable to “order” and is transferred by endorsement and delivery. The core issue is whether a subsequent holder can be a holder in due course (HDC) when the instrument is transferred after its due date. According to UCC § 3-302, a holder in due course must take the instrument without notice that it is overdue or dishonored or that there is a defense against it. UCC § 3-304 states that a promissory note payable in installments is overdue when the last installment is due. In this case, the note is payable in six equal monthly installments starting on January 1st. This means the installments are due on January 1st, February 1st, March 1st, April 1st, May 1st, and June 1st. The transfer occurs on July 15th. By July 15th, all six installments are past due. Therefore, any transferee taking the note on July 15th would have notice that the instrument is overdue. Consequently, no subsequent holder, including Mr. Finch, can qualify as a holder in due course. This prevents Mr. Finch from taking the instrument free of all defenses and claims that are not based on a holder in due course. The underlying obligation, which is the basis for the instrument’s creation, would still be subject to defenses.

The core issue here is the effect of a restrictive endorsement on negotiability and the rights of a subsequent holder. Wisconsin’s Uniform Commercial Code (UCC) Article 3, specifically § 403.205, addresses restrictive endorsements. An endorsement that prohibits further transfer or use (e.g., “For deposit only,” “Pay to the order of [Payee] for collection”) is a restrictive endorsement. Under UCC § 403.206, a person who takes an instrument with notice of a restrictive endorsement is subject to the restriction unless they are a depositary bank that is not a holder in due course. However, a subsequent holder in due course can disregard the restriction if it is for the benefit of the endorser and does not prohibit further negotiation. In this scenario, the endorsement “Pay to the order of Anya Sharma only” is a restrictive endorsement that prohibits further transfer. Therefore, any subsequent holder, even if they paid value and took in good faith, cannot become a holder in due course because the restriction on transfer prevents the instrument from being negotiated to them. The endorsement effectively terminates the chain of negotiability. Anya Sharma, as the named payee, is the only one who can enforce the instrument, and her subsequent endorsement would be necessary to transfer it. Since the question states the instrument was endorsed “For deposit only to the account of Mr. Henderson,” this is a restrictive endorsement. A bank that receives this for deposit is obligated to follow the restriction. A subsequent holder who takes the instrument after this restrictive endorsement, and without it being properly negotiated by the restrictive endorsee (Mr. Henderson), cannot acquire rights as a holder in due course. The restriction “For deposit only” means the instrument can only be deposited into the specified account. Any other use or negotiation is prohibited. Therefore, the instrument is not properly negotiated to a subsequent holder.

No calculation is required for this question as it tests conceptual understanding of UCC Article 3 principles regarding holder in due course status and defenses. The scenario presents a situation where a negotiable instrument is transferred. To determine if the transferee qualifies as a holder in due course (HDC) under Wisconsin law, which largely follows the Uniform Commercial Code (UCC) Article 3, several criteria must be met. The transferee 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 to it on the part of any person. In this case, the instrument is a promissory note. The initial transfer is from the original payee to a third party. The crucial element here is whether the third party had notice of any defenses. A maker can assert certain defenses against an ordinary holder, but these defenses are often cut off when the instrument is held by an HDC. Real defenses, such as forgery, fraud in the execution, material alteration, infancy, or illegality that renders the obligation void, are generally available against all holders, including HDCs. Personal defenses, such as breach of contract, lack of consideration, or fraud in the inducement, are typically cut off by an HDC. The question hinges on the transferee’s knowledge at the time of acquisition. If the transferee knew that the original transaction between the maker and the payee involved a material misrepresentation about the goods, this knowledge would constitute notice of a defense, preventing HDC status. Wisconsin law, consistent with UCC Article 3, emphasizes this “without notice” requirement. Therefore, if the transferee was aware of the payee’s misrepresentation, they cannot claim HDC protection, and the maker can raise the defense of fraud in the inducement.

The core issue revolves around the negotiability of a promissory note that contains a clause allowing the maker to pay the principal amount plus “all additional costs and expenses incurred by the holder in the collection of this note, including reasonable attorney’s fees.” Under UCC Article 3, as adopted in Wisconsin, a negotiable instrument must contain an unconditional promise or order to pay a fixed amount of money. While the principal amount is fixed, the inclusion of “all additional costs and expenses incurred by the holder in the collection of this note, including reasonable attorney’s fees” introduces an element of uncertainty regarding the total sum payable. Specifically, attorney’s fees and collection costs are not a fixed amount at the time of issuance and are contingent upon the event of default and subsequent collection efforts. Such a provision typically renders the instrument non-negotiable because the exact amount due is not ascertainable from the face of the instrument itself, violating the requirement for a “fixed amount.” This is because the amount of attorney’s fees and collection costs can vary significantly depending on the circumstances of collection and the reasonableness as determined by a court or through negotiation. Therefore, a holder in due course, or any subsequent holder, would not be able to enforce this instrument as a negotiable instrument, though it might still be enforceable as a simple contract.

This question revolves around the concept of a holder in due course (HDC) and the defenses available against payment on a negotiable instrument under Wisconsin’s Uniform Commercial Code (UCC) Article 3. Specifically, it tests the understanding of real defenses versus personal defenses. A real defense is generally available against all holders, including HDCs, while a personal defense is not. In Wisconsin, as under the UCC, certain defenses are considered real. These include infancy, duress, illegality of the transaction rendering the obligation void, fraud in the execution (or “real fraud”), discharge in insolvency proceedings, and material alteration. Fraud in the inducement (or “fraudulent misrepresentation”) is typically a personal defense. Therefore, when a negotiable instrument is negotiated to an HDC, the maker or drawer cannot assert fraud in the inducement as a defense to avoid payment. The scenario describes a situation where a promissory note was obtained through fraudulent misrepresentation regarding the quality of goods sold, which constitutes fraud in the inducement. This is a personal defense. Since the note was properly negotiated to an HDC, the HDC takes the instrument free from all personal defenses. Consequently, the HDC can enforce the note against the maker, even though the maker was induced to sign by fraud.

The scenario involves a promissory note that contains a clause stating, “The undersigned promises to pay to the order of Beatrice Bellweather the sum of Ten Thousand Dollars ($10,000.00) on demand, or if no demand is made, then on December 31, 2024.” This type of clause, which makes the payment due either on demand or at a specified future date, is permissible under UCC Article 3, as adopted in Wisconsin. Specifically, Wisconsin Statutes § 403.108 (UCC § 3-108) addresses demand and time instruments. A note payable on demand is a demand instrument. A note payable at a definite time is a time instrument. A note that is payable on demand or at a definite time is still considered a negotiable instrument. The crucial element for negotiability is that the instrument is payable on demand or at a definite time. The UCC permits instruments to be payable on demand or at a definite time, or at a definite time or earlier or later than a specified date. Therefore, the note is a negotiable instrument because it specifies a definite time for payment, even though it also includes a demand provision. The presence of both does not render it non-negotiable. The question asks about the negotiability of the instrument. An instrument is negotiable if it contains an unconditional promise or order to pay a fixed amount of money, payable on demand or at a definite time, payable to order or to bearer, and payable to the issuer or maker, or drawee, except as otherwise provided. The note meets these criteria.

The core issue here is determining the negotiability of the instrument. For an instrument to be negotiable under UCC Article 3, it must meet several criteria, including being payable to order or to bearer, containing an unconditional promise or order to pay a fixed amount of money, and being payable on demand or at a definite time. In Wisconsin, as in other states adopting the Uniform Commercial Code, the concept of “fixed amount of money” is crucial. While the principal sum is stated as $10,000, the inclusion of “plus interest at the prevailing prime rate as published in The Wall Street Journal on the date of issuance, adjusted quarterly” introduces a variable interest rate. UCC § 3-112(b) specifically addresses variable rates of interest, stating that a promise or order to pay a variable amount of money is for a fixed amount of money if the variable rate is determined by reference to a publicly available source or a benchmark that is not controlled by the parties. The prime rate as published in The Wall Street Journal is generally considered a publicly available source. Therefore, the instrument, despite the variable interest, likely qualifies as a negotiable instrument because the variable rate is tied to an objective, external standard. The mention of “plus 1% of the outstanding balance for every 30 days payment is late” is a penalty or late fee, which does not affect the negotiability of the principal sum plus the variable interest, as it is a separate provision for default. The key is that the principal amount and the interest calculation method are ascertainable.

The scenario involves a promissory note that is initially payable to “bearer.” Under UCC Article 3, specifically Wisconsin’s adoption of it, an instrument payable to bearer is negotiated by delivery alone. However, the subsequent endorsement by Silas, “Pay to the order of Elara,” transforms the instrument from bearer paper to order paper. For an order instrument to be negotiated, it requires the endorsement of the payee and delivery. Elara’s subsequent endorsement, “Pay to the order of Finn,” and delivery to Finn further perfects Finn’s status as a holder. The crucial point is that Silas’s endorsement, while it changed the character of the instrument, did not invalidate it. The note remained negotiable. The question asks about the validity of the instrument’s transfer to Finn. Since Elara, the current holder, endorsed and delivered it to Finn, and the instrument was initially valid and subsequently properly negotiated through each stage, Finn holds the instrument validly. The UCC permits the negotiation of bearer paper, and once endorsed to order, it follows the rules for order paper. The original “bearer” status is superseded by the subsequent order endorsement for purposes of negotiation after that point.

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder under Wisconsin’s Uniform Commercial Code (UCC) Article 3. A party who takes an instrument for value, in good faith, and without notice of any claim or defense is generally considered an HDC. Wisconsin law, like other states adopting UCC Article 3, outlines specific defenses that are “real” (good against all holders, including HDCs) and “personal” (good against holders who are not HDCs, but not against HDCs). In this scenario, the promissory note was initially issued for a legitimate business purpose. However, it was subsequently acquired by a third party, Ms. Albright, under circumstances that suggest a potential lack of good faith or notice of the underlying dispute. The critical defense raised by Mr. Henderson is the failure of consideration, which is a personal defense. This defense arises from the fact that the original seller of the antique machinery, Mr. Gable, did not deliver the goods as agreed, thus breaching the contract. Under UCC § 3-305(a)(2), an HDC takes the instrument free from all defenses of any party to the instrument with whom the holder has not dealt except for those defenses specifically enumerated as real defenses in § 3-305(a)(1). Failure of consideration is not listed as a real defense. Real defenses include infancy, duress that nullifies assent, fraud that induces the obligation of the obligor, discharge in insolvency proceedings, and other incapacity, or illegality of the transaction that nullifies assent. Since Ms. Albright acquired the note after its initial issuance and the question implies she may not have been a holder in due course due to potential notice of the dispute or lack of good faith, the question tests the understanding of when a personal defense can be asserted. If Ms. Albright *is* a holder in due course, she would take the note free from the personal defense of failure of consideration. However, if she is *not* a holder in due course, Mr. Henderson can assert the failure of consideration defense against her. The question is designed to assess the understanding of which defenses are effective against an HDC. The failure of consideration is a personal defense, meaning it is generally cut off by a holder in due course. Therefore, if Ms. Albright qualifies as an HDC, the defense would not be effective. The question implicitly assumes, for the purpose of testing the concept, that Ms. Albright might not qualify as an HDC, thereby allowing the personal defense to be raised. The correct answer hinges on the classification of the defense.

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder. Under Wisconsin law, specifically UCC Article 3, a holder who takes an instrument for value, in good faith, and without notice that it is overdue or dishonored or that there is a defense or claim to it is a holder in due course. Once an instrument is overdue, it generally loses its negotiability for HDC purposes. A check is generally considered overdue after ninety days from its date, as per UCC § 3-304(a)(2) and comments, particularly for checks. In this scenario, the check was issued on January 15th and presented for payment on April 20th. The period from January 15th to April 20th is 95 days (31 days in January minus 15 days + 28 days in February + 31 days in March + 20 days in April). Since 95 days have passed, the check is considered overdue. An overdue instrument is subject to all defenses that would be available in an action on a simple contract. Therefore, any defense that would be available against the original payee, including the failure of consideration, is available against a holder who takes the check after it is overdue, even if that holder otherwise meets the criteria for taking in good faith and for value. The fact that the holder acquired the check on April 18th, within the 90-day window, would have made them an HDC if presented before the 90-day mark. However, the presentation for payment on April 20th is the critical event that determines its overdue status at the time of enforcement against the drawer. The UCC § 3-304(a)(2) states a purchaser has notice that an instrument is overdue if the purchaser has notice that the time between the issuing of the instrument and the purchaser’s taking it exceeds a reasonable time. For a check, a reasonable time is presumed to be 90 days after issue. Since the holder took the check on April 18th, which is 93 days after issue (January 15th to April 18th), the holder had notice that the check was overdue. Consequently, the holder cannot qualify as a holder in due course and is subject to the defense of failure of consideration.

The core issue here is determining if a purported negotiable instrument can be enforced by a holder in due course (HDC) against a party who has a real defense. Under Wisconsin’s UCC Article 3, specifically focusing on the rights of an HDC, a holder in due course takes an instrument free from all defenses of any party to the instrument with whom the holder has not dealt, except for certain real defenses. Real defenses are those that can be asserted against any holder, including an HDC. Examples of real defenses include infancy, duress, illegality of the type that nullifies contractual capacity, and fraud in the factum. Fraud in the factum occurs when a party is induced to sign an instrument by a fraudulent representation that the instrument is something other than what it is, and the signer did not know or have a reasonable opportunity to know its character. In this scenario, Mr. Abernathy was led to believe he was signing a lease agreement for a snowblower, not a promissory note for its purchase. This constitutes fraud in the factum because he was unaware of the true nature of the document he was signing. Therefore, this real defense is available to him even against an HDC. The fact that Ms. Gable is a holder in due course, having taken the note for value, in good faith, and without notice of any claim or defense, is relevant to the defenses she can overcome, but not to real defenses. Since fraud in the factum is a real defense, Mr. Abernathy can successfully assert it against Ms. Gable. The other options represent personal defenses, which an HDC would typically take free from.

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 if a specified event occurs. In this case, the event is the maker’s failure to pay an installment when due. Wisconsin law, specifically as interpreted under UCC Article 3, generally upholds the negotiability of instruments containing such clauses, provided they do not render the amount payable uncertain. The question hinges on whether the acceleration clause, by making the entire amount payable upon default, affects the instrument’s status as a negotiable instrument. Under UCC § 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 immediately upon creation. However, an instrument that is otherwise payable on demand can be made payable at a definite time by including a clause that accelerates the payment date upon the occurrence of a specified event. The key is that the acceleration event must be certain to occur or capable of being determined with certainty. Failure to pay an installment is a definite event that triggers the acceleration. Therefore, the presence of this clause does not destroy negotiability. The instrument remains a negotiable promissory note.

The scenario involves a negotiable instrument that was originally made payable to a specific payee, but a subsequent endorsement altered the payee’s name. Under Wisconsin’s UCC Article 3, specifically regarding the rights of a holder, a material alteration of an instrument can affect its enforceability. However, the question focuses on the effect of an endorsement that is not a forgery or a missing necessary endorsement. When an instrument is endorsed by someone other than the named payee, and it’s not a forgery, the issue is generally one of chain of title. If the endorsement is by someone who is not the rightful holder or payee, and there’s no subsequent valid negotiation or transfer, the instrument may not be properly negotiated. In this case, the instrument was made payable to “The Green Grocer.” If Bartholomew, who is not The Green Grocer, endorses it, and there is no evidence that Bartholomew is authorized to act on behalf of The Green Grocer, or that the endorsement was ratified, then Bartholomew’s endorsement does not make him the holder in due course. For an instrument payable to order, negotiation requires delivery and the endorsement of the person to whom it is payable. If Bartholomew is not The Green Grocer, his endorsement does not complete the chain of title. Therefore, the instrument is not properly negotiated to Bartholomew.

The core concept here revolves around the concept of “value” in the context of negotiable instruments under UCC Article 3, specifically as adopted in Wisconsin. A holder in due course (HDC) takes an instrument for value, in good faith, and without notice of any defense or claim. The question probes what constitutes “value” for this purpose. Under UCC § 3-303, value is given when a person acquires a security interest in the instrument, or when they take the instrument as satisfaction of a pre-existing claim, or when they enter into a contract for its purchase. A mere promise to give value, or a gift, does not constitute value until the promise is performed or the gift is delivered. In this scenario, Agnes is receiving the note as a birthday gift. A gift is gratuitous and does not involve the giving of value in exchange for the instrument. Therefore, Agnes cannot be a holder in due course because she did not give value for the note. The other options represent situations where value *is* given: satisfying a pre-existing debt, acquiring a security interest, or a bargained-for exchange.

The core issue here revolves around the concept of “holder in due course” status and the enforceability of a negotiable instrument against a party with a real defense. Under UCC Article 3, a person who takes an instrument for value, in good faith, and without notice of any defense or claim to the instrument is a holder in due course (HDC). An HDC generally 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. A real defense is a defense that is available against all persons, including an HDC. Forgery is a classic example of a real defense, as it renders the instrument void ab initio. In this scenario, the signature of Eleanor Vance on the promissory note was forged by her nephew, Jasper. A forged signature is wholly inoperative, meaning it does not create any contractual liability for the person whose signature was forged. Therefore, Eleanor Vance has a real defense against payment. Even if the bank, which is the holder of the note, acquired it for value and in good faith without notice of the forgery, it cannot enforce the note against Eleanor Vance because the forgery is a real defense that cuts off HDC rights. Jasper, having forged the signature, is liable on the instrument, but Eleanor, whose signature was forged, is not. The question asks about the enforceability of the note against Eleanor. Since her signature was forged, she has a real defense, making the note unenforceable against her, regardless of the bank’s status as a holder in due course.

Under Wisconsin law, specifically UCC Article 3, a holder in due course (HDC) takes an instrument free from certain defenses. These defenses are categorized as “real” (or “universal”) defenses, which can be asserted against any holder, and “personal” (or “equitable”) defenses, which are generally cut off by an HDC. Real defenses include infancy, duress that nullifies assent, fraud that nullifies assent, discharge in insolvency proceedings, and discharge by a material alteration that the holder had notice of. Personal defenses include breach of contract, lack of consideration, and fraud in the inducement. In the scenario presented, the negotiable instrument is a promissory note. The maker, Mr. Abernathy, is asserting the defense of fraud in the inducement. This type of fraud involves misrepresentation about the underlying transaction or the value of the consideration, but it does not prevent the maker from understanding the nature or terms of the instrument itself. Fraud in the inducement is a personal defense, not a real defense. For Mr. Abernathy to successfully assert this defense against Ms. Bell, Ms. Bell would need to *not* be a holder in due course. To qualify as an HDC, Ms. Bell must have taken the note for value, in good faith, and without notice that it was overdue or had been dishonored or that it contained any unauthorized signature or alteration or that there was a claim to it or a defense against it. If Ms. Bell meets these criteria, she takes the note free from Mr. Abernathy’s personal defense of fraud in the inducement. If she does not meet these criteria, she takes the note subject to the defense. The question asks what defense Mr. Abernathy can assert against Ms. Bell. Since fraud in the inducement is a personal defense, it can be asserted against a holder who is not an HDC. If Ms. Bell is an HDC, this defense is not available against her. Therefore, the defense Mr. Abernathy can assert against Ms. Bell, assuming she is not an HDC, is fraud in the inducement.

The scenario describes a promissory note that contains a clause stating, “The maker agrees to pay interest at a rate of 5% per annum, or the maximum rate permitted by Wisconsin law, whichever is less.” This type of clause is known as a “variable rate” or “fluctuating rate” provision. Under UCC Article 3, as adopted in Wisconsin, an instrument is a negotiable promissory note if it contains 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. The key to negotiability here is whether the promise to pay a “fixed amount of money” is maintained despite the fluctuating interest rate. UCC § 3-112(b) (Wis. Stat. § 403.112(1)(b)) states that a promise to pay an amount that is variable because of provisions for interest at a variable rate does not prevent the instrument from being a negotiable instrument. The comment to this section clarifies that the amount payable is still considered fixed because the formula for determining the interest rate is ascertainable from the instrument itself or from external sources referenced in the instrument. In this case, the external source is Wisconsin law, which provides a definite, albeit variable, rate. The instrument’s negotiability is preserved because the amount of money to be paid is determinable with certainty at any given time, even if that amount changes based on a stated formula. The instrument is not rendered non-negotiable because the interest rate is tied to a legal standard that can be ascertained. Therefore, the note remains a negotiable instrument.

The core issue here revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder under UCC Article 3, as adopted in Wisconsin. A negotiable instrument, to be taken by an HDC, must be complete and not obviously irregular, taken in good faith, and for value. Crucially, the instrument must not be overdue or have a dishonored status at the time of negotiation. Furthermore, the holder must take it without notice of any claim to the instrument or defense against it. In this scenario, the promissory note was originally issued by Ms. Albright to “The Gadgetry Group.” The note contained a blank endorsement by “The Gadgetry Group.” Mr. Chen then purchased the note from Ms. Albright’s former business partner, Mr. Davies, who possessed the note. The critical fact is that the note was originally due on March 1, 2023. Mr. Chen acquired the note on April 15, 2023. Since the note was past its due date when Mr. Chen took possession, he cannot qualify as a holder in due course. Under UCC § 3-302(a)(2), a holder takes an instrument “when the instrument is issued or negotiated to the holder.” UCC § 3-302(a)(1) requires that the holder take the instrument “without notice that it is overdue or dishonored, or that there is an uncured default with respect to payment of another instrument issued as part of the same series.” Wisconsin law, following the UCC, considers an instrument overdue when it is taken after the stated due date. As Mr. Chen acquired the note on April 15, 2023, and the due date was March 1, 2023, the note was overdue. Therefore, Mr. Chen takes the note subject to any defenses that Ms. Albright could assert against the original payee, “The Gadgetry Group.” Ms. Albright’s defense of fraud in the inducement is a real defense, generally available against a holder not in due course.

The core concept here is the liability of a party who signs a negotiable instrument in a representative capacity without clearly indicating that they are signing on behalf of an identified principal. Wisconsin’s UCC Article 3, specifically § 401(b), addresses this. If an authorized representative signs a negotiable instrument in a way that does not show the principal’s name and the representative’s relation to the principal, the representative is personally liable. However, the representative is not liable if the instrument names the principal but does not show that the representative signed in a representative capacity. The key to avoiding personal liability is to clearly identify both the principal and the representative’s role. In this scenario, the note names “Green Valley Farms” but does not indicate that Ms. Albright signed in any particular capacity for Green Valley Farms. Therefore, under § 401(b), she is personally liable. The fact that the note is for the benefit of Green Valley Farms or that the payee knew she was the president of Green Valley Farms does not, by itself, negate her personal liability when the instrument itself does not reflect her representative capacity. The statutory language focuses on what is *on the face of the instrument*.

Under Wisconsin’s Uniform Commercial Code (UCC) Article 3, a holder in due course (HDC) takes an instrument free from all defenses of any party to the instrument with whom the holder has not dealt, except for real defenses. Real defenses, which can be asserted against any holder, including an HDC, are specifically enumerated. These include infancy, duress, illegality, fraud in the execution (real fraud), discharge in insolvency proceedings, and such other incapacity, or duress, or illegality of the transaction, as nullifies the obligation of the obligor. Forged signatures are also a real defense. In this scenario, the promissory note was initially valid between Agnes and Bartholomew. However, the subsequent alteration by Bartholomew, specifically increasing the principal amount without the consent of Agnes, constitutes a material alteration. Under UCC § 3-407, a holder in due course can enforce an instrument that has been materially altered according to its original tenor, meaning they can only recover the amount as it was originally written, not the altered amount. Therefore, when Bartholomew negotiates the note to Clara, who is a holder in due course, Clara can enforce the note against Agnes, but only for the original amount of $5,000, as the material alteration is a defense against the increased amount.

The core concept here revolves around the discharge of a party from liability on a negotiable instrument. Under Wisconsin’s Uniform Commercial Code (UCC) Article 3, specifically § 401.0311 (which mirrors UCC § 3-605), a party can be discharged by a voluntary cancellation of the instrument or by an intentional destruction of the instrument by the holder. A discharge also occurs if the holder renounces rights to payment by a separate writing signed by the holder or by surrendering the instrument for payment. In this scenario, while Mr. Henderson surrendered the note to Ms. Albright, the critical factor is that he did so *without* receiving payment. The UCC distinguishes between surrender for payment and surrender for other reasons. Surrendering the instrument for payment is an act that discharges the obligor. However, if the surrender is not for payment, and the instrument is then destroyed or otherwise rendered uncollectible, the original parties are not discharged from their liability on the underlying obligation or the instrument itself. Therefore, the destruction of the note by Ms. Albright after it was surrendered to her for inspection, and not for payment, does not discharge her liability as the maker. The holder, Mr. Henderson, still possesses the right to enforce the underlying obligation, and he could potentially seek to prove the existence and terms of the note to recover. The destruction of the physical instrument by the obligor after it was returned without payment does not extinguish the debt or the instrument’s enforceability, especially when the surrender was not intended as a discharge for payment.

The question revolves around the concept of a holder in due course (HDC) and the defenses available against such a holder under UCC Article 3, as adopted in Wisconsin. Specifically, it tests the distinction between real defenses, which are valid against an HDC, and personal defenses, which are generally not. Wisconsin Statute § 403.305(1) outlines the claims in recoupment or defense against the obligor on the instrument. Under UCC § 3-305(a)(1), an HDC takes the instrument free of most claims to it or defenses of any party to the instrument with whom the HDC has not dealt. However, UCC § 3-305(a)(2) lists certain defenses that are available against an HDC. These include infancy, duress that nullifies the obligation, fraud that induces the party to make the unauthorized signature, discharge in insolvency proceedings, and such illegality of the transaction as renders the obligation of the party a nullity. These are often referred to as “real defenses.” Other defenses, such as breach of contract, failure of consideration, or fraud in the inducement, are “personal defenses” and are cut off by an HDC. In the given scenario, the note was procured through fraudulent misrepresentation concerning the quality of goods, which constitutes fraud in the inducement. This is a personal defense. Since Amelia is a holder in due course, she takes the instrument free from this personal defense. Therefore, Amelia can enforce the instrument against Bartholomew. The calculation is conceptual: Personal Defense (Fraud in the Inducement) is NOT a defense against a Holder in Due Course.

The core issue here is whether the holder of the promissory note is a holder in due course (HDC) and thus takes the instrument free from most defenses. For a holder to be an HDC under UCC Article 3, they must take the instrument for value, in good faith, and without notice of any defense or claim. In this scenario, the note was transferred by endorsement to the Wisconsin Bank. The bank provided value by crediting the account of the transferor, a common method of giving value for an instrument. The critical element to consider is notice. The fact that the note was overdue when transferred to the bank is a significant factor. UCC § 3-304(a)(2) states that a purchaser has notice that an instrument is overdue if the purchaser has notice that the party promising to pay is obliged to pay an amount that is past due or notice that the due date of the instrument has passed. A note is overdue on the day after its due date. Since the note was due on May 1st and transferred on May 15th, it was indeed overdue. Taking an instrument that is overdue is considered taking it with notice of a defense, specifically the defense of the maker that the instrument is overdue. Therefore, the Wisconsin Bank cannot qualify as a holder in due course. As a holder not in due course, the bank takes the instrument subject to all defenses and claims that are available to the maker against the original payee. This includes the defense of failure of consideration, which the maker is attempting to assert. Consequently, the maker can assert this defense against the Wisconsin Bank.