Asked by Deangelo Johnson on Apr 26, 2024
Verified
Callaghan bought a bedroom set from a furniture store and signed a consumer credit contract agreeing to pay $150 in 12 monthly installments.The furniture store immediately negotiated the credit contract to a finance company,with which it had an arrangement,and received payment.The furniture turned out to be defective.Discuss if Callaghan can use the defense of defective furniture against the furniture store and the finance company for the money owed.
Consumer Credit Contract
An agreement between a borrower and a lender in which the borrower receives something of value now and agrees to repay the lender at a future date, usually with interest.
Defective Furniture
Furniture that has manufacturing flaws, impairing its usability, safety, or aesthetic value.
Finance Company
A business that makes loans to individuals and/or corporations, besides banks and other traditional financial institutions.
- Evaluate the consequences in legal situations in light of the standing of holders in due course and the application of defenses.
- Evaluate situations in which the consideration and issuance of negotiable instruments are disputed.
Verified Answer
OE
Olivia EvansMay 01, 2024
Final Answer :
Under the holder in due course rule adopted by the FTC,when the seller of consumer products has an arrangement with a financial institution to finance the seller's customer's purchases,the financial institution is subject to the customer's personal defenses and loses its holder-in-due-course protection.In this case,Callaghan's claims that the furniture was defective could be used against the finance company,even though it was the holder in due course.
Learning Objectives
- Evaluate the consequences in legal situations in light of the standing of holders in due course and the application of defenses.
- Evaluate situations in which the consideration and issuance of negotiable instruments are disputed.