Asked by Abder-rahmane Cisse on May 08, 2024
Verified
Under which of the following circumstances does a holder taking an instrument for value not become a holder in due course?
A) If the holder acquires a security interest or some other lien in the instrument.
B) If the holder purchases the instrument at a judicial sale or under legal process.
C) If the holder takes the instrument for payment of a preceding claim.
D) If the holder performs the promise for which the instrument was issued.
E) If the holder exchanges the instrument for an irrevocable obligation to a third party.
Preceding Claim
A claim or legal demand made or recognized before another in time.
Holder In Due Course
A legal term referring to an individual who has taken possession of a negotiable instrument in good faith, with the belief that it is valid, for value, and without notice of any defects.
Judicial Sale
A sale conducted under the supervision of a court where the property is sold to satisfy a judgment or to execute a court order.
- Acquire knowledge on the notion of accepting an instrument "for value" and its connection to the Holder in Due Course (HDC) principle.
Verified Answer
VE
Valentina EtchepareMay 12, 2024
Final Answer :
B
Explanation :
A holder who purchases the instrument at a judicial sale or under legal process does not become a holder in due course because such acquisition does not meet the voluntary negotiation requirement essential for HDC status.
Learning Objectives
- Acquire knowledge on the notion of accepting an instrument "for value" and its connection to the Holder in Due Course (HDC) principle.