Molly makes a note payable to the order of Patrick; Patrick indorses it to Amy; Amy indorses it to Blake; and Blake indorses it to Homer. Homer presents the note to Molly within a reasonable time, but she refuses to pay. If Homer notifies only Patrick of the dishonor, Amy and Blake are discharged from liability.

Question

Quizplus · Accepted Answer

In negotiable instruments law, if a note is dishonored, the holder must notify all prior indorsers to hold them liable. Failure to notify any indorser discharges them from liability. Since Homer only notified Patrick, Amy and Blake are discharged.

Molly Makes a Note Payable to the Order of Patrick;