Clint induces David,by fraud in the inducement,to make an instrument payable to the order of Clint.Clint then negotiates the instrument to Eric,a holder in due course,and later reacquires it from Eric.In this case:
A) Clint is a holder in due course.
B) Clint is not a holder in due course,but he succeeds to the rights of one,because of the shelter rule.
C) Clint does not succeed to Eric's rights as a holder in due course and remains subject to the defense of fraud.
D) because fraud in the inducement is a real defense,it can be used against both Clint and Eric.

Question

Quizplus · Accepted Answer

Clint induced David to make the instrument by fraud, which means he used deceit or trickery to obtain the instrument. Thus, Clint does not have the rights of a holder in due course, and he cannot succeed to Eric's rights either. As a result, he remains subject to the defense of fraud. Even though Eric is a holder in due course, Clint's fraud in the inducement can still be used against him.

Clint Induces David,by Fraud in the Inducement,to Make an Instrument