Steve issues a negotiable promissory note to Bob in exchange for Bob's promise to build an addition to Steve's home.The promissory note indicates this reason when Bob negotiates it to Willard for value.Can Willard be a holder in due course?
A) Yes,unless he knows that Bob has not built the addition
B) Yes,unless he did not give adequate value
C) No,since he has taken the instrument with notice of a defense
D) No,since he has violated the "good faith" requirement

Question

Quizplus · Accepted Answer

Willard can be a holder in due course unless he knows that Bob has not built the addition. A holder in due course takes an instrument free of most defenses that could be asserted against the original obligor, including claims of fraud, duress, and breach of contract. However, the holder in due course is subject to any claim that could be raised against previous holders of the instrument. Here, if Willard knows that Bob has not built the addition, he cannot claim the status of a holder in due course.

Steve Issues a Negotiable Promissory Note to Bob in Exchange