Kris transfers a note, on which Liu is the maker, to Mia, who takes it for value and in good faith. Mia knows that Kris breached the contract underlying the note, giving Liu a defense against payment. With respect to this note, Mia is
A) a knowledgeable holder in due course.
B) an ordinary holder.
C) an ordinary holder in due course.
D) an ordinary note taker.

Question

Kris transfers a note, on which Liu is the maker, to Mia, who takes it for value and in good faith. Mia knows that Kris breached the contract underlying the note, giving Liu a defense against payment. With respect to this note, Mia is​
A) ​a knowledgeable holder in due course.
B) ​an ordinary holder.
C) ​an ordinary holder in due course.
D) ​an ordinary note taker.

Quizplus · Accepted Answer

Mia is an ordinary holder because she is aware of the breach of contract, which prevents her from being a holder in due course. A holder in due course must take the note without notice of any defenses or claims against it.

Kris Transfers a Note, on Which Liu Is the Maker