Jeff convinces Kraus,who does not understand English,to sign a $1,000 note that Kraus believes is an application for a credit card.Jeff negotiates the note to Loni.Kraus
A) can avoid payment on the note even if Loni is an HDC.
B) can avoid payment on the note only if Loni is a holder.
C) must pay Loni the amount that it paid for the note.
D) must pay the note in full.

Question

Jeff convinces Kraus,who does not understand English,to sign a $1,000 note that Kraus believes is an application for a credit card.Jeff negotiates the note to Loni.Kraus​ 
A) ​can avoid payment on the note even if Loni is an HDC. 
B) ​can avoid payment on the note only if Loni is a holder. 
C) ​must pay Loni the amount that it paid for the note. 
D) ​must pay the note in full.

Quizplus · Accepted Answer

Kraus has a defense to payment on the note because he was fraudulently induced by Jeff to sign it. As a non-English speaker who believed he was signing an application for a credit card, Kraus did not have knowledge of the true nature of the note. Therefore, Loni cannot enforce payment against Kraus, even if Loni is a holder in due course (HDC).

Jeff Convinces Kraus,who Does Not Understand English,to Sign a $1,000