Jones did work for Smith,who agreed to pay him in advance by cheque.Smith prepared a cheque for Jones.In which of the following situations would Smith have to honour the cheque to Green after it had been transferred to her by Jones?
A) Where Green was Jones's girlfriend who had been given the note as a gift. Jones had not yet started the job.
B) Where Green knew that Jones had taken the completed cheque from Smith's desk while Smith was out to lunch.
C) Where Green and Jones had worked together in a scheme to cheat Smith.
D) Where Green operated a finance company and, while not knowing Jones but recognizing Smith's signature and knowing his good reputation, had given Jones $400 for the $500 cheque.
E) Where Jones had changed the $500 to read $5000 by adding a zero and rubbing out the word "hundred" and writing "thousand" over it. The alteration was clearly visible on the cheque.

Question

Quizplus · Accepted Answer

In this situation, Green is a bona fide purchaser for value without notice of any defects in the title. She has given Jones $400 for the $500 cheque, and Smith's good reputation and signature recognition are enough for her to believe that the cheque is valid. Therefore, Smith would have to honour the cheque to Green. In all other situations, there are defects in the title, and Smith would not be obligated to honour the cheque to Green.

Jones Did Work for Smith,who Agreed to Pay Him in Advance