Jon is a holder in due course of a negotiable instrument and gives the instrument to Sarah as a Valentine's Day gift.
A) Sarah is a holder in due course.
B) Sarah is not a holder in due course but has the rights of a holder in due course.
C) Personal defenses would be successful against Sarah.
D) Sarah has become the payee of the instrument.
E) Anyone Sarah transfers the instrument to becomes a holder in due course.

Question

Quizplus · Accepted Answer

Jon, as a holder in due course, can transfer the negotiable instrument to Sarah. However, Sarah does not qualify as a holder in due course since she did not give any consideration for the instrument. Therefore, personal defenses can be raised against her. However, she would have the rights of a holder in due course if she had received the instrument from Jon through a valid transfer.

Jon Is a Holder in Due Course of a Negotiable