A holder cannot qualify as a holder in due course if he or she has notice that the instrument contains an unauthorized signature or has been altered or that there is any adverse claim against or defense to its payment.This rule is commonly referred to as the ________ doctrine.
A) promissory estoppel
B) due diligence
C) blue light
D) red light
E) learned intermediary

Question

Quizplus · Accepted Answer

This rule is commonly referred to as the "red light" doctrine, indicating that the holder should stop and take notice of any potential issues with the instrument before assuming the status of a holder in due course. The other choices are not applicable to this situation.

A Holder Cannot Qualify as a Holder in Due Course