Billy,a minor,buys a car form Ajax Auto Dealers,signing a $2,000 negotiable installment note in payment.Ajax needs the cash,so it sells the note to Acme Finance Company,for its fair market value,indorsing the note in blank.The owner of Acme,who personally purchased the note,knew that Billy was a minor.Circumstances occur such that Acme can collect the note only if it is a holder in due course.Is Acme a holder in due course with respect to this note?
A) yes, Acme is a holder in due course
B) no, because the note was not properly negotiated to Acme
C) no, because the note bore evidence of irregularity
D) no, because Acme took the note with notice that there was a defense to its payment
E) no, Acme is not a holder in due course because of some other reason

Question

Quizplus · Accepted Answer

Acme is not a holder in due course because they had notice that there was a defense to the payment (i.e. that Billy was a minor). A holder in due course is someone who takes a negotiable instrument for value, in good faith, and without notice of any defects or defenses. Since Acme had notice of a defense, they are not a holder in due course.

Billy,a Minor,buys a Car Form Ajax Auto Dealers,signing a $2,000