Lisa purchases a home theater system from Homeplace Cinema.Lisa signs a $10,000 negotiable promissory note in connection with this purchase.This note requires monthly payments for five years.After the system is installed,Lisa begins to have trouble with it.It turns out that there are defective components in both the video and audio aspects of the system.Meanwhile,Homeplace Cinema has sold Lisa's promissory note to Amalgamated Finance,who meets all the requirements of a holder in due course.Lisa refuses to make any further payments on the notes due to the breach of contract by Homeplace Cinema.Which of the following is true?
A) Lisa has no further obligation to pay, because the breach of contract is a real defense.
B) Lisa must pay the note to the extent of the fair market value of the home theater system in its current condition.
C) Lisa does not have to pay, because federal legislation has eliminated holder in due course protection for negotiable instruments that are part of a consumer credit transaction.
D) Lisa must pay, because the obligation of a promissory note is always unconditional.
E) Lisa must pay, because she did not file proper written notification to the Federal Trade Commission.

Question

Quizplus · Accepted Answer

Federal legislation, specifically the FTC Holder Rule, limits the rights of a holder in due course in consumer credit transactions, allowing consumers to assert claims and defenses against the holder that they could assert against the seller.

Lisa Purchases a Home Theater System from Homeplace Cinema