Jill issues a negotiable promissory note to Cherice, who indorses it and delivers it to Lee. If Lee knows that the note was given to Cherice in exchange for worthless securities, Lee cannot be a holder in due course.

Question

Quizplus · Accepted Answer

A holder in due course must take the instrument for value, in good faith, and without notice of any defect or claim against it. Since Lee knows about the worthless securities, he has notice of a defect, preventing him from being a holder in due course.

Jill Issues a Negotiable Promissory Note to Cherice, Who Indorses