Cengage Advantage Books: Business Law 9th Edition by Arnold Goldman ,William Sigismond

Exercise 13

On June 2, Sibley Co. assigned to the HMCK Bank for $70,000 its entire interest in a $75,000 account receivable due in sixty days from Farmer. On June 4, HMCK Bank notified Farmer of the assignment. On June 7, Farmer informed HMCK that Sibley Co. had committed fraud in the transaction out of which the account receivable arose and that payment would not be made to HMCK. Should HMCK begin an action against Farmer? If Farmer is able to prove Sibley Co. acted in a fraudulent manner, can he successfully assert fraud as a defense?