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

Exercise 17

Martin made out a promissory note payable for $5,000 and issued the note to Pask. Pask transferred the note to Grimes, who became an HIDC because he purchased it in good faith, not knowing of any defects in the instrument. When the instrument became due, Grimes, without an explanation, refused to pay. Grimes, instead of presenting the note to Martin again for payment, then decided to sell the note, which was now overdue, to Tiller at a discount price simply because Grimes needed the money. Tiller, because of the discount price, still purchased the note, knowing it was overdue. Tiller then demanded payment from Martin, who now claimed fraud in the inducement on the part of Pask. Does Tiller have the right to collect on the note from Martin, the maker, even though Martin claimed fraud?