Akeya sells and delivers goods to Wayne for $10,000.Wayne executes and delivers a negotiable note to Akeya for $10,000 payable to Akeya's order in sixty days.A week later,Akeya duly negotiates the note to Maria.Which of the following is correct?
A) Maria is required to notify Wayne that she has acquired the note from Akeya.
B) If the goods are defective,Wayne's defense against Akeya is not available against Maria if Maria acquired the note in good faith and for value and had no knowledge of Wayne's defense against Akeya and took the note without reason to question its authenticity.
C) Maria is not entitled to hold Wayne for the full face amount of the note at maturity if Wayne has a valid defense against Akeya for defective goods regardless of the circumstances surrounding the negotiation of the note to Maria.
D) If there is a valid defense against Akeya,Maria cannot become a holder in due course when the note is transferred to her.

Question

Quizplus · Accepted Answer

This is the correct statement according to the rules of negotiable instruments. Maria is a holder in due course if she acquired the note in good faith and for value, and without knowledge of any defects or defenses against the note. In this case, if Wayne's defense against Akeya is related to defective goods, it will not be available against Maria. However, Maria is not required to notify Wayne of the transfer of the note to her, and she is entitled to hold Wayne for the full face amount of the note at maturity. Choice A is incorrect because there is no requirement for Maria to notify Wayne. Choice C is incorrect because it contradicts the rules for holders in due course. Choice D is incorrect because the fact that there is a defense against Akeya does not automatically prevent Maria from becoming a holder in due course.

Akeya Sells and Delivers Goods to Wayne for $10,000