Billy,a minor,buys a car form Ajax Auto Dealers,signing a $2,000 negotiable installment note in payment.Ajax needs the cash,so it sells the note to Acme Finance Company,for its fair market value,indorsing the note in blank.The owner of Acme,who personally purchased the note,knew that Billy was a minor.Circumstances occur such that Acme can collect the note only if it is a holder in due course.Is Acme a holder in due course with respect to this note?

Question

Quizplus · Accepted Answer

According to the Uniform Commercial Code (UCC), a minor is not legally responsible for a contract they entered into. Therefore, Billy can raise a defense of minority, and Acme Finance Company had notice of this defense when purchasing the note. Even though Ajax Auto Dealers indorsed the note in blank and Acme Finance Company purchased it for its fair market value, they cannot be considered a holder in due course if they have notice of a defense against the note.

Billy,a Minor,buys a Car Form Ajax Auto Dealers,signing a $2,000