Edna is the payee of a bearer instrument-a promissory note in the amount of $10,000. Flem offers to irrigate Edna's ranch next week in exchange for the note. She agrees and delivers the note to Flem. Flem is
A)an HDC, because he promised to perform services at a future date.
B)an HDC, because the transferor was the original payee on the note.
C)not an HDC, because he did not acquire the instrument in good faith.
D)not an HDC, because he did not yet give value for the instrument.

Question

Quizplus · Accepted Answer

Flem is not considered a holder in due course (HDC) because he has not yet given value for the instrument. An HDC must give value, take the instrument in good faith, and without notice that it is overdue or has any defenses against it. In this scenario, Flem has only promised future services, which does not fulfill the requirement of giving value at the time of the transaction.

Edna Is the Payee of a Bearer Instrument-A Promissory Note