Drill Bit Company issues a check drawn on East Bank made payable to Faux Products for a shipment of Genuine-brand machine parts. Drill Bit discovers that the goods are counterfeit and orders East Bank not to pay the check. Meanwhile, Faux negotiates the check to Haul-Away Trucking, which takes it in good faith, for value, and unaware of Faux's fraud. Entitled to payment on the check is

Question

Quizplus · Accepted Answer

Haul-Away Trucking, having taken the check in good faith, for value, and without knowledge of Faux's fraud, qualifies as a holder in due course (HDC). HDCs are entitled to payment even if there were issues with the underlying transaction that led to the issuance of the check.

Drill Bit Company Issues a Check Drawn on East Bank