Jeane signs a promissory note to pay $5,000 to Naresh.Naresh negotiates the instrument and indorses it to Dolph.Dolph changes the payment amount to $50,000 and negotiates the note to Nicholas.Nicholas indorses the note and negotiates it to Mack.Nicholas and Mack are both unaware of Dolph's alteration.At this point,who has primary liability over the note?

Question

Quizplus · Accepted Answer

Primary liability on a promissory note falls on the issuer of the note. In this scenario, Jeane is the issuer of the note and Naresh is the original payee, making Naresh the holder in due course. Dolph's alteration of the payment amount is fraudulent, and therefore, does not hold up in court. As such, the note remains a $5,000 note, and Naresh is entitled to receive that amount from Jeane. Nicholas and Mack are not liable as they were not aware of the fraudulent alteration made by Dolph.

Jeane Signs a Promissory Note to Pay $5,000 to Naresh