The evening news was full of stories about how Levine sold fraudulent negotiable instruments to investors around the country.Two days later,Brighty,who did not hear the news reports,bought some of the fraudulent negotiable instruments from a swindled investor.Can Brighty claim the position of a holder in due course considering the publicity of the scam?

Question

Quizplus · Accepted Answer

Brighty can claim to have purchased the instruments in good faith if he subjectively believed the instruments were valid and if objectively his purchase of the instruments was commercially reasonable. The fact that there was publicity about the scam does not automatically mean that Brighty had knowledge of it. However, the objective test considers whether a reasonable person in the position of the purchaser would have known about the fraud, and whether the purchase was commercially reasonable. Therefore, if Brighty had no actual knowledge of the fraud, and if he reasonably believed that the instruments were valid and his purchase was commercially reasonable, he can still be considered a holder in due course.

The Evening News Was Full of Stories About How Levine