Joan signs a promissory note to pay $1,000 to Alex. Alex cleverly raises the note to $10,000 and negotiates the note to Ned. Ned indorses the note and negotiates it to Mark. When Mark presents the note to Joan for payment, she has to pay only the original amount of the note, $1,000.

Question

Quizplus · Accepted Answer

Joan is only obligated to pay the original amount of $1,000 because the alteration of the note by Alex was unauthorized, making the note void except in favor of a holder in due course who may enforce it only to the extent of the original terms.

Joan Signs a Promissory Note to Pay $1,000 to Alex