CP: Benefits of Holder in Due Course Status

Question 1

What is the one sentence rule about benefits of HDC status?

Answer 1

HDC takes free from claims and personal defenses, but is subject to real defenses.

Question 2

What is a claim?

Answer 2

A right to a negotiable instrument because of superior ownership.

Question 3

If a negotiable instrument is negotiated to an HDC, who wins between the superior owner and the HDC?

Answer 3

The HDC.

Question 4

What kinds of defenses are personal?

Answer 4

Defenses available in ordinary contract actions, about inducement: lack of consideration, unconscionability, waiver, estoppel, fraud in the inducement

Question 5

What kinds of defenses are “real” defenses that the HDC takes subject to?

Answer 5

MADFIFI4
Material Alteration
Duress
Fraud in the Factum
Infancy
Insolvency
Illegality
Incapacity

Question 6

What is a material alteration in the context of negotiable instruments?

Answer 6

A change in the terms of the instrument.

Question 7

If a third party adds a bunch of zeros to the end of a negotiable instrument - is the maker or the drawer liable for that amount?

Answer 7

Not unless she was negligent (e.g. left blanks or wide spaces).