Asked by Kiasha Trammell on May 02, 2024
Verified
A negotiation to transfer an instrument can be effective even if it is obtained by fraud, duress, or mistake.
Negotiation
A dialogue between two or more parties, aimed at reaching a mutual agreement or resolving a dispute over a particular issue or contract.
Duress
Duress is a condition where a person performs an act as a result of violence, threat, or other pressure against the person, often impacting the legality of agreements made under such conditions.
- Gain insight into how fraud, forgery, and pressure affect the negotiation and legal force of negotiable documents.
Verified Answer
MM
Maximilian MulyonoMay 03, 2024
Final Answer :
True
Explanation :
Under the Uniform Commercial Code (UCC), a negotiation of an instrument may still be considered effective even if the instrument was obtained through fraud, duress, or mistake, as long as the party acquiring the instrument qualifies as a holder in due course. A holder in due course takes the instrument free from claims of the transferor or prior parties, provided they acquired the instrument for value, in good faith, and without notice of any defect at the time of acquisition.
Learning Objectives
- Gain insight into how fraud, forgery, and pressure affect the negotiation and legal force of negotiable documents.