Asked by Jocelyn Raygoza on May 10, 2024
Verified
What is the effect of Kelsey receiving notice the day after she cashed the check for Rafe that the check had been stolen?
A) The notice has no effect on her status as holder in due course because it was provided after she cashed the check.
B) The notice prevents her from being a holder in due course.
C) The notice prevents her from being a holder in due course only if Rafe had been convicted of check cashing offenses in the past since she should have checked his criminal record.
D) The notice prevents her from being a holder in due course only if she subjectively knew that Rafe had been charged criminally with check cashing violations in the past.
E) The notice prevents her from being a holder in due course because it was presented to a business; only individuals can avoid the effect of notice of theft by cashing a check prior to receiving notice.
Notice
A formal communication or declaration given by one party to another, often required by law or agreement, to inform or warn of actions taken or impending.
Holder In Due Course
A holder in due course is a person who has acquired a negotiable instrument in good faith and for value, and thus has certain rights above the original parties to the instrument.
Stolen Check
A check that has been illegally taken from its rightful owner, potentially leading to unauthorized access to the owner’s bank account or financial loss.
- Describe the Shelter Principle and its application in the context of negotiable instruments.
- Familiarize oneself with the essential characteristics and obligations required to be recognized as a holder in due course (HDC), including the protections and benefits available to HDCs.
Verified Answer
BB
Bhuvan BhasinMay 14, 2024
Final Answer :
A
Explanation :
The notice has no effect on Kelsey's status as a holder in due course because it was received after she had already cashed the check, meaning she took the check without notice of any defect.
Learning Objectives
- Describe the Shelter Principle and its application in the context of negotiable instruments.
- Familiarize oneself with the essential characteristics and obligations required to be recognized as a holder in due course (HDC), including the protections and benefits available to HDCs.