Asked by Mackenzie Magaoay on May 06, 2024
Verified
What is the effect of the check's alteration on Kelsey's status as a holder in due course?
A) The alteration has no effect because a holder is not charged with examining an instrument presented for payment.
B) The alteration will likely prohibit her from being a holder in due course.
C) The alteration will affect her status as a holder in due course only if she had been put on notice of prior criminal behavior in the past on the part of Rafe.
D) The alteration will affect her status as a holder in due course only if the issuer can establish that it was not negligent in allowing a thief to gain access resulting in the alteration.
E) On the basis that the law does not want to unduly burden holders, the alteration will affect her status as a holder in due course only because the instrument was written for an amount in excess of $500.
Materially Altered
Refers to significant changes made to a document or item that affect its value, function, or condition, often rendering it void or voidable.
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 protections against defenses and claims that could be asserted against the original parties.
Criminal Behavior
Conduct by an individual or group that violates the criminal laws of a society, state, or other jurisdiction, deemed harmful or dangerous.
- Ascertain the legal ramifications of alterations, misspellings, and unsanctioned signatures on the enforceability of negotiable instruments.
- Gain an understanding of the distinctive features and prerequisites for obtaining the position of holder in due course (HDC), together with an overview of the rights and protections allocated to HDCs.
Verified Answer
BA
Brittany AlejandreMay 12, 2024
Final Answer :
B
Explanation :
The alteration from $200 to $2,000 is a material alteration that would likely prevent Kelsey from being considered a holder in due course, as a reasonable examination of the check would have revealed the alteration, and holders in due course are expected to take checks in good faith without notice of any claims or defenses against it.
Learning Objectives
- Ascertain the legal ramifications of alterations, misspellings, and unsanctioned signatures on the enforceability of negotiable instruments.
- Gain an understanding of the distinctive features and prerequisites for obtaining the position of holder in due course (HDC), together with an overview of the rights and protections allocated to HDCs.