Home Improvement Company for repairs.

Read Chapter 26-27 Holders in Due Course and Defenses and Liabilities in Negotiation

1. How are holders in due course granted advantages and protections from disputes or problems with contracts between original parties to the bargain? Why are these protections important in commerce?
2. We see Review Questions 9 (p. 571) how Hilda signed a promissory note to Home Improvement Company for repairs. Her note was negotiated to a bank which refused to assist her when she found problems in the work— the bank sued her for payment of the loan. How should the court rule on her plea for dismissal of her obligation?  Does her conflict with the home improvement company relieve her of obligations to pay the bank for the loan? (be sure to review Table 26-1 p 565)
3. How does good faith and absence of notice determine if a party holding a negotiable instrument is truly a holder in due course?
4. Carter bought himself some new stereo equipment on credit from a dealer. His promissory note was negotiated to a bank who assumed status as a holder in due course. Shortly after purchase, the equipment failed and the stereo dealer refused to fix or replace the purchase. Describe rights Carter may assert under FTC rules to seek relief from the bank holding his note. (see p 567, fair trade rules for consumers of goods in credit)

5. Describe how agency laws allow agents to negotiate financial instruments on behalf of their principal. In Case 27.1 p 574 we read about two agents, the Helmers, who wrote bad checks to their company supplier, RTI.  The company objected and sued the agents for personal liability. How did rules for agency determine if personal liability could be assessed on the Helmers

BONUS QUESTION:

Case 27.3 pp 585-586 Halifax v. Wachovia Bank

When is a bank liable when accepting and passing a forgery? We read in Case 27.3  p 585-586 about an employee who embezzled millions by creating false accounts and hording funds in her local bank for 4 years. The community bank interacted and cheerfully assisted the woman in her banking activity, and issued no alarm to company leaders about unusual behaviors.

You be the judge:

• What would you define as “the exercise of ordinary care” required of holders in due course like the bank?Did the Wachovia Bank act in “good faith” while assisting Mary in her fraudulent banking? Was the bank negligent and responsible for the loss?

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