Business law #2&3 Siegman, a diamond merchant, issued a note for diamonds purcha
ID: 2337638 • Letter: B
Question
Business law #2&3Siegman, a diamond merchant, issued a note for diamonds purchased. The seller endorsed the note to a bank "as collateral for his pre existing obligations to the banks and as collateral for the diamonds shipped to defendants." Did the bank give value so as to qualify as a holder in due course? Explain. 2. 3. A bank received a check to deposit in Seve's account. Seve subsequently wrote checks withdrawing most of the proceeds of the deposited check. The bank paid these checks before receiving notice that the deposited check was dishonored. Does the bank qualify as a holder in due course? Explain.
Explanation / Answer
2. Anyone who accepts a third-party check is a holder in due course. He or she has certain legal rights, and is presumed to be unaware that (if such were the case) the instrument was at any time overdue, dishonored when presented for payment, had any claims against it, or the party required to pay it has valid reason for not doing so. Here, bank has accepted the note and has already given value for the instrument in the form of obligation which the seller owes to the bank. Now bank is rightfully owner and holder of the instrument.
3. Yes, since the bank had no prior knowledge that cheque would be dishonored, the bank becomes holder in due course as it has accepted a cheque and given the amount agains it.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.