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“Hunt has in his possession a negotiable instrument that was originally payable to the order of Carr. It was transferred to Hunt by a mere delivery by Drake, who took it from Carr in good faith in satisfaction of an antecedent debt. The back of the instrument read as follows: “Pay to the order of Drake in satisfaction of my prior purchase of a new video calculator, signed Carr.” Which of the following is correct?
Correct A.
Hunt has the right to assert Drake’s rights, including his standing as a holder in due course, and also has the right to obtain Drake’s signature.B.
Drake’s taking the instrument for an antecedent debt prevents him from qualifying as a holder in due course.C.
Carr’s endorsement was a special endorsement; thus, Drake’s signature was not required in order to negotiate it.D.
Hunt is a holder in due course.A holder in due course has accepted a negotiable instrument for value, in good faith, and without notice that the instrument is overdue or dishonored, has irregularities, or that any person has a defense against paying it. Drake was a holder in due course because the instrument was acquired for an existing debt. Hunt is a holder in due course because the instrument was acquired for a purchase. A holder after a holder in due course has all the rights of the first holder in due course. Consequently, Hunt has the right to assert Drake’s rights.”
The correct answer is A, however D is also a correct answer as well (as you can see by the italicized sentences). The question of this problem is simply “which of the following is correct?” Why is A considered the correct answer when D is also correct?
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