QuestionJuly 10, 2025

Trixie Trouble steals a check from your checkbook and makes it out to Sam Shady, forging your signature as the drawer. Sam Shady knows the check is stolen, but he indorses it payable to Hannah Holder and gives her the instrument in the ordinary course of business. Hannah took the check for value and in good faith Does Hannah qualify as a holder in due course? Yes, because she did not have notice of the forgery. No, because no one can be an HDC of a forged instrument. No, because she had notice of the forgery. Yes, because the forgery was not obvious just by looking at the instrument.

Trixie Trouble steals a check from your checkbook and makes it out to Sam Shady, forging your signature as the drawer. Sam Shady knows the check is stolen, but he indorses it payable to Hannah Holder and gives her the instrument in the ordinary course of business. Hannah took the check for value and in good faith Does Hannah qualify as a holder in due course? Yes, because she did not have notice of the forgery. No, because no one can be an HDC of a forged instrument. No, because she had notice of the forgery. Yes, because the forgery was not obvious just by looking at the instrument.
Trixie Trouble steals a check from your checkbook and makes it out to Sam
Shady, forging your signature as the drawer. Sam Shady knows the check is
stolen, but he indorses it payable to Hannah Holder and gives her the
instrument in the ordinary course of business. Hannah took the check for value
and in good faith Does Hannah qualify as a holder in due course?
Yes, because she did not have notice of the forgery.
No, because no one can be an HDC of a forged instrument.
No, because she had notice of the forgery.
Yes, because the forgery was not obvious just by looking at the
instrument.

Solution
4.5(304 votes)

Answer

No, because no one can be an HDC of a forged instrument. Explanation A holder in due course (HDC) must take the instrument for value, in good faith, and without notice of any defects. Since Hannah took the check knowing it was stolen, she cannot qualify as an HDC.

Explanation

A holder in due course (HDC) must take the instrument for value, in good faith, and without notice of any defects. Since Hannah took the check knowing it was stolen, she cannot qualify as an HDC.
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