Bert demanded payment from Martin, who refused to pay. What are Bert’s rights against Martin?
On January 2, 2017, seventeen-year-old Martin paid $2,000 for a used motorboat to use in his fishing business, after Dealer’s fraudulent misrepresentation of the condition of the boat. Martin signed an installment contract for $1,500, and gave Dealer the following instrument as down payment:
I promise to pay to the order of Dealer, six months after date, the sum of $500 without interest. This is given as a down payment on an installment contract for a motorboat.
Dealer, on July 1, sold his business to Henry and included this note in the transaction. Dealer indorsed the note in blank and handed it to Henry, who left the note in his office safe. On July 10, Sharpie, an employee of Henry, without authority, stole the note and sold it to Bert for $300, indorsing the note “Sharpie.” At the time, in Bert’s presence, Sharpie filled in the date on the note as February 2, 2017. Bert demanded payment from Martin, who refused to pay. What are Bert’s rights against Martin?
Individual B purchased the instrument form Individual S for value in good faith, making Individual B a holder in due course. Individual B can recover the amount from Individual M against the defenses of Individual M, such as unauthorized completion and fraud in inducement. This is because both of these are personal defenses. The only real defense Individual M has against Individual B is the status of minority, which however,is subject to a lot of other factors such as the relevance and need of the boat. If Individual B was not a holder in due course, Individual M would not have been liable to Individual B.
Individual B is a holder in due course. Individual M has defenses such as fraud in inducement and unauthorized completion.These are all personal defenses and are ineffective against Individual B. The defense elated to the minority of Individual M is subject to the laws of the particular state.
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