Question

Green Grocer Wholesale, Inc. received an $850.00 check from Bob for a grocery purchase. The check was from Forest Enterprises to Ana and had been indorsed to Bob who, in turn, indorsed the check to Green. The clerk at Green failed to carefully examine the check, not noticing that the number 5 had been changed to an 8. Green Grocer has:

a. not taken the instrument in good faith.
b. taken the instrument in good faith.
c. not taken the instrument in good faith to $500.
d. taken the instrument in good faith to $300.

Answer 1

Green Grocer Wholesale, Inc. has taken the instrument in good faith to $300.

Step-by-step explanation:

Green Grocer Wholesale, Inc. has taken the instrument in good faith to $300.

An instrument is taken in good faith if it is acquired without notice of any defect or forgery and for value. In this case, Green Grocer received the check from Bob, who endorsed it to them. The fact that the clerk failed to notice the change in the check does not invalidate the good faith of Green Grocer's acceptance of the instrument.

Since the check was originally for $850, but the number 5 was changed to an 8, the amount has been altered to $800. Therefore, Green Grocer can only claim that they took the instrument in good faith to $300, which is the difference between the original amount and the altered amount.

Green Grocer Wholesale, Inc. has not taken the instrument in good faith because the check was altered from $500 to $850, and the store clerk failed to carefully examine it for such alterations. According to the Uniform Commercial Code (UCC), good faith requires honesty in fact and the observance of reasonable commercial standards of fair dealing. Had the clerk examined the check carefully and noticed the alteration, Green Grocer could have avoided accepting a potentially fraudulent instrument.