Question

In good faith, Clinton gave Jane $500 for a negotiable promissory note made out to Jane for $550. She needed some money before the due date on the note, and Clinton had no notice of outstanding claims or other defects of the note. Clinton ______.

Answer 1

Clinton, by giving Jane $500 in good faith and without notice of any defects or claims, became a holder in due course of the negotiable promissory note of $550. This gives Clinton the right to collect the full amount of the note, protected from most defenses that could be raised by the original parties.

Step-by-step explanation:

In the situation described, Clinton gave Jane $500 in exchange for a negotiable promissory note worth $550. Since Clinton acted in good faith and had no notice of any claims or defects, Clinton would be considered a holder in due course of the note. This legal concept in commercial law means that Clinton has the right to collect the full amount of the note, assuming all other elements of being a holder in due course are met. This right is generally protected even if there are issues with the original parties, provided that Clinton was unaware of such problems and did not behave in a conspicuously reckless manner when acquiring the note.