Recognize the elements of a negotiable instrument, as well as the elements of rules
affecting transferability and liability.
Now suppose that you go to your bank and write a check on your account payable to cash
for $500. The teller gives you the cash without asking you to indorse the check. After you leave,
the teller slips the check into his pocket. Later, the teller delivers it (without an endorsement) to
his friend Carol in payment for a gambling debt. Carol takes your check to her bank, indorses it,
and deposits the money.
Discuss whether Carol is a holder in due course.
Yes, Carol can be a holder in due course because, the requirements if the holder in
due course are as follows “1. For value 2. In good faith 3. Without notice that is overdue,
that it has been dis honored by the person claiming it. In addition, that it was a unauthorized
signature.”(2011, Business law text & exercises) Even though she is not the person who took
the check from the bank she endorsed the check knowing that it was not hers to cash. It does
HOLDER IN DUE COURSE
not matter that the cashier took the check at this point. Carlo is the one who is liable for making