Question

Frey paid Holt $2,500 by check pursuant to an agreement between them whereby Holt promised to perform in Frey's theatre within the next year. Hold indorsed the check, making it payable to Len. Hol...

Frey paid Holt $2,500 by check pursuant to an agreement between them whereby Holt promised to perform in Frey's theatre within the next year. Hold indorsed the check, making it payable to Len. Holt's status with regard to the check was of of a(n)

a. Assignee since payee may not also be a holder in due course.

b. Holder since Holt's promised failed to satisfy the value requirement necessary to become a holder in due course.

c. Holder in due course under the shelter rule since Able's rights as a holder in due course revert to Holt.

d. Holder in due course since all the requirements have been satisfied.

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Answer #1

A holder in due course has to satisfy the following conditions:

- He must be a holder.

- He must have obtained the cheque for value.

- He must have obtained it in good faith.

- The check should not be dishonored, overdue or encumbered in any way.

- There should be no forgery, alterations or irregularity.

c. Holder in due course under the shelter rule since Able's rights as a holder in due course revert to Holt.

The correct option is C.

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