Banking Problems. Constance and Blair are both loan officers at ABC Bank. Constance, being somewhat dishonest, tells Henry, a cu
stomer of the bank who is wealthy and rarely checks the status of outstanding loans and balances, that she is collecting money for a local animal shelter. She asks him to sign a pledge that he will contribute $50 to the animal shelter. In fact, she had him sign a promissory note made out to her for $5,000, which she later endorsed to Richard. Henry proceeds back to one of his businesses, a used car dealership. Taylor comes in to purchase a used car. He and Henry agree that Taylor will purchase a used car for $3,000. Martha also comes in, and she and Henry agree that she will purchase a used car for $4,000. Both Taylor and Martha make out promissory notes payable to Henry. At the end of the day, Henry is looking through the notes and decides that Taylor's was mistakenly made out for $3,000. Henry mistakenly, but honestly, believed that the deal was for $3,500. Therefore, he changes the note to reflect that Taylor owed $3,500. Henry, on the other hand, simply did not like Martha. He decided that $4,000 was not enough for the car. Accordingly, he changed the note to $4,500. Which of the following is true regarding Martha's liability to Henry?
a. He will be liable because an official banking document was involved. 0 O He can claim fraud in the inducement
b. He will be liable without further inquiry unless he can establish that the note had not been endorsed to a holder in due course.
c. He can claim fraud in the factum, and whether he is liable or not will depend upon whether a court determines that he should have known what he was signing
d. He will not be liable, because a party is never liable when the party signed a negotiable instrument without knowing that it is, in fact, a negotiable instrument