Question

TP sells franchises in the Old Fast Food chain. TP sells a franchise to Choi for $100,000 by cashier's check. Choi then hears that TP is going out of business and tries to stop payment on the check. TP has already transferred the money to a third party who meets the UCC's requirements for a holder in due course. The bank paid that third party. TP declares it is out of business. In a subsequent lawsuit:
a.the court will find that the third party is a holder in due course and, despite the fact that TP has defrauded Choi, not require the third party to repay Choi
b.because of the fraud involved, the court will require the third party repay Choi
c.because the instrument involved was a cashier's check and not an ordinary check, the court will not require the third party to repay Choi
d.because the amount in controversy was more than $50,000, the courts will be empowered to view the fraud as a felony and will ignore the requirements of the UCC
e.none of the other choices

Answer 1

Answer:

a.the court will find that the third party is a holder in due course and, despite the fact that TP has defrauded Choi, not require the third party to repay Choi

Explanation:

In the event where TP who sold a franchise to Choi decides to go out of business and transfers everything to a third. In a lawsuit the court will find that the third party is a holder in due course and, despite the fact that TP has defrauded Choi, not require the third party to repay Choi.