C is corrent because payment of $250 for a $300 note would be considered value to become a holder in due course for the face value of the note. Cantrell, however, only paid $50 before he learned of defenses against the note. The value requirement of the holder in due course concept demands the holder give executed value. The promise to pay $200 in 10 days does not constitute executed value. Cantrell, however is entitled to get the benefit of the bargain. Cantrell was only paying $250 for the $300 note. Section 3-302 (d) of the UCC provides in situations where the holder provides partial value that the holder is entitled to the percentage of the value provided, rather than just the actual value provided. Since Cantrell has paid 20%, $50/$250, before he learned of the defenses, then Cantrell is entitled to 20% of the face value of the note: $60.
A is incorrect because Cantrell only paid $50 before he learned of defenses against the note. The value requirement of the holder in due course concept demands the holder give executed value. The promise to pay the other $200 in 10 days does not constitute executed value. Therefore, Cantrell is only a holder in due course to the extent of $60 and he will recover this amount from Abrams.
B is incorrect because failure to deliver goods is only a personal defense not good against a holder in due course.
D is incorrect because Cantrell only paid $50 before he learned of defenses against the note. The value requirement of the holder in due course concept demands the holder give executed value. The promise to pay $200 in 10 days does not constitute executed value. Therefore, Cantrell is only a holder in due course to the extent of $60 and he will recover this amount from Abrams.
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