In a promissory note indorsed to B, C, D, E and F, who is the current holder after notice is given and the note is dishonored, and which statements about notices of dishonor are true?

In a promissory note indorsed to B, C, D, E and F, who is the current holder after notice is given and the note is dishonored, and which statements about notices of dishonor are true?

• A. I, II & III
• B. II, III & IV
• C. I, III & IV
• D. I, II & IV

Answer: (A)

Think of a promissory note with multiple indorsements as a chain of liability moving backward through the endorsers. The current holder is the last person who possesses the instrument after all indorsements—the instrument stays with that person even after dishonor until someone pays or sues. When dishonor occurs, a notice of dishonor must be given to all prior endorsers in the chain to fix their liability to the holder. This notice must be timely and properly communicated, so the endorsers are aware they can be sued if payment isn’t made. In this scenario, the last indorsee is the current holder after the notice and dishonor, so the current holder is the person who ends up with the note at that point (the last indorsee). The statements that are true about notices of dishonor are those that reflect that such notices bind the endorsers and must be given in a timely, proper manner to those who endorse the instrument. The option that includes those true statements corresponds to I, II and III. The statement in IV is not correct, which is why the correct choice is the one that lists I, II and III.

Think of a promissory note with multiple indorsements as a chain of liability moving backward through the endorsers. The current holder is the last person who possesses the instrument after all indorsements—the instrument stays with that person even after dishonor until someone pays or sues. When dishonor occurs, a notice of dishonor must be given to all prior endorsers in the chain to fix their liability to the holder. This notice must be timely and properly communicated, so the endorsers are aware they can be sued if payment isn’t made.

In this scenario, the last indorsee is the current holder after the notice and dishonor, so the current holder is the person who ends up with the note at that point (the last indorsee). The statements that are true about notices of dishonor are those that reflect that such notices bind the endorsers and must be given in a timely, proper manner to those who endorse the instrument. The option that includes those true statements corresponds to I, II and III. The statement in IV is not correct, which is why the correct choice is the one that lists I, II and III.