[Run Around] Hema Issues a Promissory Note to Rahul

question 88

Multiple Choice

[Run Around] Hema issues a promissory note to Rahul. Rahul endorses the note and transfers it to Anne. Anne endorses the note and transfers it to Floyd. Floyd presents the note to Hema for payment. When Floyd presents the note to Hema, she asks him for reasonable identification. He did not have any identification with him and told her that she had no right to dishonor the instrument. Hema continued to insist, so finally, on the same day, Rahul obtained clear identification and presented it to her. Nevertheless, even with proper identification, Hema refused to pay the note, claiming that she lacked the funds with which to do so. After properly providing notification of dishonor to both Anne and Rahul, Floyd requested that Anne pay the note, but she told him that he would have to get his money from Rahul. Floyd has been trying to call Rahul for 35 days, but Rahul did not return his telephone calls. Floyd is exasperated; and within 40 days of when Hema refuses payment, he notifies Hema, Rahul, and Anne that the promissory note has been dishonored by Hema and that he is asserting liability on the note against all of them. Hema calls him up and says that she never dishonored the note, she simply lacks the funds with which to immediately pay and thinks that he should seek recovery elsewhere.
-Which of the following is true regarding Floyd's entitlement to payment from Hema?

• A) Floyd is only entitled to payment from Hema because Anne dishonored the payment.
• B) Floyd is not entitled to payment from Hema unless Rahul, in addition to Anne, dishonors the instrument.
• C) Floyd is never entitled payment from Hema because he must seek recovery only from Anne.
• D) Floyd is entitled to recover on the note from Hema.
• E) Floyd is entitled to recover on the note from Hema only if both Anne and Rahul have filed bankruptcy or are otherwise proven insolvent.

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Definitions:

Wealth

The abundance of valuable financial assets or physical possessions which can be converted into a form that can be used for transactions.

Flow Measure

A type of economic measurement that is recorded over a specific period of time, such as income or expenditure.

Demand Curves

A graphical representation showing the relationship between the price of a good and the quantity of that good consumers are willing to purchase at different prices.

Complements

Products that are frequently consumed in conjunction with one another, where a rise in demand for one results in a boost in demand for the other.