Question
In February 2001, New York Linen Company, a party rental company, agreed to buy 350 chairs from Elite Products. On delivery of the chairs, New
In February 2001, New York Linen Company, a party rental company, agreed to buy 350 chairs from Elite Products. On delivery of the chairs, New York Linen issued a check (dated February 27) for $13,000 to Elite. Elite's owner, Meir Shmeltzer, transferred the check to General Credit Corporation, a company in the business of buying instruments from payees for cash. Meanwhile, after recounting the chairs, New York Linen discovered that delivery was not complete and stopped payment on the check. The next day, New York Linen drafted a second check, reflecting an adjusted payment of $11,275, and delivered it to Elite. A notation on the second check indicated that it was a replacement for the first check. When the first check was dishonored, General Credit filed a suit in a New York state court against New York Linen to recover the amount. New York Linen argued in part that General Credit was not a holder in due course because of the notation on the second check. In whose favor should the court rule? Why? Discuss fully.
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