Federal trade commision in consumer notes

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Reference no: EM131662424

Rachel Allen purchases a used Honda from Friendly Fred's Used Cars, paying $1500 down and signing a promissory note in which she promises to pay $2,000 to Fred or to his order 12 months from the date of the note with interest at 8.5 percent. Fred assures Rachel that the car is in good condition and has never been involved in an accident. Fred indorses (signs) his name on the back of the promissory note and discounts (as-signs) the note to Factors, Inc. Subsequently, Rachel discovers that, contrary to Fred's assurance, the Honda had in fact been involved in an accident that caused a front-end alignment problem. When Factors notifies her of the assignemnt to it of the note and asks for payment on the due date, Rachel wants to assert a defense of failure of consideration or breach of contract (warranty) against full payment of the note.

Among the legal issues raised in the scenario are:

1. When Fred transferred the promissory note to Factors after signing his name to the back of it, what rights did Factors obtain?

2. Will Rachel be able to assert a defense of failure of consideration or breach of contract against full payment of the note to Factors?

3. If the promissory note contained the clause required by the Federal Trade Commision in consumer notes or installment sales contracts, would it change Rachel's rights?

Reference no: EM131662424

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