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Okay, can the maker of a commercial instrument limit the ability of a subsequent transferee
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of that instrument from becoming a holder in due course? Because as we've discussed, holder in due course status provides defenses or provides
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exemption from certain defenses by the payor against paying the instrument. So it would be in a payor's best interest in certain situations to limit the ability
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of individuals in the future to become a holder in due course
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So the answer is yes in certain situations. The maker of a note, this doesn't generally apply to drafts, but the maker of a note can
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follow what's called the Federal Trade Commission rule. The FTC rule says that the maker of a note in the sale of goods can include a legend on
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the instrument that includes specific language indicating that the holder of this note is
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subject to any defenses real and personal of the payor against the holder of the instrument
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And so it effectively limits the ability of an individual to become a holder in due course
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of that instrument. Now, as we previously discussed, this does affect the value of the instrument because
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the essence of negotiability is that an individual can raise their rights to a higher standard
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So it entails less risk of non-payment and makes the instrument more valid, makes it more liquid
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So in this situation doing that may affect the value and liquidity of the instrument
