A due-course holder is an individual who has received a negotiable instrument, such as a check or promissory note, in good faith without knowledge of its falsity or fraudulence. They must have also given something of value in exchange for the instrument. The instrument must be complete and not overdue. As a due-course holder, they have the legal right to collect on the instrument without concern for personal defences, although they may still be subject to real defences.
A due-course holder is someone who has acquired a negotiable instrument in good faith, paid for it, and is unaware that it has been dishonoured or is overdue. The instrument must also be complete and regular on its face. According to the UCC § 3-302, a due-course holder takes the instrument free of all claims and personal defences, but subject to real defences. This means that if the instrument is later found to be invalid or fraudulent, the due-course holder is still protected and can collect on it. For example, if John buys a car from a dealership and finances it through a bank, the bank becomes a due-course holder of the promissory note that John signed to pay for the car. If John later tries to dispute the validity of the note, the bank is still protected as a due-course holder and can collect on the debt. In this scenario, the bank is a due-course holder because they received the promissory note in good faith, paid for it, and had no knowledge that it was invalid or fraudulent. Even if John tries to dispute the note later, the bank is still protected and can collect on the debt because they are a due-course holder.
A due-course holder is a person or entity that acquires a negotiable instrument, such as a promissory note or a check, in good faith and for value, without notice of any defects or claims against it.
A due-course holder has the right to enforce the instrument and collect payment from the parties obligated to pay. They are entitled to the same rights and defences as the original holder of the instrument.
To become a due-course holder, one must acquire the negotiable instrument in good faith, for value, and without notice of any defects or claims. This typically involves purchasing or receiving the instrument in a regular course of business.
No, a due-course holder cannot be held liable for the underlying debt. They are only responsible for enforcing the instrument and collecting payment from the parties obligated to pay.
If a due-course holder receives notice of a defect or claim against the instrument, they may lose their status as a due-course holder. However, the specific legal consequences will depend on the circumstances and applicable laws.
Yes, a due-course holder can transfer their rights to another party. This is typically done through an assignment or endorsement of the negotiable instrument.
Yes, a due-course holder can sue the original debtor for non-payment. They have the same rights as the original holder to enforce the instrument and seek payment.
A debtor can raise any valid defences they have against the due-course holder, such as fraud, forgery, or lack of consideration. However, the burden of proof is on the debtor to establish these defences.
No, a due-course holder cannot be held liable for the actions of the original holder. They are only responsible for their own actions in enforcing the instrument and collecting payment.
If a due-course holder discovers a defect or claim after acquiring the instrument, they should consult with a legal professional to determine the best course of action. Depending on the circumstances, they may need to take legal action to protect their rights or negotiate a resolution with the parties involved.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 16th April 2024.
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