which of the following applies for a holder in due course

Holder in Due Course is a legal term to describe the person who has received a negotiable instrument in good faith and is unaware of any prior claim, or that there is a defect in the title of the person who negotiated it. For example; a third-party check is a holder in due course.

Full Answer

What does it mean to be a holder in due course?

The holder in due course is a concept that refers to the party who holds an important, and often negotiable, document. This document is sometimes referred to as an instrument because it is often an instrument of payment. This might include a bank note, draft, or check. The holder is temporarily the owner of the document that holds value.

What is a 3302 holder in due course?

The Preservation of Consumers’ Claims and Defenses [Holder in Due Course Rule], formally known as the "Trade Regulation Rule Concerning Preservation of Consumers' Claims and Defenses," protects consumers when merchants sell a consumer's credit contracts to other lenders. Specifically, it preserves consumers' right to assert the same legal claims and …

What are the defenses to a due course claim?

Requirements for Being a Holder in Due Course. Under Section 3-302 of the Uniform Commercial Code (UCC), to be a holder in due course (HDC), a transferee must fulfill the following: 1. Be a holder of a negotiable instrument; 2. Have taken it: a) for value, b) in good faith, c) without notice (1) that it is overdue or (2) has been dishonored ...

Is Carter a holder in due course?

A holder in due course is a holder who has taken the instrument under the following conditions: (a)That it is complete and regular upon its face; (b) That he became the holder of it before it was overdue, and without notice that it had been previously dishonored, if such was the fact; (c) That he took it in good faith and for value; (d) That at the time it was negotiated to him he had no …

What does the holder in due course get?

What the holder in due course gets is an instrument free of claims or defenses by previous possessors. A holder with such a preferred position can then treat the instrument almost as money, free from the worry that someone might show up and prove it defective.

Why is the holder in due course important?

The holder-in-due-course doctrine is important because it allows the holder of a negotiable instrument to take the paper free from most claims and defenses against it. Without the doctrine, such a holder would be a mere transferee.

What is a holder in a contract?

Again, a holder is a person who possesses a negotiable instrument “payable to bearer or, the case of an instrument payable to an identified person, if the identified person is in possession.” Uniform Commercial Code, Section 1-201 (20). An instrument is payable to an identified person if she is the named payee, or if it is indorsed to her. So a holder is one who possesses an instrument and who has all the necessary indorsements.

What is the meaning of UCC section 3303?

Section 3-303 of the UCC describes what is meant by transferring an instrument “for value.” In a broad sense, it means the holder has given something for it, which sounds like consideration. But “value” here is not the same as consideration under contract law. Here is the UCC language:

What is security interest?

Value is not limited to cash or the fulfillment of a contractual obligation. A holder who acquires a lien on, or a security interest in, an instrument other than by legal process has taken for value. 3.

What is a holder in a commercial paper?

A holder is a person in possession of an instrument payable to bearer or to the identified person possessing it. But a holder’s rights are ordinary, as we noted briefly in Chapter 22 "Nature and Form of Commercial Paper". If a person to whom an instrument is negotiated becomes nothing more than a holder, the law of commercial paper would not be ...

What is a mere holder?

A mere holder is simply an assignee, who acquires the assignor’s rights but also his liabilities; an ordinary holder must defend against claims and overcome defenses just as his assignor would. The holder in due course is really the crux of the concept of commercial paper and the key to its success and importance.

What is a blank indorsement?

A blank indorsement is one that does not indicate a particular indorsee, and it also creates bearer paper.

What happens if a check is marked as not sufficient funds?

If a check has been marked "payment refused - not sufficient funds" a person in possession of it can qualify as a holder in due course.

What is bearer paper?

An instrument that is payable to a specific payee or indorsee is bearer paper.

What does "c" mean in a transfer?

C) A transfer that creates no new legal obligations.

Can Indorsements convert bearer paper to order paper?

A) Indorsements can convert bearer paper to order paper, but not vice versa.

Can a person become a holder of an instrument under the red light doctrine?

Under the red light doctrine a person cannot become a holder in due course of an instrument if there is obvious evidence of an irregularity in the instrument.

Can an assignment transfer greater rights than the transferor?

D) An assignment can transfer no greater rights than those held by the transferor, whereas the transferee in a negotiation can receive greater rights than those held by the transferor.

Why is the holder in due course important?

The holder-in-due-course doctrine is important because it allows the holder of a negotiable instrument to take the paper free from most claims and defenses against it. Without the doctrine, such a holder would be a mere transferee.

What is the shelter rule for holder in due course?

The shelter rule#N#Under Article 3 of the Uniform Commercial Code, the transferee of an instrument acquires the same rights his or her transferor had.#N#provides that the transferee of an instrument acquires the same rights that the transferor had. Thus a person who does not himself qualify as an HDC can still acquire that status if some previous holder (someone “upstream”) was an HDC.

What is the meaning of UCC section 3303?

Section 3-303 of the UCC describes what is meant by transferring an instrument “for value.” In a broad sense, it means the holder has given something for it, which sounds like consideration. But “value” here is not the same as consideration under contract law. Here is the UCC language:

What is a holder in a contract?

Again, a holder is a person who possesses a negotiable instrument “payable to bearer or, the case of an instrument payable to an identified person, if the identified person is in possession.” Uniform Commercial Code, Section 1-201 (20). An instrument is payable to an identified person if she is the named payee, or if it is indorsed to her. So a holder is one who possesses an instrument and who has all the necessary indorsements.

What is a mere holder?

A mere holder is simply an assignee, who acquires the assignor’s rights but also his liabilities; an ordinary holder must defend against claims and overcome defenses just as his assignor would. The holder in due course is really the crux of the concept of commercial paper and the key to its success and importance.

What is a taking for value?

3. Antecedent debt. Likewise, taking an instrument in payment of, or as security for, a prior claim, whether or not the claim is due, is a taking for value.

Why did Carter argue that its motion for summary judgment should have been granted?

Carter argues that its motion for summary judgment should have been granted because, as a holder in due course, it has the right to recover on the checks from the drawer, Omni.