Real defenses are good against any holder, including an HDC. These are infancy, void obligations, fraud in the execution, bankruptcy, discharge of which holder has notice, unauthorized signatures, and fraudulent alterations.
A drawer or an individual who is liable on an instrument cannot raise a defense against a holder in due course when: an incomplete document is delivered to a holder who then negotiates it to a holder in due course.
Requirements for Being a Holder in Due CourseBe a holder of a negotiable instrument;Have taken it: a) for value, b) in good faith, c) without notice. (1) that it is overdue or. ... Have no reason to question its authenticity on account of apparent evidence of forgery, alteration, irregularity or incompleteness.
that a holder is a holder in due course he takes the instrument free from (1) all claims to it on the part of any person; and (2) all defenses of any party to the instrument with whom the holder has not dealt except ... [real defenses, such as infancy, duress, etc.].” U.C.C.
To have the status of a holder in due course, a person must first be a holder. A universal defense will defeat a holder in due course and a holder through a holder in due course.
Hence, when the indorsement is a forgery, only the person whose signature is forged can raise the defense of forgery against a holder in due course. 4.
Definition of holder in due course : one other than the original recipient who holds a legally effective negotiable instrument (such as a promissory note) and who has a right to collect from and no responsibility toward the issuer.
In commercial law, a holder in due course is someone who takes a negotiable instrument in a value-for-value exchange without reason to doubt its legitimacy. A holder in due course acquires the right to make a claim for the instrument's value against its originator and intermediate holders.
The "holder in due course" doctrine, as implemented by Article 3 of the Uniform Commercial Code, says that a party who acquires a negotiable instrument in good faith, for value, and without notice of certain facts, and who also meets some additional requirements, takes the instrument free of competing claims of ...
A holder in due course holds the instrument free from any defect of title of prior parties, and free from defenses available to prior parties among themselves, and may enforce payment of the instrument for the full amount thereof against all parties liable thereon.
A holder in due course takes a negotiable instrument free of all defenses that could be asserted by any party to the instrument. As a general rule, a holder in due course takes a negotiable instrument subject to any claims that could be asserted to the instrument by any person.
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.