Holder in Due Course

Requirements

Under UCC § 3-302(a), a holder in due course is a holder of an instrument if the instrument does not bear apparent evidence of forgery or alteration or is not otherwise so irregular or incomplete as to call into question its authenticity, and the holder took it:

• for value;
• in good faith;
• without notice that it is overdue or has been dishonored or that there is an uncured default with respect to payment of another instrument issued as part of the same series;
• without notice that it contains an unauthorized signature or has been altered;
• without notice of any claim to the instrument described in § 3-306; and
• without notice that any party has a defense or claim in recoupment described in § 3-305(a).

Consumer protections

Federal and state consumer-protection laws limit holder-in-due-course protection in many consumer credit transactions. Check the law that applies to the transaction.

Researching holder in due course in your state

First, find the statute or rule that governs holder in due course where you live. State law controls most of these questions, so the answer can change from one state to the next. Next, read recent decisions from the appellate courts in your state. They show how judges apply the law today. Also, check the local rules of the court that would hear your case. Our state procedures guide links to each state’s official rules. In addition, the Research Center explains how to confirm a source is still good law.

Sources and further reading

Official sources used on this page:

• law.cornell.edu

Related reading on Lawtopolis:

• Negotiable Instruments (UCC Article 3)
• Person Entitled to Enforce a Note