Also known as: holders in due course · HIDC · HDC · bona fide holder
Written by attorneys · grounded in primary & secondary sources — see below
A person who acquires a negotiable instrument for value, in good faith, and without notice of claims or defenses to it. The status shields the acquirer from most personal defenses while leaving real defenses intact.
Black Solar endorsed a negotiable note from the City of Nashville to Sarah for full value through an online platform. Sarah had no prior dealings with the parties and saw only a general disclaimer. Noon Energy later asserted its perfected security interest in the accounts. Sarah's holder in due course status gave her priority to the payment despite the earlier filing.
A drawer issued a bill of exchange to pay for land whose title later proved defective. The payee transferred the bill to a Maine resident before maturity in satisfaction of a preexisting debt. The transferee took without knowledge of the land dispute. The transferee enforced the bill free of the drawer's fraud defense.
Select any source to read its text and confirm it supports the definition.
An owner sold converted paintings through a chain of possessors. A later purchaser acquired one painting for value without notice of the original owner's claim. The purchaser obtained the rights of any prior holder in due course and could retain the painting against the true owner.
The purchaser must be a holder of a negotiable instrument, give value, act in good faith, and take without notice of claims or defenses. Filing of a financing statement does not constitute notice.
Yes. Article 9 expressly preserves the rights of a holder in due course of a negotiable instrument even when an earlier security interest was perfected by filing.
Only real defenses such as infancy, duress, illegality, fraud that prevented the obligor from knowing the nature of the instrument, discharge in insolvency, and certain forgery claims survive.
No. General disclaimers do not supply the specific notice of an adverse claim required to defeat the status.
Yes, to the extent the bank acquires a security interest in the item and otherwise meets the good faith and notice requirements of Section 3-302.
…Case information - Citation: 41 U.S. 1 (1842) - Judges: concurring: John Catron. Syllabus 1. Bills of exchange — Bona fide holder — State decisions. Action in the circuit court of New York on a bill of exchange, accepted in New York, instituted by the holder, a citizen of Maine. The acceptance and indorsement of the…