Holder in Due Course

Question 1

Requirements to be a holder in due course

Answer 1

Instrument must be negotiable
Must be a holder
Authenticity not questioned
Due course requires holder to take
* for value
* in good faith
* without notice

Question 2

What HDC must be without notice of

Answer 2

• instument overdue
• instrument dishonored (bounced)
• unauthorized signature or alteration
• claims to the instrument
• defenses or claims of recoupment

Question 3

Real defenses (can still be used against an HDC)

Answer 3

• infancy
• incapacity to consent
• duress
• illegality
• fraud in the factum (didn’t know what they were signing)
• discharge in insolvency proceedings
• statute of limitations
• alterations and forgeries
• accommodation (suretyship) defenses
• discharges known to HDC

Question 4

Personal defenses (cannot be used against HDC but can against others)

Answer 4

• lack of consideration
• breach of warranty
• fraud in the inducement (person knows what signing, but a lie caused them to sign)