IV. Holder in Due Course

Question 1

Holder in Due Course Defined

Answer 1

A HOLDER who GIVES VALUE in GOOD FAITH, WITHOUT NOTICE

Question 2

Holder

Answer 2

In possession of bearer paper or in possession of property issued or endorsed

Question 3

Gives Value

Answer 3

PERFORMED and AGREED TO CONSIDERATION

• can be HDC for a portion of note (e.g. only perform for 50% of it)
• value of consideration need not match value of note exactly
• OK: payment as secruity for previous claims, irrevocable commitment to 3P
• BANKS: not holders merely upon deposit of funds bu once customer withdraws bank becomes a holder. FIRST IN FIRST OUT

Question 4

Good faith

Answer 4

HONESTY IN FACT (subjective)

and observance of reasaonble commercial FAIR DEALING (objective)

Question 5

Without Notice

Answer 5

• Notice can include:
  
  • irregular or incomplete instrument
  • overdue or dishonered instrument
  • claim to the instrument
  • uauthorized or altered sig
  • any part with defense or claim in recouplment
  • knowledge of fiduciary having breached a duty or taken advantage of Fid Rel
• Does not include mistake relevant to or overdue interest payments
• Close conectedness–> more they know about the underlying trasnaction, less likely they are an HDC

Question 6

Precluding HDC

Answer 6

Any trans. where instrument taken by:

1) legal proceeding, execution, bankruptcy or creditors sale
2) bulk transaction not in bus ordinary course
3) susccessor of interest to estate or org

Question 7

Shelter Rule

Answer 7

Any individual who negotiates with HDC has same rights as HDC

Question 8

Real Defenses