§ 6A-3-302 - Holder in due course.
SECTION 6A-3-302
§ 6A-3-302 Holder in due course. –(a) Subject to subsection (c) and § 6A-3-106(d), "holder in due course"means the holder of an instrument if:
(1) The instrument when issued or negotiated to the holderdoes not bear such apparent evidence of forgery or alteration or is nototherwise so irregular or incomplete as to call into question its authenticity;and
(2) The holder took the instrument (i) for value, (ii) ingood faith, (iii) without notice that the instrument is overdue or has beendishonored or that there is an uncured default with respect to payment ofanother instrument issued as part of the same series, (iv) without notice thatthe instrument contains an unauthorized signature or has been altered, (v)without notice of any claim to the instrument described in § 6A-3-306, and(vi) without notice that any party has a defense or claim in recoupmentdescribed in § 6A-3-305(a).
(b) Notice of discharge of a party, other than discharge inan insolvency proceeding, is not notice of a defense under subsection (a), butdischarge is effective against a person who became a holder in due course withnotice of the discharge. Public filing or recording of a document does not ofitself constitute notice of a defense, claim in recoupment, or claim to theinstrument.
(c) Except to the extent a transferor or predecessor ininterest has rights as a holder in due course, a person does not acquire rightsof a holder in due course of an instrument taken (i) by legal process or bypurchase in an execution, bankruptcy, or creditor's sale or similar proceeding,(ii) by purchase as part of a bulk transaction not in ordinary course ofbusiness of the transferor, or (iii) as the successor in interest to an estateor other organization.
(d) If, under § 6A-3-303(a)(1), the promise ofperformance that is the consideration for an instrument has been partiallyperformed, the holder may assert rights as a holder in due course of theinstrument only to the fraction of the amount payable under the instrumentequal to the value of the partial performance divided by the value of thepromised performance.
(e) If (i) the person entitled to enforce an instrument hasonly a security interest in the instrument and (ii) the person obliged to paythe instrument has a defense, claim in recoupment, or claim to the instrumentthat may be asserted against the person who granted the security interest, theperson entitled to enforce the instrument may assert rights as a holder in duecourse only to an amount payable under the instrument which, at the time ofenforcement of the instrument, does not exceed the amount of the unpaidobligation secured.
(f) To be effective, notice must be received at a time and ina manner that gives a reasonable opportunity to act on it.
(g) This section is subject to any law limiting status as aholder in due course in particular classes of transactions.