8.3A-302 - A-302. Holder in due course.
§ 8.3A-302. Holder in due course.
(a) Subject to subsection (c) and § 8.3A-106 (d), "holder in due course"means the holder of an instrument if:
(1) the instrument when issued or negotiated to the holder does not bear suchapparent evidence of forgery or alteration or is not otherwise so irregularor incomplete as to call into question its authenticity; and
(2) the holder took the instrument (i) for value, (ii) in good faith, (iii)without notice that the instrument is overdue or has been dishonored or thatthere is an uncured default with respect to payment of another instrumentissued as part of the same series, (iv) without notice that the instrumentcontains an unauthorized signature or has been altered, (v) without notice ofany claim to the instrument described in § 8.3A-306, and (vi) without noticethat any party has a defense or claim in recoupment described in § 8.3A-305(a).
(b) Notice of discharge of a party, other than discharge in an insolvencyproceeding, is not notice of a defense under subsection (a), but discharge iseffective against a person who became a holder in due course with notice ofthe discharge. Public filing or recording of a document does not of itselfconstitute notice of a defense, claim in recoupment, or claim to theinstrument.
(c) Except to the extent a transferor or predecessor in interest has rightsas a holder in due course, a person does not acquire rights of a holder indue course of an instrument taken (i) by legal process or by purchase in anexecution, bankruptcy, or creditor's sale or similar proceeding, (ii) bypurchase as part of a bulk transaction not in ordinary course of business ofthe transferor, or (iii) as the successor in interest to an estate or otherorganization.
(d) If, under § 8.3A-303 (a) (1), the promise of performance that is theconsideration for an instrument has been partially performed, the holder mayassert rights as a holder in due course of the instrument only to thefraction of the amount payable under the instrument equal to the value of thepartial performance divided by the value of the promised performance.
(e) If (i) the person entitled to enforce an instrument has only a securityinterest in the instrument and (ii) the person obliged to pay the instrumenthas a defense, claim in recoupment, or claim to the instrument that may beasserted against the person who granted the security interest, the personentitled 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 in a manner thatgives a reasonable opportunity to act on it.
(g) This section is subject to any law limiting status as a holder in duecourse in particular classes of transactions.
(Code 1950, §§ 6-404, 6-408; 1964, c. 219, §§ 8.3-302, 8.3-304; 1992, c. 693.)