What are the benefits of being a holder in due course??

Asked over 2 years ago - Paterson, NJ

What are the benefits of being a holder in due course.

Attorney answers (3)

  1. Christopher Barrett Fay

    Contributor Level 13

    2

    Lawyers agree

    Answered . A holder in due course who has provided value in good faith for a negotiable instrument can be insulated from claims against the original parties to the transaction. In some ways (too complicated too discuss here), the Uniform Commercial Code elevates a holder in due course to a status above a normal party to a contract. The general idea is to protect an innocent third party (the holder in due course) who has no notice of a defect and bargains for the negotiable instrument in good faith. There can be other rights, and obligations, of being a holder in due course beyond this simplistic explanation, but I hope this provides some general information as a starting point for you.

    Good luck,
    Chris

    PS: If this was most helpful please mark it as a best answer.

    The Law Office of Christopher Barrett Fay, 1325 Spruce St., Philadelphia, PA 19107, chris@cfaylaw.com, (267)... more
  2. Andrew J Siegel

    Contributor Level 6

    2

    Lawyers agree

    Answered . The other answers are excellent. I want to add two points (note, the topic of holder in due course is fascinating and there is a myriad of laws and cases regarding same --the foundation of same is found in the Uniform Commercial Code). First, even if holder in due course, some defenses can still be raised. Second, unbeknownst to most, any endorsement page that might be on a page that is separate from the instrument must be affixed to the instrument such as by stapling. Years ago I was involved in such a case in federal court. There a lender bought millions of dollars of instruments and sued obligors when they defaulted for non-payment. It turned out that the endorsements that transferred the instruments were on separate pages that were not stapled. The lender had boxes of instruments that had each instrument folded with the endorsement page. The court held this was problematic and could be a defect barring any collection since cannot prove for sure that the endorsement goes with the instrument.
    Note, I do not represent you and no attorney client privilege exists between us. I recommend you obtain counsel.

  3. Michael Charles Doland

    Contributor Level 20

    2

    Lawyers agree

    Answered . If you are speaking of a negotiable instrument, the principal benefits are that many defenses to contracts are not available to holders in due course of negotiable instruments. The second benefit is the means of endorsement as a manner of transfer.

    The above is general legal and business analysis. It is not "legal advise" but analysis, and different lawyers may... more

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