Holder In Due Course Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Holder In Due Course, written in plain English, along with examples of how it is used.

What is Holder In Due Course?

(n) Holder In Due Course is the person holding a property or instrument or right without being the actual owner or right holder of such property in the process of conveyance of them to the correct owner. Eg. A finder of loss property is a holder in due course until he find the real owner and handover the property to him

History and Meaning of Holder In Due Course

Holder In Due Course is a legal term that refers to the person who possesses a negotiable instrument, such as a check or promissory note, and has met certain requirements, making them legally entitled to enforce it as the rightful owner. The term Holder in Due Course was introduced in the 1800s in the United States as a way to offer protection to third-party buyers of negotiable instruments, ensuring that they are not harmed by any defects in the transaction.

To qualify as a Holder In Due Course, an individual must satisfy specific criteria, such as acquiring the instrument in good faith, for value, and without any knowledge of any defects or problems with the instrument. The holder must also take the instrument without notice of any infirmity in the instrument or any issues of fraud or forgery. If these criteria are met, the holder is entitled to enforce the instrument and receive payment according to its terms.

Examples of Holder In Due Course

  1. Susan's father gives her a signed but blank check to make a payment on his behalf. Susan fills in the amount and deposits it into her account, becoming a Holder In Due Course of the check.

  2. A company purchases a promissory note from another company, paying full value for it. Since they met all the requirements and purchased the note in good faith, they become a Holder In Due Course of the note.

  3. John is given a stolen check by a friend, and he deposits it into his account. In this case, John is not a Holder In Due Course because he knew of the theft and took the check with notice of its issues.

Related Legal Terms

  1. Negotiable instrument - A document, such as a check or promissory note, that represents a promise to pay a specific amount of money and can be transferred to another person.

  2. Good faith - A term used to describe an honest and sincere intention to deal fairly with others.

  3. For value - Refers to the payment of something of worth that was given in exchange for the instrument.