Holder In Due Course in United States

Practical Information

Note: Some of this information was last updated in 1982

The transferee of a negotiable instrument (in U.S. law) who acquires the instrument under the following conditions: (1) The paper must be complete and regular on its face. (2) It must be purchased before maturity. (3) The purchase must be in good faith for a valuable consideration. (4) The purchase must be made without notice of defects in the title or of defenses against payment to the transferor. A holder in due course may enforce collection of the instrument against prior parties regardless of their claims, defenses, and offsets against one another. A transferee may acquire the rights of a holder in due course without being one himself. For example: A, the holder in due course of a note procured by the payee through fraud, endorses the note to B, who knew of the fraud and hence was not a holder in due course. B, however, acquires A’s right as a holder in due course to collect the note regardless of the fraud, provided B has no part in the fraud. See negotiable declaration (in U.S. law).

(Revised by Ann De Vries)

What is Holder In Due Course?

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