WHAT IS A HOLDER IN DUE COURSE?

Under the Uniform Commercial Code, a holder in due course is a person who has acquired an interest in a negotiable instrument in a way that gives the person a special status like that of a bona fide purchaser of other property. The UCC gives a holder in due course many special rights, including an ownership interest in the instrument that is free from the claims of other parties and the ability to enforce the liability of parties to the instrument free from many defenses. To become a holder in due course, a person must meet the formal requirements set forth in the UCC. Articles 3 and 4 contain an elaborate network of provisions that bear on who can become a holder in due course and what such a person must do in order to acquire such status. Although these provisions are in part a codification of prior negotiable instruments law, they go beyond that law both in scope and detail and they substantively change prior doctrine.

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