A holder in due course is a person who holds a negotiable instrument, such as a check or promissory note, in good faith, for value, and without notice of any defenses or claims to the instrument. The holder in due course is entitled to certain privileges that protect their rights to the instrument and allow them to collect payment from the obligor, or the person who is responsible for paying the instrument.
One privilege of a holder in due course is that they are not subject to any defenses that the obligor may have against the original maker of the instrument. For example, if the obligor had a valid defense against the maker of the instrument, such as fraud or duress, the holder in due course would still be able to collect payment from the obligor. This is because the holder in due course is protected by the principle of "holder in due course takes free," which means that the holder in due course takes the instrument free from any defenses or claims to the instrument.
Another privilege of a holder in due course is that they have the right to receive payment from the obligor even if the obligor has already paid the instrument to another party. This is known as the "right of exoneration," which allows the holder in due course to seek payment from the obligor even if the obligor has already paid the instrument to another party.
In addition to these privileges, a holder in due course also has the right to enforce the instrument against the obligor. This means that the holder in due course can take legal action against the obligor if they fail to pay the instrument.
It is important to note that in order to qualify as a holder in due course, the person must hold the instrument in good faith, for value, and without notice of any defenses or claims to the instrument. If any of these requirements are not met, the person may not qualify as a holder in due course and may not be entitled to the privileges associated with this status.
In summary, a holder in due course is entitled to certain privileges that protect their rights to a negotiable instrument and allow them to collect payment from the obligor. These privileges include being protected from defenses that the obligor may have against the original maker of the instrument, having the right to receive payment from the obligor even if the obligor has already paid the instrument to another party, and the right to enforce the instrument against the obligor. It is important to meet the requirements of good faith, value, and lack of notice in order to qualify as a holder in due course and be entitled to these privileges.
HOLDER IN DUE COURSE AND PAYMENT IN DUE COURSE
Under the Indian law, it is not enough to show that the holder acquired the instrument honestly, if in fact, he was negligent or careless. In the case of a bearer document, a payee claims the money without having his name mentioned on the cheque. Good faith The instrument may or may not be obtained in good faith. On the other hand, when the instrument is payable to order, HDC may mean any person who became endorsee or payee of the negotiable instrument, before it matures. He always possesses better little than that of his transferor or any of the previous parties and can give to the subsequent parties the good title that he possesses. What constitutes notice of defect.
Rights and Privileges of Holder in Due Course
Thus, he may get a better title than that of the transferor; e. By this act of acceptance, he admits everything essential to the validity of the existence of the negotiable instrument; and one of such essentials is the capacity of the payee named in the instrument to receive the money to be paid by an indorsement on the bill. On the other hand, the holder in due course must be a bonafide possessor of the negotiable instrument. In case of an order instrument, he must be its payee or endorse, i. However, where a former holder has participated in the fraud or illegality affecting the instrument or is not originally a holder in due course, he cannot by the repurchase of the note from such a holder acquire his immunities, but the note is subject to the same equities if it had never been in the hands of an innocent holder, and a re-transfer by him after maturity to a former holder in due course does not reinvest the transferee with that status. IT CANNOT BE ENFORCED WITH REGARD THE PERSON TO WHOM THE LEGAL DEFENSE IS AVAILABLE.
What is meant by holder and holder in due course?
On the contrary, a person can become a holder in due course, only before the maturity of the negotiable instrument. Debt collectors may not contact you all of the time, but you have the right to request that this be stopped. The party liable to pay an instrument, cannot as against a holder in due course, contend that he had lost the instrument or that it was obtained from him by means of an offence or fraud, or for an unlawful consideration. Who is the holder in due course of a cheque? It is observed that only a holder in due course can recover in an instrument in which the drawer or payee is fictitious, this is so, because the law abhors the fraud, and discountenances any instrument whereby fraud can be committed. A postdated cheque is not deemed to be irregular. Is holder in due course a law? It is to be noticed that the authority to fill up is given only to a holder of an instrument, so an agent of the person issuing the instrument under the section does not come within the purview of this section; his authority will be regulated by the general law applicable to such authority. Payment may be made either in cash or through a clearing house or by a draft.
