Book Opener

l How to determine if aperson is a holder indue coursel How to contrastpersonal defenses withreal defensesRecognizing the partiesand defenses tonegotiable instrumentswill keep you alert toproblems regardingnegotiable instruments.l holder in due coursel holderl valuel good faithl shelter provisionl personal defensesl real defensesHolders ofInstruments andDefensesHolder in Due CourseA holder in due course is a holder who takes an instrument forvalue, in good faith, and without notice. Holders in due course aretreated more favorably than mere holders are treated. They receive morerights in negotiable instruments than other parties. For this reason, negotiableinstruments are passed almost as freely as money from one personto another.HolderTo be a holder in due course, you must first be a holder . Being aholder means that the instrument must have been issued or indorsed toyou, to your order, or to bearer.When an instrument is properlynegotiated, the person towhom it is transferred is a holder.This is important because only aholder can collect the money thatis due on an instrument. It is alsoimportant because if no defensesare introduced in court, the holdercan collect the money simply byproving that the signature on theinstrument is authentic.Example 1. John and NancyAnderson obtained a commitmentfor a mortgage loanfrom a bank to build theirhouse. Periodically, the bankissued checks payable to John,Nancy, and the constructioncompany. The final check wasdeposited in the constructioncompany’s account withoutNancy’s indorsement. Thebank that received the checkHOLDERYou must first be a holder to be a holderin due course. What are therequirements to be a holder?560 Unit 5: Using Your Purchasing Power