§ 4-3-302 — Holder in due course

Colorado § 4-3-302

• Jurisdiction: Colorado
• Title 04: Uniform
• Art.: Negotiable Instruments

Text

(a) Subject to subsection (c) of this section
and section 4-3-106 (d) holder in due course means the holder of an instrument if:

(1) The instrument when issued or negotiated to the holder does not bear
such apparent evidence of forgery or alteration or is not otherwise so irregular or
incomplete as to call into question its authenticity; and

(2) The holder took the instrument (i) for value, (ii) in good faith, (iii) without
notice that the instrument is overdue or has been dishonored or that there is an
uncured default with respect to payment of another instrument issued as part of
the same series, (iv) without notice that the instrument contains an unauthorized
signature or has been altered, (v) without notice of any claim to the instrument
described in section 4-3-306, and (vi) without notice that any party has a defense or
claim in recoupment described in section 4-3-305 (a).

(b) Notice of discharge of a party, other than discharge in an insolvency
proceeding, is not notice of a defense under subsection (a) of this section, but
discharge is effective against a person who became a holder in due course with
notice of the discharge. Public filing or recording of a document does not of itself
constitute notice of a defense, claim in recoupment, or claim to the instrument.

(c) Except to the extent a transferor or predecessor in interest has rights as
a holder in due course, a person does not acquire rights of a holder in due course of
an instrument taken (i) by legal process or by purchase in an execution, bankruptcy,
or creditor's sale or similar proceeding, (ii) by purchase as part of a bulk transaction
not in ordinary course of business of the transferor, or (iii) as the successor in
interest to an estate or other organization.

(d) If, under section 4-3-303 (a)(1), the promise of performance that is the
consideration for an instrument has been partially performed, the holder may assert
rights as a holder in due course of the instrument only to the fraction of the amount
payable under the instrument equal to the value of the partial performance divided
by the value of the promised performance.

(e) If (i) the person entitled to enforce an instrument has only a security
interest in the instrument and (ii) the person obliged to pay the instrument has a
defense, claim in recoupment, or claim to the instrument that may be asserted
against the person who granted the security interest, the person entitled to enforce
the instrument may assert rights as a holder in due course only to an amount
payable under the instrument which, at the time of enforcement of the instrument,
does not exceed the amount of the unpaid obligation secured.

(f) To be effective, notice must be received at a time and in a manner that
gives a reasonable opportunity to act on it.

(g) This section is subject to any law limiting status as a holder in due course
in particular classes of transactions.

Legislative History

Source: L. 94: Entire article R&RE, p. 853, � 1, effective January 1, 1995.