§ 554.3302 — Holder in due course

Iowa § 554.3302

• Jurisdiction: Iowa
• Title XIII: COMMERCE
• Ch. 554: UNIFORM COMMERCIAL CODE

Text

1. Subject to subsection 3 and section 554.3106, subsection 4, “holder in due course”
means the holder of an instrument if:
a. 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
b. the holder took the instrument for value, in good faith, 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, without notice
that the instrument contains an unauthorized signature or has been altered, without notice
of any claim to the instrument described in section 554.3306, and without notice that any
party has a defense or claim in recoupment described in section 554.3305, subsection 1.
2. Notice of discharge of a party, other than discharge in an insolvency proceeding, is
not notice of a defense under subsection 1, 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.
3. 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
by legal process or by purchase in an execution, bankruptcy, or creditor’s sale or similar
proceeding, by purchase as part of a bulk transaction not in ordinary course of business of
the transferor, or as the successor in interest to an estate or other organization.
4. If, under section 554.3303, subsection 1, paragraph “a”, 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.
5. If the person entitled to enforce an instrument has only a security interest in the
instrument and 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.
6. Tobeeffective,noticemustbereceivedatatimeandinamannerthatgivesareasonable
opportunity to act on it.
7. This section is subject to any law limiting status as a holder in due course in particular
classes of transactions.