§ 26-1-3.1-302 — Holder in due course

Indiana § 26-1-3.1-302

• Jurisdiction: Indiana
• Title 26: COMMERCIAL LAW
• Art. 1: UNIFORM COMMERCIAL CODE
• Ch. 3.1: Negotiable Instruments

Text

(a) Subject to subsection (c) and IC 26-1-3.1-106(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:
(A) for value;
(B) in good faith;
(C) 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;
(D) without notice that the instrument contains an unauthorized
signature or has been altered;
(E) without notice of any claim to the instrument described in
IC 26-1-3.1-306; and
(F) without notice that any party has a defense or claim in
recoupment described in IC 26-1-3.1-305(a).
(b) Notice of discharge of a party, other than discharge in an
insolvency proceeding, is not notice of a defense under subsection (a),
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:
(1) by legal process or by purchase in an execution, bankruptcy,
or creditor's sale or similar proceeding;
(2) by purchase as part of a bulk transaction not in ordinary
course of business of the transferor; or
(3) as the successor in interest to an estate or other organization.
(d) If, under IC 26-1-3.1-303(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:
(1) the person entitled to enforce an instrument has only a security
interest in the instrument; and
(2) 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

As added by P.L.222-1993, SEC.5.