1.Subject to subsection 3 and to subsection 4 of section 41-03-06, "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.
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 stated in section 41-03-32,
and without notice that any party has a defense or
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1. Subject to subsection 3 and to subsection 4 of section 41-03-06, "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.
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 stated in section 41-03-32,
and without notice that any party has a defense or claim in recoupment stated in
subsection 1 of section 41-03-31.
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 at 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 subdivision a of subsection 1 of section 41-03-29, 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. To be effective, notice must be received at a time and in a manner that gives a
reasonable 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.