§ 3-304 — Notice to Purchaser

Section 3--304. Notice to Purchaser.\n (1) The purchaser has notice of a claim or defense if\n (a) the instrument is so incomplete, bears such visible evidence\n of forgery or alteration, or is otherwise so irregular as to\n call into question its validity, terms or ownership or to\n create an ambiguity as to the party to pay; or\n (b) the purchaser has notice that the obligation of any party is\n voidable in whole or in part, or that all parties have been\n discharged.\n (2) The purchaser has notice of a claim against the instrument when he\nhas knowledge that a fiduciary has negotiated the instrument in payment\nof or as security for his own debt or in any transaction for his own\nbenefit or otherwise in breach of duty.\n (3) The purchaser has notice that an instrument is overdue if he has\nreason to know\n (a) that any part of the principal amount is overdue or that\n there is an uncured default in payment of another instrument\n of the same series; or\n (b) that acceleration of the instrument has been made; or\n (c) that he is taking a demand instrument after demand has been\n made or more than a reasonable length of time after its\n issue. A reasonable time for a check drawn and payable within\n the states and territories of the United States and the\n District of Columbia is presumed to be thirty days.\n (4) Knowledge of the following facts does not of itself give the\npurchaser notice of a defense or claim\n (a) that the instrument is antedated or postdated;\n (b) that it was issued or negotiated in return for an executory\n promise or accompanied by a separate agreement, unless the\n purchaser has notice that a defense or claim has arisen from\n the terms thereof;\n (c) that any party has signed for accommodation;\n (d) that an incomplete instrument has been completed, unless the\n purchaser has notice of any improper completion;\n (e) that any person negotiating the instrument is or was a\n fiduciary;\n (f) that there has been default in payment of interest on the\n instrument or in payment of any other instrument, except one\n of the same series.\n (5) The filing or recording of a document does not of itself\nconstitute notice within the provisions of this Article to a person who\nwould otherwise be a holder in due course.\n (6) To be effective notice must be received at such time and in such\nmanner as to give a reasonable opportunity to act on it.\n (7) In any event, to constitute notice of a claim or defense, the\npurchaser must have knowledge of the claim or defense or knowledge of\nsuch facts that his action in taking the instrument amounts to bad\nfaith.\n