Commercial Law · claim
A holder in due course (HIDC) is a person or entity that holds a negotiable instrument and is entitled to certain protections under the Uniform Commercial Code (UCC). To qualify as a HIDC, the holder must obtain the instrument for value, in good faith, and without notice of any claim or defense against it.
The holder must have given value for the negotiable instrument.
What to prove: It must be proven that the holder exchanged something of value for the negotiable instrument, such as money, services, or other consideration.
The holder must have acquired the instrument in good faith.
What to prove: It must be established that the holder acted honestly and without intent to defraud at the time of obtaining the instrument.
The holder must take the instrument without notice of any defects or claims.
What to prove: The holder must demonstrate that they were not aware of any issues with the instrument at the time of acquisition, including any defenses or claims by third parties.
The burden of proof is on the holder to establish their status as a bona fide purchaser (HIDC); the standard is preponderance of the evidence.
When preparing for exams, be sure to understand the distinction between a holder, a holder in due course, and the various rights and protections afforded to each.