Does a holder in due process apply to a gift by contract?
Full Question:
Does a holder in due process apply to a gift by contract?
01/31/2007 |
Category: Contracts |
State: New Mexico |
#1391
Answer:
The holder of commercial paper must meet certain requirements to be a
holder in due course. He must receive the instrument:
• for value
• in good faith
• without notice that the paper is past due or dishonored (e.g.,
payment has been refused by the payor)
• without notice of defenses and adverse claims.
Value must be given in order for the person receiving the
commercial paper to be a holder in due course. For example, a person who
acquires an interest in a promissory note as a gift is not a holder in due
course because he did not "give value."
A person takes an instrument for value:
• by performing the act for which the instrument was given, such as
delivering goods for which a check was sent in payment or performing a
service for which a check was given as payment;
• by acquiring a security interest in the commercial paper (e.g., when
a promissory note is given to a bank as collateral for a loan); or
• by taking the instrument in payment of a debt or as evidence of a
debt.
