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*Sec. 52. What constitutes a holder in due course.

- A holder in due course is a holder


who has taken the instrument under the following conditions: (CR-BOW-GV-NO)
(a) That it is complete and regular upon its face;

Examples of NOT complete and regular on its face:

w/o year of maturity

bill w/ no drawee

altered check

indorsed by only one of two payees

payable on or before ______ - blank unfilled

Examples of complete and regular on its face:

omission is immaterial (i.e. serial number)

unapparent alteration

payee's name is stricken out but another is inserted in writing

(b) That he became the holder of it before it was overdue, and without notice
that it has been previously dishonored, if such was the fact;

As to acceleration instruments
1 installment or interest is unpaid = overdue = NOT holder in due course

As to interest
GR: if interest is overdue = holder in due course

EX: principal is to become due upon default of payment of interest


(acceleration) = overdue = NOT holder in due course

(c) That he took it in good faith and for value;

GF =
lack of notice of defect or infirmity
holder is w/o knowledge or notice of any sort which could be set up
against a prior holder of the instrument
basis is purpose NOT negligence EX if suspicious circumstance

failed to inquire

GR: Inadequacy of price = VALID

EX: proof of fraud, mistake or undue influence


trifling price = impression of fraud

(d) That at the time it was negotiated to him, he had no notice of any
infirmity in the instrument or defect in the title of the person negotiating it.
(elaboration of [c])

Defects of Title (Sec. 55)

Defenses

mistake

absence of failure of consideration (Sec. 28)

minority and other forms of incapacity to contract (Sec. 22)

lack of authority of an agent (Sec. 19)


Infirmities -wrong in the instrument itself (NOT lacking in the contract)

wrong date inserted where the instrument is expressed to be payable at a


fixed period after sight is undated (Sec. 13)

filling up of a blank instrument NOT strictly in accordance w/ the authority


given or not w/in reasonable time, where it was delivered wanting in a material
particular

filling up and negotiating w/o authority an incomplete and undelivered


instrument (Sec. 15)

Lack of valid and intentional delivery of a mechanically complete


instrument (Sec. 16)
Agent signing per procuration beyond the scope of his authority (Sec. 21)

Ultra vires acts of a corp.

Forgery (Sec. 23)

Material Alteration (Sec. 124. and 125)

Intoxication according to a better authority

Insanity where there is no notice of insanity on the part of the one


contracting w/ the insane person

Sec. 52. What constitutes a holder in due course. - A holder in due


course is a holder who has taken the instrument under the following
conditions:
(a)
That
it
is
complete
and
regular
upon
its
face;
chanroblesvirtuallawlibrary

(b) That he became the holder of it before it was overdue, and


without notice that it has been previously dishonored, if such was
the
fact;
(c)

That

he

took

it

in

good

faith

and

for

value;

(d) That at the time it was negotiated to him, he had no notice of


any infirmity in the instrument or defect in the title of the person
negotiating it.