400.3-302. Holder in due course. - Missouri Statutes

Holder in due course.

400.3-302. (a) Subject to subsection (c) and Section400.3-106(d), "holder in due course" means the holder of aninstrument if:

(1) the instrument when issued or negotiated to the holderdoes not bear such apparent evidence of forgery or alteration oris not otherwise so irregular or incomplete as to call intoquestion its authenticity; and

(2) the holder took the instrument (i) for value, (ii) ingood faith, (iii) without notice that the instrument is overdueor has been dishonored or that there is an uncured default withrespect to payment of another instrument issued as part of thesame series, (iv) without notice that the instrument contains anunauthorized signature or has been altered, (v) without notice ofany claim to the instrument described in Section 400.3-306, and(vi) without notice that any party has a defense or claim inrecoupment described in Section 400.3-305(a).

(b) Notice of discharge of a party, other than discharge inan insolvency proceeding, is not notice of a defense undersubsection (a), but discharge is effective against a person whobecame a holder in due course with notice of the discharge.Public filing or recording of a document does not of itselfconstitute notice of a defense, claim in recoupment, or claim tothe instrument.

(c) Except to the extent a transferor or predecessor ininterest has rights as a holder in due course, a person does notacquire rights of a holder in due course of an instrument taken(i) by legal process or by purchase in an execution, bankruptcy,or creditor's sale or similar proceeding, (ii) by purchase aspart of a bulk transaction not in ordinary course of business ofthe transferor, or (iii) as the successor in interest to anestate or other organization.

(d) If, under Section 400.3-303(a)(1), the promise ofperformance that is the consideration for an instrument has beenpartially performed, the holder may assert rights as a holder indue course of the instrument only to the fraction of the amountpayable under the instrument equal to the value of the partialperformance divided by the value of the promised performance.

(e) If (i) the person entitled to enforce an instrument hasonly a security interest in the instrument and (ii) the personobliged to pay the instrument has a defense, claim in recoupment,or claim to the instrument that may be asserted against theperson who granted the security interest, the person entitled toenforce the instrument may assert rights as a holder in duecourse only to an amount payable under the instrument which, atthe time of enforcement of the instrument, does not exceed theamount of the unpaid obligation secured.

(f) To be effective, notice must be received at a time andin a manner that gives a reasonable opportunity to act on it.

(g) This section is subject to any law limiting status as aholder in due course in particular classes of transactions.

(L. 1963 p. 503 § 3-302, A.L. 1992 S.B. 448)