After studying this chapter you will be able to understand: What is negotiation? What is a holder in due course? What requirements must be met to obtain holder-in-due-course status? What is the shelter principle? In what ways has the holder-in-due-course doctrine been abused? | Chapter 27 Negotiation, Holder in Due Course, and Defenses Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Chapter 27: Negotiation, Holder in Due Course, and Defenses 27- “Negotiable Instrument” Terminology Negotiable Instrument: Written document signed by maker/drawer with unconditional promise/order to pay certain sum of money on demand or at definite time to order/bearer Negotiation: Transfer of possession to third party, who becomes holder of negotiable instrument Holder: Party who possesses negotiable instrument payable to the party, or to bearer Holder in Due Course: Certain holder who has greater legal rights to the negotiable instrument (compared to mere holder), since the holder in due course is free from certain competing claims and defenses to enforceability of instrument A “negotiable instrument” is a written document signed by the maker or drawer with an unconditional promise or order to pay a certain sum of money on demand or at a definite time, to order or to bearer. “Negotiation” represents the transfer of possession to a third party, who becomes the holder of the negotiable instrument. A “holder” is a party who possesses the negotiable instrument payable to the party, or to bearer. A “holder in due course” has greater legal rights to the negotiable instrument compared to mere holder, since the holder in due course is free from certain competing claims and defenses to the enforceability of the instrument. 27- Negotiation Requirements Bearer Paper: Merely requires payee’s delivery of instrument to holder (Physical transfer of negotiable instrument) Order Paper: Requires endorsement and delivery Negotiation of bearer paper merely requires the payee’s physical delivery of the instrument to the holder. Negotiation of order paper requires endorsement and delivery. 27- Types of Endorsements “Blank”: Payee’s (or last endorsee’s) | Chapter 27 Negotiation, Holder in Due Course, and Defenses Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Chapter 27: Negotiation, Holder in Due Course, and Defenses 27- “Negotiable Instrument” Terminology Negotiable Instrument: Written document signed by maker/drawer with unconditional promise/order to pay certain sum of money on demand or at definite time to order/bearer Negotiation: Transfer of possession to third party, who becomes holder of negotiable instrument Holder: Party who possesses negotiable instrument payable to the party, or to bearer Holder in Due Course: Certain holder who has greater legal rights to the negotiable instrument (compared to mere holder), since the holder in due course is free from certain competing claims and defenses to enforceability of instrument A “negotiable instrument” is a written document signed by the maker or drawer with an .
