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Holder in Due Course

bill, value, jones, title, faith and parties

HOLDER IN DUE COURSE. The Bills of Exchange Act, 1882, Section 29, defines a holder in due course as follows : " (1) A holder in due course is a holder who has taken a bill, complete and regular on the face of it, under the following conditions, namely : " (a) That he became the holder of it before it was overdue, and without notice that it had been previously dis honoured, if such was the fact " (b) That he took the bill in good faith and for value, and that at the time the bill was negotiated to him he had no notice of any defect in the title of the person who negotiated it.

" (2) In particular the title of a person who negotiates a bill is defective within the meaning of this Act when he obtained the bill, or the acceptance thereof, by fraud, duress, or force and fear, or other unlawful means, or for an illegal consideration, or when he nego tiates it in breach of faith, or under such circumstances as amount to a fraud.

" (3) A holder (whether for value or not) who derives his title to a bill through a holder in due course, and who is not himself a party to any fraud or illegality affecting it, has all the rights of that holder in due course as regards the accep tor and all parties to the bill prior to that holder." A payee is said not to come within the definition of a holder in due course (see s.s. I, above) as the bill is not complete until it is indorsed by the payee.

By Section 30 :— " (1) Every party whose signature ap pears on a bill is prima facie deemed to have become a party thereto for value.

" (2) Every holder of a bill is pr!Illti faci' deemed to be a holder in due course ; • but if in an action on a bill it is admitted or proved that the accep tance, issue, or subsequent negotia tion of the hill is affected with fraud, duress, or force and fear, or illegality, the burden . of proof is shifted, unless and until the holder proves that, subsequent to the alleged fraud or illegality, value has in good faith been given for the bill." The meaning of " good faith " is given in Section 90 : " A thing is deemed to be done in good faith, within the meaning of this Act, where it is in fact done honestly, whether it is done negligently or not."

If, for example, Jones is a holder in due course, he has the right to sue any party to the bill, but if in an action it is proved that the bill is affected with some taint, as de scribed in the above sections, it will be neces sary for Jones, in order to preserve his rights, to show that he gave value for the bill sub sequent to the alleged taint, and that he took it in good faith without knowledge of any thing being wrong with the bill.

If Jones, the holder in due course, transfers the bill to Brown, but without any value being given therefor, Brown obtains the same rights that Jones had and can sue any party prior to Jones, but he cannot sue Jones because of the absence of consideration.

" No consideration " is a good defence between parties closely related on a bill, but a holder in due course is not affected by the fact of their having been " no consideration " between any parties before it was transferred to him for value.

Section 3S deals with the rights of a holder : " The rights and powers of the holder of a bill are as follows : " (I) He may sue on the bill in his own name : '• (2) Where he is a holder in due course, he holds the bill free from any defect of title of prior parties, as well as from mere personal de fences available to prior parties among themselves, and may enforce payment against all parties liable on the bill : " (3) Where his title is defective (a) if he negotiates the bill to a holder in due course, that holder obtains a good and complete title to the bill, and (b) if he obtains payment of the bill the person who pays him in due course gets a valid discharge for the bill." Where a signature on a bill is forged, no one can obtain any right to the bill through or under that signature. (See BILL OF EXCHANGE, FORGERY, HOLDER FOR VALUE.)