U.C.C. § 3-302 — Holder in Due Course

Editorial note. Section 3-302(a) enumerates the requirements: (1) authenticity of the instrument; (2) taking (i) for value, (ii) in good faith, (iii) without the enumerated notice categories.

Editorial note. The holder-in-due-course doctrine is the American reception of the English law-merchant rule articulated in Miller v. Race, 1 Burr. 452 (1758), and codified in the Bills of Exchange Act 1882 and the Uniform Negotiable Instruments Law (1896).

Editorial note. A holder in due course takes the instrument free of most defenses of the maker or drawer (§ 3-305(b)); the maker may assert only the 'real defenses' listed in § 3-305(a)(1) — infancy, duress, fraud in the factum, illegality, discharge in insolvency, and the like.

Editorial note. Holder-in-due-course status remains the dispositive question in many note-enforcement cases. Federal Trade Commission Rule 433 (16 C.F.R. § 433) preserves the maker's defenses against a purchaser of consumer credit paper, effectively abolishing the doctrine in consumer transactions.

Editorial note. See U.C.C. §§ 3-303 (value); 3-305 (defenses); 3-306 (claims to instrument); § 1-201(b)(20) (good faith); 16 C.F.R. § 433 (FTC Holder Rule).