Holder in Due Course - Notice of Valid Defense

The video tutorial explains the requirements for becoming a holder in due course, emphasizing the need for the holder to be unaware of any defenses against the enforcement of the instrument. It outlines potential defenses, such as overdue drafts and fraudulent alterations, and notes that certain individuals, like those involved in bulk transfers, are excluded from obtaining holder in due course status. The tutorial also highlights common law limitations on closely related individuals.

What is a key requirement for someone to be considered a holder in due course?

• They must have a close personal relationship with the original holder.

• They must be involved in a bulk transfer.

• They must not have knowledge or reason to know of any defenses.

• They must have knowledge of all defenses.

Which of the following is an example of a defense that could affect holder in due course status?

• A draft with a high interest rate

• An overdue draft

• A draft with no collateral

• A timely draft

Who is specifically excluded from obtaining holder in due course status according to the UCC?

• Individuals involved in bulk transfers of commercial paper

• Individuals who purchase a single instrument

• Individuals who are unaware of any defenses

• Individuals with no business relationship with the original holder

In what situation might someone inheriting an instrument not become a holder in due course?

• If they purchase it at a discount

• If they inherit it through a will

• If they obtain it through execution of a judgment lien

• If they receive it as a gift

How can common law limit an individual's ability to become a holder in due course?

• By requiring them to have a business license

• By restricting those closely related to the holder from transferring the note

• By mandating a minimum purchase amount

• By allowing only financial institutions to hold the status