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Transferability and Holder in Due Course Chapter Introduction 25-1 Negotiation 25-1a Negotiating Order Instruments 25-1b Negotiating Bearer Instruments 25-2 Indorsements 25-2a Blank Indorsements 25-2b Special Indorsements 25-2c Qualified Indorsements 25-2d Restrictive Indorsements 25-2e How Indorsements Can Convert Order Instruments to Bearer Instruments and Vice Versa 25-3 Miscellaneous Indorsement Problems 25-3a Misspelled Names 25-3b Instruments Payable to Entities 25-3c Alternative or Joint Payees 25-4 Holder versus Holder in Due Course 25-4a Status of an Ordinary Holder 25-4b Status of a Holder in Due Course (HDC) 25-5 Requirements for HDC Status 25-5a Taking for Value 25-5b Taking in Good Faith 25-5c Taking without Notice 25-6 Holder through an HDC 25-6a The Purpose of the Shelter Principle 25-6b Limitations on the Shelter Principle Chapter Recap Page 1 of 25 Print Chapter 2010-8-30 ... Chapter Introduction Once issued, a negotiable instrument can be transferred to others by assignment or by negotiation. Recall from Chapter 16 that an assignment is a transfer of rights under a contract. Under general contract principles, a transfer by assignment to an assignee gives the assignee only those rights that the assignor possessed. Any defenses that can be raised against an assignor can normally be raised against the assignee. This same principle applies when a negotiable instrument, such as a promissory note, is transferred by assignment to an assignee. Under the Uniform Commercial Code (UCC), negotiation is the transfer of an instrument in such form that the transferee (the person to whom the instrument is transferred) becomes a holder [UCC 3201(a)]. A holder receives, at the very least, the rights of the previous possessor [UCC 3203(b), 3305]. Unlike an assignment, a transfer by negotiation can make it possible for a holder to receive more rights in the instrument than the prior possessor had [UCC 3305]. A holder who receives greater rights is known as a the instrument than the prior possessor had [UCC 3305].... View Full Document

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