Q5. Explain what is meant by “Holder in due course” – Bills of exchange act 1882
Holder in due course. ( Statue book) *
Only holders of a bill may negotiate it. S2 1882 act directs that a “holder” means the payee or indorsee of a bill who is a possessor of it or the bearer of the bill. The act makes a presumption that every holder is a holder in due course s30 1882
(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 dishonoured, 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 an illegal consideration, or when he negotiates 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 acceptor and all parties to the bill prior to that holder. *