41-03-28. (3-302) Holder in due course.
926 words·~4 min read·
/nd/title-41/chapter-41-03-negotiable-instruments/41-03-28·A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
1. Subject to subsection 3 and to subsection 4 of section 41-03-06, "holder in due
course" means the holder of an instrument if:
a. The instrument when issued or negotiated to the holder does not bear such
apparent evidence of forgery or alteration or is not otherwise so irregular or
incomplete as to call into question its authenticity.
b. The holder took the instrument for value, in good faith, without notice that the
instrument is overdue or has been dishonored or that there is an uncured default
with respect to payment of another instrument issued as part of the same series,
without notice that the instrument contains an unauthorized signature or has been
altered, without notice of any claim to the instrument stated in section 41-03-32,
and without notice that any party has a defense or claim in recoupment stated in
subsection 1 of section 41-03-31.
2. Notice of discharge of a party, other than discharge in an insolvency proceeding, is not
notice of a defense under subsection 1, but discharge is effective against a person
who became a holder in due course with notice of the discharge. Public filing or
recording of a document does not of itself constitute notice of a defense, claim in
recoupment, or claim to the instrument.
3. Except to the extent a transferor or predecessor in interest has rights as a holder in
due course, a person does not acquire rights of a holder in due course of an
instrument taken by legal process or by purchase at an execution, bankruptcy, or
creditor's sale or similar proceeding; by purchase as part of a bulk transaction not in
ordinary course of business of the transferor; or as the successor in interest to an
estate or other organization.
4. If, under subdivision a of subsection 1 of section 41-03-29, the promise of performance
that is the consideration for an instrument has been partially performed, the holder
may assert rights as a holder in due course of the instrument only to the fraction of the
amount payable under the instrument equal to the value of the partial performance
divided by the value of the promised performance. 5. If the person entitled to enforce an instrument has only a security interest in the
instrument and the person obliged to pay the instrument has a defense, claim in
recoupment, or claim to the instrument that may be asserted against the person who
granted the security interest, the person entitled to enforce the instrument may assert
rights as a holder in due course only to an amount payable under the instrument
which, at the time of enforcement of the instrument, does not exceed the amount of
the unpaid obligation secured. 6. To be effective, notice must be received at a time and in a manner that gives a
reasonable opportunity to act on it. 7. This section is subject to any law limiting status as a holder in due course in particular
classes of transactions.
41-03-29. (3-303) Value and consideration. 1. An instrument is issued or transferred for value if any of the following exist:
a. The instrument is issued or transferred for a promise of performance, to the
extent the promise has been performed.
b. The transferee acquires a security interest or other lien in the instrument other
than a lien obtained by judicial proceeding.
c. The instrument is issued or transferred as payment of, or as security for, an
antecedent claim against any person, whether or not the claim is due.
d. The instrument is issued or transferred in exchange for a negotiable instrument.
e. The instrument is issued or transferred in exchange for the incurring of an
irrevocable obligation to a third party by the person taking the instrument. 2. "Consideration" means any consideration sufficient to support a simple contract. The
drawer or maker of an instrument has a defense if the instrument is issued without
consideration. If an instrument is issued for a promise of performance, the issuer has a
defense to the extent performance of the promise is due and the promise has not been
performed. If an instrument is issued for value as stated in subsection 1, the
instrument is also issued for consideration.
41-03-30. (3-304) Overdue instrument. 1. An instrument payable on demand becomes overdue at the earliest of the following
times:
a. On the day after the day demand for payment is duly made.
b. If the instrument is a check, ninety days after its date.
c. If the instrument is not a check, when the instrument has been outstanding for a
period of time after its date which is unreasonably long under the circumstances
of the particular case in light of the nature of the instrument and trade usage. 2. With respect to an instrument payable at a definite time, the following rules apply:
a. If the principal is payable in installments and a due date has not been
accelerated, the instrument becomes overdue upon default under the instrument
for nonpayment of an installment, and the instrument remains overdue until the
default is cured.
b. If the principal is not payable in installments and the due date has not been
accelerated, the instrument becomes overdue on the day after the due date.
c. If a due date with respect to principal has been accelerated, the instrument
becomes overdue on the day after the accelerated due date. 3. Unless the due date of principal has been accelerated, an instrument does not
become overdue if there is default in payment of interest but no default in payment of
principal.