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Holder in Due Course – Receive Instrument for Value

Cite this article as: Jason Mance Gordon, "Holder in Due Course – Receive Instrument for Value," in The Business Professor, updated January 20, 2015, last accessed April 1, 2020, https://thebusinessprofessor.com/knowledge-base/holder-in-due-course-receive-instrument-for-value/.
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Holder in Due Course - Recieve Instrument for Value
This video explains the requirement that a holder in due course receive the negotiable instrument in exchange for something of value (not as a gift or stolen).

Next Article: Holder in Due Course – Receive Instrument in Good Faith


What does it mean to receive an instrument for value?

The holder must provide some form of value, such as assets, services, or money in exchange for the instrument. Receiving the instrument as a gift is not “for value”. Value may also mean taking the instrument as payment of an antecedent debt, as consideration for a fully-performed contract, in exchange for another negotiable instrument, or in exchange for an irrevocable obligation. When exchanging the instrument for services or irrevocable obligations, the key characteristic is that the value must have already been provided. That is, there is no future obligation (such as a promise to sell goods or perform services) as part of the transfer for value.

•    Discussion: Why do you think the UCC requires that the holder exchange the instrument for value? Why do you think the value cannot be a future obligation? Is there any argument for allowing future obligations in certain instances?

•    Practice Question: Hannah issues a promissory note to Ilene. Ilene later enters into a contract to pay Juliet to paint her house. Ilene transfers the promissory note to Juliet as payment for Juliet’s obligation to paint her house. Is Juliet a holder in due course?

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