We may derive the following points of difference between ‘holder’ and ‘holder in due course’:
1. Consideration: The existence of consideration is not essential in case of a holder, but a holder in due course obtains the instrument after paying its full value. For example, if a cheque is used to provide a gift or donation to a Charitable Trust, the Trust does not become its holder in due course. On the other hand, tuition fee paid to a school or college is for a valuable consideration. Hence the school or the college acquire the status of holder in due course.
2. Possession: The person entitled to be called holder in due course must become the possessor of the instrument before it became payable. For example, if a bill of exchange is payable on March 20, 1984, a person who possesses it before this date is entitled to be its holder inc due course. If it is obtained after this date, the possessor will not be called its holder in due course. In case of a holder neither actual possession nor any time limit within which it must be acquired is required.
3. Defect in the transferor’s title: The most important point of difference is that a holder in due course acquires an instrument without having sufficient cause to believe that any defect existed in the title of the transferor. This condition is not essential in case of a holder. This condition casts a heavy responsibility on a person who claims to be a holder in due course-he should not only have the knowledge of the defective title of the transferor but in the circumstances of each case, there should be no cause to believe that any defect exists in the title of the transferor. It means that the holder in due course must obtain an instrument after taking all possible care about the transferor’s good title.
1. Consideration: The existence of consideration is not essential in case of a holder, but a holder in due course obtains the instrument after paying its full value. For example, if a cheque is used to provide a gift or donation to a Charitable Trust, the Trust does not become its holder in due course. On the other hand, tuition fee paid to a school or college is for a valuable consideration. Hence the school or the college acquire the status of holder in due course.
2. Possession: The person entitled to be called holder in due course must become the possessor of the instrument before it became payable. For example, if a bill of exchange is payable on March 20, 1984, a person who possesses it before this date is entitled to be its holder inc due course. If it is obtained after this date, the possessor will not be called its holder in due course. In case of a holder neither actual possession nor any time limit within which it must be acquired is required.
3. Defect in the transferor’s title: The most important point of difference is that a holder in due course acquires an instrument without having sufficient cause to believe that any defect existed in the title of the transferor. This condition is not essential in case of a holder. This condition casts a heavy responsibility on a person who claims to be a holder in due course-he should not only have the knowledge of the defective title of the transferor but in the circumstances of each case, there should be no cause to believe that any defect exists in the title of the transferor. It means that the holder in due course must obtain an instrument after taking all possible care about the transferor’s good title.
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