The
holder in due course (HDC) theory is a rule in commercial law that
protects a purchaser of debt, where the purchaser is assigned the right
to receive the debt payments. The theory insulates the purchaser of
debt, or other obligation to pay, against charges that either party to
the original transaction might have had against the other.
A holder in due course must
1. Be a holder
of a negotiable instrument
2. Take it for
value
3. Take it in
good faith
4. Take it
without notice that it is overdue or dishonored, or that the instrument
contains an un-authorized signature or an alteration, or that any person has
any defense against or claim to it;
5. Take it
without reason to question its authenticity due to apparent evidence of
forgery, alteration, incompleteness, or other irregularity.
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