Code of Alabama

Ala. Code § 7-3-306 (2026)

Claims to an Instrument.

✓ official Alabama Legislature (ALISON) text, current July 2026

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A person taking an instrument, other than a person having rights of a holder in due course, is subject to a claim of a property or possessory right in the instrument or its proceeds, including a claim to rescind a negotiation and to recover the instrument or its proceeds. A person having rights of a holder in due course takes free of the claim to the instrument.

(Acts 1965, No. 549, p. 811; repealed by Acts 1995, No. 95-668, p. 1381, §1; added by Acts 1995, No. 95-668, p. 1381, §1.)

Notes of Decisions

Cited in 3 cases, 1981–2013 · leading case: Strickland v. Kafko Mfg., Inc., 512 So. 2d 714 (Ala. 1987).

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Strickland v. Kafko Mfg., Inc., 512 So. 2d 714 (Ala. 1987). “Furthermore, Participating Parts involved a dispute between the immediate parties to the check, and the Court of Civil Appeals considered the payee as a holder not having the rights of a holder in due course, citing § 7-3-306. That analysis fits the facts of that case because…”

Graveling v. BankUnited N.A., 970 F. Supp. 2d 1243 (N.D. Ala. 2013). “signature or has been altered, (v) without notice of any claim to the instrument described in Section 7-3-306, and (vi) without notice that any party has a defense or claim in recoupment described in Section 7-3-305(a).”

First Alabama Bank of Guntersville v. Hunt, 402 So. 2d 992 (Ala. Civ. App. 1981). “See, § 7-3-306(b) and (c), Code of Ala. 1975. As indicated above, the trial court found that First Alabama Bank was barred from holder in due course status by § 7-3-302(3)(c), Code of Ala.”

— Ala. Code § 7-3-306(b) — 1 case

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