(a) Subject to subsection (c) of this section and section 4-3-106 (d) "holder in due course" means the holder of an instrument if:
(1) 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; and
(2) The holder took the instrument (i) for value, (ii) in good faith, (iii) 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, (iv) without notice that the instrument contains an unauthorized signature or has been altered, (v) without notice of any claim to the instrument described in section 4-3-306, and (vi) without notice that any party has a defense or claim in recoupment described in section 4-3-305 (a).
(b) Notice of discharge of a party, other than discharge in an insolvency proceeding, is not notice of a defense under subsection (a) of this section, 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.
(c) 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 (i) by legal process or by purchase in an execution, bankruptcy, or creditor's sale or similar proceeding, (ii) by purchase as part of a bulk transaction not in ordinary course of business of the transferor, or (iii) as the successor in interest to an estate or other organization.
(d) If, under section 4-3-303 (a)(1), 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.
(e) If (i) the person entitled to enforce an instrument has only a security interest in the instrument and (ii) 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. (f) To be effective, notice must be received at a time and in a manner that gives a reasonable opportunity to act on it.
(g) This section is subject to any law limiting status as a holder in due course in particular classes of transactions.
Source: L. 94: Entire article R&RE, p. 853, § 1, effective January 1, 1995.
Editor's note: This section is similar to former § 4-3-302 as it existed prior to 1994.
Cross references: For the effect of the "Uniform Consumer Credit Code" on holder in due course, see § 5-3-303.
Notes of Decisions
Georg v. Metro Fixtures Contractors, Inc., 178 P.3d 1209 (Colo. 2008).
· cites it 9× “We hold that, under the facts of this case, Freestyle had constructive possession of the check and qualified as a holder in due course under sections 4-3-302 and 4-3-306, C.R.S. (2007), of Colorado’s UCC.”
Flatiron Linen, Inc. v. First Am. State Bank, 23 P.3d 1209 (Colo. 2001).
“§ 4-3-302. Holder in due course. (a) "holder in due course" means the holder of an instrument if: (1) 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…”
La Junta State Bank v. Travis, 727 P.2d 48 (Colo. 1986).
· cites it 3× “See §§ 4-3-302, -305. Whether an instrument is payable to order or bearer is critical to the determination of whether proper negotiation has occurred.”
Willey v. Mayer, 876 P.2d 1260 (Colo. 1994).
· cites it 2× “[5] Although the court of appeals reversed the trial court's judgment in favor of Willey, it agreed with the trial court that Willey was a holder in due course of the $40,000 note, as defined in § 4-3-302(1) of the UCC. Willey, 862 P.2d at 961-62 .”
Money Mart Check Cashing Ctr., Inc. v. Epicycle Corp., 667 P.2d 1372 (Colo. 1983).
· cites it 3× “Section 4-3-302(1), C.R.S.1973, provides: “(1) A holder in due course is a holder who takes the instrument: (a) For value; and (b) In good faith; and (c) Without notice that it is overdue or has been dishonored or of any defense against or claim to it on the part of any person.”
Vail Nat'l Bank v. Finkelman, 800 P.2d 1342 (Colo. Ct. App. 1990).
· cites it 2× “A holder in due course is a holder who has taken the instrument for value, in good faith, and without notice that it is overdue, or has been dishonored, or of any defense against or claim to it on the part of any person.”
Salter v. Vanotti, 599 P.2d 962 (Colo. Ct. App. 1979).
· cites it 3× “" Section 4-3-302, C.R.S.1973. "The purchaser [of an instrument] has notice of a claim or defense if: .”
Willey v. Mayer, 862 P.2d 959 (Colo. Ct. App. 1993).
· cites it 2× “nce substantially contributes to a material alteration of the instrument or to the making of an unauthorized signature is ;precluded from asserting the alteration or lack of authority against a holder in due course or against a drawee or other payor who pays the instrument in…”
Armstrong v. Armstrong, 714 F. Supp. 451 (D. Colo. 1989).
· cites it 2× “See § 4-3-302(l)(c), C.R.S. Plaintiff then brought this action against Dick as a co-maker and guarantor and against Jean as a guarantor for payment of the outstanding balance due on the Note.”
— Colo. Rev. Stat. § 4-3-302(1) — 6 cases
Willey v. Mayer, 876 P.2d 1260 (Colo. 1994).
“[5] Although the court of appeals reversed the trial court's judgment in favor of Willey, it agreed with the trial court that Willey was a holder in due course of the $40,000 note, as defined in § 4-3-302(1) of the UCC. Willey, 862 P.2d at 961-62 .”
Money Mart Check Cashing Ctr., Inc. v. Epicycle Corp., 667 P.2d 1372 (Colo. 1983).
“Section 4-3-302(1), C.R.S.1973, provides: “(1) A holder in due course is a holder who takes the instrument: (a) For value; and (b) In good faith; and (c) Without notice that it is overdue or has been dishonored or of any defense against or claim to it on the part of any person.”
Vail Nat'l Bank v. Finkelman, 800 P.2d 1342 (Colo. Ct. App. 1990).
“A holder in due course is a holder who has taken the instrument for value, in good faith, and without notice that it is overdue, or has been dishonored, or of any defense against or claim to it on the part of any person.”
— Colo. Rev. Stat. § 4-3-302(2) — 1 case
Georg v. Metro Fixtures Contractors, Inc., 178 P.3d 1209 (Colo. 2008).
“We hold that, under the facts of this case, Freestyle had constructive possession of the check and qualified as a holder in due course under sections 4-3-302 and 4-3-306, C.R.S. (2007), of Colorado’s UCC.”
— Colo. Rev. Stat. § 4-3-302(3)(c) — 2 cases
— Colo. Rev. Stat. § 4-3-302(4) — 1 case
— Colo. Rev. Stat. § 4-3-302(a) — 1 case
— Colo. Rev. Stat. § 4-3-302(a)(1) — 1 case
— Colo. Rev. Stat. § 4-3-302(a)(2) — 1 case
— Colo. Rev. Stat. § 4-3-302(l)(c) — 3 cases
Armstrong v. Armstrong, 714 F. Supp. 451 (D. Colo. 1989).
“See § 4-3-302(l)(c), C.R.S. Plaintiff then brought this action against Dick as a co-maker and guarantor and against Jean as a guarantor for payment of the outstanding balance due on the Note.”
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