Tennessee Code Annotated
Tenn. Code Ann. § 47-3-302 (2026)
Holder in due course
✓ current as of May 2026
- (a) Subject to subsection (c) and § 47-3-106(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 § 47-3-306, and (vi) without notice that any party has a defense or claim in recoupment described in § 47-3-305(a).
- (b) Notice of discharge of a party, other than discharge in an insolvency proceeding, is not notice of a defense under subsection (a), 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 § 47-3-303(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.
Acts 1995, ch. 397, § 2.
Notes of Decisions
Cited in 20
cases (1 in the last 5 years), 1972–2021 · leading case: McConnico v. Third Nat'l Bank in Nashville, 499 S.W.2d 874 (Tenn. 1973).
McConnico v. Third Nat'l Bank in Nashville, 499 S.W.2d 874 (Tenn. 1973). “See T.C.A. § 47-3-302. As stated previously in the discussion of notice, negligence goes to the notice requirement of T.”
Starnes Fam. Off., LLC v. McCullar, 765 F. Supp. 2d 1036 (W.D. Tenn. 2011). “” Tenn.Code Ann. § 47-3-302(a)(2). For purposes of that provision, “good faith” is “honesty in fact in the conduct or transaction concerned.”
Third Nat. Bk., Nashville v. Hardi-Gardens Sup. of Ill., Inc., 380 F. Supp. 930 (M.D. Tenn. 1974). “The Uniform Commercial Code, T.C.A. § 47-3-302, succinctly states the elements of a holder in due course as follows: 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…”
Fed. Deposit Ins. Corp. v. Webb, 464 F. Supp. 520 (E.D. Tenn. 1978). “However, since the FDIC as corporate liquidator of HNB purchased HNB’s assets in a bulk transaction pursuant to court order, the FDIC cannot be a holder in due course.”
Guar. Partners v. Huff, 830 S.W.2d 73 (Tenn. Ct. App. 1992). “Huffs guaranty was a negotiable instrument and that Security Federal was a holder in due course under Tenn.Code Ann. § 47-3-302 (1979). Accordingly, the trial court denied Mr.”
Lawyers Title Ins. v. United Am. Bank of Memphis, 21 F. Supp. 2d 785 (W.D. Tenn. 1998). “Tenn.Code Ann. § 47-3-302 defines a holder in due course as a holder who took 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.”
Int'l Harvester Credit Corp. v. Hill, 496 F. Supp. 329 (M.D. Tenn. 1980). “This, coupled with the fact that Hatfield International had been out of trust on a previous occasion, was, the defendants contend, sufficient to put IHCC on notice as to possible defenses.”
Craig v. Union Cnty. Bank (In Re Crabtree), 48 B.R. 528 (Bankr. E.D. Tenn. 1985). “Tenn.Code Ann. § 47-3-302 (1979). Further, as a collection agent its rights are merely derivative.”
Peoples Nat'l Bank of Washington v. King, 697 S.W.2d 344 (Tenn. 1985). “” The attachment of a check may or may not result in making the fund it evidences available for distribution in accord with the judgment of the court.”
Greene v. Ellis (In Re Ellis), 152 B.R. 211 (Bankr. E.D. Tenn. 1993). “Holder in due course is defined under § 47-3-302 as follows: 47-3-302. Holder in due course.”
Union Exp. Co. v. N.I.B. Intermarket, A.B., 786 S.W.2d 628 (Tenn. 1990). “Notwithstanding this exception, if the person presenting a draft drawn on a letter of credit is a holder in due course (Tenn.Code Ann. § 47-3-302), the issuer must pay the draft, whether or not it has notice of forgery or fraud.”
Brown v. Fed. Sav. Bank (In Re Brown), 209 B.R. 874 (Bankr. W.D. Tenn. 1997). “In contrast, here the two defendant banks were unaware of the debtor’s kiting activity until the end of that scheme, when the debtor was confronted by his employer bank, FSB, with the evidence of the scheme. At that point, the real beneficiaries of the debtor’s activity had been…”
— Tenn. Code Ann. § 47-3-302(1) — 3 cases
McConnico v. Third Nat'l Bank in Nashville, 499 S.W.2d 874 (Tenn. 1973). “See T.C.A. § 47-3-302. As stated previously in the discussion of notice, negligence goes to the notice requirement of T.”
Int'l Harvester Credit Corp. v. Hill, 496 F. Supp. 329 (M.D. Tenn. 1980). “This, coupled with the fact that Hatfield International had been out of trust on a previous occasion, was, the defendants contend, sufficient to put IHCC on notice as to possible defenses.”
Greene v. Ellis (In Re Ellis), 152 B.R. 211 (Bankr. E.D. Tenn. 1993). “Holder in due course is defined under § 47-3-302 as follows: 47-3-302. Holder in due course.”
— Tenn. Code Ann. § 47-3-302(1)(3) — 1 case
Fed. Deposit Ins. Corp. v. Webb, 464 F. Supp. 520 (E.D. Tenn. 1978). “However, since the FDIC as corporate liquidator of HNB purchased HNB’s assets in a bulk transaction pursuant to court order, the FDIC cannot be a holder in due course.”
— Tenn. Code Ann. § 47-3-302(1)(b) — 1 case
McConnico v. Third Nat'l Bank in Nashville, 499 S.W.2d 874 (Tenn. 1973). “See T.C.A. § 47-3-302. As stated previously in the discussion of notice, negligence goes to the notice requirement of T.”
— Tenn. Code Ann. § 47-3-302(3) — 1 case
Third Nat. Bk., Nashville v. Hardi-Gardens Sup. of Ill., Inc., 380 F. Supp. 930 (M.D. Tenn. 1974). “The Uniform Commercial Code, T.C.A. § 47-3-302, succinctly states the elements of a holder in due course as follows: 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…”
— Tenn. Code Ann. § 47-3-302(3)(a) — 1 case
Peoples Nat'l Bank of Washington v. King, 697 S.W.2d 344 (Tenn. 1985). “” The attachment of a check may or may not result in making the fund it evidences available for distribution in accord with the judgment of the court.”
— Tenn. Code Ann. § 47-3-302(a) — 1 case
Harpeth Fin. Servs., LLC v. Jim Clay Pinson, Jr. (Tenn. Ct. App. 2021).
— Tenn. Code Ann. § 47-3-302(a)(2) — 2 cases
Starnes Fam. Off., LLC v. McCullar, 765 F. Supp. 2d 1036 (W.D. Tenn. 2011). “” Tenn.Code Ann. § 47-3-302(a)(2). For purposes of that provision, “good faith” is “honesty in fact in the conduct or transaction concerned.”
Harpeth Fin. Servs., LLC v. Jim Clay Pinson, Jr. (Tenn. Ct. App. 2021).
— Tenn. Code Ann. § 47-3-302(l)(b) — 1 case
Guar. Partners v. Huff, 830 S.W.2d 73 (Tenn. Ct. App. 1992). “Huffs guaranty was a negotiable instrument and that Security Federal was a holder in due course under Tenn.Code Ann. § 47-3-302 (1979). Accordingly, the trial court denied Mr.”
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