Illinois General Assembly - Illinois Compiled Statutes

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810 ILCS 5/3-302

(810 ILCS 5/3-302) (from Ch. 26, par. 3-302)

Sec. 3-302.

Holder in due course.

(a) Subject to subsection (c) and Section 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 3-306, and (vi) without notice that any party has a defense or claim in recoupment stated in Section 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 at an execution, bankruptcy, or creditor's sale or similar
proceeding, (ii) by purchase as part of a bulk transaction not in the ordinary
course of business of the transferor, or (iii) as the successor in interest
to an estate or other organization.

(d) If, under Section 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: P.A. 87-582; 87-1135.)