holder in due course

noun phrase

: one other than the original recipient who holds a legally effective negotiable instrument (such as a promissory note) and who has a right to collect from and no responsibility toward the issuer

Word History

First Known Use

1882, in the meaning defined above

Legal Definition

holder in due course

: the holder of a negotiable instrument that is complete and regular on its face and that is taken in good faith and for value without notice that it is overdue or has been dishonored or that there is any defense against it or claim to it by any party compare bona fide holder

Note: A holder in due course takes the negotiable instrument free of any claims to it and of most defenses of a party to it. Federal Trade Commission rules have abolished the status of holder in due course in consumer transactions.