Holder in Due Course - Receive Instrument for Value
What Does it Mean to Give Value or Receive the Commercial Paper for Value?
Written by Jason Gordon
Updated at April 6th, 2023
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What does it mean to receive an instrument for value?
The holder must provide some form of value, such as assets, services, or money in exchange for the instrument. Receiving the instrument as a gift is not for value. Value may also mean taking the instrument as payment of an antecedent debt, as consideration for a fully-performed contract, in exchange for another negotiable instrument, or in exchange for an irrevocable obligation. When exchanging the instrument for services or irrevocable obligations, the key characteristic is that the value must have already been provided. That is, there is no future obligation (such as a promise to sell goods or perform services) as part of the transfer for value.
Next Article: Holder in Due Course - Receive Instrument in Good Faith Back to: COMMERCIAL PAPER
Discussion Question
Why do you think the UCC requires that the holder exchange the instrument for value? Why do you think the value cannot be a future obligation? Is there any argument for allowing future obligations in certain instances?
Practice Question
Hannah issues a promissory note to Ilene. Ilene later enters into a contract to pay Juliet to paint her house. Ilene transfers the promissory note to Juliet as payment for Juliet's obligation to paint her house. Is Juliet a holder in due course?
Related Topics
- Commercial Paper (Intro)
- What is Commercial Paper?
- Negotiable Instrument
- What are the common types of commercial paper?
- Promissory Note
- Cashier's Check
- Convenience Check
- Certified Check
- Substitute Check
- Bill of Exchange
- Bank Draft Definition
- Sight Draft Definition
- Bankers Acceptance
- Who is a Holder of a negotiable instrument?
- Commercial Paper Funding Program
- What is Negotiability and why is it important?
- What is required for commercial paper to be negotiable?
- Sum Certain (Contracts)
- Inflation Adjustment Clause
- When does commercial paper contain an Unconditional promise to pay?
- Backup Line of Credit
- What is Payable on Demand or Payable on Time?
- What is Order Paper and Bearer Paper?
- Bearer Form
- How is a payee identified on the negotiable instrument?
- What rules does the court apply in determining negotiability?
- How is commercial paper negotiated to a holder?
- What is Transfer of a negotiable instrument?
- What is Indorsement of a negotiable instrument?
- What are the various types of indorsement?
- Bank Endorsement
- Blank Endorsement
- Accommodation Endorsement
- How does a holder receive payment on a negotiable instrument?
- Who is potentially liable on (or obligated to pay) a negotiable instrument?
- When is an individual liable for a representative signing a negotiable instrument?
- What rules apply if a holder loses a negotiable instrument?
- When is payment of a negotiable instrument overdue?
- What effect does a negotiable instrument have on the underlying obligation?
- What is a holder in due course?
- What are the requirements for a holder to become a holder in due course?
- Receive an instrument for value?
- Receive an instrument in good faith?
- Receive an instrument without notice of a valid defense?
- How does discharge of the Underlying Obligation affect a holder in due course?
- What is the Shelter Rule?
- Can you limit a transferee from becoming a holder in due course?
- Personal Defenses?
- Real Defenses?
- What is a Claim in Recoupment?
- What are the rights of a holder in due course if the instrument involves a consumer transaction?
- What happens if a negotiable instrument is Forged?
- What happens if a negotiable instrument is Stolen?
- Guaranty or Guarantee
- Letter of Guarantee
- Personal Guarantee
-
What is the role of a Guarantor or Surety of a negotiable instrument?
-
Surety
- Cosign
- Accommodation Paper Definition
- Secondary Liability
- Avalize Definition
- What is an Accord & Satisfaction?
- What is primary and secondary liability on an instrument?
- What is Drawer or Maker Liability for a negotiable instrument?
- What is Transferor Warranty of a negotiable instrument?
- What is Indorser Warranty of a negotiable instrument?
- What is Presentment Warranty of a negotiable instrument?
- What is a warrantors liability for a dishonored note or draft?
- What is the time limitation for warranty of a negotiable instrument?
- When are the warranties of a negotiable instrument discharged?