Rights of a Holder in Due Course

Rights of a Holder in Due Course. To the extent that a holder is a holder in due course he takes the instrument free from: (1) All claims to it on the part of any person; and (2) All defenses of any party to the instrument with whom the holder has not dealt except: (a) Infancy, to the extent that it is a defense to a simple contract; and (b) Such other incapacity, or duress, or illegality of the transaction, as renders the obligation of the party a nullity; and (c) Such misrepresentation as has induced the party to sign the instrument with neither knowledge nor reasonable opportunity to obtain knowledge of its character or its essential terms; and (d) Discharge in insolvency proceedings; and (e) Any other discharge of which the holder has notice when he takes the instrument. Source: PL 3-56, § 1 (§ 3305).