Title 11, Chapter 3, Section 302
Holder in due course.
(a) Subject to subsection (c) of this Code section and subsection (d) of Code Section 11-3-106, "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
(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 Code Section 11-3-306; and
(vi) Without notice that any party has a defense or claim in recoupment described in subsection (a) of Code Section 11-3-305.
(b) Notice of discharge of a party, other than discharge in an
insolvency proceeding, is not notice of a defense under subsection
(a) of this Code section, 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
(d) If, under paragraph (1) of subsection (a) of Code Section 11-3-303, 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 the person entitled to enforce an instrument has only a
security interest in the instrument and 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
(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 Code section is subject to any law limiting status as a
holder in due course in particular classes of transactions.