GA Code § 11-3-302 (2021)
2021 Georgia Code|Title 11 - Commercial Code|Article 3 - Negotiable Instruments|Part 3 - Enforcement of Instruments|§ 11-3-302. Holder in Due Course

  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:   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   The holder took the instrument:     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.   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 organization.   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.   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 secured.   To be effective, notice must be received at a time and in a manner that gives a reasonable opportunity to act on it.   This Code section is subject to any law limiting status as a holder in due course in particular classes of transactions.    For value;   In good faith;   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;   Without notice that the instrument contains an unauthorized signature or has been altered;   Without notice of any claim to the instrument described in Code Section 11-3-306; and   Without notice that any party has a defense or claim in recoupment described in subsection (a) of Code Section 11-3-305.    (Code 1981, §11-3-302, enacted by Ga. L. 1996, p. 1306, § 3.)   Law reviews.   - For article supporting the retention of waiver of defense clauses in credit card agreements, see 10 Ga. St. B.J. 17 (1973). For article discussing judicial activism in cases involving claims and defenses under the Uniform Commercial Code, see 17 Ga. L. Rev. 569 (1983). For article, "The Holder in Due Course Doctrine as a Default Rule," see 32 Ga. L. Rev. 783 (1998). For note, "Pyramid Marketing Plans and Consumer Protection: State and Federal Regulation," see 21 J. of Pub. L. 445 (1972). For note discussing whether a holder in due course takes free of claims of violations of the usury laws, see 12 Ga. L. Rev. 814 (1978). For note, "Negotiable Promissory Notes Containing Time and Demand Provisions: The Need for Consistent Interpretation," see 19 Ga. L. Rev. 717 (1984). For comment on Pendley v. Credit Equip. Corp., 92 Ga. App. 658, 89 S.E.2d 567 (1955), see 18 Ga. B.J. 495 (1956). For comment on Geiger Fin. Co. v. Graham, 123 Ga. App. 771, 182 S.E.2d 521 (1971), see 8 Ga. St. B.J. 400 (1972). For comment on Perini Corp. v. First Nat'l Bank, 553 F.2d 398 (5th Cir. 1977), see 27 Emory L.J. 393 (1978).   JUDICIAL DECISIONS   ANALYSIS    General Consideration   Holder   Claims   Defenses Generally   Notice   Actions   Holders Not in Due Course Generally   Holders Not in Due Course - Claims   Holders Not in Due Course - Defenses   Holders Not in Due Course - Parol Evidence    RESEARCH REFERENCES   Am. Jur. 2d.   - 11 Am. Jur. 2d, Banks, § 970. 11 Am. Jur. 2d, Bills and Notes, §§ 189, 207 et seq., 247, 251, 264, 268, 272, 288, 299. 12 Am. Jur. 2d, Bills and Notes, § 683. 15A Am. Jur. 2d, Commercial Code, § 58. 50 Am. Jur. 2d, Letters of Credit, and Credit Cards, §§ 3, 5, 10, 19. 68A Am. Jur. 2d, Secured Transactions, §§ 14, 55, 826, 926-930.   C.J.S.   - 10 C.J.S., Bills and Notes, § 169 et seq.   U.L.A.   - Uniform Commercial Code (U.L.A.) § 3-302.   ALR.    - Right of purchaser of stolen bonds, 1 A.L.R. 717; 85 A.L.R. 357; 102 A.L.R. 28.    Crediting the proceeds of negotiable paper to holder's deposit account as constituting bank a holder in due course, 6 A.L.R. 252; 59 A.L.R.2d 1173.    Breach of agreement to return a note to maker as fraud which casts upon an endorsee the burden of showing his bona fide character, 6 A.L.R. 1667.    Absence of revenue stamp as affecting bona fides of purchaser of bill or note, 6 A.L.R. 1701; 21 A.L.R. 1125.    Effect of fraud in the inception of a bill or note to throw upon a subsequent holder the burden of proving that he is a holder in due course, 18 A.L.R. 18; 34 A.L.R. 300; 57 A.L.R. 1083.    Memoranda or notations on paper as affecting one's character as a holder in due course, 34 A.L.R. 1377.    Renewal of note after notice of defenses as destroying bona fide character of holder, 35 A.L.R. 1294.    Effect on bona fides of purchaser of promissory note of fact that there is interest due and unpaid upon it, 40 A.L.R. 832.    Validity and effect of note payable to maker without words of negotiability, 42 A.L.R. 1067; 50 A.L.R. 426.    One taking bill or note as a gift or in consideration of love and affection as a holder for value or in due course protected against defenses between prior parties, 48 A.L.R. 237.    Endorsee of bill or note based on executed consideration who knows of circumstances which might result in rescission as between original parties, as a holder in due course, 59 A.L.R. 1026.    Character as holder in due course of concern which takes paper from its dealers or agents, 61 A.L.R. 694.    Maturity of one or more of series of notes as affecting status of purchaser as holder in due course, 64 A.L.R. 457.    Exchange of negotiable paper as supporting status as holder in due course of one who at time of exchange had no notice of infirmity or defect in paper received, 69 A.L.R. 408.    Endorsement without recourse as affecting character of endorsee or subsequent holder as holder in due course, 77 A.L.R. 487.    Taking negotiable paper as collateral security for or in payment of preexisting indebtedness as sustaining one's character as holder in due course under Uniform Negotiable Instruments Act, 80 A.L.R. 670.    High rate of discount upon sale of negotiable paper as affecting one's status as holder in due course, 91 A.L.R. 1139.    Possession of bill or note as essential to maintain action thereon as "holder," 102 A.L.R. 460.    Maturity of one or more of installments of note payable in installments as affecting status of purchaser as holder in due course, 170 A.L.R. 1029.    Bills and notes: indication of alteration as affecting transferee's character as holder in due course, 171 A.L.R. 798.   Crediting proceeds of negotiable paper to depositor's account, as constituting bank a holder in due course, 59 A.L.R.2d 1173.   Notice which has been forgotten as affecting status as holder in due course, 89 A.L.R.2d 1330.   Payee as holder in due course, 2 A.L.R.3d 1151; 42 A.L.R.5th 137; 67 A.L.R.3d 144; 78 A.L.R.3d 1020; 88 A.L.R.3d 1100; 97 A.L.R.3d 798; 97 A.L.R.3d 1114; 23 A.L.R.4th 855; 36 A.L.R.4th 212; 45 A.L.R.5th 389.   Fraud in the inducement and fraud in the factum as defenses under UCC sec. 3-305 against holder in due course, 78 A.L.R.3d 1020.   What constitutes unconditional promise to pay under Uniform Commercial Code sec. 3-104(1)(b), 88 A.L.R.3d 1100.   Construction and application of UCC sec. 3-403(2) dealing with personal liability of authorized representative who signs negotiable instrument in his own name, 97 A.L.R.3d 798.   Who is holder of instrument for "value" under UCC sec. 3-303, 97 A.L.R.3d 1114.   Payee's right of recovery, in conversion under UCC sec. 3-419(1)(c), for money paid on unauthorized indorsement, 23 A.L.R.4th 855.   What constitutes taking instrument in good faith, and without notice of infirmities or defenses, to support holder-in-due-course status, under UCC § 3-302, 36 A.L.R.4th 212.   Liability of bank for diversion to benefit of presenter or third party of proceeds of check drawn to bank's order by drawer not indebted to bank, 69 A.L.R.4th 778.