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Real Property • Security Interests in Real Estate
PROP#211
Legal Definition
A holder in due course is not burdened by any personal defenses of the maker (lack of consideration, fraud in inducement, waiver, estoppel, payment, unconscionability), but remains burdened by real defenses (infancy, incapacity, duress, illegality, fraud in execution, forgery, discharge in insolvency, and material alteration).
Plain English Explanation
A holder in due course is sort of like a bona fide purchaser. They are an innocent party who has paid for something without any knowledge of drama attached to it. As such, the law will try to insulate them from possible backlash from several common defenses to the formation of a contract.
