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Holder in Due Course: Promissory Note Enforcement

Debt instruments are frequently bought and sold. If A borrow money from B and signs a promissory note promising B to pay the money back in the future, it is not uncommon for B to sell his/her rights under the promissory note (usually to make a quick profit). In many cases, a litany of transfers will occur where it makes it difficult to trace down the proper holder of the note if a breach of promissory note action is filed.

If you are like B, you need to ensure that you are a holder in due course. A holder in due course is a purchaser of debt who not only has the ability to collect on the debt, but is also protected from some defenses/claims parties in the original promissory note transaction may have had against each other.

To be a holder in due course in Missouri, the holder must take the (1) instrument for value, (2) in good faith, (3)  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, (4) without notice that the instrument contains an unauthorized signature or has been altered, (5) without notice of any claim to the instrument described in Section 400.3-306, RSMo and (6) without notice that any party has a defense or claim in recoupment described in Section 400.3-305(a), RSMo.  American First Federal v. Battlefield Ctr., 282 S.W.3d 1 (Mo. App., 2009).

Contact us for questions pertaining to contracts, breach of contract claims, breach of promissory note claims, or other business/corporate law related questions.