Can the payee of a negotiable instrument be a holder in due course?
A) yes, the payee is always a holder in due course
B) yes, for notes but not for drafts
C) no, not under any circumstances
D) usually not, because the payee is usually aware of defenses or irregularities
E) only if a check is involved

Question

Quizplus · Accepted Answer

Usually, the payee is not a holder in due course because they are presumed to be aware of any defenses or irregularities that may exist with respect to the instrument. However, it is possible for a payee to be a holder in due course if they have obtained the instrument in good faith, for value, and without notice of any defects. This is more likely to be the case with notes than drafts. Therefore, option D is the best choice.

Can the Payee of a Negotiable Instrument Be a Holder