A holder who does not qualify as a holder in due course in his or her own right becomes a holder in due course if he or she acquires the instrument through a holder in due course.This is called the ________ principle.
A) shelter
B) habitation
C) domiciliary
D) residence
E) necessity

Question

Quizplus · Accepted Answer

This principle is known as the shelter principle. A holder who acquires the instrument through a holder in due course "takes shelter" under the rights and privileges of the original holder in due course, and thus becomes a holder in due course as well. This principle helps to maintain the integrity of negotiable instruments and encourages their free flow in commerce.

A Holder Who Does Not Qualify as a Holder in Due