In Chapter 27, read Case 27-2, Kane vs. Kroll
To be considered a holder in due course, four requirements are
established in UCC Section 3-302. The first one is that the party has
to be a holder of a complete and authentic negotiable instrument.
The second one is the holder must take the instrument for value. The
third one is the holder must take the instrument in good faith. The
fourth requirement is the holder must take the instrument without
notice of defects (Kubasek et al., 2020). In the case of Kane vs. Kroll,
Michael Kane met three of the requirement, which indicated he was
a holder in due course. The first one is that he took a payment from
Grace, Mr. Kroll's mom, of $6,100. He used the money to use the
money as repayment that Mr. Kroll owed to him. The holder must
take the instrument for value, which Michael Kane did when he
accepted the check from Grace. He also accepted the payment in
good faith. However, Michael Kane did not know that Mr. Kroll could
not pay his mother, Gace, back because the sales of hay did not
occur, which satisfies the fourth requirement that the holder must
take the instrument without notice of defects. Mr. Kroll and his
mother should have worked something out privately instead of
stopping payments to Michael Kane when Mr. Kroll had possessions
of Michael Kane's cow. Michael Kane's affidavit supports his
contention that he accepted the check in good faith for payment of
Mr. Kroll's debt to him. That means that Michael Kane was a holder
of due course of the $6,100 check from Mr. Kroll's mother, Grace.
The ethical value that guided this conclusion is that Michael Kane
gave the cows to Mr. Kroll even though Mr. Kroll did not have the
money to pay for them.
Reference:
Reference: Kubasek, N., Browne, M., Herron, D., Dhooge, L., Herron,
D., Barkacs, L. (2020). Requirements for Holder-in-Due-Course
Status. McGraw-Hill Connect. Retrieved from https://prod.reader-
ui.prod.mheducation.com/epub/sn_3b37d/data-uuid-
f862552324b34d41a55b0f8daade450c
