There are four requirements that a party must meet to be considered
a holder in due course. The first requirement is that the party must
be a holder of a completed and authentic negotiable instrument. The
next requirement is the holder must take the instrument for value.
The holder in due course must take the instrument in good faith. The
final requirement is the holder must take the instrument without
notice of defects. Based on the requirements, Kane was a holder in
due course.
First, Mr. Kane and Gerald made an agreement to exchange cows for
money. Gerald did not have the money, so Grace, Gerald’s mother
purchased the cows for Gerald. Mr. Kane received the check from
Grace rather than Gerald, whom at the time did not have the funds
to purchase the cows. Mr. Kane took the check without knowing that
Grace would be canceling the check because of Gerald’s inability to
pay her back. Mr. Kane took the check in good faith for the purchase
of his cows, without knowing that there was an issue. Once Grace
decided to write the check for the cows it is now her responsibility to
ensure that Mr. Kane receives the money for the purchase.
There is one major ambiguities, and that is the original deal was
between Gerald and Mr. Kane, however when Grace wrote the
check, she has now taken the place of Gerald when purchasing the
cows. Mr. Kane is not responsible for Gerald’s inability to supply the
funds to pay back Grace, so now Grace should be the proud owners
of a heard of cows.
The rule of law is a set of principles, or ideals, for ensuring an orderly
and just society. The rule of law came into effect because it
concluded that Mr. Kane was a holder in due process because he did
nothing wrong and should not be held responsible for Grace and
Gerald’s financial issue.
Grace was unethical when she canceled the check, rather than letting
the transaction take place. Grace made a commitment to Mr. Kane
when she wrote the check and her and Gerald should be required to
give Mr. Kane the money for the cows and Gerald can figure out how
to pay back Grace.
