A holder in due course must be a holder of a complete and authentic
instrument such as a check or money order, must take the instrument
for value and in good faith, and must take it without notice of any
defects. In this specific case, Kane accepted a check which satisfies
the requirement of the HODC being a holder of a complete and
authentic instrument. It was taken in good faith as he was
anticipating payment for cows he sold and it held value prior to the
stop payment being issued. The last requirement that needs to be
met is that Kane must have taken the check from Gerald Kroll
without notice of any defects. Defects in this instance would be
knowing that the check only held value if Gerald held up his end of
the bargain to Grace. Kane was not aware of their negotiations and
therefore did not have any known defects. With that being said it is
clear Kane is a holder in due course in this case. The rules of law
came into play in this court's reasoning by them going through each
individual requirement and ensuring they were fulfilled. There can be
ambiguities in these rules of law. For instance it could have been
interpreted that Kane did not act in good faith because he knew it
was someone else's check paying for another person's purchase.
Acting in good faith and having no knowledge of known defects can
be left up for questioning creating ambiguities. At which point do you
trust the plaintiff and not the defendant? If nothing is in writing how
can they know it was definitely in good faith or with no known
defects? Like most cases, it appears that for ethical value the
universalization test was used. Kane supplied the cows and Grace
agreed to pay for them on behalf of Gerald. It would not be fair for
Kane to be without the cows AND the money. I am glad that the
court decided on Kane being a holder in due course after reviewing
the case facts, the laws and the universalization test.
References
Kubasek, N. K., Browne, M. N., Herron, D. J., Dhooge, L. J., &
Barkacs, L. L. (2021). In Dynamic Business Law: The essentials. essay,
McGraw-Hill Education.
