The Depositary Bank as a Holder in Due Course

The difference in the status of a holder in due course and one not a holder in due course is clearly pointed out by the Uniform Commercial Code. Section 3-302(1) of the Code states the requirements for holding in due course and apparently one need only make a determination as to whether a particular holder has taken an instrument for value, in good faith and without notice of certain factual situations. The determination is not simple, however, and this article will attempt to deal with only one facet of holding in due course; that is, when a depositary bank is deemed to be a holder in due course. As will be shown, one of the most difficult questions to be answered in order to reach an ultimate determination of whether or not a depositary bank is a holder in due course is—when has such a bank given value.