What You Need to Know About Holder of Due Course

A Holder in Due Course is a commercial law which facilitates a transfer of debt or another financial obligation that must be paid to parties that are connected to the original transaction. The Due Course Doctrine formally insulates the final buyer of the debt obligation from challenges by either party of the original agreement or transaction. Typically, this clause is enacted and performed when there is a non-performance issue by one of the parties involved in the original contract.

To clarify, if party X promised to pay a lump sum to party Y and Y then transferred that obligation of payment to Z, then Z would be classified as insulated or protected from any conflict which arises between the original members of the contractual agreement (parties X and Y.) As a result of the Due Course Statute, party X may then sue party Y for non-performance, but is still required to pay the original obligation to party Z.

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