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The Holder

The Holder of an instrument of payment

HOLDER

  • The holder has the right to sue on the bill and the bill itself form the cause of action.
  • The defendant bears the burden of showing that the holder is not the creditor, or that defences may be raised against his claim.

In Soffiantini v Mould the court said that where a defendant owes a plaintiff a sum of money and gives a bill of exchange in payment which is dishonoured, the plaintiff can sue either on the original debt and use the bill of exchange as evidence, or he can sue on the liquid document.

Possession of instrument

The holder may, but need not neceessarily, be the owner of the bill. He may be an unlawful possessor, such as a thief. Or he may be a lawful possessor holding on behalf of another. Being a holder therefore does not necessarily mean you are the true owner.Being the holder gives one the power to sue on the bill without implying that one is entitled to the rights embodied in it.

Definition of holder

  • The holder is the payee or indorsee of a bill who possesses it or who is the bearer.
  • Possession forms the basis of being holder, but possession alone is not sufficient
  • The payee is the person to whom the bill is initially made payable
  • The payee is the holder of the bill only if he is in possession thereof
  • An indorsee is the person to whom or to whose order a bill is payable by virtue of a special indorsement

A Holder in due course

  • The holder in due course aquires ownership in the instrument even where he acquires it from a non dominus (somebody who is not the owner)
  • In terms of sec 36(b) he holds the bill "free from any defect in the title of prior parties, as well as from mere personal defences available to prior parties among themselves."

A Holder in due course continued

A holder in due course is a holder who has taken a bill, complete and regular on the face of it under the following circumstances, namely - a) he must have become the holder of it before it was overdue, and if it had previously been dishonoured, without notice thereof; andb) he must have taken the bill in good faith and for value, and at the time the bill was negotiated to him, he must have had no notice of any defect in title of the person who negotiated it.

A Holder in due course continued

A holder in due course is in a privileged position, as he or she is exempt from the nemo plus iuris rule.Example: A steals a cheque from B and negotiates it to C in a manner that makes C the holder in due course. C becomes the lawful owner of the cheque with all the rights and duties that such ownership entails. In other words, A has given something to C that A did not own, namely, ownership of a cheque.

Requirements to be a holder in due course

  • The person who takes the bill must first be the 'holder' of that bill
  • Must take the instrument for value - in return for some 'valuable consideration'
  • The bill must have been 'negotiated' to the holder
  • The person must have taken the bill in 'good faith'
  • Must have taken the instrument without knowing of any defects in title
  • The instrument itself must have been complete and regular on its face, or at a glance
  • Must have taken the instrument before it became overdue

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