What defines a Holder in Due Course?

A Holder in Due Course is defined as an individual who acquires a negotiable instrument in good faith, for value, and without knowledge of any defects or claims against it. This means that the holder has taken the instrument without awareness of issues, such as forgery or other legal defenses, that would otherwise impede their right to enforce the instrument.

By purchasing the instrument with no knowledge of such defects, the Holder in Due Course is afforded certain protections under the law. This status typically allows the holder to claim payment despite these defects, securing their position as a legitimate party entitled to collect on the instrument.

The other options do not accurately capture this legal definition: those who purchase an instrument with knowledge of its defects would not gain the protections offered to a Holder in Due Course; someone without the right to collect a debt would not fulfill the necessary criteria for status; and an individual who creates the notes does not fit into the category of a holder at all, as they would typically be involved in the issuance rather than holding the instrument as a transferor.