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CSEET · Business Laws and Management · Elements of Law relating to Negotiable Instruments

Anita is a holder in due course of a bill. She negotiates it as a gift to her friend Bela, who knows nothing of any defect and is not herself a holder in due course. Which statement is correct?

Bela has the rights of a holder in due course. The Act provides that a holder who derives title from a holder in due course has that holder's rights, so Bela need not herself satisfy the conditions such as giving consideration.

  1. ABela has the rights of a holder in due course because she derives title from oneCorrect
  2. BBela has no rights since she gave no consideration
  3. CBela can claim only the amount she paid, which is nil
  4. DBela has rights only if the bill is also re-accepted by the drawee

Explanation

Section 53 says a holder who derives title from a holder in due course has the rights of that holder in due course. Bela need not herself satisfy the conditions of Section 9, so the absence of consideration from her does not defeat her rights. The other options add requirements not found in the Act.

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