Washington University Law Quarterly
Few legal principles are better developed or better known than the one that bona fide purchasers for value of negotiable instruments that are properly negotiated to them-in other words, holders in due course—take the instruments free of defenses that might be available between the original parties. Not only is the rule well known, but it is easy to come within it. Few seem so aware of this as finance companies. Nearly every sale they finance—and the total amount of money involved runs to billions—involves a negotiable instrument, and the instrument is usually handled in such a way that the finance company has every reason to suppose that it has become, as it intended, a holder in due course.
Yet there are a significant number of cases (though nothing approaching a majority) that indicate that these efforts are in vain, and that a finance company that purchases a negotiable promissory note from, say, an automobile dealer in the usual manner of financing a consumer purchase, is not a holder in due course of the instrument even though there is no suggestion of actual bad faith on its part. It is the purpose here to examine the cases in this area, both those that give the finance company the status of a holder in due course, and those that do not.
William C. Jones,
Finance Companies as Holders in Due Course of Consumer Paper,
1958 Wash. U. L. Q. 177
Available at: http://openscholarship.wustl.edu/law_lawreview/vol1958/iss2/3