New Jersey § 12a:3-302

§ 12a:3-302.

a. Subject to subsection c. of this section and subsection d. of 12A:3-106, “ holder in due course ” means the holder of an instrument if: (1) the instrument when issued or negotiated to the holder does not bear such apparent

evidence of forgery or alteration or is not otherwise so irregular or incomplete as

to call into question its authenticity; and (2) the holder took the instrument for value, in good faith, without notice that the

instrument is overdue or has been dishonored or that there is an uncured default with

respect to payment of another instrument issued as part of the same series, without

notice that the instrument contains an unauthorized signature or has been altered,

without notice of any claim to the instrument described in 12A:3-306, and without

notice that any party has a defense or claim in recoupment described in subsection

a. of 12A:3-305. b. Notice of discharge of a party, other than discharge in an insolvency proceeding,

is not notice of a defense under subsection a. of this section, but discharge is effective

against a person who became a holder in due course with notice of the discharge. Public filing or recording of a document does not of itself constitute notice of

a defense, claim in recoupment, or claim to the instrument. c. Except to the extent a transferor or predecessor in interest has rights as a holder

in due course, a person does not acquire rights of a holder in due course of an instrument

taken by legal process or by purchase in an execution, bankruptcy, or creditor's sale

or similar proceeding, by purchase as part of a bulk transaction not in ordinary course

of business of the transferor, or as the successor in interest to an estate or other

organization. d. If, under paragraph (1) of subsection a. of 12A:3-303, the promise of performance

that is the consideration for an instrument has been partially performed, the holder

may assert rights as a holder in due course of the instrument only to the fraction

of the amount payable under the instrument equal to the value of the partial performance

divided by the value of the promised performance. e. If the person entitled to enforce an instrument has only a security interest in

the instrument and the person obliged to pay the instrument has a defense, claim in

recoupment, or claim to the instrument that may be asserted against the person who

granted the security interest, the person entitled to enforce the instrument may assert

rights as a holder in due course only to an amount payable under the instrument which,

at the time of enforcement of the instrument, does not exceed the amount of the unpaid

obligation secured. f. To be effective, notice must be received at a time and in a manner that gives a

reasonable opportunity to act on it. g. This section is subject to any law limiting status as a holder in due course in

particular classes of transactions.