. Title of the holder free from all defects A person taking the instrument in good faith and for value is known as holder in due course. When the instrument is held by holder in due course in the process of negotiation, it is cured of all defects in the instrument with respect to ownership. In other words, even though the right of the person who transferred the instrument to holder in due course is defective i.e.
disentitled to transfer, the title of the holder in due course is superior. He/ she need not return the bill to true owner. eg. A sold certain goods to B.
B gives a Bills of Exchange to S for the price. Later B refuses to pay the Bills of Exchange on the ground that the goods supplied are defective. Meantime, A endorsed the bill to C. In this case, B’s defence is of no value.
C is a holder in due course. His title is not affected by certain defence like fraud or misrepresentation or any mistake.