A debtor transfers to his creditor a negotiable instrument held by the debtor in full and final satisfaction of a debt which is barred by limitation. Would the creditor be a holder in due course of the instrument ?
This problem primarily requires to establish whether in the given case the holder of negotiable instrument (creditor) has secured it against lawful consideration or not. Under Section 25(3), a written promise to pay a time-barred debt shall be valid.
Such a promise though without consideration (since the debt having become time- barred, it is legally not payable) is held enforceable as an exception. Thus, in the given case, the holder should be considered as a holder for consideration. Other conditions of a holder in due course, satisfied, he should also be considered as a holder in due course.
This problem primarily requires to establish whether in the given case the holder of negotiable instrument (creditor) has secured it against lawful consideration or not. Under Section 25(3), a written promise to pay a time-barred debt shall be valid.
Such a promise though without consideration (since the debt having become time- barred, it is legally not payable) is held enforceable as an exception. Thus, in the given case, the holder should be considered as a holder for consideration. Other conditions of a holder in due course, satisfied, he should also be considered as a holder in due course.
