Payment in due course is the payment by a debtor on a negotiable instrument which discharges the negotiable instrument, even though the payment is made on or after the maturity date of the negotiable instrument. The holder of the negotiable instrument, known as a holder in due course, must have took the instrument for value, in good faith, without notice that the instrument is overdue or has been dishonored, without notice that the instrument is unauthorized, and without notice of any legal claims against the instrument. Uniform Commercial Code — Negotiable Instruments § 25-3-302. The term payment in due course most commonly arises in the context of a debtor’s check to satisfy a debt or a bill. For example, in Sistler v. Illinois Bankers Life Assurance Company, a party wrote a check on the last day that his insurance premium payments were due, and the check, had it been valid, would have satisfied the debt as payment in due course.
[Last updated in August of 2020 by the Wex Definitions Team]