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The shelter principle allows a holder of a negotiable instrument who does not qualify as a holder-in-due-course to still receive holder-in-due-course rights if they obtained the instrument from someone who was a holder-in-due-course. Specifically, if a negotiable instrument was previously held by a holder-in-due-course, every subsequent possessor of that instrument is entitled to the same rights and privileges, even if they themselves do not meet the qualifications of a holder-in-due-course. This principle stems from the concept that each new possessor of a negotiable instrument assumes the same rights as the person they received it from.
The shelter principle allows a holder of a negotiable instrument who does not qualify as a holder-in-due-course to still receive holder-in-due-course rights if they obtained the instrument from someone who was a holder-in-due-course. Specifically, if a negotiable instrument was previously held by a holder-in-due-course, every subsequent possessor of that instrument is entitled to the same rights and privileges, even if they themselves do not meet the qualifications of a holder-in-due-course. This principle stems from the concept that each new possessor of a negotiable instrument assumes the same rights as the person they received it from.
The shelter principle allows a holder of a negotiable instrument who does not qualify as a holder-in-due-course to still receive holder-in-due-course rights if they obtained the instrument from someone who was a holder-in-due-course. Specifically, if a negotiable instrument was previously held by a holder-in-due-course, every subsequent possessor of that instrument is entitled to the same rights and privileges, even if they themselves do not meet the qualifications of a holder-in-due-course. This principle stems from the concept that each new possessor of a negotiable instrument assumes the same rights as the person they received it from.
Negotiable Instruments Law operate to give the rights of a holder-in-due course to a holder who does not have the status of a holder-in-due course? Briefly explain. (2%) The shelter principle refers to the principle that a party which does not and cannot qualify as a holder in due course (HDC) with regard to a given negotiable instrument can actually still obtain those rights and privileges if that party obtained the instrument through an HDC. In other words, if an HDC at some point possessed the negotiable instrument, then every possessor of that negotiable instrument after that point will have access to the same rights and privileges. The reasoning behind this shelter principle is actually a core reasoning of negotiation and basic ownership. Every time a negotiable instrument transfers to a new possessor, that new possessor is always accorded at least the rights of the previous possessor, the transferor. This means that if the transferor is an HDC, then the HDC's rights and privileges are passed along with the negotiable instrument.