Question

This rule provides that a person who does not qualify as a holder in due course (HDC) but takes possession of a promissory note through an HDC can acquire the rights and privileges of an HDC which of the following:

a. the reformed holder rule.
b. the new holder principle.
c. the shelter principle.
d. the impermanence principle.

Answer 1

Answer: the shelter principle

Step-by-step explanation:

The shelter principle refers to allowing a party or individual who has a non-HDC and derives the title through an HDC to enjoy the rights of an HDC. Irrespective of a given negotiable instrument and can still obtain those rights.