Michael issues a check to Paula. She negotiates the check to Hal as payment for a used television set. Hal has no notice of any claims or defenses and takes the check in good faith. Hal indorses the check and gives it to his son as a birthday present. Is Hal's son a holder in due course? What rights does he have with respect to the check? If Michael has a defense of fraud in the inducement against Paula, can he use that defense against Hal or Hal's son?

Hal's son is not a holder in due course because he did not give value for the check. However, he has the rights and privileges of a holder in due course, which means he takes the instrument free of most defenses or adverse claims to it. He has these rights because he is a holder through a holder in due course and receives these rights under the "shelter rule" outlined in the UCC. If Michael has a defense of fraud in the inducement against Paula, this is a personal defense, which means it cannot be used against a holder in due course or one with the rights of a holder in due course. Therefore, Michael cannot use this defense against either Hal or his son.