In this lesson, we’ll discuss two vital rules affecting the scope and applicability of the holder-in-due-course protections: the close-connectedness doctrine and the shelter rule.

I. Close-Connectedness Doctrine

The close-connectedness doctrine applies primarily to consumer transactions. A consumer transaction is one in which an individual uses a negotiable instrument to purchase goods or services for personal, family, or household purposes. Historically, some creditors used the...