8.3A-305 - A-305. Defenses and claims in recoupment.
§ 8.3A-305. Defenses and claims in recoupment.
(a) Except as stated in subsection (b), the right to enforce the obligationof a party to pay an instrument is subject to the following:
(1) a defense of the obligor based on (i) infancy of the obligor to theextent it is a defense to a simple contract, (ii) duress, lack of legalcapacity, or illegality of the transaction which, under other law, nullifiesthe obligation of the obligor, (iii) fraud that induced the obligor to signthe instrument with neither knowledge nor reasonable opportunity to learn ofits character or its essential terms, or (iv) discharge of the obligor ininsolvency proceedings;
(2) a defense of the obligor stated in another section of this title or adefense of the obligor that would be available if the person entitled toenforce the instrument were enforcing a right to payment under a simplecontract; and
(3) a claim in recoupment of the obligor against the original payee of theinstrument if the claim arose from the transaction that gave rise to theinstrument; but the claim of the obligor may be asserted against a transfereeof the instrument only to reduce the amount owing on the instrument at thetime the action is brought.
(b) The right of a holder in due course to enforce the obligation of a partyto pay the instrument is subject to defenses of the obligor stated insubsection (a) (1), but is not subject to defenses of the obligor stated insubsection (a) (2) or claims in recoupment stated in subsection (a) (3)against a person other than the holder.
(c) Except as stated in subsection (d), in an action to enforce theobligation of a party to pay the instrument, the obligor may not assertagainst the person entitled to enforce the instrument a defense, claim inrecoupment, or claim to the instrument (§ 8.3A-306) of another person, butthe other person's claim to the instrument may be asserted by the obligor ifthe other person is joined in the action and personally asserts the claimagainst the person entitled to enforce the instrument. An obligor is notobliged to pay the instrument if the person seeking enforcement of theinstrument does not have rights of a holder in due course and the obligorproves that the instrument is a lost or stolen instrument.
(d) In an action to enforce the obligation of an accommodation party to payan instrument, the accommodation party may assert against the person entitledto enforce the instrument any defense or claim in recoupment under subsection(a) that the accommodated party could assert against the person entitled toenforce the instrument, except the defenses of discharge in insolvencyproceedings, infancy, and lack of legal capacity.
(Code 1950, §§ 6-367, 6-368, 6-380 through 6-409, 6-411; 1964, c. 219, §§8.3-305, 8.3-306; 1992, c. 693.)