§ 25-3-305. Defenses and claims in recoupment.
§ 25‑3‑305. Defenses and claims in recoupment.
(a) Except as stated insubsection (b) of this section, the right to enforce the obligation of a partyto pay an instrument is subject to the following:
(1) A defense of theobligor based on (i) infancy of the obligor to the extent it is a defense to asimple contract, (ii) duress, lack of legal capacity, or illegality of thetransaction which, under other law, nullifies the obligation of the obligor,(iii) fraud that induced the obligor to sign the instrument with neitherknowledge nor reasonable opportunity to learn of its character or its essentialterms, or (iv) discharge of the obligor in insolvency proceedings;
(2) A defense of theobligor stated in another section of this Article or a defense of the obligorthat would be available if the person entitled to enforce the instrument wereenforcing a right to payment under a simple contract; and
(3) A claim inrecoupment of the obligor against the original payee of the instrument if theclaim arose from the transaction that gave rise to the instrument; but theclaim of the obligor may be asserted against a transferee of the instrumentonly to reduce the amount owing on the instrument at the time the action isbrought.
(b) The right of aholder in due course to enforce the obligation of a party to pay the instrumentis subject to defenses of the obligor stated in subsection (a)(1) of thissection, but is not subject to defenses of the obligor stated in subsection(a)(2) of this section or claims in recoupment stated in subsection (a)(3) ofthis section against a person other than the holder.
(c) Except as stated insubsection (d) of this section, in an action to enforce the obligation of aparty to pay the instrument, the obligor may not assert against the person entitledto enforce the instrument a defense, claim in recoupment, or claim to theinstrument (G.S. 25‑3‑306) of another person, but the otherperson's claim to the instrument may be asserted by the obligor if the otherperson is joined in the action and personally asserts the claim against theperson entitled to enforce the instrument. An obligor is not obliged to pay theinstrument if the person seeking enforcement of the instrument does not haverights of a holder in due course and the obligor proves that the instrument isa lost or stolen instrument.
(d) In an action toenforce the obligation of an accommodation party to pay an instrument, theaccommodation party may assert against the person entitled to enforce theinstrument any defense or claim in recoupment under subsection (a) of thissection 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. (1899, c. 733, s. 15, 16, 28,57, 58, 59; Rev., ss. 2165, 2166, 2176, 2206, 2207, 2208; C.S., ss. 2297, 2996,2997, 3008, 3038, 3039, 3040; 1965, c. 700, s. 1; 1995, c. 232, s. 1.)