§ 6A-3-305 - Defenses and Claims in Recoupment.
SECTION 6A-3-305
§ 6A-3-305 Defenses and Claims inRecoupment. – (a) Except as stated in subsection (b), the right to enforce the obligation ofa party to pay an instrument is subject to the following:
(1) A defense of the obligor based on (i) infancy of theobligor to the extent it is a defense to a simple contract, (ii) duress, lackof legal capacity, or illegality of the transaction which, under other law,nullifies the obligation of the obligor, (iii) fraud that induced the obligorto sign the instrument with neither knowledge nor reasonable opportunity tolearn of its character or its essential terms, or (iv) discharge of the obligorin insolvency proceedings;
(2) A defense of the obligor stated in another section ofthis chapter or a defense of the obligor that would be available if the personentitled to enforce the instrument were enforcing a right to payment under asimple contract; and
(3) A claim in recoupment of the obligor against the originalpayee of the instrument if the claim arose from the transaction that gave riseto the instrument; but the claim of the obligor may be asserted against atransferee of the instrument only to reduce the amount owing on the instrumentat the time the action is brought.
(b) The right of a holder in due course to enforce theobligation of a party to pay the instrument is subject to defenses of theobligor stated in subsection (a)(1), but is not subject to defenses of theobligor stated in subsection (a)(2) or claims in recoupment stated insubsection (a)(3) against a person other than the holder.
(c) Except as stated in subsection (d), in an action toenforce the obligation of a party to pay the instrument, the obligor may notassert against the person entitled to enforce the instrument a defense, claimin recoupment, or claim to the instrument (§ 6A-3-306) of another person,but the other person's claim to the instrument may be asserted by the obligorif the 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 anaccommodation party to pay an instrument, the accommodation party may assertagainst the person entitled to enforce the instrument any defense or claim inrecoupment under subsection (a) that the accommodated party could assertagainst the person entitled to enforce the instrument, except the defenses ofdischarge in insolvency proceedings, infancy, and lack of legal capacity.