Sec. 42a-3-305. Defenses and claims in recoupment. - Connecticut Statutes

      Sec. 42a-3-305. Defenses and claims in recoupment. (a) Except as stated in subsection (b), the right to enforce the obligation of 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 the extent it is a defense to a simple contract, (ii) duress, lack of legal capacity, or illegality of the transaction which, under other law, nullifies the obligation of the obligor, (iii) fraud that induced the obligor to sign the instrument with neither knowledge nor reasonable opportunity to learn of its character or its essential terms, or (iv) discharge of the obligor in insolvency proceedings;

      (2) A defense of the obligor stated in another section of this article or a defense of the obligor that would be available if the person entitled to enforce the instrument were enforcing a right to payment under a simple contract; and

      (3) A claim in recoupment of the obligor against the original payee of the instrument if the claim arose from the transaction that gave rise to the instrument; but the claim of the obligor may be asserted against a transferee of the instrument only to reduce the amount owing on the instrument at the time the action is brought.

      (b) The right of a holder in due course to enforce the obligation of a party to pay the instrument is subject to defenses of the obligor stated in subsection (a)(1), but is not subject to defenses of the obligor stated in subsection (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 the obligation of a party to pay the instrument, the obligor may not assert against the person entitled to enforce the instrument a defense, claim in recoupment, or claim to the instrument, as provided in section 42a-3-306, of another person, but the other person's claim to the instrument may be asserted by the obligor if the other person is joined in the action and personally asserts the claim against the person entitled to enforce the instrument. An obligor is not obliged to pay the instrument if the person seeking enforcement of the instrument does not have rights of a holder in due course and the obligor proves that the instrument is a lost or stolen instrument.

      (d) In an action to enforce the obligation of an accommodation party to pay an instrument, the accommodation party may assert against the person entitled to enforce the instrument any defense or claim in recoupment under subsection (a) that the accommodated party could assert against the person entitled to enforce the instrument, except the defenses of discharge in insolvency proceedings, infancy and lack of legal capacity.

      (1959, P.A. 133, S. 3-305; P.A. 91-304, S. 31; May Sp. Sess. P.A. 92-11, S. 16, 70.)

      History: P.A. 91-304 substantially revised section; May Sp. Sess. P.A. 92-11 made a technical change in Subsec. (c).

      See Sec. 42a-3-306 for successor provisions to Sec. 42a-3-305(1), revised to 1991, re claims to an instrument.

      See Sec. 42a-3-601(b) for successor provisions to Sec. 42a-3-305(2)(e), revised to 1991, re effectiveness of discharge against a holder in due course.

      See Sec. 52-572g re defenses against holder in due course of instrument in consumer goods credit transaction.

      Annotations to former statute (1958 Rev., S. 39-58):

      Holder in due course may enforce payment against maker who was induced to sign through fraud or misrepresentation. 47 C. 347; 64 C. 61. Fraud of treasurer of manufacturing corporation in endorsing notes without authority, no defense. 71 C. 668; 72 C. 576. Fraud, unknown to holder, is no defense. 74 C. 198; 114 C. 699. Right of holder in due course to sue on accommodation note taken after maturity. 77 C. 634. Certain circumstances indicating lack of good faith on part of foreign bank attempting to collect drafts from acceptor in this state considered. 82 C. 24. Holder of note given without consideration as collateral security can enforce only to extent of debt secured. 91 C. 562. Cited. 97 C. 315. Holder in due course of note jointly endorsed may sue maker and endorsers jointly or separately. 101 C. 708. Cited. 105 C. 79. Applied. 106 C. 149. Quaere whether defense of usury is available against holder in due course. 126 C. 340. Subsection (2)(c) is a codification of the common-law definition of fraud in the factum and as such it seems best that it be adopted for use in case under the negotiable instruments law. 152 C. 474.

      Cited. 18 CS 15.

      Annotations to present section:

      Cited. 205 C. 604. Cited. 207 C. 483. Cited. 217 C. 205. Cited. 240 C. 10.

      Defendants' failure to read terms of contracts they signed was real cause for their ignorance of terms of note they signed payable to plaintiff, a holder in due course, and they had no defense under subsection (2)(c) of this section when sued thereon. 4 Conn. Cir. Ct. 620.

      Former Subsec. (2):

      Cited. 187 C. 637. Cited. 189 C. 591.

      Subsec. (a):

      Subdiv. (2) cited. 231 C. 441.