400.3-305. Defenses and claims in recoupment. - Missouri Statutes

Defenses and claims in recoupment.

400.3-305. (a) Except as stated in subsection (b), the right to enforcethe 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 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 Articleor a defense 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 ofthe instrument 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 aparty to 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) againsta 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 (Section 400.3-306) 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 an accommodation party topay an instrument, the accommodation party may assert against the personentitled to enforce the instrument any defense or claim in recoupment undersubsection (a) that the accommodated party could assert against the personentitled to enforce the instrument, except the defenses of discharge ininsolvency proceedings, infancy, and lack of legal capacity.

(L. 1963 p. 503 § 3-305, A.L. 1992 S.B. 448)

CROSS REFERENCE:

Defenses or setoffs arising from purchase of consumer goods available against holder of security interest, RSMo 408.405