403.305 Defenses and claims in recoupment.

408 words·~2 min read·/wi/chapter-403/403-305

A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

(1)Except as stated in sub.

(2), the right to enforce the obligation of a party to pay an instrument is subject to the following:

(a)A defense of the obligor based on any of the following:

1. Infancy of the obligor to the extent that it is a defense to a simple contract.

2. Duress, lack of legal capacity or illegality of the transaction which, under other law, nullifies the obligation of the obligor.

3. Fraud that induced the obligor to sign the instrument with neither knowledge nor reasonable opportunity to learn of its character or its essential terms.

4. Discharge of the obligor in insolvency proceedings.

(b)A defense of the obligor stated in another section of this chapter 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.

(c)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 that the action is brought.

(2)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 sub.

(a), but is not subject to defenses of the obligor stated in sub.

(b)or claims in recoupment stated in sub.

(c)against a person other than the holder.

(3)Except as stated in sub.

(4), 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, a claim in recoupment or a claim to the instrument under s. 403.306 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.