Rights of Holder in Due Course--Claims and Defenses

Question 1

What are the real defenses to an HDC’s enforcement of an instrument?

Answer 1

(1) Infancy
(2) Duress (extreme duress)
(3) Incapacity to contract
(4) Illegality
(5) Real fraud (i.e., didn’t know what they were signing–blind or don’t speak English–no knowledge or reasonable opportunity ascertain true nature of instrument)
(6) Discharge in insolvency
(7) Statute of limitations (3 years after dishonor and 6 years after notes payable at definite time)
(8) Alteration or Forgery

Question 2

What personal defenses will work against HDC?

Answer 2

NONE–anything but real defenses will fail (e.g., lack of consideration will fail, as will breach of warranty, fraud in inducement, and claims/defenses of another unless there is theft)

Question 3

Who can take an instrument from HDC?

Answer 3

Nobody–they are a perfect defendant
* Even true owner cannot recover