A. What defenses can be used against a holder in due course? b. What defenses cannot be used against a holder in due course?
a. Real defenses are used to avoid payment to all holders, including HDCs. Real defenses include infancy to the extent that it is a defense to a simple contract; any other incapacity, duress, or illegality that renders the obligation void; fraud in the execution; discharge in insolvency proceedings; any other discharge of which the holder has notice when he takes the instrument; unauthorized signature; and fraudulent alteration.
b. Personal defenses can only be used against an ordinary holder, not an HDC. Personal defenses include breach of contract; failure or lack of consideration; illegality that does not render the transaction void; setoff or counterclaim; nondelivery of an instrument; unauthorized completion; theft of a bearer instrument; fraud in the inducement; discharge of which the HDC does not have notice; payment without obtaining surrender of the instrument; lack of authority of a corporate officer, agent, or partner; and duress, undue influence, mistake, misrepresentation, or incapacity that does not render the transaction void.
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