Defenses

Defenses

Universal or Real - can be used to defeat a holder and a HDC.

Personal - can be used to defeat a holder but not a HDC.

Universal Defenses

Forgery of maker’s or drawer’s signature.

§ Or if an authorized agent exceeds his authority to the amount which exceeds his authority.

Fraud in the execution - the”autograph” situation, not fraud in the inducement.

Material Alteration.

§ Do not have to pay the altered amount ($8 to $800), only a personal defense to the original amount ($8).

§ Not a real defense if instrument left blank, (.. filled in $800), then have to pay all ($800).

Discharge in Bankruptcy.

Infancy (Minority).

Illegality - severe enough to make contract void.

Mental Incapacity (adjudicated by court).

Extreme Duress. If instrument signed under threat of immediate force or violence.

Personal Defenses

Valid against holders but not HDC’s.

§ Breach of contract or warranty.

§ Lack of consideration.

§ Fraud in the inducement.

§ Illegality - not severe enough to make void.

Mental incapacity - not severe enough to make void.

Discharge.

§ By payment or cancellation.

§ Unauthorized completion.

§ Non-delivery of instrument.

§ Ordinary duress or undue influence rendering contract voidable.