§ 41-03-31 — (3-305) Defenses and claims in recoupment

North Dakota § 41-03-31

• Jurisdiction: North Dakota
• Title 41: Uniform Commercial Code
• Ch. 41-03: Negotiable Instruments

Text

1. Except as stated in subsection 2, the right to enforce the obligation of a party to pay
the instrument is subject to the following:
a. A defense of the obligor based on infancy of the obligor to the extent it is a
defense to a simple contract, duress, lack of legal capacity, or illegality of the
transaction that nullifies the obligation of the obligor; fraud that induced the
obligor to sign the instrument with neither knowledge nor reasonable opportunity
to learn of its character or its essential terms; and 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. 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 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 subdivision a of subsection 1,
but is not subject to defenses of the obligor stated in subdivision b of subsection 1 or
claims in recoupment stated in subdivision c of subsection 1 against a person other
than the holder.
3. Except as stated in subsection 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, claim in recoupment, or claim to the instrument (section
41-03-32) 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.
4. In an action to enforce the obligation of an accommodation party to pay an instrument,
the accommodation party may assert the person entitled to enforce the instrument any
defense of claim in recoupment under subsection 1 that the accommodated party
could assert against the person entitled to enforce the instrument, except the defenses
of discharge in insolvency proceedings, infancy, or lack of legal capacity.