§ 554.3305

554.3305 Defenses and claims in recoupment. 1. Except as stated in subsection 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 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 which, underother law, nullifies the obligation of the obligor; fraud that induced the obligor to sign theinstrument with neither knowledge nor reasonable opportunity to learn of its character or itsessential terms; or discharge of the obligor in insolvency proceedings; b. a defense of the obligor stated in another section of this Article or a defense of the obligor that would be available if the person entitled to enforce the instrument were enforcinga right to payment under a simple contract; and 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 obligormay be asserted against a transferee of the instrument only to reduce the amount owing onthe instrument at the time the action is brought. 2.

gave rise to the instrument; but the claim of the obligormay be asserted against a transferee of the instrument only to reduce the amount owing onthe 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 subsection 1, paragraph 'a', butis not subject to defenses of the obligor stated in subsection 1, paragraph 'b', or claims inrecoupment stated in subsection 1, paragraph 'c', 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 theinstrument a defense, claim in recoupment, or claim to the instrument (section 554.3306) ofanother person, but the other person’s claim to the instrument may be asserted by the obligorif the other person is joined in the action and personally asserts the claim against the personentitled to enforce the instrument. An obligor is not obliged to pay the instrument if theperson seeking enforcement of the instrument does not have rights of a holder in due

claim against the personentitled to enforce the instrument. An obligor is not obliged to pay the instrument if theperson seeking enforcement of the instrument does not have rights of a holder in due courseand 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 against the person entitled to enforce the instrumentany defense or claim in recoupment under subsection 1 that the accommodated party couldassert against the person entitled to enforce the instrument, except the defenses of dischargein insolvency proceedings, infancy, and lack of legal capacity. 94 Acts, ch 1167, §40, 121, 122; 2013 Acts, ch 30, §144Referred to in §554.3302, 554.4207, 554.9403 Sat Dec 23 01:56:49 2023 Iowa Code 2024, Section 554.3305 (24, 0)