Indiana Code
Chapter 3.1. Negotiable Instruments
26-1-3.1-305. Defenses and Claims in Recoupment

Sec. 305. (a) Except as otherwise provided in this section, the right to enforce the obligation of a party to pay an instrument is subject to the following:
(1) a defense of the obligor based on:
(A) infancy of the obligor to the extent it is a defense to a simple contract;
(B) duress, lack of legal capacity, or illegality of the transaction which, under other law, nullifies the obligation of the obligor;
(C) fraud that induced the obligor to sign the instrument with neither knowledge nor reasonable opportunity to learn of its character or its essential terms; or
(D) discharge of the obligor in insolvency proceedings;
(2) a defense of the obligor stated in another section of IC 26-1-3.1 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; and
(3) 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 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.
(b) 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 (a)(1), but is not subject to defenses of the obligor stated in subsection (a)(2) or claims in recoupment stated in subsection (a)(3) against a person other than the holder.
(c) Except as stated in subsection (d), 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 (IC 26-1-3.1-306) 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.
(d) 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 instrument any defense or claim in recoupment under subsection (a) that the accommodated party could assert against the person entitled to enforce the instrument, except the defenses of discharge in insolvency proceedings, infancy, and lack of legal capacity.
(e) In a consumer transaction, if law other than this article requires that an instrument include a statement to the effect that the rights of a holder or transferee are subject to a claim or defense that the issuer could assert against the original payee, and the instrument does not include such a statement:
(1) the instrument has the same effect as if the instrument included such a statement;
(2) the issuer may assert against the holder or transferee all claims and defenses that would have been available if the instrument included such a statement; and
(3) the extent to which claims may be asserted against the holder or transferee is determined as if the instrument included such a statement.
(f) This section is subject to law other than this article that establishes a different rule for consumer transactions.
As added by P.L.222-1993, SEC.5. Amended by P.L.135-2009, SEC.6.

Structure Indiana Code

Indiana Code

Title 26. Commercial Law

Article 1. Uniform Commercial Code

Chapter 3.1. Negotiable Instruments

26-1-3.1-101. Short Title

26-1-3.1-102. Subject Matter

26-1-3.1-103. Definitions

26-1-3.1-104. Negotiable Instrument

26-1-3.1-105. Issue of Instrument

26-1-3.1-106. Unconditional Promise or Order

26-1-3.1-107. Instrument Payable in Foreign Money

26-1-3.1-108. Payable on Demand or at Definite Time

26-1-3.1-109. Payable to Bearer or to Order

26-1-3.1-110. Identification of Person to Whom Instrument Is Payable

26-1-3.1-111. Place of Payment

26-1-3.1-112. Interest

26-1-3.1-113. Date of Instrument

26-1-3.1-114. Contradictory Terms of Instrument

26-1-3.1-115. Incomplete Instrument

26-1-3.1-116. Joint and Several Liability; Contribution

26-1-3.1-117. Other Agreements Affecting Instrument

26-1-3.1-118. Statute of Limitations

26-1-3.1-119. Notice of Right to Defend Action

26-1-3.1-201. Negotiation

26-1-3.1-202. Negotiation Subject to Rescission

26-1-3.1-203. Transfer of Instrument; Rights Acquired by Transfer

26-1-3.1-204. Endorsement

26-1-3.1-205. Special Endorsement; Blank Endorsement; Anomalous Endorsement

26-1-3.1-206. Restrictive Endorsement

26-1-3.1-207. Reacquisition

26-1-3.1-301. Person Entitled to Enforce Instrument

26-1-3.1-302. Holder in Due Course

26-1-3.1-303. Value and Consideration

26-1-3.1-304. Overdue Instrument

26-1-3.1-305. Defenses and Claims in Recoupment

26-1-3.1-306. Claims to an Instrument

26-1-3.1-307. Notice of Breach of Fiduciary Duty

26-1-3.1-308. Proof of Signatures and Status as Holder in Due Course

26-1-3.1-309. Enforcement of Lost, Destroyed, or Stolen Instrument

26-1-3.1-310. Effect of Instrument on Obligation for Which Taken

26-1-3.1-311. Accord and Satisfaction by Use of Instrument

26-1-3.1-312. Lost Check; Assertion of Claim to Obligated Bank

26-1-3.1-401. Signature

26-1-3.1-402. Signature by Representative

26-1-3.1-403. Unauthorized Signature

26-1-3.1-404. Impostors; Fictitious Payees

26-1-3.1-405. Employer's Responsibility for Fraudulent Endorsement by Employee

26-1-3.1-406. Negligence Contributing to Forged Signature or Alteration of Instrument

26-1-3.1-407. Alteration

26-1-3.1-408. Drawee Not Liable on Unaccepted Draft

26-1-3.1-409. Acceptance of Draft; Certified Check

26-1-3.1-410. Acceptance Varying Draft

26-1-3.1-411. Refusal to Pay Cashier's Checks, Teller's Checks, and Certified Checks

26-1-3.1-412. Obligation of Issuer of Note or Cashier's Check

26-1-3.1-413. Obligation of Acceptor

26-1-3.1-414. Obligation of Drawer

26-1-3.1-415. Obligation of Endorser

26-1-3.1-416. Transfer Warranties

26-1-3.1-417. Presentment Warranties

26-1-3.1-418. Payment or Acceptance by Mistake

26-1-3.1-419. Instruments Signed for Accommodation

26-1-3.1-420. Conversion of Instrument

26-1-3.1-501. Presentment

26-1-3.1-502. Dishonor

26-1-3.1-502.5. Surcharge After Dishonor

26-1-3.1-503. Notice of Dishonor

26-1-3.1-504. Excused Presentment and Notice of Dishonor

26-1-3.1-505. Evidence of Dishonor

26-1-3.1-601. Discharge and Effect of Discharge

26-1-3.1-602. Payment

26-1-3.1-603. Tender of Payment

26-1-3.1-604. Discharge by Cancellation or Renunciation

26-1-3.1-605. Release or Extension of an Obligor's Obligation