Which of the following defenses will defeat a holder in due course?

Question

Quizplus · Accepted Answer

Fraud as to the nature or essential terms of the paper is a defense that can defeat a holder in due course. This defense involves the fraudulent misrepresentation of the nature, character, or essential terms of the instrument, which can render the holder in due course unable to enforce the instrument against the defendant. While ordinary contract defenses may be available against a holder in due course, they are not likely to be as effective as fraud as to the nature or essential terms of the paper. Fraud in the inducement may not necessarily defeat a holder in due course, as the holder may still be able to enforce the instrument if they had no knowledge of the fraud.

Which of the Following Defenses Will Defeat a Holder in Due