Which defense is a real or absolute defense that can be raised against a holder in due course?

Which defense is a real or absolute defense that can be raised against a holder in due course?

• A. Want of delivery of complete instrument
• B. Absence or failure of consideration
• C. Acquisition of instrument by force, duress, fear, or unlawful means
• D. Want of authority of agent

Answer: (D)

In negotiable instruments, some defenses are called real (absolute) defenses because they can defeat even a holder in due course. A key example is lack of authority by the agent who signed or issued the instrument. If the signer acted without actual authority to bind the principal, the instrument is not a valid obligation of that principal. Since the fundamental authority to bind the party is missing, payment cannot be enforced against that party, even by someone who took the instrument in good faith for value. This is why lack of authority of the agent is the strongest defense against a holder in due course. The other options involve defects or defenses that are personal or not universally binding on a holder in due course, so they don’t carry the same weight against an HDC.

In negotiable instruments, some defenses are called real (absolute) defenses because they can defeat even a holder in due course. A key example is lack of authority by the agent who signed or issued the instrument. If the signer acted without actual authority to bind the principal, the instrument is not a valid obligation of that principal. Since the fundamental authority to bind the party is missing, payment cannot be enforced against that party, even by someone who took the instrument in good faith for value.

This is why lack of authority of the agent is the strongest defense against a holder in due course. The other options involve defects or defenses that are personal or not universally binding on a holder in due course, so they don’t carry the same weight against an HDC.