Wisconsin Statutes
Wis. Stat. § 403.305 (2026)
Defenses and claims in recoupment
✓ current as of July 2026
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403.305(1)(1) Except as stated in sub. (2), the right to enforce the obligation of a party to pay an instrument is subject to the following:
403.305(1)(a)2.2. Duress, lack of legal capacity or illegality of the transaction which, under other law, nullifies the obligation of the obligor.
403.305(1)(a)3.3. Fraud that induced the obligor to sign the instrument with neither knowledge nor reasonable opportunity to learn of its character or its essential terms.
403.305(1)(b)(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.
403.305(1)(c)(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 obligor may be asserted against a transferee of the instrument only to reduce the amount owing on the instrument at the time that the action is brought.
403.305(2)(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 sub. (1) (a), but is not subject to defenses of the obligor stated in sub. (1) (b) or claims in recoupment stated in sub. (1) (c) against a person other than the holder.
403.305(3)(3) Except as stated in sub. (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, a claim in recoupment or a claim to the instrument under s. 403.306 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.
403.305(4)(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 instrument any defense or claim in recoupment under sub. (1) 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.
403.305 AnnotationExtending immediate credit on a deposited check was not contrary to reasonable commercial standards of fair dealing when the account owner had always deposited funds to cover previous overdrafts when alerted to the problem and the bank had no reason to suspect there would be a problem if immediate credit was extended. Consequently, the bank was a holder in due course who had the right to recover its losses from the check’s issuer who had stopped payment. Mid Wisconsin Bank v. Forsgard Trading, Inc., 2003 WI App 186, 266 Wis. 2d 685, 668 N.W.2d 830, 03-0123.
Notes of Decisions
Cited in 12
cases, 1974–2005 · leading case: In Re Est. of Balkus v. Sec. First Nat'l Bank of Sheboygan Trust Dep't, 381 N.W.2d 593 (Wis. Ct. App. 1985).
In Re Est. of Balkus v. Sec. First Nat'l Bank of Sheboygan Trust Dep't, 381 N.W.2d 593 (Wis. Ct. App. 1985). “Under sec. 403.305, Stats., therefore, Vesely cannot take the notes free from the personal representative's defense of nondelivery because she dealt with Balkus.”
State v. Excel Mgmt. Servs., Inc., 331 N.W.2d 312 (Wis. 1983). “In support of this position, the court of appeals referred to sec 403.305, Stats. 1979-80, a section dealing with the rights of a holder in due course, and then noted that, "to allow the state to bring an action against an assignee would render sec.”
Fed. Deposit Ins. Corp. v. Lesselyoung, 476 F. Supp. 938 (E.D. Wis. 1979). “This Court held that the FDIC, although not technically a holder in due course (Wis.Stat. § 403.305), is clothed with the same defenses available to a holder in due course.”
United Catholic Par. Schs. of Beaver Dam Educ. Ass'n v. Card Servs. Ctr., 2001 WI App 229 (Wis. Ct. App. 2001). “See Wis. Stat. § 403.305 (2); Speidel, et al.”
Co-Operative v. Kellogg-Citizens Nat'l Bank, 386 N.W.2d 510 (Wis. Ct. App. 1986). “Section 403.305(2), Stats. Failure of consideration is one such defense.”
Fed. Deposit Ins. Corp. v. Balistreri, 470 F. Supp. 752 (E.D. Wis. 1979). “§ 403.305). The defenses raised by defendant are best characterized as involving fraud in the inducement because the defendant is attacking the agreements underlying the note contract rather than the validity of the contract inherent in the making of a note.”
Wisconsin Bankers Ass'n v. Mut. Sav. & Loan Ass'n, 275 N.W.2d 130 (Wis. Ct. App. 1978). “27 Sec. 403.305, Stats. 28 See Beutel, The Development of Negotiable Instruments in Early English Law (1938), 51 Harv.”
Mortg. Assocs., Inc. v. Siverhus, 218 N.W.2d 266 (Wis. 1974). “” Sec. 403.305, Stats., provides: “Rights of a holder in due course.”
Mid Wisconsin Bank v. Forsgard Trading, Inc., 2003 WI App 186 (Wis. Ct. App. 2003). “Mid Wisconsin had no reason to suspect there would be any problem if immediate credit was extended for this check. Consequently, we conclude that Mid Wisconsin observed reasonable commercial standards of fair dealing and therefore was a holder in due course.”
Fed. Nat'l Mortg. Ass'n v. Gregory, 426 F. Supp. 282 (E.D. Wis. 1977). “As a holder in due course, the plaintiff is subject to certain defenses enumerated in Wis.Stat. 403.305. The defense of fraud in the inducement raised by Mrs.”
Associated Bank North v. Busche, 695 N.W.2d 903 (Wis. Ct. App. 2005). “" In the alternative, Busche argues "[e]ven if holder-in-due-course were applicable to this case summary judgment was inappropriate because material issues of fact existed as to whether Heritage's direct dealings with Busche constitute a violation of the good faith requirement…”
Fed. Nat. Mortg. Ass'n v. Gregory, 426 F. Supp. 282 (E.D. Wis. 1977). “As a holder in due course, the plaintiff is subject to certain defenses enumerated in Wis.Stat. 403.305. The defense of fraud in the inducement raised by Mrs.”
— Wis. Stat. § 403.305(2) — 2 cases
Co-Operative v. Kellogg-Citizens Nat'l Bank, 386 N.W.2d 510 (Wis. Ct. App. 1986). “Section 403.305(2), Stats. Failure of consideration is one such defense.”
Associated Bank North v. Busche, 695 N.W.2d 903 (Wis. Ct. App. 2005). “" In the alternative, Busche argues "[e]ven if holder-in-due-course were applicable to this case summary judgment was inappropriate because material issues of fact existed as to whether Heritage's direct dealings with Busche constitute a violation of the good faith requirement…”
— Wis. Stat. § 403.305(2)(c) — 2 cases
Fed. Nat'l Mortg. Ass'n v. Gregory, 426 F. Supp. 282 (E.D. Wis. 1977). “As a holder in due course, the plaintiff is subject to certain defenses enumerated in Wis.Stat. 403.305. The defense of fraud in the inducement raised by Mrs.”
Fed. Nat. Mortg. Ass'n v. Gregory, 426 F. Supp. 282 (E.D. Wis. 1977). “As a holder in due course, the plaintiff is subject to certain defenses enumerated in Wis.Stat. 403.305. The defense of fraud in the inducement raised by Mrs.”
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