What type of defenses can an HDC (Holder in Due Course) take a negotiable instrument subject to?

A Holder in Due Course (HDC) enjoys significant protections regarding the negotiable instruments they hold. Specifically, an HDC can take a negotiable instrument free from most defenses that could be raised against the original payee. However, the distinction between real and personal defenses is crucial for understanding the extent of these protections.

Real defenses are those that can be asserted against all holders, including HDCs. These might include issues such as fraud in the factum (where a party is misled into signing a document that is not what it appears to be), incapacity, infancy, duress, and discharge in bankruptcy. In contrast, personal defenses, such as failure of consideration or breach of contract, cannot be asserted against an HDC because the purpose of HDC status is to promote confidence in the negotiability of instruments.

Thus, the correct answer highlights that an HDC is not subjected to personal defenses, meaning they can enforce the instrument free and clear of those claims. However, they are not immune to real defenses, which can still be raised against them. Hence, the statement indicates that while the HDC has strong protections, they are not absolute, particularly when it comes to serious issues that question the validity of the instrument itself. This