Personal defense

A personal defense (인적 항변/人的抗辯) or subjective defense (주관적 항변/主觀的抗辯) refers to such defenses as being invoked by a certain or all obligors on the promissory note against a certain holder of the said note.

Personal defenses arise out of personal substantial relations other than the note itself. Sometimes personal defenses are awarded for the enhancement of negotiability of the notes. Take an example of bona fide acquisition, which could be established by cutting off, or severing, the personal defenses.

Key words
personal defense, real defense, severance of defenses, obligor on the instrument, holder of the promissory note,

Personal v. Real Defenses
Simply speaking, the personal defenses mean other defenses than the real defenses among defenses which may be invoked by the obligor on the promissory note. The followings are real defenses in the context of negotiable instruments:
 * any defect on the instrument
 * infancy or incapacity of the signer to contract
 * forgery or alteration of the instrument
 * agency without authority nor proxy (협의의 무권대리/無權代理)
 * fraud as to the nature of the instrument being signed
 * violation of law of a mandatory nature
 * judgement of nullification (제권판결/除權判決)
 * deposit of money in a designated bank (공탁/供託)
 * discharge in bankruptcy
 * the running of a statute of limitations as to the validity of the instrument.

Defenses against a specified holder

 * no capacity to receive payments (변제수령능력/辨濟受領能力)
 * any defect in the series of endorsements
 * any defect in title (무권리자/無權利者)

Defenses invoked by a certain obligor against a specified holder
A. On the rights and obligations on the instrument
 * no delivery at all
 * in breach of prohibited representation of both parties (양쪽대리 금지 위반). Article 124 of the Civil Act, Article 398 of the Commercial Act.
 * any action on the instrument by declaring intention in collusion (통정허위표시/通情虛僞表示). Article 108 of the Civil Act.
 * any action on the instrument by declaring intention under a mistake (착오/錯誤에 의한 어음행위). Article 109 of the Civil Act.
 * any action on the instrument by declaring intention by fraud or duress (사기/詐欺, 강박/强迫에 의한 어음행위). Article 110 of the Civil Act.
 * being duly paid unapparent on the instrument. Article 39 of the Bill of Exchange and Promissory Note Act
 * being exempted or set-off unapparent on the instrument
 * moratorium (지급유예/支給猶豫) unapparent on the instrument
 * obligation on the note having been novated (경개/更改)
 * abuse of the right to supplement the blank (백지보충권/白紙補充權)

B. On the substantial relations other than the instrument
 * illegal underlying relation
 * no underlying relation
 * underlying relations in violation of law and regulations
 * no value in consideration (대가/對價 없음)
 * no delivery of discounted proceeds
 * instrument for financing only (융통어음/融通於音)
 * assigning endorsement for the purpose of collection (추심/推尋)
 * specific agreement outside of the instrument.

Effect of Personal Defenses
An eligible obligor on the instrument who has any personal defense against a certain holder of the note may deny the payment on the instrument.

However, such relative defense may be invoked as a 'bad faith defense' against the acquirer of the instrument with the intent to harm the obligor.

Severance of Personal Defenses
The obligor on the instrument cannot set up against the holder defenses founded on their personal relations with the issuer or previous holders. Main sentence of Article 17 of the Act.

This is called the severance of personal defenses (인적항변의 절단/人的抗辯切斷). In other words, as personal defenses may be invoked against a certain holder, if the holder has transferred to a bona fide acquirer, the obligor can no more set up such defenses against a new acquirer. 민법상의 채권양도에 있어서는 채권이 양도될 때마다 그에 항변이 부착되어 양도되나 어음의 양도에 있어서 인적 항변은 어음의 양도될때에 절단되므로, 이 인적 항변의 절단에 의하여 어음의 유통성이 크게 강화된다.

그러나 인적 항변이라도 어음법상의 고유한 유통방법이 아닌 지명채권양도(指名債權讓渡)의 방법이라든지 상속, 합병, 강제집행(경매, 전부명령) 등에 의하여 어음이 양도되는 경우에는 인적 항변이 절단되지 않고 양수인에게 대항할 수 있다.

또한 특수배서(特殊背書)는 어음법상의 유통방법이지만, 이러한 특수배서에 의하는 경우에는 인적항변의 절단이 인정되지 아니한다. 이러한 특수배서에는 기한후배서(期限後背書)(어음법 제20조), 추심위임배서(추심위임배서(어음법 제18조)), 숨은 추심위임배서(推尋委任背書), 환배서(還背書)가 있다. 그러나 이외의 특수배서의 경우에는 보통의 양도배서와 같이 인적 항변이 절단된다.