246

LAWS OF MARYLAND

[Ch. 49

(b) The rule of subparagraph (a) applies to
an issuer which is a government or governmental agency or
unit only if either there has been substantial compliance
with the legal requirements governing the issue or the
issuer has received a substantial consideration for the
issue as a whole or for the particular security and a
stated purpose of the issue is one for which the issuer
has power to borrow money or issue the security.

(3)   Except as otherwise provided in the case of
certain unauthorized signatures on issue (§ 8—205), lack
of genuineness of a security is a complete defense even
against a purchaser for value and without notice.

(4)    All other defenses of the issuer including
non—delivery and conditional delivery of the security are
ineffective against a purchaser for value who has taken
without notice of the particular defense.

(5)    Nothing in this section shall be construed to
affect the right of a party to a "when, as and if issued"
or a "when distributed" contract to cancel the contract
in the event of a material change in the character of the
security which is the subject of the contract or in the
plan or arrangement pursuant to which such security is to
be issued or distributed.

8—203. Staleness as notice of defects or defenses.

(1)   After an act or event which creates a right to
immediate performance of the principal obligation
evidenced by the security or which sets a date on or
after which the security is to be presented or
surrendered for redemption or exchange, a purchaser is
charged with notice of any defect in its issue or defense
of the issuer

(a)    If the act or event is one requiring the
payment of money or the delivery of securities or both on
presentation or surrender of the security and such funds
or securities are available on the date set for payment
or exchange and he takes the security more than one year
after that date; and

(b)    If the act or event is not covered by
paragraph (a) and he takes the security more than two
years after the date set for surrender or presentation or
the date on which such performance became due.

(2)    A call which has been revoked is not within
subsection (1).

8—204. Effect of issuer's restrictions on transfer.