Section 14 Incomplete but delivered Instrument Delivery of the INCOMPLETE NI is VOLUNTARILY made by the Maker or drawer Presumption that the maker/drawer gave the Payee the authority authority to fill-up the NI accdg to his instruction
Section 15 Incomplete and Undelivered Instrument NO DELIVERY of the incomplete NI is made by the maker or drawer The Mr/Dr and ALL PRIOR PARTIES to the unauthorized completion and negotiation of the incomplete and undelivered NI WILL NOT be liable to ALL holders, including HDC
Section 16 Complete Undelivered NO DELIVERY of the complete NI is made by the maker or drawer
If the completed NI is taken from the Mr w/o his knowledge and consent and is in the hands of a holder, the Mr is NOT liable. Non-delivery is a PERSONAL defense against Holder for Value. HV cannot collect from Mr. BUT, if holder is a HDC, he CAN collect from Mr and all other prior parties t him because as to him, personal defenses are not va lid.
If the NI is f illed up in violation of the authority given----- Party primarily liable and all parties prior to the wrongful insertion of the NI will NOT be liable to a HOLDER, BUT LIABLE to a HDC. The HDC can enforce the NI against ALL parties prior to him including the Mr/Dr at whatever wrongfully inserted a mount. Rules applicable a. the Holder Holder or person person in possess possession ion of NI has prima prima facie authority to compete it by filling up the blanks b. A signature signature in blank blank may may be converte converted d into into NI only only if such such is is the intention of the person making the signature in effect delivery thereof. c. The NI NI may be be enforced enforced only only agai against nst a part party y prior prior to completion if filled up strictly in accordance with the authority given and w/in a reasonable time d. the defense defense that that the the NI had had not been filled filled in accordan accordance ce with the authority given and w/in a reasonable time is NOT available against a HDC. Requisites of an INCOMPLETE NI
Rules applicable a. The NI bein being g VOID VOID is is a defen defense se that that is available even against HDC
b.
The invalidity is only with reference to the parties whose signatures appear on the instrument before and not after delivery. In other words, as to PARTIES, BEFORE the instrument was completed and delivered, IT IS INVALID.
As to PARTIES, AFTER DELIVERY the instrument is VALID
a.
hNI is incomplete as to date, due date, name of P or Dr, sum payable and rate of interest b. b. NI is sign signed ed by by the the Mr/D Mr/Dr r c. Mr/Dr voluntaril voluntarily y delivers delivers the the NI to to the P, giving giving him him the the authority to fill in the blanks properly d. The P must fill up the the blanks blanks in accordan accordance ce with with such such authority and w/in a reasonable time after receipt. Personal or equitable defenseWho can use this defense?
-
Only those parties who became parties to the instrument PRIOR to its completion. may may be be used used aga again inst st HV or or HNDC HNDC BU T N OT OT a ga ga in in st st H DC DC
Rules applicable
a. b. c.
the contract on such a NI is INCOMPLETE and REVOCABLE until its delivery for the purpose of giving effect thereto. There is PRIMA FACIE presumption of valid and intentional intentional delivery if the instrument is found in the possession of an immediate party, or a remote party WHO IS NOT a HDC. If delivery delivery was was made made or authori authorized, zed, itit may be shown shown to have been: been:
1. 2. 3.
d.
not authorized c on on di di titio na na l for special special purpose purpose only only and and not for for the purpose purpose of transferring transferring the the property in the instrument
If the complete NI is in the hands of HDC, a valid delivery thereof by all parties prior to him is conclusively presumed.
Real defenses- those w/c go to the existence or validity of the instrument as a contract or to the capacity of the parties. They are attached to the instrument itself. These can be used by a party against ALL holders including HDC to avoid payment.
Personal defense- those that are available to prior parties among themselves and include all defenses to the contract which arises out of the relation of the parties to the contract. It does not include defenses that are re lated to the validity of the instrument as a contract or to the capacity of the parties.
Who can use this defense?ONLY those persons whose signature were placed thereon BEFORE delivery. Hence, only the maker or drawer
Examples: Absence or failure of consideration o o Non- delivery of complete instrument Fraud in inducement o o Total or partial failure of consideration Filling up a wrong date of instrument when it is payable at a f ixed period after date o it is issued undated o o filling up of blanks contrary to authority given, not w/in reasonable time
Examples: Material alteration, o o
Non delivery of incomplete instrument
IT is not available against HDC because under the law, as to him a valid and intentional delivery of a mechanically complete but undelivered instrument is conclusively presumed.
o
acquisition by unlawful means
Section 14
Section 15
Section 16
Nature 1. Blanks 2. Signature on blank Paper- as long as there is an intention to make it negotiable
Nature
Person in Possession/Holder 1. Payee 2. Indorsee
Person in Possession/Holder 1. Payee 2. Indorsee
Person in Possession/Holder 1. Payee 2. Indors ee
Right of the Holder 1. to fill up the blanks or convert to Negotiable Instrument in any amount, date etc 2. complete within reasonable time
Effect
Effect 1. 2. 3.
Nature
1. 2. 3.
Blanks Signature on blank paper Undelivered
1. Not a valid contract in the hands of ANY holder including the HDC
Duty of the Holder 1. Prima facie (disputable presumption) authority to convert 2. In accordance with authority given by the maker
1. 2.
Mechanically complete Undelivered
revocable prior to delivery delivery must be authorized delivery may be conditional or for specific purpose
Presumption 1. All holders- disputable 2. HDC- conclusive
Right/Liability of the party PRIOR to COMPLETION 1. Personal defense against holder NOT in due course (HNDC) 2. NOT a defense against HDC
Right/Liability of the party PRIOR to COMPLETION 1. REAL defense against ALL HOLDERS, including HDC
Right/Liability of the party PRIOR to COMPLETION 1. Personal Defense against HNDC 2. Liable to HDC
Right/Liability of the party AFTER COMPLETION 1. HDC can enforce instrument against all prior parties 2. OTHER holders subject to all defenses 3. Indorsers liable on their warranties
Right/Liability of the party AFTER COMPLETION 1. HDC has no right against prior parties 2. Indorsers liable on their warranties to all subsequent holders
Right/Liability of the party AFTER COMPLETION
1. HDC can enforce instrument against all prior 2. 3.
parties Other holders subject to all defenses Indorsers liable for warranties
