section 14 15 and 16 in ni
TRANSCRIPT
Section 14 Section 15 Section 16Incomplete but delivered Instrument Incomplete and Undelivered Instrument Complete UndeliveredDelivery of the INCOMPLETE NI is VOLUNTARILY made by the Maker or drawer
NO DELIVERY of the incomplete NI is made by the maker or drawer
NO DELIVERY of the complete NI is made by the maker or drawer
Presumption that the maker/drawer gave the Payee the authority to fill-up the NI accdg to his instruction
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
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 valid.
If the NI is filled 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 amount.Rules applicable
a. the Holder or person in possession of NI has prima facie authority to compete it by filling up the blanks
b. A signature in blank may be converted into NI only if such is the intention of the person making the signature in effect delivery thereof.
c. The NI may be enforced only against a party prior to completion if filled up strictly in accordance with the authority given and w/in a reasonable time
d. the defense that the NI had not been filled in accordance with the authority given and w/in a reasonable time is NOT available against a HDC.
Requisites of an INCOMPLETE NIa. hNI is incomplete as to date, due date, name of P or Dr, sum
payable and rate of interestb. NI is signed by the Mr/Drc. Mr/Dr voluntarily delivers the NI to the P, giving him the
authority to fill in the blanks properlyd. The P must fill up the blanks in accordance with such
authority and w/in a reasonable time after receipt.
Rules applicable a. The NI being VOID is a defense that is
available even against HDCb. 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
Rules applicablea. the contract on such a NI is INCOMPLETE and REVOCABLE until its delivery
for the purpose of giving effect thereto.b. There is PRIMA FACIE presumption of valid and intentional delivery if the
instrument is found in the possession of an immediate party, or a remote party WHO IS NOT a HDC.
c. If delivery was made or authorized, it may be shown to have been:1. not authorized2. conditional3. for special purpose only and not for the purpose of transferring the
property in the instrumentd. If the complete NI is in the hands of HDC, a valid delivery thereof by all parties
prior to him is conclusively presumed.
Personal or equitable defense-
Who can use this defense?- Only those parties who became parties to the
instrument PRIOR to its completion.- may be used against HV or HNDC - BUT NOT against HDC
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.
Who can use this defense?- ONLY those persons whose signature were placed thereon BEFORE delivery. Hence, only the maker or drawer
Examples:o Material alteration, o Non delivery of incomplete instrumento Contractual fraud or fraud in factum,o Minorityo Forgery
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 related to the validity of the instrument as a contract or to the capacity of the parties.
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.
Examples:o Absence or failure of considerationo Non- delivery of complete instrumento Fraud in inducemento Total or partial failure of considerationo Filling up a wrong date of instrument when it is payable at a fixed period after dateo it is issued undatedo filling up of blanks contrary to authority given, not w/in reasonable timeo Illegality of considerationo undue influence, duresso negotiation in breach of faitho acquisition by unlawful means
Section 14 Section 15 Section 16
Nature1. Blanks2. Signature on blank Paper- as long as there is an
intention to make it negotiable
Nature1. Blanks2. Signature on blank paper3. Undelivered
Nature1. Mechanically complete2. Undelivered
Person in Possession/Holder1. Payee2. Indorsee
Person in Possession/Holder1. Payee2. Indorsee
Person in Possession/Holder1. Payee2. Indorsee
Right of the Holder1. to fill up the blanks or convert to Negotiable
Instrument in any amount, date etc2. complete within reasonable time
Effect1. Not a valid contract in the hands of ANY holder
including the HDC
Effect1. revocable prior to delivery2. delivery must be authorized3. delivery may be conditional or for specific
purpose
Duty of the Holder1. Prima facie (disputable presumption) authority to
convert2. In accordance with authority given by the maker
Presumption1. All holders- disputable2. HDC- conclusive
Right/Liability of the party PRIOR to COMPLETION1. Personal defense against holder NOT in due
course (HNDC)2. NOT a defense against HDC
Right/Liability of the party PRIOR to COMPLETION1. REAL defense against ALL HOLDERS,
including HDC
Right/Liability of the party PRIOR to COMPLETION1. Personal Defense against HNDC2. Liable to HDC
Right/Liability of the party AFTER COMPLETION1. HDC can enforce instrument against all prior
parties2. OTHER holders subject to all defenses3. Indorsers liable on their warranties
Right/Liability of the party AFTER COMPLETION1. HDC has no right against prior parties2. Indorsers liable on their warranties to all
subsequent holders
Right/Liability of the party AFTER COMPLETION1. HDC can enforce instrument against all prior
parties2. Other holders subject to all defenses3. Indorsers liable for warranties