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Section 14 Section 15 Section 16

Incomplete but delivered Instrument Incomplete and Undelivered Instrument Complete Undelivered
Delivery of the INCOMPLETE NI is VOLUNTARILY made by the NO DELIVERY of the incomplete NI is made by NO DELIVERY of the complete NI is made by the maker or drawer
Maker or drawer the maker or drawer
Presumption that the maker/drawer gave the Payee the authority to The Mr/Dr and ALL PRIOR PARTIES to the If the completed NI is taken from the Mr w/o his knowledge and consent and is in the hands of
fill-up the NI accdg to his instruction unauthorized completion and negotiation of the a holder, the Mr is NOT liable.
incomplete and undelivered NI WILL NOT be
liable to ALL holders, including HDC 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 Rules applicable Rules applicable
a. the Holder or person in possession of NI has prima facie a. The NI being VOID is a defense that is a. the contract on such a NI is INCOMPLETE and REVOCABLE until its delivery
authority to compete it by filling up the blanks available even against HDC
for the purpose of giving effect thereto.
b. A signature in blank may be converted into NI only if such is b. The invalidity is only with reference to
the intention of the person making the signature in effect
the parties whose signatures appear on
b. There is PRIMA FACIE presumption of valid and intentional delivery if the
delivery thereof. instrument is found in the possession of an immediate party, or a remote party
the instrument before and not after
c. The NI may be enforced only against a party prior to WHO IS NOT a HDC.
completion if filled up strictly in accordance with the c. If delivery was made or authorized, it may be shown to have been:
In other words, as to PARTIES, BEFORE the
authority given and w/in a reasonable time 1. not authorized
instrument was completed and delivered, IT
d. the defense that the NI had not been filled in accordance with
IS INVALID. 2. conditional
the authority given and w/in a reasonable time is NOT
3. for special purpose only and not for the purpose of transferring the
available against a HDC.
As to PARTIES, AFTER DELIVERY the property in the instrument
instrument is VALID d. If the complete NI is in the hands of HDC, a valid delivery thereof by all parties
Requisites of an INCOMPLETE NI
a. hNI is incomplete as to date, due date, name of P or Dr, sum prior to him is conclusively presumed.
payable and rate of interest
b. NI is signed by the Mr/Dr
c. Mr/Dr voluntarily delivers the NI to the P, giving him the
authority to fill in the blanks properly
d. The P must fill up the blanks in accordance with such
authority and w/in a reasonable time after receipt.
Personal or equitable defense- Real defenses- those w/c go to the existence or Personal defense- those that are available to prior parties among themselves and include all
validity of the instrument as a contract or to the defenses to the contract which arises out of the relation of the parties to the contract. It does
Who can use this defense? capacity of the parties. They are attached to the not include defenses that are related to the validity of the instrument as a contract or to the
- Only those parties who became parties to the instrument itself. These can be used by a party capacity of the parties.
against ALL holders including HDC to avoid
instrument PRIOR to its completion.
payment. IT is not available against HDC because under the law, as to him a valid and intentional
- may be used against HV or HNDC
delivery of a mechanically complete but undelivered instrument is conclusively presumed.
- BUT NOT against HDC
Who can use this defense?- Examples:
ONLY those persons whose signature were placed o Absence or failure of consideration
thereon BEFORE delivery. Hence, only the maker o Non- delivery of complete instrument
or drawer o Fraud in inducement
o Total or partial failure of consideration
Examples: o Filling up a wrong date of instrument when it is payable at a fixed period after date
o Material alteration, o it is issued undated
o Non delivery of incomplete instrument o filling up of blanks contrary to authority given, not w/in reasonable time
o Contractual fraud or fraud in factum, o Illegality of consideration
o Minority o undue influence, duress
o negotiation in breach of faith
o Forgery
o acquisition by unlawful means

Section 14 Section 15 Section 16

Nature Nature Nature
1. Blanks 1. Blanks 1. Mechanically complete
2. Signature on blank Paper- as long as there is an 2. Signature on blank paper 2. Undelivered
intention to make it negotiable 3. Undelivered

Person in Possession/Holder Person in Possession/Holder Person in Possession/Holder

1. Payee 1. Payee 1. Payee
2. Indorsee 2. Indorsee 2. Indorsee
Right of the Holder Effect Effect
1. to fill up the blanks or convert to Negotiable 1. Not a valid contract in the hands of ANY holder 1. revocable prior to delivery
Instrument in any amount, date etc including the HDC 2. delivery must be authorized
2. complete within reasonable time 3. delivery may be conditional or for specific

Duty of the Holder Presumption

1. Prima facie (disputable presumption) authority to 1. All holders- disputable
convert 2. HDC- conclusive
2. In accordance with authority given by the maker

Right/Liability of the party PRIOR to COMPLETION Right/Liability of the party PRIOR to COMPLETION Right/Liability of the party PRIOR to COMPLETION
1. Personal defense against holder NOT in due 1. REAL defense against ALL HOLDERS, 1. Personal Defense against HNDC
course (HNDC) including HDC 2. Liable to HDC
2. NOT a defense against HDC

Right/Liability of the party AFTER COMPLETION Right/Liability of the party AFTER COMPLETION Right/Liability of the party AFTER COMPLETION
1. HDC can enforce instrument against all prior 1. HDC has no right against prior parties 1. HDC can enforce instrument against all prior
parties 2. Indorsers liable on their warranties to all parties
2. OTHER holders subject to all defenses subsequent holders 2. Other holders subject to all defenses
3. Indorsers liable on their warranties 3. Indorsers liable for warranties