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    Defenses and Equities Kinds of Defenses: Negotiable Instruments Law

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    Grester Fernandez
    This document discusses various defenses and equities related to negotiable instruments law. It outlines real defenses, which attach to the instrument and render the underlying contract invalid, and personal defenses, which make enforcement of an otherwise valid contract inequitable. Specific defenses addressed include incapacity, illegality, forgery, material alteration, fraud, duress, incomplete instruments, and more. Exceptions are provided for parties precluded from asserting certain defenses, like general endorsers.

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    Defenses and Equities Kinds of Defenses: Negotiable Instruments Law

    Uploaded by

    Grester Fernandez
    25 views2 pages
    This document discusses various defenses and equities related to negotiable instruments law. It outlines real defenses, which attach to the instrument and render the underlying contract invalid, and personal defenses, which make enforcement of an otherwise valid contract inequitable. Specific defenses addressed include incapacity, illegality, forgery, material alteration, fraud, duress, incomplete instruments, and more. Exceptions are provided for parties precluded from asserting certain defenses, like general endorsers.

    Original Description:

    based on agbayani

    Original Title

    NOTES-ON-NI

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    This document discusses various defenses and equities related to negotiable instruments law. It outlines real defenses, which attach to the instrument and render the underlying contract invalid, and personal defenses, which make enforcement of an otherwise valid contract inequitable. Specific defenses addressed include incapacity, illegality, forgery, material alteration, fraud, duress, incomplete instruments, and more. Exceptions are provided for parties precluded from asserting certain defenses, like general endorsers.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    25 views2 pages

    Defenses and Equities Kinds of Defenses: Negotiable Instruments Law

    Uploaded by

    Grester Fernandez
    This document discusses various defenses and equities related to negotiable instruments law. It outlines real defenses, which attach to the instrument and render the underlying contract invalid, and personal defenses, which make enforcement of an otherwise valid contract inequitable. Specific defenses addressed include incapacity, illegality, forgery, material alteration, fraud, duress, incomplete instruments, and more. Exceptions are provided for parties precluded from asserting certain defenses, like general endorsers.

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    © All Rights Reserved
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    of 2

    NEGOTIABLE INSTRUMENTS LAW

    DEFENSES AND EQUITIES

    KINDS OF DEFENSES

    1. real defense – attaches to instrument; on the principle that the right sought to be
    enforced never existed/there was no contract at all
    2. personal defense – growing out of agreement; renders it inequitable to be enforced vs.
    defendant

    DEFENSES

    1. INCAPACITY: real; indorsement/assign by corp/infant: passes property but corp/infant


    no liability

    1. ILLEGALITY: personal, even if no K because void under CC 1409

    1. FORGERY: real (lack of consent):


    1. forged
    2. made without authority of person whose signature it purports to be.

    General Rule:

    1. wholly inoperative
    2. no right to retain instrument, or give discharge, or enforce payment vs. any party, can be
    acquired through or under such signature (unless forged signature unnecessary to holder’s
    title)

    Exception:

    unless the party against whom it is sought to enforce such right is precluded from setting up
    forgery/want of authority

    precluded:

    1. parties who make certain warranties, like a general indorser or acceptor


    2. estopped/negligent parties

    * note rules on Acceptance/Payment Under Mistake as applied to:

    1. 1. overdraft
    2. 2. stop payment order
    3. 3. forged indorsements

    1. MATERIAL ALTERATION

     Where NI materially altered w/o assent of all parties liable thereon, avoided, except as vs.
    a

    1. party who has himself made, authorized or assented to alteration


    2. and subsequent indorsers.

     But when an instrument has been materially altered and is in the hands of a HDC not a
    party to the alteration, HDC may enforce payment thereof according to orig. tenor

    NJI_027
     Material Alteration

    1. change date
    2. sum payable, either for principal or interest
    3. time of payment
    4. number/relations of parties
    5. medium/currency of payment, adds place of payment where none specified, other
    change/addition altering effect of instrument in any respect.

    *material alteration a personal defense when used to deny liability according to org. tenor of
    instrument, but real defense when relied on to deny liability according to altered terms.

    1. FRAUD
    2. fraud in execution: real defense (didn’t know it was NI)
    3. fraud in inducement: personal defense (knows it’s NI but deceived as to value/terms)

    1. DURESS

     Personal, unless so serious as to give rise to a real defense for lack of contractual intent

    1. COMPLETE, UNDELIVERED INSTRUMENT

     Personal defense (sec. 16)


     If instrument not in poss. Of party who signed, delivery prima facie presumed
     If holder is HDC, delivery conclusively presumed

    1. INCOMPLETE, UNDELIVERED INSTRUMENT

     Real defense (sec. 15)


     Instrument will not, if completed and negotiated without authority, be a valid contract in
    the hands of any holder, as against any person whose signature was placed thereon before
    delivery

    10. INCOMPLETE, DELIVERED

     Personal defense (sec. 14)


     2 Kinds of Writings:

    1. Where instrument is wanting in any material particular: person in possession has prima
    facie authority to complete it by filing up blanks therein
    2. Signature on blank paper delivered by person making the signature in order that the paper
    may be converted into a NI: prima facie authority to fill up as such for any amount

     In order that any such instrument, when completed, ma be enforced vs. any person who
    became a party thereto prior to its completion:

    1. must be filled up strictly in accordance w/ authority given


    2. within a reasonable time

     but if any such instrument after completion is negotiated to HDC, it’s valid for all
    purposes in his hands, he may enforce it as if it had been filled up properly.

    NJI_027

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