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 to
fill-up the NI accdg to his instruction
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 NI
a. hNI is incomplete as to date, due date, name of P or Dr, sum
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-
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
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
Rules applicable
a. The NI being VOID is a defense 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
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 instrument
o Contractual fraud or fraud in factum,
o Minority
o Forgery
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 valid.
Rules applicable
a. 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 authorized
2. conditional
3. for special purpose only and not for the purpose of transferring the
property in the instrument
d. If the complete NI is in the hands of HDC, a valid delivery thereof by all parties
prior to him is conclusively presumed.
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 consideration
o Non- delivery of complete instrument
o Fraud in inducement
o Total or partial failure of consideration
o Filling up a wrong date of instrument when it is payable at a fixed period after date
o it is issued undated
o filling up of blanks contrary to authority given, not w/in reasonable time
o Illegality of consideration
o undue influence, duress
o negotiation in breach of faith
 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
purpose

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
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
parties
2. Other holders subject to all defenses
3. Indorsers liable for warranties