Sec.

Sec.
Sec.
Sec.
Sec.

13:
14:
15:
16:
23:

Insertion of a wrong date

Incomplete but delivered instrument
Incomplete, undelivered instrument
Complete but undelivered
Forgery

Personal Defense
Personal Defense
Real Defense
Personal Defense
Real Defense

Holder in due course

Insertion of a wrong date Prior Parties to the defect
Holder can successfully claim payment against
prior parties (maker, drawee, payee) because
they cannot raise the personal defense of
insertion of a wrong date
Subsequent parties to the defect
Indorsers- can be held liable because they
warrant that the instrument is genuine and in
all respects what it purports to be.
Persons negotiating by delivery- can be held
liable only if they are the immediate transferor
because the warranty that the instrument is
genuine and in all respects what it purports to
be only extends to immediate transferee.
Perpetrator of the fraud- is held ultimately
liable because we do not tolerate fraud in
commercial transactions.
*if it is a bill of exchange- the holder may go after
the drawee being the person primarily liable and
because the latter cannot raise the personal
defense of insertion of a wrong date against the
former.
Incomplete but delivered Prior Parties to the defect
instrument
Holder can successfully claim payment against
prior parties (maker, drawee, payee) because
prior parties cannot raise the personal defense
of incomplete but delivered instrument
Subsequent parties to the defect
Indorsers- can be held liable because they
warrant that the instrument is genuine and in
all respects what it purports to be.
Persons negotiating by delivery- can be held
liable only if they are the immediate transferor
because the warranty that the instrument is

Holder thru a holder in

due course
Same rules as in the
holder
in
due
course
because
holder through a
holder
in
due
course acquires the
rights of the holder
in due course.

Same rules as in the

holder in due course
because holder
through a holder in
due course acquires
the rights of the
holder in due course.

Holder not in due course

Prior Parties to the defect
Holder cannot successfully claim payment
against prior parties (maker, drawee, payee)
because they can raise the personal defense of
insertion of a wrong date
Subsequent parties to the defect
Indorsers- can be held liable because they
warrant that the instrument is genuine and in all
respects what it purports to be.
Persons negotiating by delivery- can be held
liable only if they are the immediate transferor
because the warranty that the instrument is
genuine and in all respects what it purports to
be only extends to immediate transferee.
Perpetrator of the fraud- is held ultimately liable
because we do not tolerate fraud in commercial
transactions.

Prior Parties to the defect

Holder cannot successfully claim payment
against prior parties (maker, drawee, payee)
because prior parties can raise the personal
defense of incomplete but delivered instrument
Subsequent parties to the defect
Indorsers- can be held liable because they
warrant that the instrument is genuine and in all
respects what it purports to be.
Persons negotiating by delivery- can be held
liable only if they are the immediate transferor
because the warranty that the instrument is

Incomplete, undelivered
instrument

genuine and in all respects what it purports to

be only extends to immediate transferee.
Perpetrator of the fraud- is held ultimately
liable because we do not tolerate fraud in
commercial transactions.

Prior Parties to the defect

Holder cannot successfully claim payment
against prior parties (maker, drawee, payee)
because prior parties can raise the real defense
of incomplete but undelivered instrument.
Hence, prior parties cannot be held liable.
Subsequent parties to the defect
Indorsers- can be held liable because they
warrant that the instrument is genuine and in
all respects what it purports to be and that they
have good title to it.
Persons negotiating by delivery- can be held
liable only if they are the immediate transferor
because the warranty that the instrument is
genuine and in all respects what it purports to
be and that they have good title to it only
extends to immediate transferee.
Perpetrator of the fraud- is held ultimately
liable because we do not tolerate fraud in
commercial transactions, and theft in our laws
is penalized.

Complete but undelivered Prior Parties to the defect

instrument
Holder can successfully claim payment against
prior parties (maker, drawee, payee) because
TN: in the hands of the
prior parties cannot raise the personal defense
Holder in due course,
of complete but undelivered instrument
valid
and
effectual
delivery is conclusively Subsequent parties to the defect
Indorsers- can be held liable because they
presumed.
warrant that they have good title to it.
Persons negotiating by delivery- can be held
liable only if they are the immediate transferor
because the warranty that they have good title
only extends to immediate transferee.
Perpetrator of fraud- is held ultimately liable
because theft is penalized by law.

genuine and in all respects what it purports to

be only extends to immediate transferee.
Perpetrator of the fraud- is held ultimately liable
because we do not tolerate fraud in commercial
transactions.

Same rules as in the

holder in due course
because holder
through a holder in
due course acquires
the rights of the
holder in due course.

Prior Parties to the defect

Holder cannot successfully claim payment
against prior parties (maker, drawee, payee)
because prior parties can raise the real defense
of incomplete but undelivered instrument.
Hence, prior parties cannot be held liable.

Same rules as in the

holder in due course
because holder
through a holder in
due course acquires
the rights of the
holder in due course.

Prior Parties to the defect

Holder cannot successfully claim payment
against prior parties (maker, drawee, payee)
because prior parties can raise the personal
defense of complete but undelivered instrument.
Otherwise stated, prior parties cannot be held
liable because they can raise the personal
defense of complete but undelivered instrument.

Subsequent parties to the defect

Indorsers- can be held liable because they
warrant that the instrument is genuine and in all
respects what it purports to be and that they
have good title to it.
Persons negotiating by delivery- can be held
liable only if they are the immediate transferor
because the warranty that the instrument is
genuine and in all respects what it purports to
be and that they have good title to it only
extends to immediate transferee.
Perpetrator of the fraud- is held ultimately liable
because we do not tolerate fraud in commercial
transactions and theft in our laws is penalized.

Subsequent parties to the defect

Indorsers- can be held liable because they
warrant that they have good title to it.
Persons negotiating by delivery- can be held
liable only if they are the immediate transferor
because the warranty that they have good title
only extends to immediate transferee.
Perpetrator of fraud- is held ultimately liable
because theft is penalized by law.

*Bill of Exchange
B->Y(thief)->A(payee)-X (drawee/acceptor)-C-D-E
Can X be held liable?- No. He cannot be held liable
because he can raise the personal defense of
complete but undelivered instrument even if he
accepted the instrument because he does not
warrant that the instrument is genuine and in all
respect what it purports to be.
Forgery

Promissory Note
a. Signature of the maker

Maker- cannot be held liable because he can

raise the real defense of forgery, and he is not
a party to the defect. [otherwise stated, the
holder cannot successfully demand payment
from the maker because the latter can raise
the real defense of forgery.

Indorsers- can be held liable because they

warrant that the instrument is genuine and in
all respects what it purports to be.

Person negotiating by delivery- can be held

liable only if he is the immediate transferor
because the warranty that the instrument is
genuine and in all respects what it purports to
be extends only to immediate transferee.

Forger- is ultimately liable because forgery is

penalized under the law.
b. Signature of indorser forged

Prior parties (maker, payee, indorsers prior to

the forgery)
If bearer instrument, the maker can be held
liable because the forged signature is not
necessary to the title of the holder, or that
they are precluded from raising the defense
of forgery because the forged signature is
not necessary to the title of the holder.
Persons negotiating by delivery prior to the
defect cannot be held liable because they did
not warrant that the instrument is genuine
and in all respects what it purports to be.
If order instrument, prior parties cannot be
held liable because they can raise the real
defense of forgery against the holder.

Subsequent parties
Indorsers- can be held liable because they

Same rules as in the

holder in due course
because holder
through a holder in
due course acquires
the rights of the
holder in due course.

Maker- cannot be held liable because he can

raise the real defense of forgery, and he is not a
party to the defect.
Indorsers- can be held liable because they
warrant that the instrument is genuine and in all
respects what it purports to be.
Person negotiating by delivery- can be held
liable only if he is the immediate transferor
because the warranty that the instrument is
genuine and in all respects what it purports to
be extends only to immediate transferee.
Forger- is ultimately liable because forgery is
penalized under the law.

Same rules as in the

holder in due course
because holder
through a holder in
due course acquires
the rights of the
holder in due course.

Prior parties (maker, payee, indorsers prior to

the forgery)
If bearer instrument, the maker cannot be
held liable. This is because even though the
forged signature is not necessary to the title
of the holder, the maker can raise the
personal defense of non-delivery.
Persons negotiating by delivery prior to the
defect cannot be held liable because they did
not warrant that the instrument is genuine
and in all respects what it purports to be.
If order instrument, prior parties cannot be
held liable because they can raise the real
defense of forgery against the holder.

Subsequent parties
Indorsers- can be held liable because they
warrant that the instrument is genuine and in

warrant that the instrument is genuine and in

all respects what it purports to be.
PNBD- can be held liable only if they are the
immediate transferor because the warranty
that the instrument is genuine and in all
respects what it purports to be extends only
to immediate transferee.
Forger- ultimately liable because forgery is
penalized under the law.

all respects what it purports to be.

PNBD- can be held liable only if he is the
immediate transferor because it is only him
warrants that the instrument is genuine and in
all respects what it purports to be extends to
the immediate transferee.
Forger- ultimately liable because forgery is
penalized under the law.

Bills of Exchange
a. Drawers signature is forged
Prior Parties

Drawee-acceptor- he is liable because he

warrants the genuineness of the drawers
signature

Drawer- not liable because it is his signature

that is forged and he can raised the real
defense of forgery
Subsequent parties

Indorsers- can be held liable because they

warrant that the instrument is genuine and in
all respects what it purports to be.

PNBD- can be held liable only if they are the

immediate transferor because the warranty
that the instrument is genuine and in all
respects what it purports to be extends only to
immediate transferee.

Forger- ultimately liable because forgery is

penalized under the law.
b. Indorsers signature is forged
Prior Parties

Drawee-acceptor- he is not liable because he

can raise the real defense of forgery. Except,
if he is negligent, in such case he can be made
liable and estopped from raising forgery as a
defense.

Drawer- not liable because he can raised the

real defense of forgery
Subsequent parties

Indorsers- can be held liable because they

warrant that the instrument is genuine and in
all respects what it purports to be.

PNBD- can be held liable only if they are the

immediate transferor because the warranty

Same rules as in the

holder in due course
because holder
through a holder in
due course acquires
the rights of the
holder in due course.

Same rules as in the

holder in due course
because holder
through a holder in
due course acquires
the rights of the
holder in due course.

Prior Parties

Drawee-acceptor- he is not liable because he

can raise the personal defense of nondelivery.

that the instrument is genuine and in all

respects what it purports to be extends only to
immediate transferee.
Forger- ultimately liable because forgery is
penalized under the law.