Defense even against a holder in due course real

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Defense even against a holder in due course (real defense) Defense available to parties Invalidity only to person/s whose signature appear on the instrument BEFORE delivery SECTION 16 o Complete but NOT delivered Still incomplete and revocable o Complete and Delivered Valid instrument SECTION 17 “If the instrument is ambiguous” Rules: 1. Sum written in words will prevail But if WORDS are ambiguous, reference will be made to figures 2. The interest will run at the date of the instrument If UNDATED , the interest will run at the date of issuance 3. Written provision will prevail over the printed provision Written provisions are the real intention of the maker
LAW ON NEGOTIABLE INSTRUMENTS 4. The holder has the option to determine if the instrument is: Promissory note Bill of exchange 5. If there is doubt with the person signing, the person will be treated as an INDORSER. Endorsers are secondarily liable 6. Instrument where 2 or more persons signed. o “I promise to pay” , 2 or more persons signed Solidary liable o “We promise to pay” , 2 or more persons signed Jointly Liable SECTION 18,19,20 GENERAL RULE: “Only those whose name or signature written on the document are liable .” Exceptions: 1. The name written is ASSUMED NAME OR TRADE NAME 2. If the person authorized someone to sign in behalf of the principal Requirements: The agent must be authorized He adds words indicating that he is an agent He discloses his principal (If NOT, he will be personally liable) SECTION 21 Agent has a limited authority: 1. If he is only signing by procuration Procuration is an act by which a principal gives power to another to act in his place as he could himself 2. If he acted beyond his scope or limits He will be liable SECTION 22 There will still be a transfer even if: 1. Ultra Veris Act 2. Minor (Minority is a real defense ) Situation 1: M is a minor P indorses it to A M is not liable because of real defense (minority) Situation 2: M issues the instrument to P P is a minor , indorses it to A M becomes liable because there has been a TRANSFER (from P to A) SECTION 23: Forgery “If the signature is forged or made without authority, it is considered inoperative .” Forgery fraudulent alterations of any writing real defense Inoperative You have no right to retain, discharge, or enforce payment. applies only to SIGNATURE The negotiable instrument with a forged signature is still valid. 2 ways to commit forgery: 1. Signature 2. Indorsement Situations under Promissory notes 1. By order (Forged Signature) M issued a PN by order to P P forged M’s signature M is NOT liable because of inoperative P is criminally and civilly liable A, B, & C are LIABLE for Warranty 2. By Bearer (Forged Signature) M issued a PN by Bearer to P P forged M’s signature M is NOT liable because of inoperative P is criminally and civilly liable A & B are not liable (remote parties) C is liable because he is an immediate party (liable for warranty) Under this situation, Liability for warranty only extends to IMMEDIATE PARTY 3. By Order(Forged Indorsement) T forged the indorsement of P to A

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