Negotiable Instruments Notes: Form and Interpretation (Sec. 9

*Sec. 9. When payable to bearer. - The instrument is payable to bearer: (authority for payment to the holder)

(a) When it is expressed to be so payable; or (payable to bearer) (b) When it is payable to a person named therein or bearer; or (payable to A or bearer) (c) When it is payable to the order of a

fictitious or non-existing person, and

such fact was known to the person making it so payable; or

Fictitious

person who has NO right to the instrument bec. the drawer or maker of it so intended

feigned or pretended

Non-existent person

one who does NOT exist in the sense that he was intended to be the payee by the drawer

Example: dead person; superman

If agent is authorized to make or draw, his knowledge is controlling

estate - only becomes a juridical person when the person dies until then it is non-existent

(d) When the name of the payee does not purport to be the name of any person; or (Example: cash, order of cash, order of money) (e) When the only or last indorsement is an indorsement in blank.

*Sec. 10. Terms, when sufficient. - The instrument need not follow the language of this Act, but any terms are sufficient which clearly indicate an intention to conform to the requirements hereof.

advisable to use the words of the law to avoid uncertainty and doubt but NOT necessary

promise = agree

bearer = holder

*Sec. 11. Date, presumption as to. - Where the instrument or an acceptance or any indorsement thereon is dated, such date is deemed prima facie to be the true date of the making, drawing, acceptance, or indorsement, as the case may be.

When to apply:

instrument contains issue date (true date of making or drawing)

accepted bill of exchange where acceptance is dated (true date of acceptance)

where instrument is indorsed, indorsement is dated (true date of indorsement)

*Sec. 12. Ante-dated and post-dated. - The instrument is not invalid for the reason only that it is ante-dated or post-dated, provided this is not done for an illegal or fraudulent purpose. The person to whom an instrument so dated is delivered acquires the title thereto as of the date of delivery.

GR: Ante-date and post-dated is valid

EX: for an illegal or fraudulent purpose

Applies when ante-dated or post-dated in accordance w/ a mutual agreement by the parties

Ante-dated - earlier than the date of issuance/delivery

Post-dated - later than the date of issuance/delivery

When title is acquired: date of actual delivery (NOT date of issuance)

*Sec. 13. When date may be inserted. - Where an instrument expressed

to be payable at a fixed period after date is issued undated, or

where the acceptance of an instrument payable at a fixed period after sight is undated,

any holder may insert therein the true date of issue or acceptance, and the instrument shall be payable accordingly. The insertion of a wrong date does not avoid the instrument in the hands of a subsequent holder in due course; but as to him, the date so inserted is to be regarded as the true date.

GR: Date is NOT necessary for the negotiability of the instrument (relate to Sec. 6)

EX: (When date is necessary) (what to insert? same as presumption)

where interest is stipulated, to determine when interest is to run

to determine where a party has acted w/in a reasonable time

Knowingly inserting the wrong date in an undated instrument

party so inserting the wrong date = it is VOID

holder in due course = it is VALID, date inserted = true date

2 steps in the exec. of a nego instrument (Sec. 14; Sec. 15; Sec.16)

act of writing completely and in accordance w/ sec. 1 of the nego instrument law (WUPPA)

delivery w/ intention of giving effect to it

*Sec. 14. Blanks; when may be filled. - Where the instrument is wanting in any material particular, the person in possession thereof has a prima facie authority to complete it by filling up the blanks therein. And a signature on a blank paper delivered by the person making the signature in order that the paper may be converted into a negotiable instrument operates as a prima facie authority to fill it up as such for any amount. In order, however, that any such instrument when completed may be enforced against any person who became a party thereto prior to its completion, it must be filled up strictly

in accordance with the authority given and

within a reasonable time.

But if any such instrument, after completion, is negotiated to a holder in due course, it is valid and effectual for all purposes in his hands, and he may enforce it as if it had been filled up strictly in accordance with the authority given and within a reasonable time.

Material Particular

particular omission will render the instrument - non-negotiable

name of the payee

name of the drawer

2. particular omission will NOT render the instrument non-nego

date

rate of interest

place of payment

prima facie auth presumed

want of material particular in the instrument

possession by person (other than the drawer or maker)

person had auth to fill up the blank

prima facie auth to fill up any amount

signature on a blank paper

person signing in blank delivers it w/ intention that the paper may be converted into a nego instrument

Rule (holder-payee,indorsee,bearer=plaintiff; debtor-maker,acceptor,drawer or indorser = defendant)

holder in due course - can enforce the instrument as completed against both prior OR subsequent parties

holder NOT holder in due course - can enforce the instrument as completed against subsequent parties only

Personal/equitable defense that below req is NOT met - only against holder NOT holder in due course

Req to hold prior parties liable (must be holder in due course NOT just holder; prior parties - indorsers and person negotiating by delivery)

blank filled up in accordance w/ the auth given

must be filled up w/in reasonable time (relative)

*Sec. 15. Incomplete instrument not delivered. - Where an incomplete instrument has not been delivered, it 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.

*Sec. 16. Delivery; when effectual; when presumed. - Every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. As between immediate parties and as regards a remote party other than a holder in due course, the delivery, in order to be effectual, must be made either by or under the authority of the party making, drawing, accepting, or indorsing, as the case may be; and, in such case, the delivery may be shown to have been conditional, or for a special purpose only, and not for the purpose of transferring the property in the instrument. But where the instrument is in the hands of a holder in due course, a valid delivery thereof by all parties prior to him so as to make them liable to him is conclusively presumed. And where the instrument is no longer in the possession of a party whose signature appears thereon, a valid and intentional delivery by him is presumed until the contrary is proved.

Rules Sec 15 and 16:

Delivery - essential to validity

Undelivered = incomplete = revocable = no rights

2. As bet. immediate parties or those in like cases, delivery must have been w/ the intention of passing title

3. An instrument signed by the drawer or maker BUT NOT completed by him and retained in his own custody is invalid as to him for want of delivery even though stolen and negotiated to a holder in due course

Incomplete and undelivered - Defense is valid against any holder (INCLUDES holder in due course)

4. BUT when the instrument mentioned in (3) is in the hands of a holder in due course, there is prima facie presumption of delivery which the maker or drawer may rebut by proof of non-delivery

Real defense - party who signed prior to delivery

Instrument is valid against all whose signature appear after delivery

Prove personal defenses:

no delivery was made

delivery was NOT authorized

delivery was conditional or for a special purpose and NOT for purpose of transfer (Ex: safe-keeping,security,collection) NOTE: delivery and NOT the promise is conditional otherwise non-nego

5. Where the custody of the incomplete instrument has been entrusted to another, who wrongfully completes and negotiates it to a holder in due course, delivery of agent or custodian is sufficient to bind maker or drawer

6. Where maker or drawer executes a complete instrument found in possession of another NOT a holder in due course, delivery is presumed prima facie

7. Where the instrument mentioned in (6) is in the hands of a holder in due course, there is a CONCLUSIVE presumption of delivery

8. Delivery of the instrument may be made on a parol condition or for a special purpose NOT inconsistent w/ its written terms, where the validity of the instrument is to arise out of the performance of the condition or consummation of the purpose

Condition precedent - valid; NOT affect the rights of a holder in due course

Condition subsequent - contradicts the written terms and may NOT be set up by parol evidence

Immediate parties - knowing or being held to know the conditions or limitations placed upon the delivery of the instrument or that it was stolen; privity NOT proximity

Remote parties - not know

Diligence of owner - to give notice of loss to all parties and inform them NOT to pay the amount to any one except to the loser or his order

Rights of

finder - no title

owner - action of replevin (writ issued to recover an item of personal property wrongfully taken)

Not discharged from liability if he pays the amount to the holder of the lost instrument bef. maturity UNLESS bona fide holder for value and entitled to enforce payment