Barcelona, Joyce Ann A.

FMA-2A

REAL AND PERSONAL DEFENSES

POINT OF DISTINCTION PERSONAL DEFENSES REAL DEFENSES

As to legal effect Defenses that may be used Absolute defenses to

to avoid payment to an
ordinary holder, but not an
holder in due course or a
holder with the rights of an
holder in due course.
As to purpose
liability on a negotiable
instrument that are valid
against all holders,
including holder in due
course and other holder
with the rights of holder in
due course.

As to validity to holder Valid against ordinary Valid against ordinary

holder holders as well we holder in
due course
As to Holder
If Holder in Due Course Whether holder in due
 He is in good faith course / holder not in due
(no knowledge of course
any defect)  He cannot recover
 He cannot recover

If Holder in Due Course

 He is in bad faith
 He cannot recover

As to what kind of Incomplete but delivered Incomplete and undelivered

Abnormal Instrument instrument (sec.14) instrument (sec.15)
 Synonymous to - No one can recover
“Doctrine of
Comparative
Negligence” or
“Breach of Trust or
Authority”

 The drawer or maker

can only recover to
 the person who are
holder in due course
up to the original
amount

Complete but delivered

instrument (sec.16)
 If the completed and
delivered instrument
without authority, the
instrument is not
valid against any
person who signed it
before delivery.
As to Insertion of Date Inserted a wrong date (sec With date but altered (sec
13) 124)
As to Authorization to insert Breach of authority Want of authority
amount
As to Fraud Fraud in incumbent Fraud in Factum / Factum
 Person has no in Esse Contractus
knowledge on what  He has no
he is signing knowledge on what
 He was deceived he is signing
 He was deceived by
a purpose
As to Alteration Forgery (sec. 23) Material Alteration (sec
 Holder in due course 124)
cannot recover  Holder in due course
( exception to the can recover
rule 4)
As to Person who Alter Spoliation – done by a Material alteration – done
stranger by a person related
As to Authority and Want of Authority (sec.20) Want of consideration
Consideration (sec.28)
As to Illegality Illegality of contract Illegality of maker or drawer
As to want of delivery of Where the instrument is
complete instrument mechanically complete and Where the instrument is
is not wanting in any payable to order for the
particular. person would have to
commit forgery on
As against holders not in instrument
due course, it can be
shown that no delivery was
made, or that the delivery
 was conditional or for
special purpose

Where the instrument is

stolen is also a personal
defense
As to Mental Incapacity A person who has not been
adjudged mentally
incompetent, nonetheless
may claim mental
incapacity as a defense void from the beginning and
against an ordinary holder
but not an holder in due
course.
As to Discharge from If the party primarily liable
Liability pays the instrument in full,
all parties on the instrument
are discharged.
If secondarily liable party
pays the instrument, only
that party and subsequent
parties are discharged.
As to material alteration When used to deny liability
according to org. tenor of liability according to altered
instrument
As to duress Unless so serious as to
give rise
Any instrument made or
issued by a person
previously adjudged to be
mentally incompetent is
,therefore , unenforceable
even by an holder in due
course.
Drawers, makers, and
subsequent indorsers are
not liable to an holder in
due course if they have
been discharged in
bankruptcy.
When relied on to deny
terms.
Lack of contractual intent