Negotiable Instruments Law – Defenses and Equities


Memory Aid

Based on the Outline of the 1994 Edition of Campos & Campos



  1. real defense – attaches to instrument; on the principle that the right sought to be enforced  never existed/there was no contract at all
  2. personal defense – growing out of agreement; renders it inequitable to be enforced vs. defendant


  1. INCAPACITY: real; indorsement/assign by  corp/infant: passes property but corp/infant no liability
  1. ILLEGALITY: personal, even if no K because void under CC 1409
  1. FORGERY:  real (lack of consent):
    1. forged
    2. made without authority of person whose signature it purports to be.

General Rule:

  1. wholly inoperative
  2. no right to retain instrument, or give discharge, or enforce payment vs. any party, can be acquired through or under such signature (unless forged signature unnecessary to holder’s title)


unless the party against whom it is sought to enforce such right is precluded from setting up forgery/want of authority


  1. parties who make certain warranties, like a general indorser or acceptor
  2. estopped/negligent parties

* note  rules on Acceptance/Payment Under Mistake as applied to:

  1. 1.    overdraft
  2. 2.    stop payment order
  3. 3.    forged indorsements


  • Where NI materially altered w/o assent of all parties liable thereon, avoided, except as vs. a
  1. party who has himself made, authorized or assented to alteration
  2. and subsequent indorsers.
  • But when an instrument has been materially altered and is in the hands of a HDC not a party to the alteration, HDC may enforce payment thereof according to orig. tenor
  • Material Alteration
  1. change date
  2. sum payable, either for principal or interest
  3. time of payment
  4. number/relations of parties
  5. medium/currency of payment, adds place of payment where none specified, other change/addition altering effect of instrument in any respect.

*material alteration a personal defense when used to deny liability according to org. tenor of instrument, but real defense when relied on to deny liability according to altered terms.

  1. FRAUD
  2. fraud in execution: real defense (didn’t know it was NI)
  3. fraud in inducement: personal defense (knows it’s NI but deceived as to value/terms)
  • Personal, unless so serious as to give rise to a real defense for lack of contractual intent
  • Personal defense (sec. 16)
  • If instrument not in poss. Of party who signed, delivery prima facie presumed
  • If holder is HDC, delivery conclusively presumed
  • Real defense (sec. 15)
  • Instrument 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


  • Personal defense (sec. 14)
  • 2 Kinds of Writings:
  1. Where instrument is wanting in any material particular: person in possession has prima facie authority to complete it by filing up blanks therein
  2. Signature on blank paper delivered by person making the signature in order that the paper may be converted into a NI: prima facie authority to fill up as such for any amount
  • In order that any such instrument, when completed, ma be enforced vs. any person who became a party thereto prior to its completion:
  1. must be filled up strictly in accordance w/ authority given
  2. within a reasonable time
  • but if any such instrument after completion is negotiated to HDC, it’s valid for all purposes in his hands, he may enforce it as if it had been filled up properly.

Reference:  University of the Philippines

BarOps ’99

Commercial Law – Val Feria, Mina Herrera, Gary Mallari & Rachel Ramos


About Magz

First of all, I am not a lawyer. I'm a graduate of AB Political Science and went to the College of Law but stopped going to law school for some reasons. I'm a passionate teacher who has been teaching English to speakers of other languages and a person who likes writing and blogging. I lost some important files and software when my computer broke down so the reason I created this website is to preserve the notes, reviewers and digests I collected when I was at the law school and at the same time, I want to help out law students who do not have enough time to go and read books in the library.

Posted on December 19, 2011, in Negotiable Instruments Law and tagged . Bookmark the permalink. Leave a comment.

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