Saturday, January 07, 2006

Real vs Personal Defenses

Real defenses are those that attach to the instrument and are available against all holders, whether in due course or not, but only by the party or parties entitled to raise them.

- Minority/Incapacity
- Forgery
- Non-delivery of incomplete instrument
- Material Alteration
- Ultra Vires Act of Corporation
- Fraud in Factum or Esse Contractus
- Illegality – if declared void for any purpose
- Vicious force or violence
- Want of authority
- Prescription
- Discharge in insolvency

Personal Defenses are available only against the holder not in due course who stands in privity with the party who is entitled to set it up or those who are not or do not have the rights of a holder in due course.

- Failure or absence of consideration
- Illegal consideration
- Non-delivery of complete instrument
- Conditional delivery of complete instrument
- Fraud in inducement
- Filling up blank not in authority
- Duress or intimidation
- Filling up blank beyond reasonable time
- Transfer in breach of faith
- Mistake
- Insertion of wrong date
- Ante-dating or post-dating for illegal or fraudulent purposes


Terms:

Holder in due course – a holder who has taken the instrument under the following conditions: (1) that it is complete and regular upon its face; (2) That he became a holder of it before it was overdue and without notice that it had been previously dishonored, if such was the fact. (3)That he took it in good faith and for value; (4) That at the time it was negotiated to him, he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it.



Word of the Day

Allonge – A piece of paper annexed to a negotiable instrument on which to write endorsements for which there is no room on the instrument itself. Such must be so firmly affixed thereto as to become a part thereof.

Question of the Day

Are postal money order and treasury warrants negotiable instruments?

5 comments:

  1. Treasury warrant is not a negotiable instrument because it is payable out of a particular fund. A money order is also not a negotiable instrument because the operation of money order system is not a commercial transaction but a governmental function for the public benefit.

    ReplyDelete
  2. Well said dianne. Thnx anony.

    ReplyDelete
  3. is insertion of wrong amount a personal defense?

    ReplyDelete
  4. Personal Defenses are available only against the holder not in due course who stands in privity with the party who is entitled to set it up or those who are not or do not have the rights of a holder in due course.Kensington Greece

    ReplyDelete