Forgery
 M’s Obligation is not extinguished
I promise to pay A or Bearer 100,000
Sgd. M
 A forge the signature of M
 A to B- C- D- E
 M is not liable to any holder
 E cannot collect from M
 E can collect from D according to
Section 65
 E cannot collect from C because he
cannot trace the title of instrument
because it is a bearer instrument and
can only enforce liability to its
immediate transferor
I promise to pay A or Bearer 100,000
Sgd. M
 A to B- C- D- E
 C stole the instrument from B
 C forged the instrument of B
 E can still collect from M since it is
payable to bearer
 E not a holder in due course- Section 16
cannot collect from M but can recover
from A, B, C, D,
I promise to pay A or order 100,000
Sgd. M
 A forge the signature of M
 A to B- C- D- E
 M is not liable
 E can collect from C, B, D be of
indorsement
I promise to pay A or order 100,000
Sgd. M
 A to B- C- D- E
 C forged the signature of B.
 E cannot collect from M
 No valid of title was transferred after B
 E can recover from C and D
because payment of money is generic
 B can collect from M because he
unjustly enriched, B cannot collect from
A or M because no promissory note for
presentment
Bill of exchange
Pay to A or Bearer 100,000
Sgd. X
To Y:
 Signature of drawer X is forged
 E can enforced to Y because bill of
exchange
 If Y refused to pay Y is not liable
unless he accepted and Y has no
right to debit the amount to X
section 62
 Y cannot recover the payment E-
negligence and genuineness of the
signature
Pay to A or Bearer 100,000
Sgd. X
To Y:
 C stole the instrument from B and
forged the signature of B.
 Y accepted and paid E,
 Y can debit the account of X because
the signature of drawer is Genuine
 Indorsement is not necessary in order
to transfer title
 What defense must be raised by X?
personal defense be complete but
undelivered
 Y can recover what he has paid to E, Y
did not validate any of his warranties
and E is not a holder in due course
 If E is a holder in due course Y can debit
the account of X
Pay to A or order 100,000
Sgd. X
To Y:
 Signature of X was forged by A
 Y accepted: Y cannot debit the
account of X
Y cannot recover from X
Pay to A or order 100,000
Sgd. X
To Y:
 C forged signature of B
 If accepted and paid E
 Y cannot debit the account of X because
the order of X to Y is to pay A or
whoever orders it to pay
 The indorsement of the title is cut off
even if it is a holder in due course.
 Y can recover from E because Y did not
violate any warranties. The acceptor
does not warrant that the signature of
indorsee is genuine.
Persons precluded from setting up the forgery
 Forgers
 Agent
Section 29
 Accomodation party is the one who
signed the instrument as a Maker,
drawer, acceptor or indorsee without
receiving a value therefor and for the
purpose of lending his name to some
other persons.
 Primarily liable is the Accomodated
Party
 Accomodation party only acts as a
surety to the instrument. A failure of
payment by the accommodation party
makes the Accomodation party
primarily liable to the instrument.
Section 32
Pay to A or B -does not constitute negotiability
Pay to A and B- constitute negotiability
Section 38
Qualified Indorsement
Pay to A or order 100,000
Sgd. M
 A to B to C to D
 M is insolvent
 C is qualified Indorser
 D cannot held C liable because C did not
warrant the instrument will be paid
unless that the time C indorses the
instrument to D, he has knowledge that
M is insolvent, he can be held liable
Section 39
Conditional Indorsement
 Instrument is still negotiable because
the condition is only the indorsement.
The condition is not on the face of
instrument
Pay to A or order 100,000
Sgd. M
 A to B to C to D
 D indorses it to E with a condition that
If E passes the CPA board Exam
 E can collect from M to collect but M
can refuse to pay E
 M can pay E as principal debtor, he can
disregard the condition to pay; has the
option to terminate his obligation
Section 49
Assignment – transfer of rights to the assignee.
He acquires no better right than the assignor
Negotiation – transfer of title, transferee
becomes the holder, not a mere assignee,
holder acquires a better right than the
transferor
Section 50
Reacquirer – any subsequent parties’ liability
has been extinguished
Section 58 Shelter rule
Pay to A or order 100,000
Sgd. M
 M bought 100 sacks of rice from A
 D does not know failure of
consideration
 E knows failure of consideration
 E acquired the note from a holder in
due course as long as E is not part of
illegality or fraud
Summary of forgery
Promissory note – Bearer
If Signature of maker is forged it is wholly
inoperative, the holder can collect from its
immediate transferor because one of there
warranties is the genuineness of signature of
maker but he cannot collect to other indorsers
because he cannot track the transfer of title
If Signature of one of the indorser is forged, the
holder being a holder in due course can still
collect from maker because it is a bearer
instrument. But if He is a holder not holder in
due course he cannot collect from the maker
but he can recover from prior indorsers.
Promissory note – Order
If signature of Maker is forged it is wholly
inoperative, the holder can collect from
indorsers because one of their warranties is the
genuineness of signature of maker
If Signature of the indorser is forged the holder
cannot collect payment from the maker
because there is no transfer of title to the
holder. The only recourse that the holder have
is to recover from prior indorsers or to the
person who forged the signature of the indorser
Bill of Exchange – Bearer
If Signature of Drawer is forged and the drawee
accepts the bill of exchange. The Drawee
cannot debit the account of drawer because of
Section 62. He cannot also recover form the
holder because of his negligence and warranty
that the signature of drawer is genuine
If signature of indorser is forged and the
drawee accepts the bill of exchange. The
drawee can debit the account of drawer
because Drawer does not violate any of his
warranties. He can also collect from a holder
not a holder in due course in case the drawer
raised the defense of Personal defense that is
complete but undelivered
Bill of Echange – Order
If Signature of Drawer is forged and the drawee
accepts the bill of exchange. The Drawee
cannot debit the account of drawer because of
Section 62. He cannot also recover form the
holder because of his negligence and warranty
that the signature of drawer is genuine
If signature of Indorser is forged and the
drawee accepts the bill of exchange. The
drawee cannot debit the account of drawer
because there is no transfer of title. The remedy
of drawee is to recover from the holder because
he did not violate one of his warranties