Antalan,Allia D.

AC201 October 09,2019

MWF (9:00-10:00)

1. What constitute holder in due course?

A holder in due course is a holder who has taken the instrument under the following conditions:

(a) That is complete and regular upon its face;

(b) That he became the holder of it before it was overdue, and without notice that it had been
previously dishonored, if such was the fact;

(c) That he took it in good faith and for value;

(d) 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.

2. What is real defense?

Real defenses are those that are assertable against all parties, both immediate and remote,
including holders in due course or holders through the latter. In other words, there are cases
when a holder in due course is not legally entitled to payment from the primary party. A real
defense questions the legal validity of tye instrument itself.

3. Give examples of real defense.

(a) Incapacity as far as the incapacitated person is concerned.

(b) Illegality of contract when declared by law, except where the maker or drawer is himself a
party to its illegality; thus, a note for gambling debt (an illegal consideration) is a mere personal
defense.

(c) Want of delivery of incomplete instrument.

(d) Forgery.

(e) Want of authority, apparent and real.

(f) Duress amounting to forgery as where one takes the hands of another and forces him at
gunpoint to sign his name. There are varying degrees of duress under the law. If, for example, a
person signs his name under a vague threat or through fear of economic retaliation, the defense
is only personal in nature. The duress must be so overwhelming that the victim is entirely deprived
of his will.

(g) Fraud in factum or fraud in esse contractus.

(f) Fraudulent alteration by holder.

(i) Prescription.

(j) Other infirmities appearing on the face of the instrument.

(k) Discharge at or after maturity.

4. What is personal defense?

Personal defenses are those available to prior parties among themselves but which are not good
against a holder in due course. They include every defense available in actions under ordinary
contract law. They can be asserted only against ordinary holders, but not against holders in due
course or holders with all the rights of a holder in due course.

They are so-called because they are available only against that person or subsequent holder who
stands in privity with the party seeking to enforce it.They can be used only between original
parties or immediate parties or against one who is not a holder in due course. A personal defense
affects only the validity of the agreement for which the instrument was issued.

5. Give examples of personal defense.

(a) filling of wrong date.

(b) filling up of blanks not in accordance with the authority given and within reasonable time.

(c) want of delivery of complete instrument.

(d) absence or failure of consideration.

(e) simple fraud or fraud in inducement.

(f) acquisition of instrument (not signature) by duress, or force and fear.

(g) acquisition of instrument by unlawful means.

(h) acquisition of instrument for an illegal consideration.

(i) negotiation in breach of faith.

(j) negotiation under circumstances that amount to fraud.

(k) innocent alteration or spoliation. Spoliation is an alteration made by a stranger to an

instrument. If the original meaning can be ascertained, the holder in due course may recover
according to its original tenor.

(l) set-off between immediate parties.

(m) discharge by payment or renunciation or release before maturity.

n. discharge of party secondarily liable by discharge of prior party.

(o) want of authority of the agent who has apparent authority, but if the principal can show that
the agent had no express, implied, or apparent authoruty to sign, the defense us real.

6. Define bills in a set.

A bill in a set is one composed of several parts, each part being numbered and containing a
reference to the other parts, the whole of the parts constituting but one bill.

7. What is the purpose of bills in set?

Bills in set are usually availed of in cases where a bill had to be sent to a distant place through
some conveyance. If each part is sent by different means of comveyances, the chance that at least
one part of the set would reach its destination would be greater. The purpose then of drawing a
bill in set to avoid the difficulties which would arise in case of loss or miscarriage on the way of
the bill.