When may blanks be filled in a negotiable instrument?

Category: Law on Negotiable Instruments

Sec.  14.  Blanks;  when  may  be  filled.  -  Where  the  instrument  is wanting  in  any  material  particular,  the  person  in  possession thereof has a prima facie authority to complete it by filling up the blanks therein. And a signature on a blank paper delivered by the person  making  the  signature  in  order  that  the  paper  may  be converted  into  a  negotiable  instrument  operates  as  a  prima  facie authority  to  fill  it  up  as  such  for  any  amount.  In  order,  however, that any such instrument when completed may be enforced against any person who became a party thereto prior to its completion, it must be filled up strictly in accordance with the authority given and within  a   reasonable  time.  But  if   any  such  instrument,  after
completion, is negotiated to a holder in due course, it is valid and effectual for all purposes in his hands, and he may enforce it as if it had  been  filled  up  strictly  in  accordance  with  the  authority  given and within a reasonable time.

SCOPE OF SECTION 14

      There are 2 steps in the execution of a negotiable instrument—
o      The   act   of   writing   the   instrument   completely   and   in accordance with Section 1 of the Negotiable Instruments Law
o      The  delivery  of  the  instrument  with  the  intention  of  giving effect to it
 

THE MATERIAL PARTICULAR REFERRED TO IN THIS PROVISION MAY BE—

1.    A  particular  the  omission  of  which  will  render  the  instrument  non-negotiable
2.    A particular the omission of which will not render the instrument non-negotiable
 

FACTS FROM WHICH PRIMA FACIE AUTHORITY PRESUMED

1.    Want of a material particular in the instrument
2.    Possession thereof by a person, a third fact
3.    That such person had authority to fill up the blank
 

THE  LAW  PRESUMES  THE  EXISTENCE  OF  AUTHORITY  TO  FILL  THE INSTRUMENT UP TO ANY AMOUNT FROM THE FOLLOWING FACTS

1.    A signature on blank paper
2.    That the person signing in blank delivers it in order that the paper may be converted into a negotiable instrument
 

REQUISITES TO HOLD PRIOR PARTIES LIABLE

1.    The blank must be filled strictly in accordance with the authority given
2.    It must be filled up within a reasonable time 

RIGHT OF HOLDER OF DUE COURSE WHERE BLANK WRONGFULLY FILLED

      First view: One who is not a holder in due course cannot enforce the instrument if the same is not filled up strictly in accordance with the authority given or within reasonable time
      Second  view:  the  holder  can  enforce  the  instrument  accordance  with the authorized tenor
      According  to  Agbayani,  the  better  view  is  the  first  view  is  the  better view  to  have.    The  law  provides  that  in  order  be  one  who  is  not  a holder  in  due  course  may  enforce  mechanically  incomplete  but delivered instrument, the two requisites must exist.  The implication is that one or both are not present, the instrument may not be enforced. 
 

REASONABLE TIME

      Regard is had to the nature of the instrument,  the usage of trade or business with respect to such instrument and the facts of the particular case
      Term is very relative
 

PERSONAL DEFENSE

      Defense available only to holders who are not holders in due course
 

SUMMARY OF RULES WHEN INSTRUMENT IS INCOMPLETE BUT DELIVERED

1.    Where  the  holder  is  a  holder  in  due  course,  he  can  enforce  the instrument  as  completed  against  parties  prior  or  subsequent  to  the completion
2.    Where  the  holder  is  not  a  holder  in  due  course,  he  can  enforce  the instrument  as  completed  as  against  the  parties  subsequent  to  the completion but not against those prior thereto