Also known as: unauthorised completion · incomplete instrument
Written by attorneys · grounded in primary & secondary sources — see below
A personal defense to enforcement of a negotiable instrument arising from the addition of words or numbers to an incomplete instrument without authority or beyond the authority granted. The defense prevents a holder who is not a holder in due course from enforcing the instrument according to its completed terms.
Uma Underwood signed a blank check as drawer and gave it to her assistant with instructions to pay a supplier $500. The assistant instead wrote in a different payee and $5,000. When the completed check reached United Bank, the bank paid it. Underwood may assert unauthorized completion against the bank because the bank is not a holder in due course.
Ultrasonic Dynamics signed an incomplete draft and entrusted its bookkeeper to add only the payee name. The bookkeeper added both a payee and an unauthorized amount, then negotiated it to Ultimate Solutions. Ultimate Solutions took the instrument for value in good faith. Unauthorized completion allows the company to avoid liability to Ultimate Solutions on the added terms.
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Unauthorized completion occurs when words or numbers are added to an incomplete instrument without authority. Other alterations involve changes to an already complete instrument. Both fall under the definition of alteration in UCC § 3-407(a), but the rules for enforcement and discharge may differ depending on whether the instrument was incomplete when signed.
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Unauthorized completion is a personal defense. It may be asserted only against a holder who does not qualify as a holder in due course. A holder in due course can enforce the instrument according to its completed terms under the rules in UCC § 3-407(c).
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The person asserting that words or numbers were added without authority bears the burden of establishing the lack of authority under UCC § 3-115(d).
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No. Unauthorized completion does not discharge the party unless the alteration was made fraudulently. The instrument remains enforceable according to its original terms or as completed with authority, subject to the personal defense against non-HDC holders.
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