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FINAL EXAM FOR LAW 104

MARY HAZEL JILL ANSUAS BSA- IVB 1. WHAT ARE THE TWO INSTANCES WHEN NOTICE MAY BE GIVEN TO THE PARTY HIMSELF OR TO HIS TRUSTEE OR ASSIGNEE? CITE THE SECTION IN POINT.

Section 101 cites two instances wherein one may give notice to the party himself or to his trustee or assignee; one is, when the party has been adjudged a bankrupt or insolvent and the other is when he made an assignment of his properties for the benefit of creditors.

2. WHAT ARE THE TWO MEANS OF GIVING NOTICE OF DISHONOR? DEFINE EACH ONE AND CITE THE SECTION IN POINT.

Section 103 provides for two means of giving notice of dishonor: (1) personally and (2) by mail. A notice of dishonor may be given personally when the parties reside in the same place, at the place of business or at the residence of the person to receive notice before the close of business hours or the usual hours of rest on the day following A notice of dishonor may be given by mail by depositing it in the post office in time to reach him in the usual course on the day following.

3. CAN A NOTICE OF DISHONOR BE WAIVED? HOW? CITE THE SECTION IN POINT.

Yes it can, Section 109 cites that notice of dishonor may be waived before the time of giving notice or after the omission to give due notice. It may be express when it is made orally or in writing as when notice of dishonor waived appears above the signature of the indorser. It is implied where it is inferred from act or language.

4. WHO ARE AFFECTED BY AN EXPRES WAIVER? CITE THE SECTION IN POINT.


Section 110 states that an express waiver may affect parties depending on where it is written

If the waiver is embodied in the instrument itself, that is, it appears in the body or on the face of the instrument, it binds all parties. If it written above the signature of an indorser, it binds himself only.

5. CITE THE EFFECT OF A WAIVER OF PROTEST.

6. CAN A DELAY IN GIVING NOTICE BE EXCUSED? EXPLAIN YOUR ANSWER.

Where a protest is waived, presentment and notice of dishonor are also deemed waived. This is so because protest means all steps accompanying dishonor necessary to charge a party secondarily liable.

Yes, delay in giving notice is excused when it is caused by circumstances beyond the control of the holder and not imputable to his default, misconduct or negligence.

7. IS NOTICE OF DISHONOR TO A DRAWER ALWAYS REQUIRED? WHY?

No, because there are certain circumstances when notice to a drawer is not required. Circumstances like: Where the drawer and the drawee are the same person When the drawee is a fictitious person or a person not having the capacity to contract When the drawer is the person to whom the instrument is presented for payment. Where the drawer has no right to expect or require that the drawee or acceptor will honor the instrument Where the drawer has countermanded payment.

8. IS NOTICE OF DISHONOR TO AN INDORSER ALWAYS REQUIRED? WHY?

No, because certain cases like: When the drawee is a fictitious person or a person not having the capacity to contract, and the indorser was aware of that fact at the time he indorsed the instrument When the indorser is the person to whom the instrument is presented for payment. Where the instrument was made or accepted for his accommodation.

9. WHAT MUST A HOLDER DO IF THE INSTRUMENT IS ACCEPTED AFTER IT HAS BEEN DISHONORED BY NONACCEPTANCE? GIVE THE SECTION IN POINT AS THE LEAGAL BASIS FOR YOUR ANSWER.

If the instrument is accepted after it has been dishonored by nonacceptance, it is necessary for the holder to present the instrument for payment upon maturity. In case of non-payment, the holder must give the corresponding notice of dishonor. Failure to do so will discharge the secondary parties.

10. WHAT IS THE EFFECT OF OMISSION TO GIVE NOTICE OF NON-ACCEPTANCE?


The failure of the previous holder to give notice of dishonor by non-acceptance cannot prejudice a holder in due course who may still present the instrument to the drawee for acceptance and notify the drawer and indorsers if the acceptance is refused.

11. WHEN IS A PROTEST REQUIRED? WHEN IS IT NOT REQUIRED?


A protest is required only in the case of foreign bills of exchange which have been dishonored by non-acceptance or non-payment, as the case may be. However, in cases of other negotiable instruments like inland bills of exchange, checks and promissory notes, protest is not required except cases provided by sections 158, 161 and 171.

12. DEFINE DISCHARGE OF AN INSTRUMENT. WHAT ARE ITS METHODS? GIVE ITS EFFECT.
Discharge of an instrument means a release of all parties, whether primary or secondary, from the obligations arising under the instrument rendering it without force and effect and, consequently, no longer negotiable. The methods of discharging an instrument are by: Payment by principal debtor. Payment by accommodated party Intentional cancellation of instrument by holder. Any act which discharges a contract. Reacquisition by principal debtor in his own right.

13. ENUMERATE HOW SECONDARY PARTIES MAY BE DISCHARGED. GIVE CLARIFACTORY DISCOURSE ON EACH.

14. COMPARE AND CONTRAST BILL OF EXCHANGE AND PROMISSORY NOTE

Any act which discharges instrument. If the instrument is discharged under Section 119, it ceases to have force and effect. Hence, all parties, whether primarily or secondarily liable, will also be discharged. But a discharge of a secondary party does not affect a discharge of the instrument itself. Intentional cancellation of signature. If the holder intentionally strikes out the signature of a person secondarily liable, the effect is to discharge him from liability on the instrument as if he has never been a party to the same. However, the right of a holder to cancel the signature of an indorser is subject to the limitation that the indorsement is not necessary to the holders title. Discharge of prior party. The discharge of a party as by intentional cancellation of his signature also operates as a discharge of parties subsequent to the party discharged because it deprives a subsequent party of a right of recourse against the party discharged by the holder. Valid tender of payment. A valid tender of payment made by a prior party, if accepted, would result in the discharge of said party and necessarily, of all parties subsequent to him. It is but just, therefore, that the holders refusal without any justifiable reason to accept a valid tender of payment made by a prior party should discharge the subsequent parties. Release of the principal debtor. The release of the principal debtor discharges the instrument and, therefore, all the secondary parties are also discharged. Moreover, with the release of the principal debtor, subsequent parties lose their right of recourse against him. And the release of the principal debtor must be by the act of the holder and not by operation of law. Extension of time of payment. The words agreement binding on the holder means agreement binding on the holder made with the principal debtor. Hence, an agreement by the holder with a third party to extend the time of payment does not discharge the indorsers. To be binding, the agreement must be supported by a valuable consideration and for a definite period.

The distinction between a bill and a note are as follows: A bill contains an unconditional order addressed by one person to another requiring the latter to pay the

instrument, while a note contains an unconditional promise made by one person to another to pay it. In a bill there are three parties: the drawer, the drawee, and the payee or bearer, while in a note there are only two parties: the maker and the payee or bearer; In a bill, the drawer, the one who issues the instrument, is only secondarily liable, while in a note, the maker, the one who issues the instrument, is primarily liable; A bill drawn payable to the drawers own order is complete without indorsement, provided it has been accepted by the drawee, while a note drawn payable to the makers own order is not complete until indorsed by him. A bill must be presented for acceptance in certain cases and the drawee is not liable unless and until he accepts the same, while in a note, there is no need of presentment for acceptance; and A bill payable on demand must be presented for payment within a reasonable time from its last negotiation, while a note payable on demand must be presented for payment within a reasonable time from its issue.

15. WHAT IS THE STATUS OF DRAWEE PRIOR TO ACCEPTANCE OR PAYMENT?

Drawee, a mere stranger to bill. A drawee is a stranger to the bill drawn on him unless and until he accepts the same. Before acceptance, the bill is merely an order to the drawee to pay. As far as the holder is concerned, the drawee is not bound to accept even if the drawer has sufficient funds in his hands. Drawer not liable to holder in due course. The mere issuance of a bill does not operate as an assignment of the funds in the hands of the drawee. Hence, a holder in due course of a dishonored bill has no cause of action against the drawee but only against the drawer and indorsers, if any. But the drawee that refuses to accept may be made liable to the drawer.

16. CAN A BILL BE ADDRESSED TO MORE THAN ONE DRAWEE? HOW?

Yes, a bill may be addressed to two or more drawees, thus: To A and B or To A, B, and C whether they are partners or not; but it cannot be addressed to two or more drawees in the alternative,

thus: To A or B; nor to two or more drawees in succession, thus: To A, and in his absence, to B.

17. WHO IS A REFEREE IN CASE OF NEED? WHAT IS HIS FUNCTION? IS IT NECESSARY TO HAVE ONE? SUPPORT YOUR ANSWER.

Referee in case of need is the person named by the drawer or indorser as the one to whom the holder may resort in case of need, that is, in case the bill is dishonored by non-acceptance or non-payment. No, it is not necessary to have a referee in case of need because it is not obligatory upon the holder to apply to the referee in case of dishonor.

18. WHEN IS A PROMISE TO ACCEPT EQUIVALENT TO ACCEPTANCE IN RELATION TO A BILL? CITE THE SECTION IN POINT.

Section 135 provides that a promise to accept is good to any person who upon the faith thereof receives the bill for value. The promise to accept a future non-existing bill must be unconditional and in writing.

19. WHAT IS PRESENTMENT FOR ACCEPTANCE? WHEN CAN IT BE MADE?


Presentment for acceptance is the production or exhibition of a bill of exchange to the drawee for his acceptance or payment. Presentment for acceptance can be made on any day on which negotiable instruments may be presented for payment under the provisions of Sections seventy-two and eighty-five of this Act. When Saturday is not otherwise a holiday, presentment for acceptance may be before twelve o clock noon on that day

20. HOW DO YOU MAKE A PRESENTMENT FOR ACCEPTANCE?

In order that presentment for acceptance may be proper, it is necessary that it: Must be made by or on behalf of the holder At a reasonable hour On a business day Before the bill is overdue and within a reasonable time To the drawee or some person authorized to accept or refuse acceptance on his behalf.

21. GIVE THE DUTY OF HOLDER IN CASE OF NON-ACCEPTANCE. STATE THE RIGHTS OF A HOLDER WHERE BILL IS NOT ACCEPTED.
If, within twenty-four (24) hours after presentment as provided for in Section 136 the bill is not accepted,the person presenting it must treat the bill as dishonored. Thus, the holder must take the necessary proceedings against the drawer and each indorser, that is, have the bill protested in those cases when required and give notice of dishonor in other cases. The holder of a dishonored bill by non-acceptance after giving notice of dishonor and protesting when required may immediately proceed against the drawer and indorsers for value of the bill without waiting for the date of maturity. But if the bill is subsequently accepted, presentment for payment is necessary

22. HOW IS A PROTEST TO BE ANNEXED TO THE BILL MADE? WHO MAY MAKE SUCH?

The protest must be annexed to the bill or must contain a copy thereof, and must be under the hand and seal of the notary making it, and must specify: The time and place of presentment The fact that presentment was made and the manner thereof The cause or reason for protesting the bill The demand made and the answer given, if any, or the fact that the drawee or acceptor could not be found. A protest may be made by: A notary public; or By any respectable resident of the place where the bill is dishonored, in the presence of two or more credible witnesses The differences of a protest and a notice of dishonor are: Protest is required only, as a rule, in case of dishonor of foreign bill appearing on its face to be such, while notice of dishonor, in any negotiable instrument, other than a foreign bill. Protest is always written, while notice of dishonor may be oral or written

23. DISTINGUISH PROTEST FROM NOTICE OF DISHONOR.

24. COMPARE AND CONTRAST ACCEPTANCE FOR HONOR AND ORDINARY ACCEPTANCE.

Protest includes presentment, notice of dishonor, and all the steps accompanying dishonor, while notice of dishonor is limited only to such notice. Protest is made either by a notary public, or by any respectable resident in the presence of witnesses, while notice of dishonor, by party or his agent. Protest is made, as a rule, at the place where the bill is dishonored, while in notice of dishonor, the place is not essential. Protest is made on the day of dishonor, while in notice of dishonor; the giving of notice is made within the times prescribed.

Some distinctions between acceptance for honor and ordinary acceptance are as follows: In the former, there must be previous protest, while in the latter, protest is not required In the former, the acceptor must be a stranger to the bill, while in the latter, the acceptor is the drawee In the former, the consent of the holder is required, while in the latter, such consent is not required In the former, the acceptor is secondarily liable, while in the latter, the acceptor is primarily liable In the former, there may be several acceptors for the honor for different parties in the bill ,while in the latter, there can be no acceptors in the alternative or in succession In the former, the bill is not discharged upon payment by acceptor for honor, while in the latter; it is discharged upon payment by the acceptor.

25. DISTINGUISH PAYMENT FOR HONOR FROM ACCEPTANCE FOR HONOR.


Payment for honor is distinguished from acceptance for honor as follows: In the former, the protest must be made for non-payment ,while in the latter, for non-acceptance or for better security

In the former, the bill is overdue ,while in the latter it must not be overdue In the former, the consent of the holder is not required nor can holder refuse ,while in the latter, the consent of the holder is required In the former, the acceptor is secondarily liable ,while in the latter, the acceptor is primarily liable In the former, a notarial act of honor is necessary ,while in the latter, it is not necessary The effects of payment for honor are those provided for in Sections 175 and 177, while the effects of acceptance for honor are those provided for in sections 164 and 165.

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