Beruflich Dokumente
Kultur Dokumente
see below)
GLENN TUAZON
Section 1: IMPORTANT!
An instrument to be negotiable must conform to the following
requirements:
(a)It must be in writing and signed by the maker or drawer
(b)Must contain an unconditional promise or order to pay a sum certain
in money;
(c) Must be payable on demand or at a fixed or determinable future
time;
(d)Must be payable to order or to bearer; and
(e)Where the instrument is addressed to a drawee, he must be named
or otherwise indicated therein with reasonable certainty.
What should be considered for negotiability:
1. Whole of instrument
2. Only what appears on the instruments face
a. N.I.L., especially section 1
Any signature is valid and binding as long as the person making the signature
intends to bound by it. It can be at any part of the instrument but if it is
unclear at what capacity he signed as, he is just deemed an indorser.
Legal tender the sort of money in which a debt or any obligation with money
may be lawfully paid in, in the absence any stipulation
A non-negotiable instrument may still be assigned or transferred.
There must be a promise to pay; acknowledgement of debt is NOT enough.
o Due to X P10,000 is NOT a promise to pay.
No payment date assumed to be immediately demandable.
Drawee (E) has to accept the note to become a party.
o Accepted + signature of the drawee he becomes an acceptor.
o The drawer (R) becomes a surety.
o E has to pay damages if he refuses to accept Ds bill, when D has funds in
the hands of E.
2. By stated installments
a. Elements specified:
i. Interest of each installment
ii. Due date of each installment
3. Installments with acceleration clause
a. Acceleration at the option of the maker NEGOTIABLE
b. Acceleration at the option of the holder X NEGOTIABLE
4. With fixed or current exchange rate
a. Exchange only applicable to foreign bills, not inland or domestic bills
5. With costs of collection or attorneys fee if payment is not made upon
maturity.
a. Here, even if uncertain, payment is made AFTER maturity, where the
instrument ceases to be negotiable in the full commercial sense.
EVEN WITHOUT USING order Let the bearer or W will much oblige R to
pay P or order
Mere requests are not enough, although polite commands are fine.
1.
2.
3.
4.
5.
No date
Value given not stated
Place drawn or payable not stated
Bears seal
Designates particular kind of money
On terms:
o Intent governs
o Foreign language is fine
CONSIDERATION
Accommodation
Without receiving value
Lends his name to some other person
May prove by parole evidence his being
an accommodation party
Cannot avail of defense of lack of
consideration to holder in due course
May sue for reimbursement from
accommodated party
Regular
Receiving value
X
Cannot disclaim liability by parole
evidence
Can avail of this defense
Regular party may not sue for
reimbursement
DEFENSES
Incomplete and delivered (Sec 14)
Distinguish:
o Those with obvious blanks
apparent authority to fill up
for signer/indorser/holder
o Those apparently complete
but do not fill up the entire
page doctrine of
negligence
(1) Fill up MATERIAL PARTICULARS
o But not to ALTER
(2) To put any amount if there is
just a signature on a blank piece
of paper
o Need to prove intent of M
to have the blank paper
turned into a NI
Defenses
o Can be enforced against
party prior to completion if:
1. Filled up according
to authority given
2. Within reasonable
time
o VS HOLDER IN DUE COURSE
the abovementioned
(scope of authority/time
violations) are NOT
defenses (merely personal).
Complete but undelivered (Sec 16)
Negotiable instruments have no
legal existence until delivered
o Delivery may be through
agent; but receipt of checks
FORGERY
GENERAL RULES:
The drawee may recover from the INDORSER/ENCASHER
The drawee may not recover from the DRAWER/depositor
EXCEPTION: when it is the AGENT or EMPLOYEE of the
drawer/depositor that perpetuates the forgery, because
sooner or later some leak will show on the drawers book
o It is not the duty of the drawee to know whether or not the payees or
indorsers signature is genuine or not. It is the duty of indorser to warrant
the genuineness of the signatures in the negotiable instrument.
Rights of parties when there are forged indorsements
o 1. When note payable to order
Party whose indorsement is forged is NOT liable even to a holder in
due course
Parties prior to forged indorsement are not liable either
o 2. When note payable to bearer
Party whose indorsement is forged is LIABLE to a holder in due
course
But NOT to a holder not in due course
Parties prior to forged indorsement are LIABLE even to a holder not
in due course
Because the instrument can be negotiated by mere delivery
The only defense available is against a holder not in due
course
Ex. (Bearer instrument) M P A B (As signature forged by X)
C D (holder in due course)
Indorsement of M, P, or A not necessary to vest ownership to
D
M, P, and A can be liable to D
D may also enforce the note against B and C, as indorsers
o 3. When bill payable to order
Party whose indorsement is forged is not liable to any holder even a
holder in due course
If signature of the payee is FORGED, the collecting bank is liable to
the payee
As if the collecting bank converted the check without
indorsement
If drawee pays under a forged indorsement, the drawer is not liable
(drawee may NOT collect from drawer)
But drawee may recover from forger/subsequent parties
If the collecting bank receives the check for mere collection and
deposit cannot be expected to know the genuineness of all prior
indorsements
BUT if it stamped on the checks its guarantee that all prior
indorsements guaranteed then collecting bank is bound as
warrantor
o
NEGOTIATION
3 methods of transfer:
o Issue
o Negotiation
Indorsement + delivery order
Delivery bearer
o Assignment rules of non-negotiable instruments apply
Order instrument that is just delivered: assignment
Payment by drawee not negotiation
o BPI v CA: writing of name of holder on the back of the check before
surrendering to drawee-bank for payment is NOT an indorsement;
signature is just a receipt for the money. The drawee-bank is neither
payee nor indorsee.
Negotiation to payee?
o First delivery to payee just issue
o First delivery of instrument is to other person (such as agent) payee
acquired title by negotiation
o Delivery of instrument to the payee by the last holder negotiation
Evidence to prove conditional negotiation:
o Condition precedent can be proven by parol evidence
o Condition antecedent CANNOT be proven by parol evidence (because it
contravenes the written contract)
Negotiation
Negotiable instruments only
Transferee is holder
HDC only subject to real defenses
HDC may acquire better title than
indorser
General I warrants solvency of prior
parties
I not liable unless with presentment and
notice of DH
Governed by NIL
Assignment
Ordinary K
Transferee is assignee
Assignee subject to personal and real
defenses
Assignee steps into assignors shoes
Assignor does not generally warrant
solvency of prior parties
Assignor liable even without
presentment and notice of DH
Governed by Civil Code (1624-1635)
Indorsement
o FORM
Write on instrument itself or attached paper
Discharged by payment
Even if overdue still negotiable (just not HDC)
Corollary if non-negotiable but indorsed to bearer or to order: BECOMES
NEGOTIABLE AS TO INDORSER AND SUBSEQUENT HOLDER
Striking out indorsements:
o Bearer instrument
May strike out intervening indorsements not necessary of his title
release them from liability
All, any, or none
o Order instrument
If there is indorsement in blank, may strike out subsequent
indorsements (released)
BUT NEVER the payees indorsement (need his order)
Transfer without indorsement (for order instrument)
o Acquire transferor-for-values rights
o May compel indorsement
But to see if HDC, the indorsement is the reckoning point
If gratuitous CANNOT compel indorsement
When prior party reacquires the instrument
o Before maturity: may renegotiate it, EXCEPT:
Payable to order of 3rd person and paid by the drawer
Paid by accommodated party
When instrument is discharged
o But there is NO action on intervening parties between the acquisitions
o
o
o
For transferee who purchases the N.I. and there is no full payment yet:
o Only HDC to extent of what was paid before notice of defect
o No legal obligation to pay the balance
Ex. M P A (paid 12K, balance is 8K). P fails to deliver goods to
M. A is HDC only to extent of 12K
Rights of HDC
May sue on the instrument in his own
name
May receive payment and if payment is
in due course, instrument discharged
Holds instrument free from any defect of
title of prior parties
Holds instrument free from defenses of
prior parties among themselves
Rights of H not in DC
May sue on the instrument in his own
name
May receive payment and if payment is
in due course, instrument discharged
Entitled to instrument, but holds it
subject to defenses, as if it were nonnegotiable
Has all the rights of the HDC from whom
he derives title as to all parties prior to
the holder
As long as he is not a party to
fraud//illegality
LIABILITIES OF PARTIES
Liability of M:
Pay instrument according to its
tenor
Admit existence of P and his then
capacity to indorse
Liability of A:
Pay instrument according to tenor
of acceptance (not tenor of
instrument)
o BUT if there is alteration
and A was not aware of
such, then he pays
according to the original
tenor of the instrument, not
his acceptance
Admit existence of R, genuineness
Liability of R:
Admit existence of P and his then
capacity to indorse
Pay instrument if with due
presentment and due notice of
dishonor
o BUT R may insert in the
instrument express
stipulations limiting his
liability
Liability of irregular I (not a party, but
placed signature in blank before
delivery):
If payable to order of 3rd person,
liable to P and all subsequent
parties
If payable to order of M or R, liable
to all parties subsequent to M or R
o Here, M and P are the same
person
If signed for accommodation of P,
Warranties of indorsers:
If instrument negotiated by delivery
or qualified indorsement (without
recourse):
They are not liable unless there is
breach of any of the 4 warranties
(not subsidiarily liable)
o Qualified indorser to all
subsequent parties who
make title from his
indorsement
o Negotiated by delivery
just to immediate
transferee
Instrument is genuine in all respects
He has good title to it
All prior parties had capacity to contract
Does not apply to persons
negotiating public/corporation
securities other than bills and
notes
No knowledge of any fact that would
impair instrument
1. Primarily liable:
a. M
b. A
c. Certifier of check
When
Exceptions to presentment:
When
o
o
o
When
o
o
o
o
o
NOTICE OF DISHONOR
Ex. M P A B C D
Instrument dishonored in hands of C, and C
gave notice to A
Benefited:
D (subsequent holder)
B (prior party who has recourse against party
given notice)
3 and 4. Another party to instrument who might be compelled to
pay or another in his behalf
And towards a party he has a right to reimbursement
Ex. M P A B C
o Instrument is dishonored in hands of C
o C may give notice to B
o In turn B may give notice to A or P because he has
right to reimbursement from them (but not A to B, for
instance)
Who benefits from notice given by/in behalf of this entitled party:
1. Holder
2. All parties subsequent to party to whom notice is given
o Ex. M P A B C D
C gave notice to P
Benefited:
D (holder)
A and B (parties subsequent to whom notice is
given)
on agents giving notice:
Differentiate:
Need not be authorized, in order to give notice of dishonor
But MUST be authorized to receive notice of dishonor
If dishonored in hands of agent:
May inform the parties liable
Or inform his principal
Within same time period as if he were holder
Then principal has same time period to give notice thereafter
on form of notice:
May be oral or written
Need not be signed
1. Instrument properly identified
Misdescribed instrument no vitiation of notice, unless party
given notice is misled
2. Indicate that it had been dishonored
Insufficient written notice may be supplemented by verbal
communication
Personally/through mail
on parties
If party is dead:
o
Rules
o
Rules
o
o
Rules
o
DISCHARGE OF INSTRUMENT
How discharged:
1. Payment in due course by/in behalf of principal debtor requirements:
a. By principal debtor/in his behalf
b. Made at or after date of maturity
c. Made to holder
d. Made in GF and w/o notice of defect in holders title
2. Payment in due course by accommodated party
3. Intentional cancellation by holder
4. By other acts that discharge K (payment, loss, compensation, condonation,
confusion, novation)
5. When principal debtor becomes holder of instrument in his own right (at/after
maturity)
Medium or currency
Adds place of payment
BILLS OF EXCHANGE
Form and interpretation
Acceptance
Form:
o Must be in writing
o Signed by E
o Express a promise to pay money
o Delivered back to holder by the E/A
Holders right:
o Can compel A to write acceptance on face of bill
o If not can treat bill as DH
o Although it is not required per se to have acceptance written on face of
BOE
If acceptance is on separate instrument:
o Only binds those to whom the acceptance is shown
o And who took instrument for value on faith thereof
If acceptance is through unconditional promise in writing before bill is drawn:
o Deemed as actual acceptance as to third person
o Who took instrument for value on faith thereof
Time limit: 24 hours after presentment, to decide if he will accept
o Acceptance deemed as date of presentment
Constructive acceptance:
o E willfully destroys the bill
o Refused to return within 24 hours after delivery
o Contra: but there is NO implied acceptance, only constructive
o This only applies for presentment for ACCEPTANCE, not for payment
E may still accept bill:
o Even before it was completed
But if the bill was transferred to the holder while incomplete, he is
NOT a HDC
o Even after it was overdue
o After it was DH
Deemed that it was accepted after the first presentment
Kinds of acceptance:
When needed:
o If bill is payable after sight, or presentment needed to fix maturity of
instrument
Ex. Payable 30 days after sight
o Bill expressly stipulates need for presentment
o Bill is payable elsewhere than residence/business place of E
Ex. bill payable to P at Manila, and E lives in QC
o BUT it is in Hs best interest to present it for acceptance:
To bind E as A
Else, only R and Is can be considered debtors
When:
o H, WITHIN REASONABLE TIME, must either:
Present it for acceptance or
Negotiate it within reasonable time
o ELSE, the R and Is are discharged
How:
o By or on behalf of H
o Reasonable hour
o Business day
o Before bill is overdue and within reasonable time
o To E or person authorized to accept in his behalf
o Place is immaterial
o If to 2 or more drawees:
If partners can be to either
Else must be to all (unless 1 authorized to accept for all)
o E is dead:
To personal representative
o E is bankrupt:
Protest
Applies to foreign bill (appearing on its face) that has been DH by nonacceptance or non-payment
o If not protested, R and Is discharged
o If it being foreign does X appear on its face, then it need not be protested
Protest: executed by N.P./competent person certifying that the facts of DH has
taken place
o Formal declaration of DH
o Must be annexed to the bill (or must contain copy of bill)
With seal of N.P. and signed
Specify:
Time and place of presentment
Presentment was made and manner thereof
Cause and reason for protest
Demand made and answer given if any or fact that E/A
could not be found
Procedure:
o After DH, holder takes instrument to NP
No need for witnesses
o NP presents the instrument again to the DHing party
o If refused, NP makes a minute of the DH on the instrument or in notarial
register
And protest
Special types:
Certificate of deposit
o Bank = debtor, depositor = creditor
o Bank promises to pay to depositor, or to him or his order, or to third
person/order
o On demand/fixed date often with interest
o =/= deposit slip
Bond
o Evidence of indebtedness issued by public/private corporation
o Long period of time, and for very large amounts
Registered bond non negotiable; only payable to person appearing
on face of certificate
Coupon bond with interest coupons that may be detached and
negotiated like PNs independent of main instrument
Bank note issued by bank for circulation payable to bearer on demand
Due bill PN, on its face: person acknowledges his indebtedness to another
Mortgage note indicates that the M can be foreclosed if note is not paid
o Chattel M note
o Real Estate M note
Title-retaining note thing remains in Es name, until fully paid
Collateral note M pledges securities to payee to secure payment
Judgment note attached power of attorney enabling payee to take judgment
against maker without formality of trial if note not paid
Check
o
o
o
Types
o
BANK ESTOPPED
o Cant challenge genuineness of signature
o Cant use lack of funds as defense
Can only be certified when payable
Without certification: remedy is for H to go after R
When bank may refuse:
Bank insolvent
Rs deposit insufficient
R insolvent and proper notice received by bank
R dies and proper notice received by bank
R countermanded payment
H refuses to identify himself
Bank believes check is forged
Check is stale/postdated
Also serves as receipt when paid and cancelled by the bank
Delivery of check itself is not payment of debt may be refused by
creditor
Not a valid tender of payment
Only when cashed
Substitute for cash: misappropriation of check into anothers account:
ESTAFA
Postdated checks as if they werent issued until the day indicated
of checks:
Memorandum check:
memorandum/memo/mem written on face of check
R engages to pay H absolutely, without need for presentment + due
notice
Check = evidence of debt, but may also be presented for payment
to bank
Cashiers check:
Drawn by cashier of a bank against the bank itself
Not subject to countermand
Can be treated as PN, with bank as M
Usually treated as good as cash
Managers check:
Drawn by bank manager against bank itself
Substantially as good as the money it represents
Travelers check:
Hs signature must appear twice
First upon issue
Second for counter-signature by him in presence of payee
To provide traveler convenient payment method without hassle of
carrying cash
Sold by banks and express companies
Certified check:
Upon its face: E-bank agrees to pay upon presentation
Stamped: certified
Crossed check:
Specially: two parallel lines on upper left corner name of particular
bank or company written
The E-bank will only pay to that bank/entity
Else, E-bank can be held liable a second time
Generally: no name written, or and co.
Must pay check through bank/banker (cannot be pay to
cash)
Still negotiable, albeit to those with bank account
Payees account only indicates that it must be deposited in
account of payee only
Has cause of action against bank, because it must exercise due
diligence
When checks become stale: 6 months
o No automatic discharge of R only if he suffers any loss from delay
o Banks will normally not pay without consulting R
When indorsement of R not necessary: when paid to cash
Bank need not identify who the bearer is
o But may ensure identity of bearer, if reasonable
Duty of depositor:
o Diligence, as to DEPOSITORY BANK
Exercise diligence by keeping record of all checks issued in record
slip
To check for forgeries
o None, as to collecting bank
No privity
o
Check
Always drawn on bank
Always payable on demand
Drawn against previous deposit
Need not be presented for acceptance
Ordinarily intended for immediate
payment
Death of R = revokes banks authority to
pay
Must be presented for payment within
reasonable time after issue
R = discharged from liability to extent
of loss caused by delay if not
presented within reasonable time
Indorser totally discharged
When certified R and Is totally
discharged
Ordinary BOE
May or may not be
May or may not be
Need not be
Requires presentment for acceptance
Instrument of credit, intended for
circulation
Death of R = does not revoke authority
Must be presented for payment within
reasonable time after last negotiation
R = totally discharged if not presented
within reasonable time
LETTERS OF CREDIT
Definition:
o instrument issued by bank guaranteeing its clients ability to pay for
imported goods and services
o Authorizing a firm/individual to draw drafts on the bank
o Under certain conditions present:
Draft
Required shipping documents
Sometimes used for non-sale settings, to reduce risk of nonperformance
Three distinct contracts:
o 1. Sale between buyer and seller
o 2. Contract of buyer with issuing bank
o 3. Letter of credit proper in which bank promises to pay seller pursuant
to conditions
PERFECTION once the correspondent bank pays seller/person in whose
favor it was opened
o Just a mode of payment, so it doesnt affect perfection of the sale
contract (first K)
Essential parties (at least 3):
o Buyer/applicant procures LOC, obliges self to reimburse issuing bank
o Issuing bank undertakes to pay seller upon receipt of draft +
documents of title
o Seller/beneficiary ships goods and delivers documents to recover
payment from bank
Optional parties (CORRESPONDING BANKS):
o Advising bank conveys to seller existence of credit
No duty to assume the LOC
o Confirming bank lends credence to LOC issued by unknown bank
Direct obligation and liability with regard to it is primary
o Paying bank undertakes to encash drafts drawn by exporter
o Negotiation bank buyer may approach negotiating bank to have draft
discounted instead of approaching issuing bank
Has right of recourse against issuer bank
Relationships:
o Issuing bank and seller technically have no privity
But seller can enforce his right
o NOT a contract pour autrui because issuer must honor drafts
regardless (even if sale contract failed)
o NOT an assignment (buyer/applicant cant draw on LOC)
o NOT a guarantee/surety
o NOT a negotiable instrument (not payable to order/bearer)
STRICT COMPLIANCE NEEDED