The first issue involved is simple enough: should a special indorsement on

bearer paper control its future negotiation?

Indorsement of instrument payable to bearer 1. - Where an instrument, originally payable
to bearer, is indorsed specially, it may nevertheless be further negotiated by delivery; but
the person indorsing specially is liable as indorser to only such holders as make title
through his indorsement. "
The proposed amendment would change the rule which has uniformly prevailed - that
paper drawn payable to bearer may still be negotiated by delivery notwithstanding it has
been specially indorsed.

It is believed that to a perhaps lesser extent this applies also

to other bearer paper. the above proposed amendment shall remove the conflict that may arise
between section 40 and 342.
The proposed amendment will have the effect of clarifying that the subsequent special
indorsement of an instrument originally drawn to bearer shall not control its future
negotiation. Such modification shall also result to a proportioned relationship between
instrument originally payable to bearer and instrument originally drawn or payable to order
indoresed in blank.
Another proposed amendment would be for sec. 1683 which provides the time a check
must be presented. It is submitted bby the authors that the provision should allow electronic
1 Section 40" Indorsement of instrument payable to bearer. - Where an instrument, payable to bearer, is
indorsed specially, it may nevertheless be further negotiated by delivery; but the person indorsing specially is liable
as indorser to only such holders as make title through his indorsement. "

2 Section 34 provides that a special indorsement specifies the person to whom, or to whose order, the
instrument is to be payable, and the indorsement of such indorsee is necessary to the further negotiation
of the instrument
3 Sec. 186. Within what time a check must be presented.A check must be presented for payment within a
reasonable time after its issue or the drawer will be discharged from liability thereon to the extent of the loss
caused by the delay.
"Submission of negotiable instruments such as bank checks should be done personally by the
holder or by some person authorized to receive payment on his behalf, in a proper place and during
banking hours.

copies or transfers of check that will be sufficient basis for clearing. The rationale considered of
course is that in todays generation, electronic transfers will

be faster and reduce the

inconveniences on the part of the check issuer.

The third issue that the authors would want to address is the proposal to amend
Section 71 concerning the time for presentment of demand instruments:
An effort be made to bring about earlier retirement of all demand paper.
The law would be more readily understood if the reasonable-time-after-issue test
were to apply both to drawers and endorsers.
It is not commercially practicable to await court decision as to what amounts to a
reasonable time, before you may know what your rights are against secondary parties.
It would be commercially desirable, if possible, to state a more definite rule than any
"reasonable time" test.
There should be a legislation fixing definitely the time within which presentment of
interest-bearing demand notes must be made as, for example, one year after date.
Also a proposal to Sec. 24 relating to presumption of consideration.

the authors of this

ppaper are of the view that the consideration should clearly be stated in relation to the
presumption is the cause or vinculum juris with respect to the maker or drawer, the person who
issued the instrument in order to Know eactly whether or not the consideration as to the
maker/drawer who issued and the cause with respect to the payee and subsequent holders pertain
to a single consideration. If in case it pertains to the same cause, it runs in conflict with the
provisions of the Civil Code particularly on Sales and Obligations and Contracts. Under the Civil
Code on Sales and Obligations and Contracts, the cause or consideration is coherent depending
n on the party. The cause for which the vendor or obligee entered into a contract is different for
the vendee or obligor.
4 Sec. 24. Presumption of consideration. Every negotiable instrument is deemed prima facie to have
been issued for a valuable consideration; and every person whose signature appears thereon to have become a
party thereto for value.

The third proposal would be on rights of a purchaser after maturity which should
be given be given against an accommodation signer.

Accommodation parties generally expect to limit their responsibility to cases where

the accommodated party has negotiated the instrument before maturity.
Accommodation parties in signing as maker or co-maker their obligation is greater
than if they signed on the back of the paper as endorser. Accommodation party as indorser is
accorded a type of suretyship position.
It is convenient commercially to provide either of two possible contracts for the
accommodation signer, depending on his bargain, as is done in most states; that is, if he
signs as endorser, to accord him the protection of any signer in that capacity, but, if he
signs as maker or co-maker, to provide that he assumes the obligation of a primary party
and is not discharged, for example, because of an extension of time.
Lastly, a proposed ammendment would be on Section 119 which provides that a
negotiable instrument Is discharged by any other act which will discharge a simple
contract for the payment of money.
The acceptance of chattel mortgage in satisfaction of a note before maturity must,
according to this provision, discharge the note. This is a startling innovation, and doubtless to no
one more surprising than to the framers of the Act.
Another would be on Section 120 a person secondarily liable on the instrument is
discharged: --By the discharge of a prior party.
If the word discharge is to receive its natural interpretation, standing as it does without
any qualification, it must mean any kind of discharge whether by act of the parties or by
operation of law.
One secondarily liable would be discharged therefore, if any prior party should be
discharged by the Statute of Limitations or if any prior indorser should be discharged by the
holders failure to give him due notice of dishonor.