DEFINITION OF A NEGOTIABLE INSTRUMENT

It is a written contract for the payment of money which is intended as

a substitute for money and passes from one person to another as
money.
FEATURES OF NEGOTIABLE INSTRUMENTS
Negotiability negotiable instruments can be transferred from one
person to another.

Accumulation of secondary contracts indorsers become secondarily

liable not only to their immediate transferee but also to any holder.
KINDS OF NEGOTIABLE INSTRUMENTS
 1. Promissory Note an unconditional promise made by one
person to another. It only becomes complete when indorsed
by the maker.

Bill of Exchange An unconditional order in writing addressed by one

person to another, signed by the person giving it, requiring the person
whom it is addressed to pay on demand/ at a fixed future time.
KINDS OF PROMISSORY NOTES
Certificate of deposit written acknowledgment of a bank of its
receipt of a certain amount.

Bonds certificate of evidence of a debt.

Debenture a promissory note or a bond backed by the general credit

of a corporation.
KINDS OF BILLS OF EXCHANGE
 Check drawn on bank payable on demand
Time draft payable at a fixed rate
Sight or demand draft payable when the holder presents it for payment
Trade acceptance used in a contract of sale
Drafts used in documentary exchange
Inland Bill drawn and payable within the Philippines
Foreign Bill may not be both drawn and payable within the Philippines
Bankers acceptance
Clean Bill of Exchange a bill which no document is attached when presentment
for payment or acceptance is made
Documentary Bill of exchange
Bills in Set
WHEN BILL OF EXCHANGE IS TREATED AS PROMISSORY NOTE
Instances when a BOE is treated as PM:
1. When the drawee and drawer of the bill of exchange is the
same person;
2. When the drawee is a fictitious person;
3. When the drawee has no capacity to contract; and
4. When the document is so ambiguous.
PARTIES IN A PROMISSORY NOTE
1. Maker person who promises to pay the amount stated in a
promissory note.
2. Payee Person who is supposed to be paid by the maker.
PARTIES IN A BILL OF EXCHANGE
1. Drawer person who draws and signs the instrument, orders
the drawee to pay.
2. Drawee the person who is being ordered to pay, he is not
yet liable until he accepts.
3. Acceptor the drawee who already accepted the bill of
exchange.
4. Payee the one to whom payment should be made by the
acceptor.
OTHER PARTIES
1. Indorsers persons who transfer or negotiate an instrument
by indorsement completed by delivery.
2. Holder
a. Payee or indorsee who is in possession of a bill or
note payable to order.
b. Bearer of a note or bill payable to the bearer.
3. Bearer person in possession of a bill or note which is
payable to bearer.
REQUIREMENTS OF A NEGOTIABLE INSTRUMENT
1. M b i w a s b t m o d;
2. M c a u p o o t p a s c i m;
3. M b p o d, o a a f o d f t;
4. M b p t o o b; a
5. W t i i a t a d, h m b n o o i t w r c.
1. Must be in writing and signed by the maker or drawer;
2. Must contain an unconditional promise or order to pay a sum
certain in money;
3. Must be payable on demand, or at a fixed or determinable future
time;
4. Must be payable to order or bearer; and
5. Where the instrument is addressed to a drawee, he must be
named or otherwise indicated therein with reasonable certainty.
FACTORS THAT AFFECT THE DETERMINATION OF NEGOTIABILITY OF
INSTRUMENTS
 1. The whole of the instrument shall be considered;
2. Only what appears on the face of the instrument shall be
considered.
3. The provisions of the NIL, especially Sec. 1, shall be applied.

Therefore, the negotiability is not determined by looking at a separate

document.