ENRIQUEZ, Darla Claire

Commercial
Written promises or obligations that arise out of commercial transactions from the use of such instruments as promissory notes and bills of exchange
Paper
Negotiable Contractual obligation to pay money
Instrument Intended as a substitute for money
FORMAL REQUIREMENTS OF NEGOTIABILITY
BILL OF EXCHANGE
PROMISORY NOTE E. Where the instrument is addressed
SECTION 1. A. It must be in writing and to a drawee, he must be named or
B. Must contain an unconditional promise or order to pay a C. Must be payable on demand, or at a
signed by the maker or D. Must be payable to order or to bearer otherwise indicated therein with
sum certain in money fixed or determinable future time
drawer reasonable certainty.
SECTION UNCONDITIONAL PROMISE DETERMINABLE FUTURE TIME (8) The instrument is payable to order An order which is not addressed to
(3) An unqualified order or promise to pay is unconditional (4) An instrument is payable at a where it is drawn payable to the order of a any person cannot be a bill
though coupled with: determinable future time, within the specified person or to him or his order. It Bill would be sufficient if the
meaning of this act, which is expressed may be drawn payable to the order of: drawee is indicated therein with
a. An indication of a The fund indicated is not the direct
to be payable: a. A payee who is not a maker, drawer or reasonable certainty though he is
particular fund out source of payment but only the source
a. At a fixed period after date or sight drawee not named (e.g. treasurer of a
of which of payment but only the source of
b. On or before a fixed or determinable b. The drawer or maker certain corp.)
reimbursement is to reimbursement which is an act
future time specified therein c. The drawee To enable the payee or holder to
be made or a subsequent to the payment
c. On or at a fixed period after the d. Two or more payees jointly know upon whom he is to call for
particular account
occurrence of a specified event which is e. One or some of several payees acceptance or payment
to be debited with
certain to happen, though the time of f. The holder of an office for the time The payee must be named with
the amount
happening be uncertain being. reasonable certainty
b. A statement of 1. Mere recital of consideration for
An instrument payable upon Where the instrument is payable to
the transaction instrument/origin of transaction- e.g.
contingency (unforeseen event) is not order, the payee must be named or
which gives rise to I promise to pay to the order of P
negotiable, and the happening of otherwise indicated therein with
the instrument. P300,000 being the price of a car this
the event does not cure the defect. reasonable certainty.
day sold and delivered to me.
2. Terms and conditions considered in
ON DEMAND (9) The instrument is payable to bearer:
another paper- not negotiable
(7) An instrument is payable on a. When it is expressed to be so payable
But an order or Because the amount to be paid is
demand: b. When it is payable to a person named
promise to pay out made to depend upon the adequacy
a. When it is so expressed to be payable therein or bearer
of a particular fund or existence of the fund designated
on demand, or at sight, or on c. When it is payable to the order of a
is not unconditional.
presentation fictitious or non existing person, and such
MONEY
b. In which no time for payment has fact was known to the person making it so
(2)The sum payable is a sum certain, though it has to be payable
been expressed
paid: d. When the name of the payee does not
Where an instrument is issued,
a. With interest 1. Interest at a fixed rate- negotiable accepted, or indorsed when overdue, purport to be the name of any person
2. Interest at increased or reduced it is, as regards the person so issuing, e. When the only or last indorsement is an
rate- increased if not paid at maturity accepting, or indorsing it, payable on indorsement in blank.
or reduced if payment made before demand
maturity, negotiable
3. Accrual/rate of interest not
specified- no date stated from which
interest is to run, it shall be computed
from the date of the instrument. If the
instrument is not dated, from issue
thereof (Sec. 17[b]). If interest not

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specified, legal interest.
4. Interest usurious- negotiable
b. By stated I. The interest of each installment
installments II. Due date of each installment must
be fixed in the instrument
(e.g. I promise to pay P or order the
sum of P1,000 in two installments as
follows: P500 on or before Nov. 1,
2017 and P500, on or before Dec. 1,
2017[the amount and date of
installment must be clearly specified
or equal installments at date])

c. By stated ACCELERATION CLAUSE

installments, with a 1. Acceleration clause- negotiable
provision that, upon 2. Acceleration at option of holder-
default in payment non-negotiable
of any installment
or of interest, the EXTENSION CLAUSE
whole shall become Provides that under certain
due circumstances, the date shall be
further extended.
1. Right given to holder: the length of
extension need not be specified-
negotiable
2. Right given to obligor: the length of
extension must be specified to keep
the instrument negotiable, for the
right to extend without limit, it
cannot be determined with
absolute certainty when the holder
will have the absolute right to be
paid.
d. With exchange, Instruments that are payable in
whether at a fixed foreign currency.
rate or at the 1. Payment in foreign currency-
current rate negotiable, as current rate of
exchange may easily be ascertained
2. Payment with exchanged rate-
applies to instruments drawn in one
country and payable in another
3. Exchange not applicable to inland
or domestic bill- instrument both
drawn and payable at the same
place
o Under RA 8183, every monetary
obligation must be paid in PH
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currency which is the legal
tender. HOWEVER, the parties
may agree that the obligation
shall be settled in any other
currency
e. With cost of 1. Increase in amount due effective
collection or an after maturity- negotiable
attorneys fee, in 2. Uncertainty of sum payable only
case payment shall after maturity- non-negotiable
not be made at EXAMPLE:
maturity a. M promises to pay P or bearer
P100,00 on or before Dec. 4, 2017
with 12% attys.fee and costs of
collection if not paid at maturity
(negotiable)
b. to pay all costs, charges and
expenses including attys. fee incurred
by payee in any legal proceedings for
the collection of the debt (non
negotiable)
(6) The validity and negotiable character of an instrument
are not affected by the fact that:
a. It is not dated Not necessary (Sec. 1 are what is
essential in negotiability)
If there is a date stated, but there is
no such date in the calendar, the
law will deem the nearest date of
the month the date intended.

EXCEPTIONS
1. Where said date is tied to the date
of issue
2. Where interest stipulated for the
purpose of determining when the
interest is to run (Sec. 17[c])
3. In the case of promissory note and
bill of exchange, the date of the last
negotiation thereof, for the purpose
of determining whether a party
acted within a reasonable time in
making presentment for payment.
b. Does not specify Not necessary to state that value has
the value given, or been received for the instrument
that any value had because consideration is presumed.
been given therefor
c. Does not specify An instrument is presumed
the place where it is to have been made where it is
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ENRIQUEZ, Darla Claire
drawn or the place dated.
where it is payable A note that does not specify
the place of payment is presumed
to be payable at the place of the
residence of the maker.
d. Bears a seal No effect as to its negotiability

e. Designates a The law does not require that

particular kind of payment be made in legal tender
current money in
which payment is to
be made.
NOTES Maker: person issuing a Must contain an unconditional promise or order
promissory note
Drawer: issuing bill of exchange
Must be in writing or tangible Money is the one standard of value in actual business.
form: to be negotiated or passed Money always measures rise and fall, and remains the
from hand to hand same.
- Not only that which has Acquire a uniform standard of value enabling them to
been written on paper pass freely in lieu of money in the business world
and with a pen or pencil Includes all legal tender.
but also that which is in Legal Tender is that sort of money in which a debt, or other
print or has been typed obligation calling for money, may be lawfully paid, if the
or any other substitute contract does not specify the medium of payment.
for paper as long as it is
movable in nature
- There is no such thing as
oral negotiable
instrument. An oral To assure clarity and certainty in determining the value of
promise can make it the instrument.
difficult to determine
liability and create the The sum certain requirements is met if:
danger of fraud. 1. If the holder can determine from the instrument itself
- Negotiability or non- the amount he is entitled to receive at maturity
negotiability is Must be paid plainly on the face of th instrument
determined from the or at least, may be ascertained upon its face by
writing that is from the computation, independent of any extrinsic
face of the instrument evidence
itself The value of which is not ascertained but depends
The instrument must be signed upon extrinsic evidence, it would not be
by the maker or drawer. negotiable
- It will be valid and 2. If the instrument calls for an act other than the
binding as long as it payment of money, it is not negotiable because a
appears that a person negotiable instrument is intended as a substitute for
intended to make the money
instrument his own.
His signature is prima
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facie evidence of his
intention to be bound
as either maker or
drawer
- Where the genuiness
of the signature of the
maker or drawer is
denied, the signature
is nevertheless
presumed valid. The
maker or drawer must
provide some
evidence of the
signatures invalidity

Non An instrument which does not meet the requirements laid down to qualify an instrument as a negotiable one, or an instrument which in its exception was negotiable but has lost its quality of negotiability.
Negotiable Covered by the general provisions of the Civil Code, not by the Negotiable Instruments Law
Instrument A simple contract in writing and is evidenced of such intangible rights as may have been created by the assent of the parties.
Money Coined or stamped by public authority and has its value fixed by public authority Money not governed by Act Paper money
Promissory Promise to pay a sum of money
note May be a demand instrument (Sec. 7) but it is normally a time instrument (Sec. 4)
Bill of An order made by one person to another to pay money to a third person.
exchange The check is the most common form of order paper