1.

Differentiate Order Instrument from Bearer Instrument

a. Indorsement OI needs to be indorsed coupled with delivery,
whereas, BI does not need to mere delivery will suffice.
2. Last requisite of Sec 1, if the instrument is addressed to a drawee,
otherwise indicated therein with reasonable certainty.
a. Example: The president of the Philippines for year 2017
b. Hence, an instrument is negotiable if it conforms with Sec. 1
and is issued for commercial purposes.
3. Sec. 5. Additional Provisions which does not affect negotiability
a. Authorizes sale of collateral securities in case the instrument is
not paid at maturity.
i. Precisely, because it only takes effect after the maturity
of the note wherein generally it is now considered as not
negotiable.
b. Authorized a confession of judgment if the instrument be not
paid at maturity.
i. SC Case: PNB v Manila Oil Refining ruled that it is void
since it is against public policy.
1. Bargains your right to a day in court.
2. Strike down the right to appeal.
3. It enlarges the field of fraud.
ii. Exception when confession of judgment is VALID:
1. Cognovit Actionem
a. Confession if after filing of case.
2. Relicta Verificationem
a. Withdrawal of an answer(pleading) filed
because you are no longer contending with
the adverse party.
c. Waives the benefit of any law intended for the advantage or
protection of the obligor (debtor).
i. This is given for the benefit of the holder of the
instrument.
d. Gives the holder an election to require something to be done in
lieu of payment of money.
 i. This is allowed since it is the holder who has a choice to
choose. It will not render the sum uncertain.
4. Sec. 6
a. Not dated instrument (No date of issuance)
i. Not required in Sec. 1
ii. Presumption: The date is the date it is issued.
b. Does not specify the value given or if any has been given
i. Not a required in Sec. 1, hence, does not matter whether
a consideration is given for it to be negotiable.
c. Does not specify the place where it is drawn or where it is
payable
i. Not required in Sec. 1
d. Bears a seal
i. Aside from the fact that it is not practiced in the country,
it is also not required by Sec. 1
e. Designates a particular kind of current money
i. Not required in Sec. 1 and the law now allows that
transactions in the country need not be in Philippine
Currency.
5. Sec. 10
a. It is not necessary to follow the terms used by the law for as
long as it can be determined or at least similar to what the law
provides.
6. Sec. 52. Holder in Due Course (C-O-F-I)
a. Complete and regular upon its face
i. Nothing in the document raises a doubt as to its
authenticity or genuineness
b. Became a holder before it was overdue and no notice that it
was previously dishonoured
i. If overdue non-negotiable already.
ii. This provision pertains to dishonoured thru presentation
for acceptance or payment
1. If it there was knowledge of it being previously
dishonoured then you are not a Holder in due
course.
c. In good faith and for value
 i. No bad faith on your part and that you acquired the
instrument for a consideration. However, liberality or
generosity cannot be a basis for a holder for value.
d. At the time it was negotiated to him, he had no notice of any
infirmity in the instrument or defect in the title of the person
negotiating it.
i. Infirmity
1. Any alterations or incompleteness on the
instrument.
ii. Defect in title
1. The person negotiating the instrument to you does
not have a right over the instrument.
e. Take Note: What matters is the circumstance upon acceptance
of the instrument, any knowledge of these defects after
acceptance will not render a person not a holder in due course.
7. Sec. 59
a. Prima Facie assumption that a person is a holder in due course.
He who asserts must prove.
b. Except a person who became bound on the instrument prior to
the acquisition of such defective title. Hence, the presumption
does not apply to him.
8. Sec. 58
a. Shelter Principle
i. A holder who derives his title through a holder in due
course may exercise the all the rights of the latter.
Provided, he is not a party to any fraud or illegality of the
instrument.
9. Types of Holders
a. Holder in due course
b. Holder not in due course
c. Holder through a holder in due course
10. Warranty given by a person negotiating the instrument (Sec. 65)
a. Instrument is genuine and in all respects what it purports to be
b. He has good title to it
c. All prior parties had capacity to contract
d. No knowledge of any fact which would impair the validity of the
instrument