PostsaboutNegotiableInstrumentsLawonPhilippineLaw

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1.NegotiableInstrumentswrittencontractsforthepaymentofmoneybyitsform,intendedasa
substituteformoneyandintendedtopassfromhandtohand,togivetheholderinduecoursetherighttohold
thesameandcollectthesumdue.

2.CharacteristicsofNegotiableInstruments:

a.negotiabilityrightoftransfereetoholdtheinstrumentandcollectthesumdue

b.accumulationofsecondarycontractsinstrumentisnegotiatedfrompersontoperson

3.DifferencebetweenNegotiableInstrumentsfromNonNegotiableInstruments:

NegotiableInstruments NonnegotiableInstruments

ContainsalltherequisitesofSec.1ofthe doesnotcontainalltherequisitesofSec.1
NIL oftheNIL

Transferredbynegotiation transferredbyassignment

Holderinduecoursemayhavebetterrights transfereeacquiresrightsonlyofhis
thantransferor transferor

Priorpartieswarrantpayment priorpartiesmerelywarrantlegalityoftitle

Transfereehasrightofrecourseagainst
transfereehasnorightofrecourse
intermediateparties

4.DifferencebetweenNegotiableInstrumentsandNegotiableDocumentsofTitle

NegotiableInstruments NegotiableDocumentsofTitle

HaverequisitesofSec.1oftheNIL doesnotcontainrequisitesofSec.1ofNIL

Haverightofrecourseagainstintermediate
nosecondaryliabilityofintermediateparties
partieswhoaresecondarilyliable

Holderinduecoursemayhaverightsbetter transfereemerelystepsintotheshoesofthe
thantransferor transferor

Subjectismoney subjectisgoods

instrumentismerelyevidenceoftitlethingof
 Instrumentitselfispropertyofvalue valuearethegoodsmentionedinthedocument

5.PromissoryNoteunconditionalpromisetopayinwritingmadebyonepersontoanther,signedbythe
maker,engagingtopayondemandorafixeddeterminablefuturetimeasumcertaininmoneytoorderor
bearer.Whenthenoteisdrawntomakersownorder,itisnotcompleteuntilindorsebyhim.(Sec.184NIL)

Parties:

1.maker
2.payee

6.BillofExchangeunconditionalorderinwritingaddressedbyonepersontoanother,signedbythe
persongivingit,requiringthepersontowhomitisaddressedtopayondemandoratafixedordeterminable
futuretimeasumcertaininmoneytoorderortobearer.(Sec.126NIL)

Parties:

1.drawer
2.payee
3.drawee/acceptor

7.Checkbillofexchangedrawnonabankandpayableondemand.(Sec.185NIL)

8.DifferencebetweenPromissoryNoteandBillofExchange

PromissoryNote BillofExchange

Unconditionalpromise unconditionalorder

Involves2parties involves3parties

Makerprimarilyliable draweronlysecondarilyliable

generally2presentmentsforacceptanceand
only1presentmentforpayment
forpayment

9.DistinctionsbetweenaCheckandBillofExchange

CHECK BOE

alwaysdrawnuponabankorbanker mayormaynotbedrawnagainstabank

maybepayableondemandoratafixed
alwayspayableondemand
ordeterminablefuturetime

notnecessarythatitbepresentedfor necessarythatitbepresentedfor
 acceptance acceptance

drawnonadeposit notdrawnonadeposit

thedeathofadrawerofacheck,with
thedeathofthedraweroftheordinarybill
knowledgebythebanks,revokesthe
ofexchangedoesnot
authorityofthebankerpay

mustbepresentedforpaymentwithina maybepresentedforpaymentwithina
reasonabletimeafteritsissue(6months) reasonabletimeafteritslastnegotiation.

10.DistinctionsbetweenaPromissoryNoteandCheck

PN CHECK

therearetwo(2)parties,themakerand therearethree(3)parties,thedrawer,the
thepayee draweebankandthepayee

maybedrawnagainstanyperson,not
alwaysdrawnagainstabank
necessarilyabank

maybepayableondemandoratafixed
alwayspayableondemand
ordeterminablefuturetime

apromisetopay anordertopay

11.OtherFormsofNegotiableInstruments:

a.certificatesofdeposits

b.tradeacceptances

c.bondsinthenatureofpromissorynotes

d.draftswhicharebillsofexchangedrawnby1banktoanother

e.lettersofcredit

12.TrustReceiptasecuritytransactionintendedtoaidinthefinancingofimportersandretailerswhodo
nothavesufficientfundstofinancetheirtransactionandacquirecreditexcepttouseascollateralthe
merchandiseimported

13.RequisitesofaNegotiableNote(PN):(SUDO)

Itmust:

a.beinwritingsignedbythedrawer
b.containsanunconditionalpromiseorordertopayasumcertaininmoney

c.bepayableondemandoratafixeddeterminablefuturetime

d.bepayabletoorderortobearer(Sec.1NIL)

14.RequisitesofaNegotiableBill(BOE):(SUDOC)

Itmust:

1.beinwritingsignedbythedrawer
2.containsanunconditionalpromiseorordertopayasumcertaininmoney
3.bepayableondemandoratafixeddeterminablefuturetime
4.bepayabletoorderortobearer
5.thedraweemustbenamedorotherwiseindicatedwithreasonablecertainty(Sec.1NIL)

NotesonSection1:
Inordertobenegotiable,theremustbeawritingofsomekind,elsetherewouldbenothingtobe
negotiatedorpassedfromhandtohand.Thewritingmaybeinink,printorpencil.Itmaybeuponparchment,
cloth,leatheroranyothersubstituteofpaper.

Itmustbesignedbythemakerordrawer.Itmayconsistofmereinitialsorevennumbers,butthe
holdermustprovethatwhatiswrittenisintendedasasignatureofthepersonsoughttobecharged.

TheBillmustcontainanorder,somethingmorethanthemereaskingofafavor.

Sumpayablemustbeinmoneyonly.Itcannotbemadepayableingoods,wares,ormerchandiseorin
property.

AdraweesnamemaybefilledinunderSection14oftheNIL

15.Determinationofnegotiability

1.bytheprovisionsoftheNegotiableInstrumentLaw,particularlySection1thereof
2.byconsideringthewholeinstrument
3.bywhatappearsonthefaceoftheinstrumentandnotelsewhere

*Indeterminingistheinstrumentisnegotiable,onlytheinstrumentitselfandnoother,mustbeexaminedand
comparedwiththerequirementsstatedinSec.1.Ifitappearsontheinstrumentthatitlacksoneofthe
requirements,itisnotnegotiableandtheprovisionsoftheNILdonotgoverntheinstrument.Therequirement
lackingcannotbesuppliedbyusingaseparateinstrumentinwhichthatrequirementwhichislackingappears.

16.Sumiscertainevenifitistobepaidwith:

a.interest

b.ininstallments
c.ininstallmentswithaccelerationclause

d.withexchange

e.costsofcollectionorattorneysfees(Sec.2NIL)

17.GeneralRule:Thepromiseorordershouldnotdependonacontingentevent.Ifitisconditional,itisnon
negotiable.

Exceptions:

a.indicationofparticularfundfromwhichtheacceptordisburseshimselfafterpayment

b.statementofthetransactionwhichgivesrisetotheinstrument.(Sec.3NIL)

Butanorderorpromisetopayoutofaparticularfundisnotunconditional

NotesonSection3
Theparticularfundindicatedshouldnotbethedirectsourceofpayment,elseitbecomesunconditional
andthereforenonnegotiable.Thefundshouldonlybethesourceofreimbursement.

Astatementofthetransactiondoesnotdestroythenegotiabilityoftheinstrument.Exception:Wherethe
promisetopayororderismadesubjecttothetermsandconditionsofthetransactionstated.

18.Instrumentispayableuponadeterminablefuturetimeif:

a.thereisafixedperiodaftersight/date

b.onorbeforeaspecifieddate/fixeddeterminablefuturetime

c.onoratafixeddateaftertheoccurrenceofaneventcertaintohappenthoughtheexactdateisnot
certain(Sec.4NIL)

NotesonSection4
Iftheinstrumentispayableuponacontingency,thehappeningoftheeventdoesnotcurethedefect
(stillnonnegotiable)

19.GeneralRule:Ifsomeotheractisrequiredotherthanthepaymentofmoney,itisnonnegotiable.

Exceptions:

a.saleofcollateralsecurities

b.confessionofjudgment

c.waivesbenefitoflaw

d.givesoptiontotheholdertorequiresomethingtobedoneinlieuofmoney(Sec.5NIL)
NotesofSection5
Limitationontheprovision,itcannotrequiresomethingillegal.

Therearetwokindsofjudgementsbyconfession:a)cognovitactionemb)relictaverificatione

ConfessionsofjudgementinthePhilippinesarevoidasagainstpublicpolicy.

Ifthechoicelieswiththedebtor,theinstrumentisrenderednonnegotiable.

20.Thevalidityandnegotiabilityofaninstrumentisnotaffectedbythefactthat:

1.itisnotdated
2.doesnotspecifythevaluegivenorthatanyhadbeengiven
3.doesnotspecifytheplacewhereitisdrawnorpayable
4.bearsaseal
5.designatesthekindofcurrentmoneyinwhichpaymentistobemade(Sec.6NIL)

21.Instrumentispayableupondemandif:

a.itisexpressedtobesopayableonsightoruponpresentation

b.noperiodofpaymentisstipulated

c.issued,accepted,orendorsedaftermaturity(Sec.7NIL)

Whereaninstrumentisissued,acceptedorindorsedwhenoverdue,itis,asregardstothepersonsoissuing,
accepting,orindorsingit,payableondemand.

NotesonSection7
ifthetimeforpaymentisleftblank(asopposedtobeingomitted),itmayproperlybeconsideredasan
incompleteinstrumentandfallundertheprovisionsofSec.14,15,or16dependingonhowtheinstrumentis
delivered.

22.Instrumentispayabletoorder:

whereitisdrawnpayabletotheorderofaspecifiedpersonor

toaspecifiedpersonorhisorder

Itmaybedrawnpayabletotheorderof:

1.apayeewhoisnotamaker,drawer,ordrawee
2.thedrawerormaker
3.thedrawee
4.twoormorepayeesjointly
5.oneorsomeofseveralpayees
6.theholderofanofficeforthetimebeing(Sec.8NIL)
NotesonSection8
Thepayeemustbenamedorotherwiseindicatedthereinwithreasonablecertainty.

Ifthereisnopayee,therewouldbenoonetoindorsetheinstrumentpayabletoorder.Therefore
uselesstobeconsiderednegotiable.

Jointpayeesinindicatedbytheconjunctionand.Tonegotiate,allmustindorse.

Beingseveralpayeesisindicatedbytheconjunctionor.

23.Instrumentispayabletobearer:

a.whenitisexpressedtobesopayable

b.whenpayabletothepersonnamedorbearer

c.payabletoorderoffictitiousornonexistentpersonandthisfactwasknowntodrawer

d.nameofpayeenotnameofanyperson

e.onlyandlastindorsementisanindorsementinblank(Sec.9NIL)

NotesonSection9
fictitiouspersonisnotlimitedtopersonshavingnolegalexistence.Anexistingpersonmaybe
consideredfictitiousdependingontheintentionofthemakerorthedrawer.

fictitiouspersonmeansapersonwhohasnorighttotheinstrumentbecausethemakerordrawerofit
sointended.Hewasnotintendedtobethepayee.

wheretheinstrumentisdrawn,madeorpreparedbyanagent,theknowledgeorintentofthesignerof
theinstrumentiscontrolling.

Wheretheagenthasnoauthoritytoexecutetheinstrument,theintentoftheprincipaliscontrolling

24.Thedatemaybeinsertedinaninstrumentwhen:

1.aninstrumentexpressedtobepayableatafixedperiodafterdateisissuedundated
2.whereacceptanceofaninstrumentpayableatafixedperiodaftersightisundated(Sec.13NIL)

Effects:

anyholdermayinsertthetruedateofissuanceoracceptance

theinsertionofawrongdatedoesnotavoidtheinstrumentinthehandsofasubsequentholderindue
course

astotheholderinduecourse,thedateinserted(evenifitbethewrongdate)isregardedasthetrue
date.
25.SubsequentHolderinDueCoursenotaffectedbythefollowingdeficiencies:

a.incompletebutdeliveredinstrument(Sec.14NIL)

b.completebutundelivered(Sec.16NIL)

c.completeanddeliveredissuedwithoutconsiderationoraconsiderationconsistingofapromisewhichwas
notfulfilled(Sec28NIL)

26.HolderinDueCourseAffectedbyAbnormality/Deficiency:
a.incompleteandundeliveredinstrument(Sec.15NIL)

b.maker/drawerssignatureforged(Sec.23NIL)

27.IncompletebutDeliveredInstrument:
1.Whereaninstrumentiswantinginanymaterialparticular:

a.Holderhasprimafacieauthoritytofilluptheblankstherein.

b.Itmustbefilledupstrictlyinaccordancewiththeauthoritygivenandwithinareasonabletime.

c.Ifnegotiatedtoaholderinduecourse,itisvalidandeffectualforallpurposeasthoughitwasfilledup
strictlyinaccordancewiththeauthoritygivenandwithinreasonabletime.(Sec.14NIL)

2.Whereonlyasignatureonablankpaperwasdelivered:

1.Itwasdeliveredbythepersonmakingitinorderthatitmaybeconvertedintoanegotiableinstrument
2.Theholderhasprimafacieauthoritytofillitupassuchforanyamount.(Sec.14NIL)

NotesonSection14
iftheinstrumentiswantinginmaterialparticular,merepossessionoftheinstrumentisenoughto
presumeprimafacieauthoritytofillitup.

materialparticularmaybeanomissionwhichwillrendertheinstrumentnonnegotiable(e.g.nameof
payee),anomissionwhichwillnotrendertheinstrumentnonnegotiable(e.g.date)

inthecaseofthesignatureinblank,deliverywithintenttoconvertitintoanegotiableinstrumentis
required.Merepossessionisnotenough.

28.IncompleteandUndeliveredInstrument:

GeneralRule:Whereanincompleteinstrumenthasnotbeendelivered,itwillnot,ifcompletedandnegotiated
withoutauthority,beavalidcontractinthehandsofanyholderagainstanypersonwhosignedbeforedelivery.
(Sec.15NIL)

NotesonSection15
itisarealdefense.Itcanbeinterposedagainstaholderinduecourse.
deliveryisnotconclusivelypresumedwheretheinstrumentisincomplete

defenseofthemakeristoprovenondeliveryoftheincompleteinstrument.

29.CompletebutUndelivered:

GeneralRule:Everycontractonanegotiableinstrumentisincompleteandrevocableuntildeliveryforthe
purposeofgivingeffectthereto.

a.Ifbetweenimmediatepartiesandremotepartiesnotholderinduecourse,tobeeffectualtheremustbe
authorizeddeliverybythepartymaking,drawing,acceptingorindorsing.Deliverymaybeshowntobe
conditionalorforaspecialpurposeonly

b.Iftheholderisaholderinduecourse,allpriordeliveriesconclusivelypresumedvalid

c.Ifinstrumentnotinhandsofdrawer/maker,validandintentionaldeliveryispresumeduntilthecontraryis
proven(Sec.16NIL)

Rulesondeliveryofnegotiableinstruments:
1)deliveryisessentialtothevalidityofanynegotiableinstrument

2)asbetweenimmediatepartiesorthoseislikecases,deliverymustbewithintentionofpassingtitle

3)aninstrumentsignedbutnotcompletedbythedrawerormakerandretainedbyhimisinvalidastohimfor
wantofdeliveryeveninthehandsofaholderinduecourse

4)butthereisprimafaciepresumptionofdeliveryofaninstrumentsignedbutnotcompletedbythedraweror
makerandretainedbyhimifitisinthehandsofaholderinduecourse.Thismayberebuttedbyproofofnon
delivery.

5)aninstrumententrustedtoanotherwhowrongfullycompletesitandnegotiatesittoaholderinduecourse,
deliverytotheagentorcustodianissufficientdeliverytobindthemakerordrawer.

6)Ifaninstrumentiscompletedandisfoundinthepossessionofanother,thereisprimafacieevidenceof
deliveryandifitbeaholderinduecourse,thereisconclusivepresumptionofdelivery.

7)deliverymaybeconditionalorforaspecialpurposebutsuchdonotaffecttherightsofaholderindue
course.

30.Generalrule:apersonwhosesignaturedoesnotappearontheinstrumentinnotliable.
Exception:

1.onewhosignsinatradeorassumedname(Sec.18)
2.adulyauthorizedagent(Sec.19)
3.aforger(Sec.23)
31.Generalrule:anagentisnotliableontheinstrumentifheweredulyauthorizedtosignfororonbehalfofa
principal.

Requisites:

1.hemustbedulyauthorized
2.hemustaddwordstohissignatureindicatingthathesignsasanagent
3.hemustdisclosehisprincipal(Sec.20NIL)

NotesonSection20
ifanagentdoesnotdisclosehisprincipal,theagentispersonallyliableontheinstrument.

32.PerProcurationoperatesasnoticethattheagenthasalimitedauthoritytosign.
Effects:

theprincipalinonlyboundiftheagentactedwithinthelimitsoftheauthoritygiven

thepersonwhotakestheinstrumentisboundtoinquireintotheextentandnatureoftheauthority
given.(Sec.21NIL)

33.Generalrule:Infantsandcorporationsincurnoliabilitybytheirindorsementorassignmentofan
instrument.(Sec.22NIL)

Effects:

noliabilityattachedtotheinfantorthecorporation

theinstrumentisstillvalidandtheindorseeacquirestitle

34.Generalrule:asignaturewhichisforgedormadewithoutauthorityiswhollyinoperative.

Effects:

1.norighttoretain
2.norighttogiveadischarge
3.norighttoenforcepaymentcanbeacquired.(Sec.23NIL)

Exception:

thepartyagainstwhomitissoughttobeenforcedisprecludedfromsettinguptheforgeryorwantof
authority.

NotesonSection23
Section23appliesonlytoforgedsignaturesorsignaturesmadewithoutauthority

Alterationssuchastoamountsorlikefallundersection124

Formsofforgeryarea)fraudinfactumb)duressamountingtofraudc)fraudulentimpersonation
Onlythesignatureforgedormadewithoutauthorityisinoperative,theinstrumentorothersignatures
whicharegenuineareaffected

Theinstrumentcanbeenforcedbyholderstowhosetitletheforgedsignatureisnotnecessary

Personswhoareprecludedfromsettinguptheforgeryarea)thosewhowarrantoradmitthe
genuinenessofthesignatureb)thosewhoareestopped.

Personswhoareprecludedbywarrantingarea)indorsersb)personsnegotiatingbydeliveryc)
acceptors.

draweebankisconclusivelypresumedtoknowthesignatureofitsdrawer

ifendorserssignatureisforged,losswillbebornebytheforgerandpartiessubsequentthereto

draweebankisnotconclusivelypresumedtoknowthesignatureoftheindorser.Theresponsibilityfalls
onthebankwhichlastguaranteedtheindorsementandnotthedraweebank.

Wherethepayeessignatureisforged,paymentsmadebythedraweebanktocollectingbankis
ineffective.Nodebtor/creditorrelationshipiscreated.Anagencytocollectiscreatedbetweentheperson
depositingandthecollectingbank.Draweebankmayrecoverfromcollectingbankwhomayinturnrecover
fromthepersondepositing.

RulesonliabilitiesofpartiesonaforgedinstrumentInaPN
apartywhoseindorsementisforgedonanotepayabletoorderandallpartiespriortohimincludingthe
makercannotbeheldliablebyanyholder

apartywhoseindorsementisforgedonanoteoriginallypayabletobearerandallpartiespriortohim
includingthemakermaybeheldliablebyaholderinduecourseprovidedthatitwasmechanicallycomplete
beforetheforgery

amakerwhosesignaturewasforgedcannotbeheldliablebyanyholder

InaBOE
thedrawersaccountcannotbechargedbythedraweewherethedraweepaid

thedrawerhasnorighttorecoverfromthecollectingbank

thedraweebankcanrecoverfromthecollectingbank

thepayeecanrecoverfromthedrawer

thepayeecanrecoverfromtherecipientofthepayment,suchasthecollectingbank

thepayeecannotcollectfromthedraweebank

thecollectingbankbearsthelossbutcanrecoverfromthepersontowhomitpaid
ifpayabletobearer,therulesarethesameasinPN.

ifthedraweehasacceptedthebill,thedraweebearsthelossandhisremedyistogoaftertheforger

ifthedraweehasnotacceptedthebillbuthaspaidit,thedraweecannotrecoverfromthedrawerorthe
recipientoftheproceeds,absenceanyactofnegligenceontheirpart.

35.Everynegotiableinstrumentisdeemedprimafacietohavebeenissuedforavaluableconsideration.(Sec.
24NIL)

Effects:

everypersonwhosesignatureappearsthereonisapartyforvalue

presumptionisdisputable

36.Wherevaluehasatanytimebeengivenfortheinstrument,theholderisdeemedaholderforvaluein
respecttoallpartieswhobecomesuchpriortothattime.(Sec.26NIL)

37.Effectofwantofconsideration:

1.Absenceorfailureofconsiderationmaybesetupagainstaholdernotaholderinduecourse(personal
defense)
2.Partialfailureofconsiderationisadefenseprotanto(Sec28NIL)

NotesonSection28
absenceofconsiderationiswherenoconsiderationwasintendedtopass.

failureofconsiderationimpliesthatconsiderationwasintendedbythatitfailedtopass

thedefenseofwantofconsiderationisineffectiveagainstaholderinduecourse

adraweewhoacceptsthebillcannotallegewantofconsiderationagainstthedrawer

38.Anaccommodationpartyisonewhosignstheinstrumentasmaker,drawer,acceptor,orindorserwithout
receivingvaluethereforandforthepurposeoflendinghisnametosomeotherperson.

Effects:

anaccommodationpartyisliabletotheholderforvaluenotwithstandingthatsuchholderknewthatof
theaccommodation.(Sec.28NIL)

NotesonSection28
theaccommodatedpartycannotrecoverfromtheaccommodationparty

wantofconsiderationcannotbeinterposedbytheaccommodationparty
anaccommodationmakermayseekreimbursementfromacomakerevenintheabsenceofany
provisionintheNILthedeficiencyissuppliedbytheNewCivilCode.

hemaydothisevenwithoutfirstproceedingagainstthedebtorprovided:

a.hepaidbyvirtueofjudicialdemand

b.principaldebtorisinsolvent

39.Aninstrumentisnegotiatedwhen:

1.itistransferredfromonepersontoanother
2.thatthetransfermustbeinamannerastoconstitutethetransfereeaholder

Forabearerinstrumentbydelivery

Forpayabletoorderbyindorsementanddelivery(Sec.30NIL)

40.Indorsementtobemustbe:

1.written
2.ontheinstrumentitselforuponapieceofpaperattached(Sec.31NIL)

NotesonSection31
thepaperattachedwiththeindorsementisanallonge

anallongemustbeattachedsothatitbecomesapartoftheinstrument,itcannotbesimplypinnedor
clippedtoit.

41.KindsofIndorsements:42.Effectsofindorsinganinstrumentoriginallypayabletobearer:
itmayfurtherbenegotiatedbydelivery

thepersonindorsingisliableasindorsertosuchpersonsastomaketitlethroughhisindorsement(Sec.
40NIL)

NotesonSection40
Section40appliesonlytoinstrumentsoriginallypayabletobearer

Itcannotapplywheretheinstrumentispayabletobearerbecausetheonlyorlastindorsementisin
blank.

43.Aholdermaystrikeoutanyindorsementwhichisnotnecessarytohistitle.

Effects:

Anindorserwhoseindorsementisstruckoutisdischarged

Allindorserssubsequenttosuchindorserwhohasbeendischargedarelikewiserelieved.(Sec.48NIL)
44.Effectsofatransferwithoutendorsement:
thetransfereeacquiressuchtitleasthetransferorhad

thetransfereeacquirestherighttohavetheindorsementofthetransferor

negotiationtakeseffectasofthetimetheindorsementisactuallymade(Sec.49NIL)

45.Rightsofaholder:
aholdermaysueinhisownname

aholdermayreceivepayment.

Effects:

ifinduecourseitdischargestheinstrument(Sec.51NIL)

46.RequisitesforaHolderinDueCourse(HDC):
a.receivestheinstrumentcompleteandregularonitsface

b.becameaholderbeforeitwasoverdueandhadnonoticethatithadbeenpreviouslydishonoredifsuch
wasthefact

c.takestheinstrumentforvalueandingoodfaith

d.attimehetooktheinstrument,nonoticeofinfirmityininstrumentordefectinthetitleoftheperson
negotiatingit(Sec.52NIL)

NotesonSection52
everyholderispresumedtobeaHDC(Sec.59)

thepersonwhoquestionssuchhastheburdenofprooftoproveotherwise

ifoneoftherequisitesarelacking,theholderisnotHDC

aninstrumentisconsideredcompleteandregularonitsfaceifa)theomissionisimmaterialb)the
alterationontheinstrumentwasnotapparentonitsface

aninstrumentisoverdueafterthedateofmaturity.

onthedateofmaturity,theinstrumentisnotoverdueandtheholderisaHDC

acquisitionofthetransfereeorindorseemustbeingoodfaith

goodfaithmeanslackofknowledgeornoticeofdefectorinfirmity

47.AholderisnotaHDCwhereaninstrumentpayableondemandisnegotiatedatanunreasonablelengthof
timeafteritsissue(Sec.53NIL)
48.RightsofaHDC:
holdstheinstrumentfreefromanydefectoftitleofpriorparties

freefromdefensesavailabletopriorpartiesamongthemselves(personal/equitabledefenses)

mayenforcepaymentoftheinstrumentforthefullamountagainstallpartiesliable(Sec.57NIL)

NotesonSection57
Personalorequitabledefensesarethosewhichgrowoutoftheagreementorconductofaparticular
personinregardtotheinstrumentwhichrendersitinequitableforhimthroughlegaltitletoenforceit.Canbe
setupagainstholdersnotHDC

Legalorrealdefensesarethosewhichattachtotheinstrumentitselfandcanbesetupagainstthe
wholeworld,includingaHDC.

PersonalDefenses RealDefenses

1.absenceorfailureofconsideration Alteration

2.wantofdeliveryofcompleteinstrument Wantofdeliveryofincompleteinstrument

3.insertionofwrongdatewherepayableat
afixedperiodafterdateandissued
Duressamountingtoforgery
undatedoratafixedperiodaftersightand
acceptanceisundated

4.fillinguptheblankscontrarytoauthority
Fraudinfactumorinessecontractus
givenornotwithinreasonabletime

5.fraudininducement Minority

6.acquisitionoftheinstrumentbyforce,
Marriageincaseofawife
duressorfear

7.acquisitionoftheinstrumentbyunlawful Insanitywheretheinsanepersonhasa
means guardianappointedbythecourt

Ultraviresactsofacorporationwhereits
8.acquisitionoftheinstrumentforanillegal
charterorbystatue,itisprohibitedfrom
consideration
issuingcommercialpaper

9.negotiationinbreachoffaith Wantofauthorityofagent

10.negotiationundercircumstances Executionofinstrumentbetweenpublic
amountingtofraud enemies

1.Mistake
Illegalityofcontractmadebystatue
 12.intoxication Forgery

13.ultraviresactsofcorporations

14.wantofauthorityoftheagentwherehe
hasapparentauthority

15.illegalityofcontractwhereformor
considerationisillegal

16.insanitywherethereisnonoticeof
insanity

49.AinstrumentnotinthehandsofaHDCissubjecttothesamedefensesasifitwerenonnegotiable.

Exception:

aholderwhoderiveshistitlethroughaHDCandisnotapartytoanyfraudorillegalityaffectingthe
instrument,hasalltherightsofsuchHDCinrespecttoallpartiesprior.(Sec.58NIL)

RightsofaholdernotaHDC
maysueinhisownname

mayreceivepaymentandifitisinduecourse,theinstrumentisdischarged

holdstheinstrumentsubjecttothesamedefensesasifitwerenonnegotiable

ifhederiveshistitlethroughaHDCandisnotapartytoanyfraudorillegalitythereto,hasalltherights
ofsuchHDC

50.Generalrule:everyholderisdeemedprimafacietobeaholderinduecourse.

Exception:

whereitisshownthatthetitleofanypersonwhohasnegotiatedtheinstrumentisdefective,theburden
isontheholdertoprovethatheisaHDCorthatapersonunderwhomheclaimsisaHDC(Sec.59NIL)

51.Amakerisprimarilyliable:

Effectsofmakingtheinstrument,themaker:

a.engagestopayaccordingtotenorofinstrument

b.admitsexistenceofpayeeandhiscapacitytoindorse(Sec.60NIL)

NotesonSection60
amakersliabilityisprimarilyandunconditional
onewhohassignedassuchispresumedtohaveactedwithcareandtohavesignedwithfull
knowledgeofitscontents,unlessfraudisproved

thepayeesinterestisonlytoseetoitthatthenoteispaidaccordingtoitsterms

whentwoormoremakerssignjointly,eachisindividuallyliableforthefullamountevenifonedidnot
receivethevaluegiven

themakerisprecludedfromsettingupthedefenseofa)thepayeeisfictional,b)thatthepayeewas
insane,aminororacorporationactingultravires

52.Adrawerissecondarilyliable

Effectsofdrawingtheinstrument,thedrawer:

1.admitstheexistenceofthepayee,
2.thecapacityofsuchpayeetoindorse
3.engagesthatonduepresentment,theinstrumentwillbeacceptedorpaidorbothaccordingtoitstenor.

Iftheinstrumentisdishonored,andthenecessaryproceedingsondishonordulytaken

1.thedrawerwillpaytheamountthereoftotheholder
2.willpaytoanysubsequentindorserwhomaybecompelledtopayit.(Sec.61NIL)

NotesonSection61
adrawermayinsertanexpressstipulationtonegativeorlimithisliability

53.Anacceptorisprimarilyliable

Byacceptingtheinstrument,anacceptor:

engagesthathewillpayaccordingtothetenorofhisacceptance

admitstheexistenceofthedrawer,thegenuinenessofhissignatureandhiscapacityandauthorityto
drawtheinstrument

theexistenceofthepayeeandhisthencapacityindorse

54.IrregularIndorserapersonnototherwiseapartytoaninstrumentplaceshissignatureinblankbefore
deliveryisliableasanindorserinthefollowingmanner:

1.ifpayabletoorderofathirdpersonliabletothepayeeandtoallsubsequentparties
2.ifpayabletoorderofthemakerordrawerliabletoallpartiessubsequenttothemakerordrawer
3.ifpayabletobearerliabletoallpartiessubsequenttothemakerordrawer
4.ifsignsforanaccommodationpartyliabletoallpartiessubsequenttothepayee(Sec.64NIL)

55.Warrantieswherenegotiatingbydeliveryorqualifiedendorsement:
1.theinstrumentisgenuineandinallrespectwhatitpurportstobe
2.theindorserhasgoodtitletoit
3.allpriorpartieshadthecapacitytocontract
4.indorserhasnoknowledgeofanyfactthatwouldimpairthevalidityorthevalueoftheinstrument.

Limitationsofwarranties:
ifbydeliveryextendsonlytoimmediatetransferee

warrantyofcapacitytocontractdoesnotapplytopersonsnegotiatingpublicorcorporatesecurities(Sec.65
NIL)

NotesonSection65
aqualifiedindorserisonewhoindorseswithoutrecourseorsansrecourse

recourseresorttoapersonsecondarilyliableafterdefaultofpersonprimarilyliable

aqualifiedindorsercannotraisethedefenseofa)forgeryb)defectofhistitleorthatitisvoidc)the
incapacityofthemaker,drawerorpreviousindorsers.

aqualifiedIndorsementmakestheindorsermereassignoroftitleofinstrument,relieveshimofgeneral
obligationtopayifinstrumentisdishonored,butheisstillliableforthewarrantiesarisingfrominstrumentonly
uptowarrantiesofgeneralindorser

thewarrantyistothecapacityofpriorpartiesatthetimetheinstrumentwasnegotiated.Subsequent
incapacitydoesnotbreachthewarranty.

lackofknowledgeoftheindorserastoanyfactthatwouldimpairthevalidityorthevalueofthe
instrumentmustbesubsistingallthroughout.

apersonNegotiatingbyDeliverywarrantssameasthoseofqualifiedindorserandextendstoimmediate
transfereesonly

56.Warrantiesofageneralindorser:
1.theinstrumentisgenuineandinallrespectwhatitpurportstobe
2.thehehasgoodtitletoit
3.allpriorpartieshadthecapacitytocontract
4.thattheinstrumentatthetimeofhisindorsementwasvalidandsubsisting(Sec.66NIL)

Inaddition:

engagesthattheinstrumentwillbeacceptedorpaidorbothaccordingtoitstenoronduepresentment

engagestopaytheamountthereofifitbedishonoredandthenecessaryproceedingsondishonorare
taken

NotesonSection66
theindorserunderSection66warrantsthesolvencyofapriorparty

theindorserwarrantsthattheinstrumentisvalidandsubsistingregardlessofwhetherheisignorantof
thatfactornot.

warrantiesextendinfavorofa)aHDCb)personswhoderivetheirtitlefromHDCc)immediate
transfereesevenifnotHDC

theindorserdoesnotwarrantthegenuinenessofthedrawerssignature

generalindorserisonlysecondarilyliable

57.Generalrule:Presentmentforpaymentisnotnecessarytochargepersonsprimarilyliableonthe
instrument.Presentmentforpaymentisnecessarytochargethedrawerandindorsers.(Sec70NIL)

NotesonSection70
presentationforpaymentproductionofaBOEtothedraweeforhisacceptance,ortoadraweeor
acceptorforpayment.AlsopresentmentofaPNtothepartyliableforpaymentofthesame.

consistsofa)apersonaldemandforpaymentataproperplaceb)thebillornotemustbereadytobe
exhibitedifrequiredandsurrendereduponpayment.

partiesprimarilyliablepersonsbythetermsoftheinstrumentareabsolutelyrequiredtopaythesame.
E.gmakerandacceptors.Theycanbesueddirectly.

ifpayableatthespecialplace,andthepersonliableiswillingtopaythereatmaturity,suchwillingness
andabilityisequivalenttotenderofpayment.

presentmentisnecessarytochargepersonssecondarilyliableotherwisetheyaredischarged

Actsneededtochargepersonssecondarilyliable:a)presentmentforpayment/acceptanceb)dishonor
bynonpayment/nonacceptancec)noticeofdishonortosecondaryparties

Actsneededtochargepersonssecondarilyliableinothercases:a)Protestfornonpaymentbythe
draweeb)protestfornonpaymentbytheacceptorforhonor

58.Properpresentment:
1.bytheholderoranauthorizedperson
2.atareasonablehouronabusinessday
3.ataproperplace
4.tothepersonprimarilyliableorifabsenttoanypersonfoundattheplacewherepresentmentismade(sec.
72NIL)

NotesonSection72
onlytheholderoroneauthorizedbyhimhastherighttomakepresentmentforpayment

presentmentcannotbemadeonaSundayorholiday
presentmentforpaymentismadetothemaker,oracceptor.Nottothepersonsecondarilyliable.

iftheinstrumentispayableondemanda)ifitisanotepresentmentmustbemadewithin
reasonabletimeafterissueb)ifitisabillpresentmentmustbemadewithinreasonabletimeafterlast
negotiation.

59.Presentmentnotrequiredtochargethedrawer:
1.hehasnorighttoexpect
2.hehasnorighttorequire

thatthedraweeoracceptorwillpay(Sec79NIL)

60.Presentmentnotrequiredtochargetheindorserwhere:
1.theinstrumentwasmadeoracceptedforhisaccommodation
2.hehasnoreasontoexpectthattheinstrumentwillbepaidifpresented(Sec.80NIL)

61.Generalrule:Presentmentforpaymentnecessarytochargepersonssecondarilyliableotherwisetheyare
discharged:

Exception:

Section79and80

NotesonSection79and80
onlythedrawerorindorserarenotdischarged.Allotherpartiessecondarilyliablearedischarged.

62.Presentmentforpaymentexcusedif:
a.afterduediligence,presentmentcannotbemade

b.presentmentiswaived

c.thedraweeisafictitiousperson(Sec82NIL)

NotesonSection82
whatisexcusedisthefailuretomakepresentment.Thereisnoneedtomakeanypresentmentversus
undersection81(delayinpresentment)presentmentforpaymentisstillrequiredafterthecauseofdelayhas
ceased.

63.Summaryofrulesastopresentmentforpayment:

1.presentmentnotnecessarytochargepersonsprimarilyliable
2.necessarytochargepersonssecondarilyliableexcept:

thedrawerunderSec.79

theindorserunderSec.80
whenexcusedunderSec.82

whentheinstrumenthasbeendishonoredbynonacceptanceunderSec.83

64.Howdishonoredbynonacceptance:

theinstrumentwasdulypresentedbutpaymentisrefusedorcannotbeobtained

presentmentisexcusedandtheinstrumentisoverdueandunpaid(Sec.83NIL)

65.Effectsofdishonorbynonpayment:

animmediaterightofrecoursetoallpartiessecondarilyliableaccruestotheholder.(Sec.84NIL)

NotesonSection84
partiesceasetobesecondarilyliableandbecomeprincipaldebtors.

Liabilitybecomesthesameasthatoftheoriginalobligors.

66.Requisitesforpaymentinduecourse:
1.madeatorafterthematurityoftheinstrument
2.totheholder
3.ingoodfaith
4.withoutnoticeofanydefectintheholderstitle(sec.88NIL)

NotesonSection88
paymentmustbemadetothepossessoroftheinstrument

possessionofthenotebythemakerispresumptiveevidencethatithasbeenpaid

67.NoticeofDishonormaybegiven:
1.byoronbehalfortheholder
2.byoronbehalfofanypartywho:

isapartytotheinstrumentandmightbecompelledtopaytheinstrument

toaholderwhohavingtakenitupwouldhavearightofreimbursementfromthepartytowhomnoticeis
given.(Sec.90NIL)

68.Notice:
1.maybewrittenororal(Sec.96)
2.writtennoticeneednotbesignedormaybesupplementedbyverbalcommunication(Sec.95)
3.maybebypersonaldeliveryorbymail(Sec.96)

69.Noticemaybewaivedeitherexpresslyorimplied:
1.beforethetimeofgivingnoticehasarrived
2.aftertheomissiontogiveduenotice(Sec.109NIL)
70.Protestmaybewaived:
Effects:

deemedawaiverofpresentmentandnoticeofdishonoraswell(Sec.111NIL)

NotesonSection111
Wherenoticeiswaived,presentmentisnotwaived

Wherepresentmentiswaived,noticeisalsowaived

Whereprotestiswaived,noticeandpresentmentiswaived

71.NoticeofDishonorgivenbytheholdertothepartiessecondarilyliable,drawerandeachindorser,that
theinstrumentwasdishonoredbynonacceptanceornonpaymentbythedrawee/maker

Generalrule:Anydrawerorindorsertowhomsuchnoticeisnotgivenisdischarged.

Exceptions:

1.Waiver(Sec.109)
2.Noticeisdispensed(Sec.112)
3.NotnecessarytoDrawer(Sec.114)
4.NotnecessarytoIndorser(Sec.115)

ifnoticeisdelayed,delaymaybeexcused(Sec.113)

72.InstanceswhenNoticeofDishonorNotNecessarytoDrawer
a.draweranddraweesameperson

b.draweeisafictitious/incapacitatedperson

c.draweristhepersontowhompresentmentforpaymentismade

d.drawerhasnorighttoexpectthatthedraweewillaccept/paytheinstrument(Sec.114NIL)

73.InstanceswhenNoticeNotRequiredtoIndorser
a.draweewasafictitious/incapacitatedpersonandtheindorserwasawareofsuchatthetimeof
indorsement

b.indorseristhepersontowhominstrumentwaspresentedforpayment

c.instrumentmade/acceptedforhisaccommodation(Sec.115NIL)

74.OmissiontogivenoticeofdishonorbynonacceptancedoenotprejudiceaHDC(Sec.117NIL)

75.Protestonlynecessaryforaforeignbillofexchange.Protestforothernegotiableinstrumentsisoptional.
(Sec.118NIL)
76.CausesofDischargeoftheInstrument
a.paymentbythedebtor

b.paymentbyaccommodatedparty

c.intentionalcancellationbyholderofinstrument

d.anyotheractdischargingasimplemonetaryobligation

e.debtorbecomesholderoftheinstrumentat/aftermaturityinhisownright(Sec119NIL)

NotesonSection119
dischargeoftheinstrumentdischargesallthepartiesthereto

paymentmustbeinduecourse,andbytheprincipaldebtororonhisbehalf

ifpaymentisnotmadebytheprincipaldebtor,paymentonlycancelstheliabilityofthepayorandthose
obligatedafterhimbutdoesnotdischargetheinstrument.

paymentbyanaccommodationpartydoesnotdischargetheinstrument.

77.DischargeofSecondaryParties:
a.anyactdischargingtheinstrument

b.cancellationofindorserssignaturebyindorsers

c.dischargeofpriorparty

d.tenderofpaymentbypriorparty

e.releaseofprincipaldebtor

f.extensionofpaymentbytheholder/postponementofrighttoenforcewithoutassentofsecondaryparties
andwithoutreservationofrightofrecourseagainstsecondaryparties(Sec120NIL)

78.Rightsofapartysecondarilyliablewhopays:
theinstrumentisnotdischarge

thepartyisremittedtohisformerrightsastoallpriorparties

thepartymaystrikeouthisownandallsubsequentindorsements

thepartymaynegotiatetheinstrumentagain

Exception:

aninstrumentcannotberenegotiatedwhereitispayabletoorderofa3rdpersonandhasbeenpaidby
thedrawer
andinstrumentcannotberenegotiatedwhereiswasmadeoracceptedforaccommodationandithas
beenpaidbythepartyaccommodated.

78.Renunciationbyaholderdischargesaninstrumentwhen:
1.itisabsoluteandunconditional
2.madeinfavorofapersonprimarilyliable
3.madeatoraftermaturityoftheinstrument
4.inwritingortheinstrumentisdelivereduptothepersonprimarilyliable(Sec.122NIL)

NotesonSection122
ifrenouncedinfavorofapartysecondarilyliable,onlyheisexoneratedfromliabilityandallparties
subsequenttohim

dischargebynovationisallowed

79.Generalrule:Whenmateriallyaltered,withouttheconsentofallpartiesliable,theinstrumentisavoided
exceptasagainst:

1.thepartywhohasmadethealteration
2.thepartywhoauthorizedorassentedtothealteration.
3.subsequentindorsers

Exception:

ifinthehandsofaHDC,maybeenforcedaccordingtoitsoriginaltenor

NotesonSection124
thereisnodistinctionbetweenfraudulentandinnocentalteration

80.MaterialAlterationanalternationissaidtobematerialifitalterstheeffectoftheinstrument.
UnderSection125thefollowingchangesareconsideredmaterialalterations:

1.dates
2.thesumpayable
3.timeandplaceofpayment
4.numberorrelationsoftheparties
5.mediumorcurrencyforpayment
6.addingaplaceofpaymentwherenoplaceisspecified
7.anyotherwhichalterstheaffectoftheinstrument

81.InstanceswhereaBOEmaybetreatedasaPN:
1.wherethedrawerandthedraweeareoneandthesame
2.wherethedraweeisafictitiousperson
3.wherethedraweehasnocapacitytocontract(Sec.130NIL)

TheholderhastheoptiontotreatitasaBOEoraPN
82.Acceptanceisthesignificationbythedraweeofhisassenttotheorderofthedrawer.Itisanactbywhich
apersononwhomtheBOEisdrawnassentstotherequestofthedrawertopayit.(Sec.132NIL)

Acceptancemaybe:Requisitesofactualacceptance:
inwriting

signedbythedrawee

mustnotexpressthedraweewillperformhispromisebyanyothermeansthanpaymentofmoney

communicatedordeliveredtotheholder

1.Aholderhastheright:

1.requirethatacceptancebewrittenonthebillandifrefused,treatitasifdishonored(Sec.133)
2.refusetoacceptaqualifiedacceptanceandmaytreatitasdishonored(Sec.142)

1.ConstructiveAcceptance:

1.wherethedraweetowhomthebillhasbeendelivereddestroysit
2.thedraweerefuseswithin24hrsaftersuchdeliveryorwithinsuchtimeasisgiven,toreturnthebillaccepted
ornot.(Sec.137NIL)

NotesonSection137
draweebecomesprimarilyliableasanacceptor.

mereretentionisequivalenttoacceptance

1.Whenpresentmentforacceptanceisnecessary:

1.ifnecessarytofixthematurityofthebill
2.ifitisexpresslystipulatedthatitshallbepresentedforacceptance
3.ifthebillisdrawnpayableelsewherethantheresidenceorplaceofbusinessofthedrawee(Sec.143NIL)

NotesonSection143
PresentmentistheproductionofaBOEtothedraweeforhisacceptance

inonordercaseispresentmentnecessarytomakepartiesliable.

90.SummaryonpresentmentforacceptanceofBillsofExchange:
a.tomakethedraweeprimarilyliableandfortheaccrualofsecondaryliability(Sec.144)

b.necessarytofixmaturitydate,wherebillexpresslystipulatespresentment,billpayableotherthanplace
ofdrawee(Sec.143)

c.whenpresentmentisexcused:draweeisdead,hides,isfictitious,incapacitatedperson,afterdue
diligencepresentmentcannotbemade,presentmentisrefusedonanothergroundalthoughpresentmentis
irregular(Sec.148)

1.Generalrule:Protestisrequiredonlyforforeignbills

Exception:

inlandbillsandnotesmayalsobeprotestedifdesired

Protestisrequired:
1.wheretheforeignbillisdishonoredbynonacceptance
2.wheretheforeignbillisdishonoredbynonpayment
3.wherethebillhasbeenacceptedforhonor,itmustbeprotestedfornonpaymentbeforeitispresentedfor
paymenttotheacceptorforhonor
4.wherethebillcontainsarefereeincaseofneed,itmustbeprotestedfornonpaymentbeforepresentment
forpaymenttotherefereeincaseofneed(Sec.152)

NotesonSection152
Protestformalstatementinwritingmadebyanotaryunderhissealofofficeattherequestofthe
holder,inwhichitisdeclarethatthesomewaspresentedforpaymentoracceptance(asthecasemaybe)and
suchwasrefused.

itmeansallstepsoractsaccompanyingthedishonorofabillornotenecessarytochargeanindorser

requiredwhentheinstrumentisaforeignbillofexchange.

itmustbemadeonthesamedateofdishonor,byanotary/respectablecitizenoftheplaceinthe
presenceof2crediblewitnessessorecoursetosecondaryparties

1.AcceptanceforHonor(Sec.161NIL)anacceptanceofabillmadebyastrangertoitbeforematurirty,
wherethedraweeofthebillhas:

1.refusedtoacceptit
2.andthebillhasbeenprotestedfornonacceptance
3.orwherethebillhasbeenprotestedforbettersecurity

Requisitesforacceptanceforhonor:
thebillmusthavebeenpreviouslyprotesteda)fornonacceptanceb)orforbettersecurity

thebillisnotoverdueatthetimeoftheacceptanceforhonor

theacceptorforhonormustbeastrangertothebill

theholdermustgivehisconsent

NotesonAcceptanceforHonor
Purpose:tosavethecreditofthepartiestotheinstrumentorsomepartytoitasthedrawer,drawee,or
indorserorsomebodyelse.
Acceptorforhonorisliabletotheholderandtoallthepartiestothebillsubsequenttothepartyfor
whosehonorhehasaccepted(Sec.164)

1.Howacceptanceforhonorismade:

1.inwritingandindicatedthatitisanacceptanceforhonor
2.signedbythepersonmakingtheacceptance(Sec.162NIL)

1.PaymentforHonorpaymentmadethroughanotarialactofhonorofapartyliable/strangertothebillafter
billhasbeendishonoredbynonpaymentbytheacceptorandprotestedfornonpaymentbytheholder

Requisites:

a.protestfornonpayment

b.anypersonmaypaysupraprotest

Formforpaymentofhonor:
1.paymentmustbeattestedbynotarialactappendedtotheprotest,orformanextensiontoit.
2.notarialactofhonormustbebasedonadeclarationbythepayerforhonor

1.BillsinSetbillofexchangedrawninseveralparts,eachpartofthesetbeingnumberedandcontaininga
referencetotheotherparts,thewholeofthepartsjustconstitutingonebill(Sec178NIL)

Source:CommercialLawMemoryAid
Paymentinduecourse:

1.madeatoraftermaturity
2.totheholderthereof
3.ingoodfaithandwithoutnoticethathistitleisdefective
4.paymentinduecoursebypartyaccommodatedwherepartyismade/acceptedforaccommodation
5.intentionalcancellationbyholder

ifunintentionalorundermistakeorwithoutauthorityofholder,inoperative.Burdenofproofonpartywhich
allegesitwasunintentional,etc.

1.anyotheractwhichdischargesasimplecontract
2.principaldebtorbecomesholderofinstrumentatoraftermaturityinhisownright
3.renunciationofholder:

holdermayexpresslyrenouncehisrightsvs.anypartytotheinstrument,beforeorafteritsmaturity
absoluteandunconditionalrenunciationofhisrightsvs.principaldebtormadeatoraftermaturitydischarges
theinstrument
renunciationdoesnotaffectrightsofHDCw/onotice.
Renunciationmustbeinwritingunlessinstrumentdelivereduptopersonprimarilyliablethereon
 1.materialalteration(sec.124:materialalterationw/oassentofallpartiesliableavoidsinstrumentexceptas
againstpartytoalterationandsubsequentindorsers)

1.Ofsecondaryparties
2.anyactwhichdischargestheinstrument
3.intentionalcancellationofsignaturebyholder
4.dischargeofpriorparty
5.validtenderofpaymentmadebypriorparty
6.releaseofprincipaldebtor,unlessholdersrightofrecoursevs.2ndarypartyreserved
7.anyagreementbindinguponholdertoextendtimeofpayment,ortopostponeholdersrighttoenforce
instrument,unlessmadewithassentofpartysecondarilyliable,orunlessrightofrecoursereserved.
8.Failuretomakeduepresentment(sec.70,144)
9.failuretogivenoticeofdishonor
10.certificationofcheckatinstanceofholder
11.reacquisitionbypriorparty

whereinstrumentnegotiatedbacktoapriorparty,suchpartymayreissueandfurthernegotiate,butnot
entitledtoenforcepaymentvs.anyinterveningpartytowhomhewaspersonallyliable
whereinstrumentispaidbypartysecondarilyliable,itsnotdischarged,but

1.thepartysopayingitisremittedtohisformerrightsasregardtoallpriorparties
2.andhemaystrikeouthisownandallsubsequentindorsements,andagainnegotiateinstrument,except

whereitspayabletoorderof3rdpartyandhasbeenpaidbydrawer
whereitsmade/acceptedforaccommodationandhasbeenpaidbypartyaccommodated.

Reference:UniversityofthePhilippinesBarOps99CommercialLawValFeria,MinaHerrera,Gary
Mallari&RachelRamosMemoryAid

BasedontheOutlineofthe1994EditionofCampos&Campos

LIABILITIESOFPARTIES
1.PRIMARYPARTIES

Personprimarilyliable:personwhobythetermsoftheinstrumentisabsolutelyrequiredtopaythesame.
Sec.70(effectofwantofdemandonprincipaldebtor)

1.LiabilityofMaker
2.Promisestopayitaccordingtoitstenor
3.admitsexistenceofpayeeandhisthencapacitytoindorse

1.Statusofdraweepriortoacceptanceorpayment

sec.127(billnotanassignmentoffundsinhandsofdrawee)
sec.189(whencheckoperatesasassignment)
1.LiabilityofAcceptor

Promisestopayinstaccordingtoitstenor
Admitsthefollowing:

1.existenceofdrawer
2.genuinenessofhissignature
3.hiscapacityandauthoritytodrawtheinstrument
4.existenceofpayeeandhisthencapacitytoendorse

sec.191,132,133,138formalrequisitesofacceptance
sec.136,137,150constructiveacceptance
sec.134,135acceptanceonaseparateinstrument
KindsofAcceptance:

*sec.142(rightsofpartiesastoqualifiedacceptance)

Certification:Principles

1.whencheckcertifiedbybankonwhichitsdrawn,equivalenttoacceptance
2.whereholderofcheckprocuresittobeaccepted/certified,drawerandallindorsersdischargedfromal
liability
3.checknotoperateasassignmentofanypartoffundstocreditofdrawerwithbank,andbankisnotliableto
holder,unlessanduntilitacceptsorcertifiescheck
4.certificationobtainedatrequestofdrawer:secondarypartiesnotreleased
5.bankwhichcertifiesliableasanacceptor
6.checkscannotbecertifiedbeforepayable

1.SECONDARYPARTIES
2.LiabilityofDrawer
3.Admitsexistenceofpayeeandhisthencapacitytoendorse
4.Engagesthatonduepresentmentinstrumentwillbeaccepted,orpaid,orboth,accordingtoitstenorand
that
5.Ifitbedishonored,andthenecessaryproceedingsondishonorbedulytaken,hewillpaytheamountthereof
totheholderortoansubsequentindorserwhomaybecompelledtopayit

drawermayinsertintheinstrumentanexpressstipulationnegativing/limitinghisownliabilitytoholder

1.LiabilityofIndorsers:

QualifiedIndorserandoneNegotiatingbyDelivery

1.Instrumentgenuine,inallrespectswhatitpurportstobe
2.goodtitle
3.allpriorpartieshadcapacitytocontract
4.hehadnoknowledgeofanyfactw/cwouldimpairvalidityofinstrumentorrenderitvalueless

incaseofnegotiationbydeliveryonly,warrantyonlyextendsinfavorofimmediatetransferee

LiabilityofaGeneralorUnqualifiedIndorser

1.instrumentgenuine,goodtitle,capacityofpriorparties
2.instrumentisattimeofindorsementvalidandsubsisting
3.onduepresentment,itshallbeacceptedorpaid,orboth,accordingtotenor
4.ifitbedishonored,andnecessaryproceedingsondishonorbedulytaken,hewillpaytheamt.Toholder,or
toanysubsequentindorserwhomaybecompelledtopayit

OrderofLiabilityamongIndorsers

1.amongthemselves:liableprimafacieintheordertheyindorse,butproofofanotheragreementadmissible
2.butholdermaysueanyoftheindorsers,regardlessoforderofindorsement
3.jointpayees/indorseesdeemedtoindorsejointlyandseverally

1.LiabilityofAccomodationParty

Definition:onewhosignedinstrumentasmaker/drawer/acceptor/indorserw/oreceivingvaluethereof,for
thepurposeoflendinghisnametosomeotherperson
APliableontheinstrumenttoholderforvalueevenifholder,attimeoftakinginstrument,knewhewasonly
anAP
LiabilityofIrregularIndorser
Whereapersonnototherwiseapartytoaninstrument,placesthereonhissignatureinblankbefore
delivery,hesliableasanindorser,inaccordancew/theserules:

1.Instrumentpayabletoorderof3rdperson:liabletopayeeandtoallsubsequentparties
2.Instrumentpayabletotheorderofmaker/drawer,orpayabletobearer:liabletoallpartiessubsequentto
maker/drawer
3.Signsforaccommodationofpayee,liabletoallpartiessubsequenttopayee

SadayavSevillaRules:

1.ajointandseveralaccommodationmakerofanegotiablepromissorynotemaydemandfromtheprincipal
debtorreimbursementfortheamt.Thathepaidtothepayee
2.ajointandseveralaccommodationmakerwhopaysonthesaidpromissorynotemaydirectlydemand
reimbursementfromhiscoaccommodationmakerwithoutfirstdirectinghisactionvs.theprincipaldebtor
provided:
1.hemadethepaymentbyvirtueofajudicialdemand
2.ortheprincipaldebtorisinsolvent

1.LiabilityofanAgent

Signatureofanypartymaybemadebydulyauthorizedagent,establishasinordinaryagency
 Whereinstrumentcontainsorapersonaddstohissignaturewordsindicatingthathesignsfororonbehalf
ofaprincipal,heisnotliableontheinstrumentifhewasdulyauthorized,butthemereadditionofwords
describinghimasanagentwithoutdisclosinghisprincipal,doesnotexemptfrompersonalliability.
Signatureperprocurationoperatesasnoticethattheagenthasbutalimitedauthoritytosign,andthe
principalisboundonlyincasetheagentinsosigningactedwithintheactuallimitsofhisauthority
Whereabrokeroragentnegotiatesaninstrumentwithoutindorsement,heincursallliabilitiesinSec.65,
unlesshedisclosesnameofprincipalandfactthathesonlyactingasagent

I.PresentmentForAcceptance

Whenpresentmentforacceptancemustbemade

1.billpayableaftersight,orinothercaseswherepresentmentforacceptancenecessarytofixmaturity
2.wherebillexpresslystipulatesthatitshallbepresentedforacceptance
3.wherebillisdrawnpayableelsewherethanatresidence/placeofbusinessofdrawee

Whenfailuretopresentreleasesdrawer/indorser

Failuretopresentforacceptanceofnegotiatebillofexchangewithinreasonabletime

ReasonableTime

Mustconsider

1.natureofinstrument
2.usageoftradeorbusinesswithrespecttoinstrument
3.factsofeachcase

HowandWhenMadeSec.145,146,147

WhenExcusedSec.148

DishonorandEffects
sec.149(whendishonoredbynonacceptance)
sec.150(dutyofholderwherebillnotaccepted)
sec.151(rightsofholderwherebillnotaccepted)
sec.89(towhomnoticeofdishonormustbegiven)
sec.117(effectofomissiontogivenoticeofnonacceptance)

II.ForPayment
WherenecessarySec.70

WherenotnecessarySec.79,80,82,151,111

DateandtimeofpresentmentofinstrumentbearingfixedmaturitySec.71,85,86,194

Dateofpresentment
 Whereinstrumentnotpayableondemand:presentmentmustbemadeondateitfallsdue
Wherepayableondemand:presentmentmustbemadewithinreasonabletimeafterissue,exceptthatin
caseofabillofexchange,presentmentforpaymentwillbesufficientifmadewithinareasonabletimeafter
lastnegotiation(butnote:thoughreasonabletimefromlastnegotiation,itmaybeunreasonabletimefrom
issuancethusholdermaynotbeHDCundersec.71)
Checkmustbepresentedforpaymentwithinreasonabletimeafteritsissueordrawerwillbedischarged
fromliabilitythereontoextentoflosscausedbydelay

DelayexcusedSec.81

MannerSec.74,72,75

PlaceSec.73

ToWhomSec.72,76,77,78

DishonorbynonpaymentSec.83,84

NoticeofDishonor
Generalrule:todrawerandtoeachindorser,andanydrawerorindorsertowhomsuchnoticeisnotgivenis
discharged

Form,Contents,TimeSec.95,96,102,103,104,105,106,108,113

ByWhomGiven
Byoronbehalfoftheholderoranypartytotheinstrumentwhomaybecompelledtopayittotheholder,
andwho,upontakingitup,wouldhavearighttoreimbursementfromthepartytowhomthenoticeisgiven
Noticeofdishonormaybegivenbyanagenteitherinhisownnameorinthenameofanypartyentitledto
givenotice,whetherthatpartybehisprincipalornot
Whereinstrumenthasbeendishonoredinhandsofagent,hemayeitherhimselfgivenoticetotheparties
liablethereon,orhemaygivenoticetohisprincipal(asifagentanindependentholder)

Inwhosefavornoticeoperates
1.whengivenby/onbehalfofholder:insurestobenefitof
1.allsubsequentholdersand
2.allpriorpartieswhohavearightofrecoursevs.thepartytowhomitsgiven

2.wherenoticegivenby/onbehalfofapartyentitledtogivenotice:insuresforbenefitofa.holder,and

b.allpartiessubsequenttopartytowhomnoticegiven

WaiverSec.109,110

Wherenotnecessarytochargedrawer
1.drawer/draweesameperson
2.draweefictitious,incapacitated
3.drawerispersontowhominstrumentispresentedforpayment
4.drawerhasnorighttoexpect/requirethatdrawee/acceptorwillhonorinstrument
5.drawercountermandedpayment

Wherenotnecessarytochargeindorser
1.draweefictitious,incapacitated,andindorserawareofthefactattimeofindorsement
2.indorserispersontowhominstrumentpresentedforpaymt
3.instrumentmade/acceptedforhisaccommodation

Protest
Definition:testimonyofsomeproperpersonthattheregularlegalstepstofixtheliabilityofdrawerand
indorsershavebeentaken

Whennecessary:sec.152,

Formandcontents:sec.153

Bywhommade:sec.154

TimeandPlace:sec.155,156

Forbettersecurity:sec.158

Excused:sec.159

Waiver:sec.111

AcceptanceforHonor
Sec.161,131,171

BillsinSet:178183

Reference:UniversityofthePhilippinesBarOps99CommercialLawValFeria,MinaHerrera,Gary
Mallari&RachelRamosMemoryAid

BasedontheOutlineofthe1994EditionofCampos&Campos

DEFENSESANDEQUITIESKINDSOFDEFENSES
1.realdefenseattachestoinstrumentontheprinciplethattherightsoughttobeenforcednever
existed/therewasnocontractatall
2.personaldefensegrowingoutofagreementrendersitinequitabletobeenforcedvs.defendant

DEFENSES
1.INCAPACITY:realindorsement/assignbycorp/infant:passespropertybutcorp/infantnoliability

1.ILLEGALITY:personal,evenifnoKbecausevoidunderCC1409
1.FORGERY:real(lackofconsent):
1.forged
2.madewithoutauthorityofpersonwhosesignatureitpurportstobe.

GeneralRule:
1.whollyinoperative
2.norighttoretaininstrument,orgivedischarge,orenforcepaymentvs.anyparty,canbeacquiredthroughor
undersuchsignature(unlessforgedsignatureunnecessarytoholderstitle)

Exception:
unlessthepartyagainstwhomitissoughttoenforcesuchrightisprecludedfromsettingupforgery/wantof
authority

precluded:

1.partieswhomakecertainwarranties,likeageneralindorseroracceptor
2.estopped/negligentparties

*noterulesonAcceptance/PaymentUnderMistakeasappliedto:
1.1.overdraft
2.2.stoppaymentorder
3.3.forgedindorsements

1.MATERIALALTERATION

WhereNImateriallyalteredw/oassentofallpartiesliablethereon,avoided,exceptasvs.a

1.partywhohashimselfmade,authorizedorassentedtoalteration
2.andsubsequentindorsers.

ButwhenaninstrumenthasbeenmateriallyalteredandisinthehandsofaHDCnotapartytothe
alteration,HDCmayenforcepaymentthereofaccordingtoorig.tenor
MaterialAlteration

1.changedate
2.sumpayable,eitherforprincipalorinterest
3.timeofpayment
4.number/relationsofparties
5.medium/currencyofpayment,addsplaceofpaymentwherenonespecified,otherchange/additionaltering
effectofinstrumentinanyrespect.

*materialalterationapersonaldefensewhenusedtodenyliabilityaccordingtoorg.tenorofinstrument,butreal
defensewhenreliedontodenyliabilityaccordingtoalteredterms.
1.FRAUD
2.fraudinexecution:realdefense(didntknowitwasNI)
3.fraudininducement:personaldefense(knowsitsNIbutdeceivedastovalue/terms)

1.DURESS

Personal,unlesssoseriousastogiverisetoarealdefenseforlackofcontractualintent

1.COMPLETE,UNDELIVEREDINSTRUMENT

Personaldefense(sec.16)
Ifinstrumentnotinposs.Ofpartywhosigned,deliveryprimafaciepresumed
IfholderisHDC,deliveryconclusivelypresumed

1.INCOMPLETE,UNDELIVEREDINSTRUMENT

Realdefense(sec.15)
Instrumentwillnot,ifcompletedandnegotiatedwithoutauthority,beavalidcontractinthehandsofany
holder,asagainstanypersonwhosesignaturewasplacedthereonbeforedelivery

10.INCOMPLETE,DELIVERED
Personaldefense(sec.14)
2KindsofWritings:

1.Whereinstrumentiswantinginanymaterialparticular:personinpossessionhasprimafacieauthorityto
completeitbyfilingupblankstherein
2.Signatureonblankpaperdeliveredbypersonmakingthesignatureinorderthatthepapermaybe
convertedintoaNI:primafacieauthoritytofillupassuchforanyamount

Inorderthatanysuchinstrument,whencompleted,mabeenforcedvs.anypersonwhobecameaparty
theretopriortoitscompletion:

1.mustbefilledupstrictlyinaccordancew/authoritygiven
2.withinareasonabletime

butifanysuchinstrumentaftercompletionisnegotiatedtoHDC,itsvalidforallpurposesinhishands,he
mayenforceitasifithadbeenfilledupproperly.

Reference:UniversityofthePhilippinesBarOps99CommercialLawValFeria,MinaHerrera,Gary
Mallari&RachelRamosMemoryAid

BasedontheOutlineofthe1994EditionofCampos&Campos

HOLDERINDUECOURSEHOLDER
Sec.191

RIGHTSOFHOLDER
1.suethereoninhisownname
2.paymenttohiminduecoursedischargesinstrument
HOLDERINDUECOURSE:REQUISITIES
1.completeandregularuponitsface

sec.124(effectofalteration)
sec.125(whatconstitutematerialalterations)

1.holderbecamesuchbeforeitwasoverdue,withoutnoticeofanypreviousdishonor

sec.53(demandinst.negoafterunreasonablelengthoftime:notHDC)
sec.12(effectantedating/postdating)

1.takeningoodfaithandforvalue

sec.24(presumptionofconsideration)
sec25(definition.ofvalue)
sec.26(definition.holderforvalue)
sec.27(lienasvalue)

1.attimenegotiatedtohim,hehadnonotice(sec.56def54noticebeforefullamt.paid)of
1.infirmityininstrument
2. 1.instrument/signatureobtainedthroughfraud,etc.,illegalconsideration/means,or
2.instrumentnegotiatedinbreachoffaith,orfraudulentcircumstances

RIGHTSOFHOLDERINDUECOURSE:
1.holdsinstrumentfreeofanydefectoftitleofpriorparties
2.freefromdefensesavailabletopriorpartiesamongthemselves
3.mayenforcepaymentofinstrumentforfullamount,againstallpartiesliable

*ifinthehandofanyholder(notedefinitionofholder)otherthanaHDC,vulnerabletosamedefensesasif
nonnegotiable

RIGHTSOFPURCHASERFROMHOLDERINDUECOURSE:
GeneralRule:inthehandsofanyholderotherthanaHDC,NIissubjecttosamedefensesasifitwerenon
negotiable.

Exception:holderwhoderivestitlethroughHDCandwhoisnothimselfapartytoanyfraudorillegalityhasall
rightsofsuchformerholderinrespecttoallpartiespriortothelatter.

WHODEEMEDHDC
primafaciepresumptioninfavorofholder
butwhenshownthattitleofanypersonwhohasnegotiatedinstrumentwasdefective(sec.55whentitle
defective):burdenreversed(nowwithholder)
butnoreversalifpartybeingmadeliablebecameboundpriortoacquisitionofdefectivetitle(i.e.,where
defenseisnothisown)
Reference:UniversityofthePhilippinesBarOps99CommercialLawValFeria,MinaHerrera,Gary
Mallari&RachelRamosMemoryAid

BasedontheOutlineofthe1994EditionofCampos&Campos

TRANSFERDELIVERY
NIincompleteandrevocableuntildeliveryforthepurposeofgivingeffectthereto
asbetween

1.immediateparties
2.aremotepartyotherthanholderinduecourse

delivery,tobeeffectual,mustbemadebyorundertheauthorityoftheparty
making/drawing/accepting/indorsing

insuchcasedeliverymaybeshowntohavebeenconditional,orforaspecialpurposeonly,andnotforthe
purposeoftransferringthepropertyintheinstrument.

PRESUMPTIONOFDELIVERY
Wheretheinstrumentisnolongerinthepossessionofapartywhosesignatureappearsthereon,avalidand
intentionaldeliverybyhimispresumeduntilthecontraryisproved(*ifinthehandsofaHDC,presumption
conclusive)

NEGOTIATION
Whenaninstrumentistransferredfromonepersontoanotherastoconstitutethetransfereetheholder
thereof.
IfpayabletoBEARER,negotiatedbydeliveryifpayabletoORDER,negotiatedbyindorsementofholder+
delivery

INDORSEMENT
Indorsergenerallyentersintotwocontracts:

1.saleorassignmentofinstrument
2.topayinstrumentincaseofdefaultofmaker

Sec.31(howindorsementmade)
Sec.41(wherepayabletotwoormore)
Sec.43(indorsementwherenamemisspelled)
Sec.48(cancellationofindorsement)
Sec.45,46(presumptions)
Indorsementmustbeofentireinstrument.(cantbeindorsementofonlypartofamountpayable,norcanit
betotwoormoreindorseesseverally.Butokaytoindorseresidueofpartiallypaidinstrument)
Sec.67(liabilityofindorserwherepapernegotiablebydelivery)
Sec.63(whenpersondeemedindorser)
KINDSOFINDORSEMENT
1.astomanneroffuturemethodofnegotiation
2.specialspecifiesthepersontowhom/towhoseordertheinstrumentistobepayableindorsementofsuch
indorseeisnecessarytofurthernegotiation.
3.Blankspecifiesnoindorsee,instrumentsoindorsedispayabletobearer,andmaybenegotiatedby
delivery

theholdermayconvertablankindorsementintoaspecialindorsementbywritingoverthesignatureofthe
indorserinblankanycontractconsistentwiththecharacteroftheindorsement

1.astokindoftitletransferred
2.restrictive

prohibitsfurthernegotiationofinstrument,
constitutesindorseeasagentofindorser,or
veststitleinindorseeintrustforanother
rightsofindorseeinrestrictiveind.:
receivepaymentofinst.
Bringanyactionthereonthatindorsercouldbring
Transferhisrightsassuchindorsee,butallsubsequentindorseesacquireonlytitleoffirstindorseeunder
restrictiveindorsement

1.nonrestrictive

1.astokindofliabilityassumedbyindorser
2.qualifiedconstitutesindorserasmereassignoroftitle(eg.withoutrecourse)
3.unqualified

1.astopresence/absenceofexpresslimitationsputbyindorseruponprimaryobligorsprivilegesofpayingthe
holder
2.conditionaladditionalconditionannexedtoindorsersliability.

Whereanindorsementisconditional,apartyrequiredtopaytheinstrumentmaydisregardthecondition,
andmakepaymenttotheindorseeorhistransferee,whetherconditionhasbeenfulfilledornot
Anypersontowhomaninstrumentsoindorsedisnegotiatedwillholdthesame/proceedssubjecttorightsof
personindorsingconditionally

1.unconditional

INDORSEMENTOFBEARERINST.
Whereaninstrumentpayabletobearerisindorsedspecially,itmayneverthelessbefurthernegotiatedby
delivery
Personindorsingspeciallyliableasindorsertoonlysuchholdersasmaketitlethroughhisindorsement

UNINDORSEDINSTRUMENTS
 Whereholderofinstrumentpayabletohisordertransfersitforvaluewithoutindorsing,transfervestsin
transferee

1.suchtitleastransferorhadtherein
2.rightoftranfereetohaveindorsementoftransferor

forpurposesofdeterminingHDCnegotiationeffectiveuponactualindorsement

Reference:UniversityofthePhilippinesBarOps99CommercialLawValFeria,MinaHerrera,Gary
Mallari&RachelRamosMemoryAid

BasedontheOutlineofthe1994EditionofCampos&Campos

NEGOTIABILITY

REQUISITES
1.1.inwritingandsignedbymakerordrawer

nopersonliableontheinstrumentwhosesignaturedoesnotappearthereon(subjecttoexceptions)
onewhosignsinatradeorassumednameliabletothesameextentasifhehadsignedinhisownname
signatureofanypartymaybemadebyadulyauthorizedagent,noparticularformofappt.necessary

1.unconditionalpromiseorordertopay

unqualifiedorderorpromisetopayisunconditionalthoughcoupledwith

1.anindicationofaparticularfundoutofwhichreimbursementtobemade,oraparticularaccounttobe
debitedwithamount,or
1.astatementofthetransactionwhichgivesrisetotheinstrument

anorderorpromisetopayoutofaparticularfundisnotunconditional

asumcertaininmoney
evenifstipulatedtobepaid

1.withinterest,or
2.bystatedinstallments,or
3.bystatedinstallmentswithaprovisionthatupondefaultinpaymentofanyinstallment/interest,thewhole
shallbecomedue,or
4.withexchange,whetheratafixedrateoratthecurrentrate,or
5.withcostsofcollectionoranattorneysfee,incasepaymentnotmadeatmaturity

1.3.payableondemand,

whenexpressedtobepayableondemand,oratsight,oronpresentation
whennotimeforpaymentexpressed,or
 whereaninstrumentisissued,acceptedorindorsedwhenoverdue,itis,asregardsthepersonsoissuing,
accepting,orindorsingit,payableondemand

oratafixedordeterminablefuturetime

whenitsexpressedtobepayableatafixedperiodafterdateorsight,or
onorbeforeafixedordeterminablefuturetimefixedtherein,or
onoratafixedperiodaftertheoccurrenceofaspecifiedeventwhichiscertaintohappen,thoughthetime
ofhappeningbeuncertain
aninstrumentpayableuponacontingencynotnegotiable,andhappeningofeventdoesntcureit

*relatetosec.11(presumptionastodate)andsec.17(constructionwhereinstrumentambiguous)

*noteeffectofaccelerationprovisions,p.30Campos*noteeffectofprovisionsextendingtimeofpayment,p.
40Campos
1.4.payabletoorder

whereitisdrawnpayabletotheorderofaspecifiedpersonortohimorhisorder.Maybedrawnpayableto
orderof
whentheinstrumentispayabletoorderthepayeemustbenamedorotherwiseindicatedthereinwith
reasonablecertainty

1.apayeenotthemaker/drawer/drawee,or
2.drawerormaker,or
3.drawee,or
4.twoormorepayeesjointly,or
5.holderofanofficefortimebeing

orbearer,
whenexpressedtobesopayable
whenpayabletopersonnamedthereinorbearer
whenpayabletoorderorfictitious/nonexistentperson,andsuchfactknowntothepersonmakingitso
payable,or
whennameofpayeedoesntpurporttobethenameofanyperson,or
whentheonly/lastindorsementisinblank

1.5.whereaddressedtodrawee:suchdraweenamed/indicatedthereinwithreasonablecertainty

billmaybeaddressedtotwoormoredraweesjointly,whetherpartnersornot,butnottotwoormore
draweesinthealternativeorinsuccession
billmaybetreatedasaPN,atoptionofholder,where

1.draweranddraweearesameperson
2.draweeisfictitious/incapacitated
EFFECTOFADDITIONALPROVISIONS
Gen.Rule:order/promisetodoanyactinadditiontothepaymentofmoneyrendersinstrumentnonnegotiable.

Exception:negotiabilitynotaffectedbyprovisionsw/c

1.authorizesaleofcollateralsecurityifinstrumentnotpaidatmaturity
2.authorizeconfessionofjudgment
3.waivesbenefitofanylawintendedforadvantage/protectionofobligor
4.giveholderelectiontorequiresomethingtobedoneinlieuofmoney

CONTINUATIONOFNEGOTIABLECHARACTER
Until

MemoryAid

BasedontheOutlineofthe1994EditionofCampos&Campos

DEFINITIONS

NEGOTIABLEINSTRUMENT
Writtencontractforthepaymentofmoney,byitsformintendedassubstituteformoneyandintendedtopass
fromhandtohandtogivetheholderinduecoursetherighttoholdthesameandcollectthesumdue

PROMISSORYNOTE

unconditionalpromiseinwritingmadebyonepersontoanothersignedbythemaker
engagingtopayondemand,oratafixedordeterminablefuturetimeasumcertaininmoneytoorderorto
bearer
whereanoteisdrawntothemakersownorder,itisnotcompleteuntilindorsedbyhim

BILLOFEXCHANGE

unconditionalorderinwritingaddressedbyonepersontoanothersignedbythepersongivingit
requiringthepersontowhomitsaddressedtopayondemandoratafixedordeterminablefuturetimea
sumcertaininmoneytoorderortobearer
check:billofexchangedrawnonabankpayableondemand.Kindsofchecks:

1.personalcheck
2.managers/cashierscheckdrawnbyabankonitself.Issuancehastheeffectofacceptance
3.memorandumcheckmemoiswrittenacrossitsface,signifyingthatdrawerwillpayholderabsolutely
withoutneedofpresentment
4.crossedcheck

effects:

1.checkmaynotbeencashedbutonlydepositedinbank
2.maybenegotiatedonlyonce,toonewhohasanacct.withabank
 3.warningtoholderthatcheckhasbeenissuedforadefinitepurposesothathemustinquireifhereceived
checkpursuanttosuchpurpose,otherwisenotHDC

kinds:

1.general(nowordbetweenlines,orcobetweenlines)
2.special(nameofbankappearingbetweenparallellines)

BEARER

Personinpossessionofabill/notepayabletobearer

HOLDER
Payeeorindorseeofabillornotewhoisinpossessionofit,orthebearerthereof.

THELIFEOFANEGOTIABLEINSTRUMENT:
1.issue
2.negotiation
3.presentmentforacceptanceincertainbills
4.acceptance
5.dishonorbyonacceptance
6.presentmentforpayment
7.dishonorbynonpayment
8.noticeofdishonor
9.protestincertaincases
10.discharge

Reference:UniversityofthePhilippinesBarOps99CommercialLawValFeria,MinaHerrera,Gary
Mallari&RachelRamos
Firstofall,Iamnotalawyer.I'magraduateofABPoliticalScienceandwenttotheCollegeofLawbut
stoppedgoingtolawschoolforsomereasons.I'mapassionateteacherwhohasbeenteachingEnglishto
speakersofotherlanguagesandapersonwholikeswritingandblogging.Ilostsomeimportantfilesand
softwarewhenmycomputerbrokedownsothereasonIcreatedthiswebsiteistopreservethenotes,
reviewersanddigestsIcollectedwhenIwasatthelawschoolandatthesametime,Iwanttohelpoutlaw
studentswhodonothaveenoughtimetogoandreadbooksinthelibrary.