NEGOTIABLE INSTRUMENTS LAW and Negotiable vs. Non-negotiable What is a PN? BoE?

BOUNCING CHECKS LAW Negotiable Non-negotiable Promissory Note Bill of exchange

REVIEW and final details instruments instruments Contains an Contains an
Contains all the Does not contain all unconditional unconditional order
Basic Concepts requisites of Sec. 1 of the requisites of Sec. promise to pay to pay
 What are negotiable instruments? the NIL 1 of the NIL Involves two (2) Involves three (3)
 Characteristics of negotiable Transferred by Transferred by parties parties
negotiation assignment Maker primarily Drawer only
instruments
Holder in due course Transferee acquires liable secondarily liable
 What are the phases in the life of a
may have better rights only of his Only one Generally two
negotiable instrument? rights than transferor transferor presentment needed presentments
Prior parties warrant Prior parties merely – for payment needed – for
Phases in the life of a negotiable instrument payment warrant legality of acceptance and for
Issuance – first delivery of the instrument, title payment
complete in form, to a person who takes it as a Transferee has right Transferee has no
holder (Sec. 191) of recourse against right of recourse What is a Check?
Negotiation – transfer of the instrument and intermediate parties Check Bill of exchange
title thereof to another person Indorsement. Always drawn upon a May or may not be
with delivery, in case of order instruments. Negotiable instruments vs. Negotiable bank or a banker drawn against a bank
Indorsement – a signature on the instrument by documents of title Always payable on May be payable on
the previous holder thereof with the intent of Negotiable Negotiable demand demand or at a fixed
transferring title thereto to a subsequent party. instruments documents of title or determinable
Mere delivery – In case of bearer instruments. Contains all the Does not contain all future time
requisites of Sec. 1 of the requisites of Sec. Not necessary that it Necessary that it be
Phases in the life of a negotiable instrument the NIL 1 of the NIL be presented for presented for
Have right of No secondary liability acceptance acceptance
Presentment for acceptance in certain bills
recourse against of intermediate Drawn on a deposit Not drawn on a
(Sec. 143)
intermediate parties parties deposit
Acceptance – one completed by delivery and
who are secondarily The death of a The death of the
notification (Sec. 191)
liable drawer of a check, drawer of the
 Dishonor by non-acceptance Holder in due course Transferee merely with knowledge by ordinary bill does not
 Presentment for payment may have better steps into the shoes the banks, revokes revoke the authority
 Dishonor by non-payment rights than transferor of transferor the authority of the of the drawee to pay
 Notice of dishonor Subject is money Subject is goods banker to pay
 Protest in certain cases (Sec. 118, 152 Instrument itself is Instrument is merely Must be presented May be presented for
and 167) property of value evidence of title; for payment within a payment within a
 Discharge (Sec. 51, 119) thing of value are the reasonable time after reasonable time after
goods mentioned in its issue (6 months) its last negotiation
the document
 What is a Check? HOW NEGOTIABILITY DETERMINED is drawn or the place where it is payable (Sec.
Promissory note Check 1. by the provisions of the NIL, particularly 73) bears a seal (see Art. 2244[4], NCC)
There are two (2) There are three (3) Sec. 1 thereof; designates a particular kind of current money in
parties: the maker parties: the drawer, 2. By considering the whole instrument; which payment is to be made
and the payee the drawee bank and 3. By what appears on the face of the
the payee instrument and not elsewhere.  When is an instrument payable on
May be drawn Always drawn against demand?
against any person, a bank SUM CERTAIN  When is an instrument payable to
not necessarily a
 Determine from the instrument itself order?
bank
May be payable on Always payable on
the amount he is entitled to receive at  When is an instrument payable to
demand or at a fixed demand maturity CERTAIN EVEN IF? bearer?
or determinable
future time PROMISE OR ORDER TO PAY UNCONDITIONAL Deficiencies in the Instrument
Contains a promise Contains an order to  Unqualified and not dependent on any  Issuance
to pay pay uncertain, contingent event. See Sec 3.  Mechanical Act of writing (Sec
1)
Check PAYABLE AT A DETERMINABLE FUTURE TIME  Delivery (Not affected by: Sec
 Crossed check  See Sec 4. Determinable even if? 14, 16, 28 124, 193 – personal
 Certified check defenses)
General rule: If some other act is required other  These deficiencies affect HDC when:
Other negotiable instruments than the payment of money, the instrument is Real defense: S15, 23, 124, 125
non-negotiable.
1. certificates of deposits  Ambiguities in the Instrument Sec 17
2. trade acceptances Exceptions: sale of collateral securities if the  Signatures in the Instrument
3. bonds in the nature of promissory notes instrument is not paid at maturity confession of General rule: A person whose signature
4. drafts which are bills of exchange judgment if the instrument is not paid at does not appear on the instrument is
drawn by one bank on another maturity waiver of benefit granted by law not liable.
5. letters of credit election of holder to require some other act E:
6. trust receipt S18, 19 [E:S20], 21, rules on agents, 23 –
Validity or negotiability of an instrument is not
REQUISITES OF NEGOTIABILITY affected by (Sec 6) RULES ON FORGERY 134, 135, 22, 29
Not dated (Sec. 17[c]); (Sec. 191, par. 6), Sec. (accommodation party), rules on
Section 1 13, Sec. 17[b], (Sec. 70, 71), (Sec. 144), (Sec. 12) indorsements
 PN – WUPO …until Disccharge of Instruments.
 BoE – WUPOA Does not specify the value given, or that any
value has been given therefor (Sec. 24; see Art.
1354, NCC) does not specify the place where it