Want of Consideration

If not authorized in the first place or there is really no valuable consideration or you issue a negotiable instrument on the basis of
love and affection, there is want of consideration.
Failure of Consideration
You have the authority but after a condition is set and you can’t deliver, there is failure of consideration.
Rule in case of partial failure of consideration
In case of partial failure of consideration, this would bar recovery only pro tanto.
Example: If only 2/3 portion of the land was delivered, there would be a partial failure of consideration which would bar recovery
only pro tanto. Hence, P could recover only 2/3 of the note as M is not liable to the extent of the 1/3 which is the price of the
undelivered portion.
ACCOMMODATION PARTY AND ITS LIABILITIES
Relevant Codal Provision
Sec. 29. Liability of accommodation party. – An accommodation party is one who has signed the instrument as maker, drawer,
acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person. Such a
person is liable on the instrument to a holder for value, notwithstanding such holder at the time of taking the instrument know him
to be only an accommodation party.
Accommodation Party
Person who:
1. Signed the instrument as a maker, drawer, acceptor or indorser.
2. Without receiving any value
3. For the purpose of lending his name to the instrument.

Example: Atty. Amago – has good credit; Mr. Divinagracia – has no good credit. For him to be able to loan from the bank, Atty.
Amago will issue a negotiable instrument in his favor so that he can offer it as a security for his loan from the bank.
Important: Issue on want of consideration is not a defense available to an accommodation party against holders for value who are
also holders in due course.
Accommodation party’s defense of want of consideration
It is possible that one is a HNDC but is a holder for value. One is a HNDC not for the reason that he did not receive value for the
negotiable instrument but due to other reasons (i.e. taking the instrument when overdue). You are a holder for value but not a
holder in due course.
In this case, an accommodation party may raise the defense of want of consideration applying Sec. 28. (If there is want of
consideration, you can raise it against a holder not in due course) Sec. 29 is only applicable to holders for value who are also
holders in due course.
Meaning of “without receiving value therefor”
Means that no value has been received for the negotiable instrument and not “without receiving payment for lending his name”.
Being an accommodation party doesn’t mean that you don’t accept any value at all. You don’t receive any value for negotiating the
instrument but for purposes of lending one’s name, you may.
Example: M is given P1, 000 in consideration of lending his name, but not for the promissory note he signs, M does not lose his
status as an accommodation party.
Right to present parol evidence to prove accommodation
One of the problems in this undertaking is that you may not know if one is an accommodation party or not, thus it is an established
principle under NIL that an accommodation party can present parol evidence.
The accommodation party is permitted to show by parol evidence which party he accommodated. Otherwise, if this was not
allowed, an accommodated party may enforce payment of the instrument against the accommodation party.
General rule: Negotiable instrument is a contract and one can’t present parol or oral evidence. The contract itself is already the
evidence of what was agreed upon. A party is precluded from saying anything against the stipulations of the contract.
Exception: Parol evidence may be used to present proof as an accommodation party.
Accommodation party and Regular party
regular party
distinguished
Accommodation party
Signs an instrument without Signs the instrument for value
receiving value therefor
Signs an instrument for the Does not sign for that
purpose of lending his name purpose
to some other person
May always show by parol Cannot disclaim or limit his
evidence that he is only such personal liability as appearing
on the instrument by parol
evidence
Cannot avail of the defense of May avail of said defense
absence or failure of against a holder not in due
consideration against a holder course
not in due course
After paying the holder, may May not sue any subsequent
ask sue for reimbursement party for reimbursement
from the accommodated
party, although a subsequent
party