What constitute determinable future

time?
See Section 3
If payable

1.

Fixed period after date or sight

Example:
May 17, 2014
Thirty days after date, I promise to pay to the order
of Frank Drew the sum of P53,000.00.
(Sgd.)
William Garcia

2. On or before a fixed or determinable

future time
Example:
June 1, 2014
On or before October 31, 2010, I promise to pay to
the order of Joseph Teodoro the sum of P55,000.00.
(Sgd.)
Grace Dizon

3. On or before at a fixed period after

the occurrence of a specified event
which is certain to happen, though
the time of happening be uncertain
Example:
April 7, 2014
I promise to pay to David Valdez or bearer the sum
of P150,000.00 on the death of John Ray.
(Sgd.)
Virginia Singson

Payable upon a contingency

If the time fixed for payment is
subject to contingency, or a condition
or event which, may or may not
happen, renders the instrument NOT
NEGOTIABLE.
The happening of the contingent
event does not cure the defect of a
non-negotiable instrument.

Example:
June 9, 2014
I promise to pay to the order of Vanessa
Adina P890,000.00 if she should marry
Michael Santos on or before July 22,
2014.
(Sgd.)
Sonia Carag

Provisions in addition to order,

or promise to pay money
See Section 5

A provision for the doing of an

act in addition to paying money
destroys the negotiability of the
instrument.

Different provisions that do not affect

the negotiability of an instrument
See Sections 5 and 6
1. Authorizes the sale of collateral securities in case
the instrument be not paid at maturity; or
2. Authorizes a confession of judgment if the
instrument be not paid at maturity; or
3. Waives the benefit of any law intended for the
advantage or protection of the obligor;
4. Gives the holder an election to require
something to be done in lieu of payment of
money.

5. It is not dated; or
6. It does not specify the value given, or that any
value had been given therefor; or
7. It does not specify the place where it is drawn of
the place where it is payable; or
8. It bears a seal; or
9. It designated a particular kind of currency
money in which payment is to be made.

I. Authorizes the sale of collateral

securities in case the instrument is
not paid at maturity
. The sale of the collateral securities must be
done after the date of maturity otherwise it
would render the instrument non-negotiable.
Example:
I promise to pay to the order of Lorenzo Gray P1,350,000.00 on
February 3, 2014 provided however that if this note is not paid on
maturity, my Patek Philippe watch which I pledged to Lorenzo Gray
as security for the payment of this note may be sold by the holder of
this note and proceeds thereof applied to the amount of this note.

II. Authorizes a confession of judgment

if instrument is not paid at maturity
. A provision wherein one who appears in
court and consents to the entry of a
judgment against him and as such, he is
held to have admitted the existence of every
fact necessary to sustain the judgment.
Example:
I promise to pay Lorenzo Gray or order P350,000.00 on January
31, 2014 with 10% interest per annum and in case the same is not
paid at maturity, I do hereby authorize any attorney to appear
before any court and confess judgment thereon for the principal
amount, with interest, costs and attorneys fees.

III.Waives the benefit of any law

intended for the advantage or
protection of the obligor
. A provision whereby makers and the
indorsers waive presentment, protest,
demand and notice of protest, or notice of
non-payment, in case the instrument is not
paid at maturity, does not affect the
negotiability of the instrument.
Example:
Pay to the order of Gregory Dimson the sum of fifty thousand
pesos (P50,000.00) on October 31, 2014.
Presentment for payment is hereby waived.

IV.Gives the holder an election to

require something to be done in lieu
of payment of money
. A provision in the instrument entitling the
holder, at his option, to receive money or
require something to be done, does not
destroy its negotiability.
Example:
I promise to pay Jerome Alas or order P40,000.00 or an Apple
Iphone 8GB at the option of the holder .

V. It is not dated.
. It is not essential that the instrument be
dated, although, when presented, the date is
a material part of the instrument.
Example:
Antipolo City
For value received, I promise to pay to the order of Zoila Gomez
P30,000.00.
(Sgd.)
Rey Ramos

VI.It does not specify the value given, or

that any value had been given therefor
. It is not necessary to the validity of the
instrument to insert the words value
received or to express the consideration for
its issuance.
Example:
Ligao, Albay
June 19, 2014
I promise to pay to Sancho Arnaiz or order the sum of P500,000.00.
(Sgd.)
Henry Abao

VII.It does not specify the place where it

is drawn or the place where it is
payable.
. The place of the execution of an instrument
is not essential for purposes of negotiability
and it need not specify the place where it is
payable to be valid and negotiable.
Example:
March 22, 2014
I promise to pay Gary Hilario or order the sum of P350,000.00.
(Sgd.)
Julian Santiago

VIII.It bears a seal.

. A negotiable instrument need not be under
seal, but the fact that it is under seal does
not affect its validity or negotiability.

IX.It designated a particular kind of

currency money in which payment is
to be made
. The negotiability of an instrument is not
affected by a designation of a particular kind
of money for payment. If an instrument is for
payment of money only, it is not material
whether it is the money of one country or the
money of another.
Example:
I promise to pay the order of Herminigildo Valdez the sum of
$15,000.00 on September 18, 2014.

An instrument is payable on demand

1. Where expressed to be payable on
demand, at sight or on presentation.
Example:
June 15, 2014
On demand, pay to Marlon Cerrado or bearer the
sum of P85,000.00.
(Sgd.)
Enrico Arguelles

An instrument is payable on demand

2. Where no period of payment is stated.
Example:
___________________, after date, without grace period, the
undersigned, for value received, hereby promises to pay to Venancio
Perillos or order the sum of P750,000.00.
(Sgd.)
Jhandi Kanagi

An instrument is payable on demand

3. Where issued, accepted, or indorsed after
maturity.
i.

As to maker and drawer when the

instrument is issued after its maturity
ii. As to acceptor when the instrument is
accepted after its maturity
iii. As to indorser when the instrument is
indorsed after its maturity

Instrument payable to order

See Section 8
The instrument is payable to order
where it is drawn payable to the order
of a specified person or to him or his
order.

Instrument payable to order

Instrument payable to order may be
drawn payable to the order of:
1. Payee who is not the maker, drawer, or
drawee
2. Drawer or maker
3. Drawee
4. Two or more payees jointly
5. One or more of several payees
6. Holder of an office for the time being.

Instrument payable to bearer

1. It is expressed .
2. Payable to a person named or bearer.
3. Payable to the order of a fictitious or
non- existing person and such fact was
known to the person making it so
payable.
4. The name of the payee does not purport
to be the name of any person
5. The only or last endorsement is an
endorsement in blank.

1. When expressed to be payable to bearer.

Example:

I promise to pay to bearer the sum of P12,000.00.

2. Payable to person named therein or bearer.

Example:

I promise to pay to Liezl Hernando or bearer the sum of

P32,000.00.

3. Payable to the order of a fictitious or

non- existing person

A negotiable instrument or indorsement

made to a fictitious person cannot be
treated as payable to bearer unless the
maker:
1. Knows the payee to be fictitious; and
2. Actually intends to make the
instrument payable to fictitious person

Designation of payee
Where an instrument is payable to
the order, the payee must be named
or
otherwise
indicated
with
reasonable certainty. A promise to
pay, other than to bearer, which is not
certain as to the payee, is NOT
negotiable.

Date is essential to make an

instrument negotiable
See Section 6 (a)
General Rule:
It states that the date is non- essential. If
dated, such date is deemed a prima facie
proof that it is the true date of the making
drawing, acceptance or endorsement of
the instrument.

Date is important in the following instances, not to

determine negotiability, but to determine
maturity.
1. Where the instrument is payable within a
specified period after date, or after sight.
2. When the instrument is payable on demand,
date is necessary to determine whether the
instrument was presented within a reasonable
time from issue, or from the last negotiation.
3. When the instrument is an interest bearing one,
to determine when the interest starts to run.

Ante-dated and Post-dated

Antedate to date an instrument as of a time before the
time it was written.
Post-dated to date an instrument as of a time later than
that at which it is really made.

Effect when instrument is antedated

or postdated:
The instrument is valid and it does not lose
its negotiable character provided this was not
done for an illegal or fraudulent purpose.

When title is acquired in antedated or post-dated instrument

The person to whom a post-dated or
ante-dated instrument is delivered,
acquires a title thereto as of the date
of delivery and not as of the date
written on the instrument.

Instances when date be inserted

1. Where an instrument expressed to be
payable at a fixed period after the date is
issued undated.
2. Where the acceptance of an instrument
payable at a fixed period after sight is
undated.

 If an instrument is delivered with a blank space

for the insertion of the date, the presumption is
that authority is conferred on the payee to fill the
blank, which he may do without in any way
affecting the character of the instrument or the
rights of the parties thereto. The implied
authority of the payee extends only to the
insertion of the true date.
Who may insert the date of issue or
acceptance:
1. Payee; or
2. Any holder to whom the instrument is indorsed.

Effect of insertion of wrong date

(With knowledge of true date)
As against the party inserting a
wrong date It renders the instrument void as to
him and the indorsers are discharged
but if subsequently ratified by the
maker, it is equivalent to original
authority for filling up of the blank
with respect to the date.

Effect of insertion of wrong date

(With knowledge of true date)
As against subsequent holders
in due course It does not avoid the instrument in
the hands of a subsequent holder in
due course. In his hands, the date
inserted, even if wrong, is to be
regarded as the true date.

Effect of insertion of wrong date

(By mistake)
The payees mistake in inserting a
date other than that which the parties
intended does not amount to an
unauthorized alteration.

Various situations involving

negotiable instruments
A. Incomplete instrument
1. Delivered
a. With the forgery and alteration.
b. Without forgery and alteration.
2. Not delivered
a. With the forgery and alteration.
b. Without forgery and alteration.

Various situations involving

negotiable instruments
B. Complete instrument
1. Delivered
a. With forgery and alteration
b. Without forgery and alteration.
2. Not delivered
a. With forgery and alteration.
b. Without forgery and alteration.

INCOMPLETE BUT DELIVERED

INSTRUMENT
See Section 14
An instrument is incomplete when it
is wanting in any material particular.

Meaning of material particular

Any particular proper to be inserted
in a negotiable instrument to make it
complete.

Authority to fill up the blanks in an

incomplete but delivered instrument
The holder has a prima facie authority to
complete it. And a signature on the blank
paper delivered by the person making the
signature in order that the paper may be
converted into a negotiable instrument
operates as a prima facie authority to fill it
up as such for any amount.

When is a prior party bound by an

incomplete but delivered instrument
If it is filled up strictly in accordance with the
authority given and within a reasonable time.
But if any such instrument, after completion, is
negotiated to a holder in due course, it is valid
and effectual for all purposes in his hands, and
he may enforce it as if it had been filled up
strictly in accordance with the authority given
and within a reasonable time.

Nature of defense
The defense that the instrument is not
filled up strictly in accordance with the
authority given or that it is not filled
within a reasonable time is a mere
personal or equitable defense. As
such, the defense is available against a
holder who is not a holder in due course
but NOT against a holder in due course.

Rules when incomplete but delivered

instrument was completed in
contravention of the authority given or
not completed within a reasonable time

Holder in due course:

He can enforce the instrument as
completed against prior parties as
well as parties subsequent to the
wrongful completion.

Rules when incomplete but delivered

instrument was completed in
contravention of the authority given or
not completed within a reasonable time

Holder not in due course:

He can enforce payment against the
party guilty of wrongful completion as
well as parties subsequent to the
wrongful completion but not against
parties prior thereto.

Example:
Steven Perez executes and issues to Jill Chua a note with the
amount in blank. Steven Perez authorizes Jill Chua to place
the sum of P5,000.00. If Jill Chua inserts the sum of
P50,000.00, she cannot enforce payment against Steven
Perez. However, if after its completion, the note is
negotiated by Jill Chua to Andrew Go, Andrew Go to Dante
Ramos who is a holder in due course, Dante Ramos may
enforce payment of P50,000.00 against the maker and any
of the indorsers. However, if Dante Ramos is not a holder in
due course, he cannot enforce payment against Steven
Perez, a party signing the note before its completion,
although he may enforce it against Jill Chua, the party
guilty of wrongful completion and Andrew Chua, party
subsequent to the wrongful completion.

INCOMPLETE AND UNDELIVERED

INSTRUMENT
See Section 15
As against the party signing the
instrument BEFORE delivery
Not valid against the party whose signature
was placed before delivery, whether the
holder is a holder in due course or not.
However, with respect to a holder in due
course, there is a prima facie presumption
of delivery which may be rebutted.

 As against the party AFTER

completion and delivery
The holder of an originally incomplete and
undelivered instrument may enforce its
payment against parties signing the
instrument after its completion. Thus, if
an incomplete note is stolen and the thief
completes it and negotiates the same to
other persons, the holder of the note may
enforce payment against the thief and all
parties subsequent to the latter.

Party whose signature was

placed after delivery
Valid against the party whose
signature was placed after delivery
like an endorser because the endorser
warrants the instrument to be
genuine and in all respect what it
purports to be.

Nature of defense
The defense of a party signing the
instrument prior to its delivery that it is
not valid for having been incomplete and
undelivered is a REAL or ABSOLUTE
defense. Such defense can be interposed
not only against one who is not a holder in
due course but also against a holder in due
course.

Effect if an instrument is
undelivered
It is incomplete and revocable until
delivery of the instrument. The payee
acquires no right until the instrument
is delivered to him by or under the
authority of the maker or drawer.

Delivery and Issue defined

Delivery

Issue

It is the transfer of possession,

actual or constructive, from
one person to another, with
the intent to transfer title to
payee and recognize him as
holder thereof.

The first delivery of the

instrument, complete in form,
to a person who takes it as
holder.

When delivery presumed and

nature of presumption
As against a holder not in due
course
Where the instrument is no longer in
the possession of a party whose
signature appears thereon, a valid
and intentional delivery is presumed
until the contrary is proved.

When delivery presumed and

nature of presumption
As against a holder in due
course
Where the instrument is in the hands
of a holder in due course, a valid
delivery thereof by all parties prior to
him so as to make them liable to him
is conclusively presumed.

Instrument in the possession

of a party other than a
holder in due course

Prima facie presumption of delivery

but subject to rebuttal. It must be
made either by or under the authority
of the party making, drawing,
accepting or indorsing.

Effect if the instrument is in the

possession of a holder in due
course
Valid delivery is conclusively presumed
and lack of delivery is not available as a
defense against him. Thus, if a complete
note payable to bearer is, before its
delivery by the maker, stolen and
negotiated by a thief, the holder in due
course may enforce payment against all
prior parties.

Effect if the instrument is in the

possession of a holder not in due
course
Lack of delivery is a defense against the
holder having notice of the lack of delivery
at the time he received the instrument.
Thus, if a complete note payable to bearer
is, before its delivery by the maker, stolen
and negotiated by a thief to a holder with
knowledge of the want of delivery cannot
enforce payment against the maker.

Rule if the instrument is

delivered conditionally or
for a special purpose
To a holder not in due course, prior
parties are not bound. To a holder in
due course, the instrument will be as
if there is no condition.

Immediate parties
Those having or being held to know
the conditions or limitations placed
upon the delivery of an instrument. It
means privity, and not proximity.

Remote parties
Those who do not know the
conditions or limitations placed upon
the delivery of an instrument, even if
he is the next party physically.

Nature of defense
The defense that the instrument was not
delivered, or if delivered, delivery was not
authorized or only on a condition or for a
special purpose is a mere PERSONAL
defense. As such, the defense is available
against a holder who is not a holder in due
course but not against a holder in due
course.

Exercise No. 1
Which of the following stipulations of a
promissory note affect or do not affect its
negotiability, assuming that the instrument
is otherwise negotiable?
A. The date of the promissory note is
February 30, 2013.
B. The promissory note gives the maker the
option to make payment either in money
or in quantity of palay or equivalent
value.

C. The promissory note bears interest

payable on the last day of the calendar
year at a rate equal to five percent (5%)
per annum, with 10% of the total sum due
as attorneys fees, if the note is not paid
on maturity.
D. The promissory note gives the holder the
option either to require the maker to
serve as the bodyguard or escort of the
holder for 30 days.

Exercise No. 2

Terence Chong is an indorsee of a promissory note that

simply states: PAY TO JUAN TAN OR ORDER
P400.00. The promissory note has no date, no place of
payment and no consideration mentioned. It was signed
by Mario Go and written under his letterhead specifying
the address, which happens to be his residence. Terence
Chong accepted the promissory note as payment for
services rendered to Samuel Ty who in turn received the
promissory note from Juan Tan as payment for a prepaid
cellphone card worth P450.00. The payee acknowledged
having received the note on June 30, 2013. Is the
promissory note negotiable considering that it was
undated and there is no mention of a place of payment
and any consideration? Why?

Exercise No.3
Gaspar and Baltazar executed and delivered to
Melchor a promissory note which reads as follows: I
promise to pay Melchor or bearer the sum of
P80,000.00 with interest of 12% per annum
on or before June 30, 2013 Manila, March 1,
2013 (Sgd.) Gaspar and Baltazar. Two
months later, for value received Melchor delivered to
Pedro the promissory note with the indorsement
Pay to Pedro and on May 18, 2013, the said note
was endorsed in blank by Pedro and delivered to
Joseph without consideration. Upon Gaspars refusal
to pay upon the demand made by Joseph, the latter
filed an

action to collect from Gaspar the total amount of

the promissory note with 12% interest per annum
from March 1, 2013 and the costs of suit. Gaspars
defenses are that the promissory note is null and
void because the said note was endorsed in blank
by Pedro to pay a gambling debt and that in any
event, his liability cannot exceed more than one
half of the amount due.
1. Are the defenses raised by Gaspar valid? Why?
2. Is Joseph entitled to the whole amount of the
promissory note? Why?

Exercise No. 4
Soledad Aquino signs a promissory note payable
to Crisanta Garcia or bearer and delivers it
personally to Crisanta Garcia. Due to old age,
Crisanta Garcia somehow misplaces the
promissory note and Roman Alegre finds it among
the scattered papers on the floor. Roman Alegre
endorses the promissory note to Leandro Kalaw
for value by forging the signature of Crisanta
Garcia. May Leandro Kalaw hold Soledad Aquino
liable on the promissory note? Why?

Exercise No. 5
Criselda issued a negotiable promissory
note and authorized Pacita to fill up the
amount in blank up to P5,000.00 only.
However, Pacita filled it up to P50,000.00
and negotiated the note for value to Melissa,
who is a holder in due course. For what
amount are Criselda and Pacita liable to
Melissa? Why?

Exercise No. 6
Nympha, using her charm and appeal, succeeded in
making Paquito affixed his signature on a check
without Paquitos knowing that it was a check. At the
time of signing, the check was complete in all
respects. Nympha intended to encash the check the
following morning but that night, it was stolen by
Joshua who succeeded in negotiating the check to
Lope, a holder in due course. Lope encashed the
check the following morning. Paquito refused to have
the amount of the check deducted from his bank
deposit. Can the drawee bank properly charge the
amount of check against Paquitos account? Why?

Exercise No. 7
Horacio makes a promissory note payable to bearer
with the amount blank and delivers it to Catalina for
safekeeping only. Marita surreptitiously snitched
the promissory note and fills it up for P150,000.00
and negotiates it to Andres for value. When
presented by Andres for payment, Horacio
dishonored the promissory note and refused
payment to Andres on the ground that the note (a)
was incomplete and (b) was originally delivered to
Catalina for safekeeping only and not for
negotiating? Are the grounds interposed by Horacio
to dishonor the promissory note valid? Why?

Exercise No. 8
Rene makes a bearer promissory note, leaves the
amount blank and places said note inside the
drawer of his unlocked office table where it was
stolen by Pamela, his office secretary who inserts
the amount of P50,000.00 on the blank space
provided. Pamela negotiated the promissory note
to Donald who was aware that it was stolen.
Donald in turn, negotiated the note to Pocholo who
paid value and was unaware that it was a stolen
promissory note. Can Pocholo enforce payment of
the whole amount of the promissory note to Rene?
Why?

Exercise No. 9

Gerald was about to leave for a business trip. As

his usual practice, he signed several blank checks.
He instructed Erica, his secretary, to fill them as
payment for his obligations. Erica filled one check
with her name as payee, placed P15,000.00
thereon, endorsed and delivered it to Isabel. Isabel
accepted the check in good faith as payment for
the clothes she delivered to Erica. Eventually,
Erica regretted what she did and apologized to
Gerald. Immediately, Gerald directed the drawee
bank to dishonor the check. When Isabel
subsequently encashed the check to the drawee
bank, it was dishonored.

1. Is Gerald liable to Isabel? Why?

2. Suppose the check was stolen while in Ericas
possession and a thief filled the blank check,
endorsed and delivered it to Isabel in payment
for the goods she purchased from her. Is
Gerald liable to Isabel if the check was
subsequently dishonored? Why?

Exercise No. 10
Nicolas makes a promissory note for P12,000.00, but
leaves the name of the payee in blank because he
wanted to verify the correct spelling first. He
mindlessly left the promissory note on top of his table
at the end of the workday. When Nicolas returned the
following morning, he discovered that the promissory
note was missing. It turned up later when Ronald
presented the promissory note for payment. Before
Ronald, Kerby, who turned out to have filched the
promissory note from Nicolas office, had endorsed
the note after inserting his own name in the blank
space as the payee. Nicolas
dishonored
the
promissory note,

contending that he did not authorized the

completion and delivery. But Ronald said that he
had no participation in, or knowledge about the
pilferage and alteration of the note and therefore
he enjoys the rights of a holder in due course
under the Negotiable Instruments Law. Who is
correct and why?

Presumption
It is an inference of a fact not actually
known arising from its usual
connection with another which is
known.

Kinds of presumptions of law

1. CONCLUSIVE PRESUMPTIONS:
Those which are not permitted to be
overcome by any proof to the contrary.
2. DISPUTABLE PRESUMPTIONS:
Those which can be contradicted or
rebutted by presenting proof to the
contrary.

Under Section 3, Rule 131 of the Revised Rules on

Evidence,
the
following
are
disputable
presumptions:
(d) That a person takes ordinary care of his
concerns;
(f) That money paid by one to another belonged to
the latter;
(g) That a thing delivered by one to another
belonged to the latter;
(h) That an obligation delivered up to the debtor
has been paid;
(i) That prior rents or installments had been paid
when a receipt for the later ones is produced;

(k) That a person in possession of an order on himself for

the payment of the money, or the delivery of anything,
has paid the money or delivered the thing accordingly;
(p) That private transactions have been fair and regular;
(q) That the ordinary course of business had been
followed;
That there was a sufficient consideration for a contract;
(s) That a negotiable instrument was given and indorsed
for a sufficient consideration;
(t) That an indorsement of a negotiable instrument was
made before the instrument was overdue and at a place
where the instrument is dated;
(u) That a writing is truly dated;