NEGOTIATION AND

ENDORSEMENT

MCB PF
A Check is negotiated when it is transferred from one
person to another in such a manner as to constitute
the transferee the holder thereof. If payable to order, it
is negotiated by the endorsement of the holder
completed by delivery.
Endorsement must be written at the back of the check
or on a separate paper known as detached
endorsement. Signature of the holder or endorser,
without additional words is sufficient endorsement.
ENDORSEMENT is the signature of the payee on the
back of the negotiable instrument. The original payee
becomes the endorser in negotiating the instrument.

KINDS OF ENDORSEMENT
1. Special Endorsement – applies to check payable to
order. The endorsement of the payee at the back of the
instrument is said to be special endorsement, since it is
his name specified as payee on the face of the check.
2. BLANK ENDORSEMENT – applies to checks payable
top bearer. In this case, the instrument was drawn against
no specified payee. Whoever is the holder in due course,
must endorse the check at the back for encashment.
3. RESTRICTIVE ENDORSEMENT – prohibits further
negotiation of the check when endorsement is in favor of a
particular person only. It specifies the words “ for deposits
only”. It limits further negotiation of the instrument, and
lessens the risk on the part of the payee under cases where
he makes further transfer of the instrument to another
holder. This is commonly used when the instrument issued
by a drawer is payable to bearer.
4. QUALIFIED ENDORSEMENT – constitutes the
endorser as a mere assignor of the title to the check. It
may ne done by adding word “ without recourse” or
words of similar import.
USES AND LIMITATIONS OF CHECK
1. SAFETY AND CONVENIENCE – it is safer to bring
along with you checks for the amount payable
rather than cash. If lost in the hand of the payee, he
may request for replacement from the drawer.
2. STOP PAYMENT notice. Drawer may notify bank “
for stop payment” of certain checks issued due to
some default in the performance of any obligation
on the part of the payee.
3. FOR ODD AMOUNTS – some transactions may
require odd amounts which can be easily paid by
simply indorsing a check.
4. AS A RECEIPT – acceptance and payment through
checks serve as official receipt for business
transactions, particularly when received by the drawer
together with his monthly bank statement.
5. FOR LARGE AMOUNTS – check are convenient to
use as instrument for paying large amounts of business
transactions.
CHECKS being a negotiable instrument must conform
to the following requirements.
1. It must be in writing and signed by the drawer
2. Must contain an unconditional promise or order to
pay certain amount of money.
3. Must be payable on demand, or at a fixed
determinable future time.
4. Must be payable to bearer or order and
5. Where the instrument is addressed to a drawee, the
drawee must be named with reasonable certainty.
 Five Basic item we seen in check

1. The date
2. The amount
3. The drawer – the person or entity that issued
checks directing the drawee to pay the payee
named therein.
4. The drawee – is the bank who shall pay the party/
5. And the payee – is the party entitled to receive
payment.
 LIABILITIES OF GENERAL ENDORSER

A party who endorses without any conditions or

qualification make the following warranties:
1. That the check is genuine and all respect what it
purports to be
2. That he has good title to it
3. That all prior parties have the capacity to contract
4. That the check is, at the time of his endorsement
valid and subsisting. It will be paid, and if
dishonored, he will pay the amount thereof to the
holder or any subsequent endorser who may be
compelled to pay it
Guidelines in Accepting Checks for Payment

1. Date must be current (examine month, day and

year);
2. Amount in words must tally with the amount in
figures.
3. Payee must be the name of the company (corporate
accounts);
4. Must be signed by the drawer
5. Any erasures or adjustment must be validated by
the full signature of the drawer.
6. If company check, corporate title must be indicated.
Also ensure all required signatories sign the check.
7. Whenever more than one receipt is issued for a
single check, write the amount of the check after the
check number on all receipts covered by it.
8. When payment is part cash and part check, indicate
how much is cash and how mush is the amount of
check.
 TYPES OF BANK DEPOSITS

1. SAVING DEPOSITS – is an interest earning deposit.

Depending on the bank, savings deposits earn interest
at a given time rate computed on the daily or monthly
balance of the deposit.
2. TIME DEPOSIT – is another interest earning deposit
that may only be withdrawn after a stipulated period of
time.
3. DEMAND DEPOSIT – also referred to as a checking or
current account, generally does not earn interest. To
withdraw money from type of deposit, the depositor issues
a check, or written order to pay, which is the reason why
the demand deposit account is also referred to as a
checking account.
4. NOW ACCOUNT – also am interest-earning savings
deposit account from which a withdrawal is made by
means of a check known as NEGOTIABLE ORDER OF
WITHDRAWAL. No passbook is required.
Now account offer the benefit of savings account (it
means interest) and the convenience of a demand
deposit account (withdrawals by check).
The unpaid seller is entitled to any of the following
rights:
1. The right to retain possession of goods.
2. The right to stop the goods in transmit or stoppage
in transit.
3. The right to resell the goods
4. The right to rescind transfer of title and resume
ownership of the goods.
 RIGHTS AND REMEDIES OF CREDITOR

Possibility for debtors incapacity to pay is great, that

creditor suffer bad debts for some account. Allowance
for bad debts must always be provided by creditors but
to a minimum. Before the account can be totally
declared uncontrollable, a legal means can be sought
by the creditor, this is by filing a court suit with the
assistance of a lawyer. A civil case for collection can be
filed with the proper court, depending on the amount
of the claim. To date, the Barangay is given the right to
find justices for creditors in settling accounts within
their level.
Under this legal claim, the debtor is now called
DEFENDANT and the creditor is PLAINTIFF.

RIGHT TO ATTACHMENT is a provisional remedy by

which the property of the defendant is taken into
custody of the law as a security for the satisfaction of
any judgment which the plaintiff may recover.
RIGHT TO GARNISHMENT – is the creditors option
to request from court a third party, the garnishee, to
hold and control the property of the debtor during the
legal proceedings.

RIGHT TO RECEIVERSHIP – is a remedy where the

claim property is placed under custody of third party
called the receiver. The receiver has the right to hold,
control and dispose the subject property per court
direction.
RIGHT TO REPLEVIN – is a provisional remedy
compelling the defendant to deliver to the plaintiff,
any personal property claimed or merchandise loaned,
for non-payment of obligation. Delivery of the item
shall be per court order.

RIGHT TO COMPOSITION – is the will of the debtor

at this own motion to voluntarily pay his creditors
certain portion of their claims in exchange for release
from his liabilities.
Right to composition shall be valid under the following
conditions:
1. There must be list of debtors property and other
creditors
2. Acceptance of the creditors must be in writing
3. Bank deposit certificates by the debtor
4. Terms and conditions must be approved by court.
 Contract of Loan

An agreement where a party delivers to another,

money or consumable thing, upon the condition that
the same amount of the same type and quality shall be
paid.
Contract of loan can be mutuum and commodatum.
MUTUUM – is a contract where subject is a
consumable thing.
COMMODATUM – is an agreement to deliver no
consumable thing.
BAILOR – in a commodatum is the creditor and the
BAILEE is the debtor.
 INTEREST PAYMENT

Where parties agreed on interest rate, their agreement

shall be valid provided it does not violate provision of
Usury Law. When agreement is made but interest is
not stipulated, legal rate which is six (6%) per annum
applies. Classes of interest are:
a. Legal Interest – interest rate prescribed by law as
stipulated under Usury Law.
b. Conventional Interest – interest rate agreed upon
by both parties.
c. Usurious interest – interest rate over and above
what the law provided.
d. Compound interest – interest on interest, accrued
interest added to the principal sum.