A. When notice by dishonor is in letter, what are the requisites?

(Sec 96)
Whether written or oral, the notice must contain the following:
1. Sufficient description of the instrument to identify it.
2. A statement that it has been presented for payment or for acceptance, and that it has been
dishonored (if protest is necessary, the notice must also contain a statement that it has been
protested)
3. A statement that the party giving notice intends to look for the party addressed for payment.
B. When notice need not be given to the drawer, circumstances? (Sec 114)
1. When the drawer and the drawee are the same person
2. When the drawee is a fictitious person or a person not having a capacity to contract
3. When the drawer is the person to whom the instrument is presented for payment
4. When the drawer had no right to expect or require that the drawee or acceptor will honor the
instrument
5. Where the drawer has countermanded payment.
C. Distinguish the liabilities of a drawer and maker (Sec 60 and 61)
Maker
1. engages to pay according to the tenor of the instrument
2. admits the existence of the payee and his capacity to indorse
Drawer
1. Admits the existence of the payee and his capacity to indorse
2. Engages that on due presentment, the instrument will be accepted or paid, or both, according to
its tenor, and that if it be dishonored and the necessary proceedings on dishonor be duly taken, he
will pay the amount thereof to the holder or to any subsequent indorser who may be compelled to
pay it.
- But the drawer may insert in the instrument an express stipulation negativing or limiting his own
liability to the holder
E. What is an irregular indorser? His liabilities?
An irregular indorser or anomalous indorser is a person not a party to the instrument but places his
signature in blank before delivery. Liabilities:
1. If the instrument is payable to the order of a 3rd person, he is liable to the payee and to all
subsequent parties. --- liable to the payee
2. If the instrument is payable to the order of the maker or drawer, or is payable to bearer, he is
liable to all parties subsequent to the maker or drawer.--- liable to the payee
3. If he signs for the accommodation of the payee, he is liable to all parties subsequent to the payee
--- not liable to the payee
liability of an irregular indorser as an accommodation party?
F. What is payment in due course? If maker pays before maturity, is the instrument
discharged? (Sec 88)
- payment in the usual course of business
- payment should be in money
Payment in due course is payment made
1. at or after maturity
2. to the holder thereof
3. in good faith and without notice that his title is defective
- Payment before maturity does not discharge the instrument anymore than if it were merely
discounted and would constitute a negotiation back to the primary party (Sec 50)
- If the instrument is renegotiated to a holder in due course, the latter may recover on the
instrument
G. What is presentment for payment? (Sec 70)
Presentment is the production of a BOE to the drawee for his acceptance or to the drawee or acceptor
for payment or the production of a promissory note to the party liable for payment of the same.

Presentment for payment consists of:

1. a personal demand for payment at the proper place;
2. with the bill or note in readiness to exhibit it if required, and to receive payment and surrender it,
if the debtor is willing to pay.
H. What constitute a sufficient presentment? (Sec 72)
It must be made:
1. by the holder or by some person authorized to receive payment on his behalf
2. at a reasonable hour on a business day;
3. at a proper place as herein defined
4. to the person primarily liable on the instrument, or if he is absent or inaccessible, to any person
found at the place where the presentment is made
I. What are the effects of the acceptors admission? (Sec 62, pp 327 Agbayani)
He engages to pay unconditionally the bill according to the tenor of his acceptance.
The acceptor is the drawee who accepts the bill. Before acceptance the o drawee is not liable on the
bill.
The drawee by acceptance becomes liable to the payee or his indorsee, and also to the drawer
himself. His acceptance immediately places a legal liability on him for the payment of the bill in favor
of one who became a holder thereof after acceptance and if he wants to escape liability, it is up to him
to show that he is a mere agent of the drawer, or allege and prove any other defense which he has to
the liability.
By the acceptor's admission, he is precluded from setting up the defense that:
1. the drawer is non-existent or fictitious because of his admission of the drawer's existence;
2. neither can he claim that the drawer's signature is a forgery because he admits the
genuineness of the drawer's signature;
3. neither can the drawee escape liability by alleging want of consideration between him and the
drawer, as by accepting the bill, he admits the capacity and authority of the drawer to draw the bill.
For the same reason, the better rule seems to be that the acceptor is liable on the bill even if the
drawer has overdrawn his account.
K. When is there a dishonor by non-payment? What are the recourse of the holder when
the instrument is dishonored by non-payment? (Sec 83 and 84)
The instrument is dishonored by non-payment when:
1. It is duly presented for payment and payment is refused or cannot be obtained; or
2. Presentment is excused and the instrument is overdue and unpaid
- When instrument is dishonored by non-payment, an immediate right of recourse to all parties
secondarily liable thereon accrues to the holder
- After dishonor by non-payment, the persons secondarily liable becomes the principal debtors and the
liability becomes the same as that of the original obligors provided that notice of dishonor is given
- Persons secondarily liable are presumed liable in the order they become parties to the instrument
L. What are the necessary steps to charge persons secondarily liable in
a. Bill of exchange
b. promissory notes
c. in other cases
a. Bill of Exchange
1. Presentment for acceptance to the drawee or negotiation within reasonable time after
acquisition unless excused.
2. If the bill is dishonored by non-acceptance
a. notice of dishonor by non-acceptance must be given to persons secondarily liable unless
excused
b. in case of foreign bills, protest for dishonor by non-acceptance must be made unless
excused.
3. If the bill is accepted, or if the bill is not required to be presented for acceptance, it must be
presented for payment to the persons primarily liable unless excused.
4. If the bill is dishonored by non-payment
a. Notice of dishonor by non-payment must also be given to person secondarily liable unless
excused

b. in case of foreign bills, protest for dishonor by non-acceptance must be made unless excused
b. Promissory Notes
1. Presentment for payment must be made within the period required to the person primarily liable
unless excused.
2. If dishonored by non-payment, notice of dishonor by non-payment must be given to the person
secondarily liable unless excused.
c. Other cases
1. Protest for non-payment by drawee is necessary to charge an acceptor for honor or a referee in
case of need.
2. Protest for non-payment by the acceptor for honor is also required.
M. Purpose for exhibiting the instrument
The purpose of exhibition is to enable the debtor:
1. To determine the genuineness of the instrument and the right of the holder to receive payment
2. To reclaim possession upon payment
No valid presentment and demand can be made by any person without having the note in his
possession at the time, so that the maker may receive it in case he pays the amount due unless
special circumstances, such as the loss of the note or its destruction, are shown to excuse its
absence.
When exhibition is excused:
1. When the debtor does not demand to see the instrument but refuses payment on some other
grounds and
2. When the instrument is lost or destroyed.
N. What is implied waiver of presentment?
Implied waiver of presentment may be manifested by any language or conduct or any agreement
between the parties reasonably calculated to lead the holder to believe that presentment is waived or
to mislead or prevent him from treating the bill as he otherwise would.
Examples:
1. Declarations, acts or conduct which mislead the holder, and induce him from taking the necessary
steps to make presentment.
2. Drawer A tells holder F that he will take care of collecting the bill. This is waiver on A's part and if F
fails to make presentment, A is not discharged.
3. Holder failed to make presentment to the drawee. Thereafter, drawer paid part of the bill and
promised orally to pay the rest. This is implied waiver of presentment.
4. Where the maker, before maturity of the note, was adjudged bankrupt partly upon his written
admission of inability to pay the debts with a willingness that he be adjudged a bankrupt.
5. Where the indorsers of a note payable at a bank had assured the holder that it could not be paid at
maturity and knew that the maker, a corporation, had no money to pay for it.
6. Where the indorser assured the holder, before maturity of the note, that a note of the same amount
with his indorsement will be given in renewal, such assurance, if relied by the holder.
7. When the maker, on the day of maturity of the note , telephoned the holder that he could not then
pay the note and the holder then telephoned the maker consenting in giving further time to the
maker.
O. Summary of rules as to presentment for payment:
1. Presentment for payment is not necessary to charge persons primarily liable
2. But is necessary to charge persons secondarily liable EXCEPT:
1. as to drawer under Section 79 where he has no right to expect or require that the drawee or
acceptor will pay the instrument
2. as to indorser as to Section 80 where it is made or accepted for his accommodation
3. when dispensed with under Section 82 diligence exercised, fictitious drawee, waived
4. When the instrument has been dishonored by non-acceptance
P. When is delay in making presentment excused?
1. When delay is caused by circumstances beyond the control of the holder and

2. Not imputable to his default, misconduct or negligence

- when the cause of delay ceases to operate, presentment must be made with reasonable diligence.
Q. When must notice be given where the parties reside in the same place? (Sec 103)
Where the person giving and the person to receive notice reside in the same place, notice must be
given within the following times:
1. If given at the place of business of the person to receive notice, it must be given before the
close of the business hours on the following day.
2. If given at his residence, it must be given before the usual hour of rest on the day following.
3. If sent by mail, it must be deposited in the post-office in time to reach him in the usual
course on the day following.
R. What are the differences between qualified indorser and general indorser?
Qualified Indorser (Section 65)
General Indorser (Section 66)
Warranties extend to all subsequent parties who Warranties extend only to subsequent holders in
acquire title through his indorsement regardless due course
of whether they are holders in due course or not
Warrants only that he is ignorant of any fact Warrants that the instrument at the time of
which would impair the validity of the indorsement is valid and subsisting
instrument or render it valueless
Secondary liability is limited.
Secondary liability is not limited to the 4
Does not engage to pay if it is dishonored by warranties. Indorser engages that on due
non-acceptance or non-payment except when presentment, the instrument will be accepted or
the dishonor arises from his 4 warranties.
paid, or both, according to its tenor, and that if
it be dishonored and the necessary proceedings
on dishonor be duly take, he will pay the
amount thereof to the holder, or to any
subsequent indorser who may be compelled to
pay it.
Engages to pay whether the dishonor arises
from the warranties or from other causes such
as insolvency.
General Rule Only persons whose signatures appear on an instrument are liable thereon.
Exceptions:
1. Where a person signs in a trade or assumed name;
2. The principal is liable if a duly authorized agent signs on his own behalf;
3. In case of forgery, the forger is liable even if his signature does not appear on the instrument;
4. Where the acceptor makes his acceptance of a bill on a separate paper; &
5. Where a person makes a written promise to accept a bill before it is drawn.
Q: what is the Effect of WAIVER to 1) Presentment of Payment 2) Notice of Dishonor 3)
Protest
1) Where Presentment for Payment is waived, notice of dishonor is also waived.
2) Waiver of Notice of Dishonor does not waive Presentment of Payment.
3) When Protest is waived Presentment and Notice of Dishonor are also deemed waived. This is so
because protest means all the steps accompanying dishonour necessary to charge a party
secondarily liable. But a waiver of Notice of Protest waives NOTICE only and is not a waiver of
presentment.
Q: What is PROTEST? Circumstances when Protest required?
PROTEST is the formal instrument executed usually by a notary public certifying that the legal steps
necessary to fix the liability of the drawee and the indorsers have been taken. It only applies to foreign
bills but the custom top treat inland bills and notes in the same manner has become so nearly
universal, that in common usage the term means the taking of such steps as are required to charge
the indorser.

Sec 152. In what cases Protest Necessary:

Where a foreign bill appearing on its face to be such is dishonored by non-acceptance, it must be duly
protested for non-acceptance, and where such a bill which has not previously been dishonored by nonpayment, it must be duly protested for non-payment. If it is not so protested, the drawer and indorsers
are discharged. Where a bill does not appear on its face to be a foreign bill, protest thereof in case of
dishonor is unnecessary.
Q: What is the effect when a bill is payable at a bank, and there is a failure to present the
bill during banking hours?
Sec. 75. Presentment where instrument payable at bank. - Where the instrument is payable at
a bank, presentment for payment must be made during banking hours, unless the person to make
payment has no funds there to meet it at any time during the day, in which case presentment at any
hour before the bank is closed on that day is sufficient.
Q: What is Acceptance for Honor? Its Purpose? How it is made?
Acceptance for Honor is an undertaking by a stranger to a bill after protest for the benefit of any
party liable thereon or for the honor of the person for whose account the bill is drawn which
acceptance inures also to the benefit of all parties subsequent to the person for whose honor it is
accepted, and conditioned to pay the bill when it becomes due if the original drawee does not pay it. It
is also called acceptance supra protest since previous protest for non-acceptance or for better security
is necessary.
Purpose: To preserve the credit of the parties to the instrument or some party to it for whose honor
the acceptance is made, as the drawer, drawee or indorser or somebody else.

Sec. 162. Acceptance for honor; how made. - An acceptance for honor supra protest must be in
writing and indicate that it is an acceptance for honor and must be signed by the acceptor for honor.
Q: What is the nature and extent of liability of acceptance for honor?
Sec. 164. Liability of the acceptor for honor. - The acceptor for honor is liable to the holder and
to all parties to the bill subsequent to the party for whose honor he has accepted.
The acceptor for honor upon payment of the bill is subrogated to the rights which the parties to the
bill subsequent to the party for whose honor he has accepted may have as regards the latter and all
prior parties. As the acceptor for honor takes the place of the person for whose honor he accepts, he is
liable to the holder and all subsequent parties who have a right of recourse against the person for
whose honor he accepts.
Q: What is notice of dishonor? Effect of delay of notice?
Notice of Dishonor is the bringing, either verbally or in writing, to the knowledge of the drawer or
indorser of an instrument, the fact that a specified negotiable instrument, upon proper proceedings
taken, has not been accepted or paid and that the party notified is expected to pay it.
Sec. 113. Delay in giving notice; how excused. - Delay in giving notice of dishonor is excused
when the delay is caused by circumstances beyond the control of the holder and not imputable to his
default, misconduct, or negligence. When the cause of delay ceases to operate, notice must be given
with reasonable diligence.
*This section excuses merely the delay in giving notice. It has been held that delay in giving notice of
dishonor caused by the necessity of making inquiries as to the address of the party to be notified is
excusable where the holder was ignorant of the address. But the delay will not be excused in the case
where the holders agent called at the defendants place to give him notice of dishonor, but he was
absent from the city, since notice by mail was practicable.