NEGOTIABLE INSTRUMENTS

PRESENTMENT FOR PAYMENT

Not necessary to charge persons primarily liable
TENDER OF PAYMENT - if the instrument is, by its terms payable at a special place, and he is able
and willing to pay it there at maturity
Necessary to charge secondarily liable (drawer and indorsers) (Sec 70)
Exceptions: 1. Drawer -> where he has no right to expect or require that drawee will pay (Sec 79)
2. Indorsers -> where the instrument was made or accepted for his accommodation
and he has no reason to expect that the instrument will be paid (Sec 80)
Not payable on demand - PP on the day it falls due
If payable on demand - within reasonable time after issue or after the last negotiation (BOE) (Sec 71)
Sufficient presentment - (Sec 72)
1. By holder or agent
2. At a reasonable hour on a business day
3. At a proper place as herein defined
4. To the person primarily liable or if absent or inaccessible, to any person found at the place
Proper place - (Sec 73)
1. Specified place
2. Address of the person to make payment
3. Usual place of business or residence
4. Any other case, wherever he can be found or last known place of business or address
Instrument must be exhibited and delivered to the party paying (Sec 74)
If payable at bank equivalent to an order to the bank to pay for the account of the principal
debtor thereon (Sec 87)
Presentment: during banking hours; (Sec 75)
Unless the person to make payment has no funds to meet it at anytime during the day -> any hour
before the bank is closed on that day
PRESENTMENT TO:
1. Principal debtor is dead and no place of payment is specified -> personal representative (Sec 76)
2. Partners and no place of payment is specified - to any one of them (sec 77)
3. Joint debtors -> to all of them(Sec 78)
Delay is excused -> circumstances beyond the control of the holder without fault
Delay ceases to operate -> presentment must be made with reasonable diligence (Sec 81)
Presentment is excused - (Sec 82)
1. It cannot be made after the exercise of reasonable diligence;
2. Drawee is a fictitious person
3. Waiver (express or implied)
Dishonored by non-payment - (Sec 83)
1. It is duly presented for payment and payment is refused or cannot be obtained
2. Presentment is excused and the instrument is overdue and unpaid
----> immediate right of recourse to all parties secondarily liable (Sec 84)
Every NI is payable at the time FIXED therein WITHOUT GRACE. (Sec 85)
Maturity date:
Sunday or holiday and Saturday -----> next succeeding business day

NEGOTIABLE INSTRUMENTS

Saturday -----> if payable on demand, may be presented before 12nn when the
entire day is not holiday
Time, how computed ----> excluding the day from which the time is to begin to run and by including
the date of payment (Sec 86)
Payment in due course - made at or after the maturity of the payment to the holder in GF and w/o
notice that his title is defective
NOTICE OF DISHONOR
When the instrument has been dishonored by non-acceptance or non-payment, NOD must be given
to the drawer and to each indorser
-----> any drawer or indorser not given NOD is DISCHARGED. (Sec 89)
By whom given (Sec 90) -1. By or on behalf of the holder
2. By or on behalf of any party who might be compelled to pay (**have a right of reimbursement from
the party to whom the notice is given)
Notice may be given by an agent (Sec 91)
A holder, whether he is the owner or not, may give NOD.
(Sec 94) NOD to the parties liable; or
NOD to his principal ---> as if he is an independent holder (the principal also has the same time)
Notice on behalf the holder it inures to the benefit of all subsequent holders and all prior parties who have a right of recourse
against the party to whom it is given (Sec 92)
Notice is given by the party entitled thereto --- (Sec 93)
It inures to the benefit of the holder and all parties subsequent to the party to whom notice is given
Form of notice (Sec 96) -- in writing or merely oral
**need not be signed (Sec 95)
To whom notice may be given -- (Sec 97)
-----> to the party himself or to his agent in that behalf
1. Where party is dead --- (his death is known to the party giving notice);
----> personal representative (if no PR) last residence or business (Sec 98)
2. Partners -----> to any one partner (even though there has been dissolution) (Sec 99)
3. Persons jointly liable ----> to each of them (unless one has authority) (Sec 100)
4. Bankcrupt / Insolvent/ assignment for the creditors ------> either to the party himself or to his
trustee or assignee (Sec 101)
Notice may be given as soon as the instrument is dishonored (Sec 102), unless delay is excused
Delay ceases to operate ->NOD must be given with reasonable diligence (Sec 81)
Parties reside in same place ----- (Sec 103)
1. Place of business - before the close of business hours on the day ffg.
2. Residence - before the usual hours of rest on the day ffg.
3. By mail - must be deposited in the post office in time to reach in the usual course the day ffg

NEGOTIABLE INSTRUMENTS

Parties reside in different places ----- (Sec 104)

1. By mail - must be deposited in the post office in time to go by mail the day ffg; or
If there be no mail at a convenient hour on last day, by the next mail thereafter.
2. if otherwise than mail, within the time that notice would have been received in due course, if it
had been deposited in the post office within the time specified in #1
Sender deemed to have given due notice - where NOD is duly addressed and deposited in the post
office, notwithstanding any miscarriage (Sec 105)
Deposit in post office - when deposited under the control of the post office dept (Sec 106)
Notice to subsequent parties - has the same time for giving notice to antecedent parties (Sec 107)
Where notice must be sent --- (Sec 108)
A. To the address of the party when it is added to his signature
B. If no address is given:
a) Post office - nearest to residence or where he is accustomed
b) Residence or business
c) Sojourning place
Where notice is actually received, it is sufficient though not in accordance with the rules
Waiver - before or after the omission; express or implied (Sec 109)
*if embodied in instrument ---> binding upon all parties
*if written above the signature of the indorser ---> binds only the indorser (Sec 110)
Waiver of protest - includes NOD and presentment
NOD is dispensed with when, after the exercise of reasonable diligence, it cannot be given (sec 111)
Delay -- same Sec 81
When notice need not be given to DRAWER---- (Sec 114)
1. Drawer and drawee same person
2. Drawee - fictitious person or no capacity
3. Drawer is the person to whom the instrument is presented
4. *no right to expect or require
5. Countermanded payment
When notice need not be given to INDORSER -- (Sec 115)
1. Drawee is a fictitious person or no capacity and indorser is aware of it at he time he indorsed
2. Indorser is the person to whom the instrument is presented
3. Made or accepted for his accommodation
Where due NOD for non-acceptance has been given, notice of a subsequent dishonor by nonpayment is not necessary, unless in the meantime the instrument has been accepted (Sec 116)
An omission to give NOD by non-acceptance, does not prejudice the rights of a HIDC subsequent to
the omission (Sec 117)
Protest is required only in foreign bills of exchange (Sec 118)
DISCHARGE OF NEGOTIABLE INSTRUMENTS
An NI is discharged: (Sec 119)

NEGOTIABLE INSTRUMENTS

1. Payment in due course by the principal debtor

2. Payment in due course by the party accommodated (where the NI is made or accepted for his
accommodation)
3. Intentional cancellation by the holder
4. Any other act which will discharge a simple contract for payment of money
5. When the principal debtor becomes the holder at or after maturity in his own right (reaaquisition)
\*renunciation by the holder (Sec 122)
*material alteration (Sec 124)
A person secondarily liable is discharged:
1. By any act which discharges the instrument (sec 119)
2. Intentional cancellation of his signature by the holder (Striking out indorsement)
3. Discharge of a prior party
4. Valid tender of payment made by a prior party
5. Release of the principal debtor (by the creditor) **untless the hlolders right of recourse against
them is expressly reserved
6. any agreement binding upon the holder to extend the time of payment or to postpone the holders
right to enforce the instrument **unless made with the assent of the party secondarily liable or the
right of recourse is expressly reserved
**renunciation by the holder (Sec 122)
**qualified acceptance unless they have assented (Sec 143)
**failure to present for acceptance when required (Sec 144)
**failure to present for payment (Sec 70)
**failure to give notice of dishonor (Sec 89)
**the holder of a check procures it to be certified (Sec 188)
**when foreign BOE is not protested (Sec 152)
If the instrument is paid by a party secondarily liable ---> he is only remitted to his former rights as
regards all prior parties (Sec 121)
*he may strike out his indorsement and all subsequent indorsements and may again negotiate the
instrument
Except:
1. Payable to 3rd person and has been paid by the drawer;
2. Made or accepted for accommodation and has been paid by the party accommodated
RENUNCIATION by the holder --- (Sec 122)
1. The holder may expressly renounce his rights against any party to the instrument before, at, or
after its maturity.
2. An absolute and unconditional renunciation of his rights against the principal debtor made at or
after maturity discharges the instrument.
**personal defense - it will not affect HIDC
how made:
1. In writing
2. Delivery of the instrument to the person primarily liable
CANCELLATION (Sec 123)
If made unintentionally, under a mistake or without authority ----> it is inoperative
Burden of proof ---> the party who alleges that cancellation was made unintentionally
ALTERATION (Sec 124)
If materially altered without assent of all parties ---> the instrument is avoided
**except: against a party who has himself made or authorized to the alteration and subsequent
indorsers

NEGOTIABLE INSTRUMENTS

** personal defense --- HIDC---> may enforce payment according to its original tenor
MATERIAL ALTERATION -- (Sec 125)
1. Date
2. Sum payable (principal or interest)
3. Time or place of payment
4. Number or relation of parties
5. Medium or currency in w/c payment is to be made
6. Adds a place of payment if no specifie, or any other change which alters the effect of the instrument
BILLS OF EXCHANGE
An unconditional order in writing addressed by one person to another, signed by the person giving it,
requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future
time a sum certain in money to order or to a bearer. (Sec 126)
BOE not an assignment of funds in the hands of the drawee.
Drawee is not liable until he accepts (Sec 127)
A bill may be addressed to two or more drawees jointly, but not in alternative or in succession (Sec
128)
Inland and foreign BOE (Sec 129)
When bill may be treated as PN: (Sec 130)
1. Drawer and drawee same person
2. Drawee is fictitious or no capacity
REFEREE (Sec 131) --- a person to whom the holder (at its option) may resort in case of need when
the bill is dishonored
*bill must be protested for non-payment before it is presented to a referee in case of need (Sec
167)
ACCEPTANCE
How made-- (Sec 132)
1. In writing and signed by drawee
2. Must not express that he will perform his promise by any other means other than payment of money
The holder may require that acceptance be written on the bill, if such request is denied, may treat the
bill as dishonored (Sec 133)
Allonge - (Sec 134)
When an acceptance is written on a paper other than the instrument
It does not bind the acceptor except in favor of a person (1) to whom it is shown and (2) who, on
faith thereof (reliability), receives the bill for value
An unconditional promise in writing to accept a bill before it is drawn is deemed an actual
acceptance in favor of every person who, upon the faith thereof, receives the bill for value (Sec 135)
Time allowed drawee to accept --> 24hours after presentment (Sec 136)
CONSTRUCTIVE ACCEPTANCE (Sec 137)---1. Where the drawee to whom a bill is delivered for acceptance destroys the same

NEGOTIABLE INSTRUMENTS

2. or refuses within 24hrs after such delivery or within such other period as the holder may allow, to
return the bill accepted or non-accepted
Acceptance may be made: (Sec 138)
a. Before the bill has been signed by the drawer
b. Incomplete
c. Overdue
d. Dishonored by a previous refusal to accept or by non-payment
KINDS OF ACCEPTANCE (Sec 139)
General or qualified
1. General acceptance (Sec 140) - without qualification
Payment at a particular place is a general acceptance, unless the bill is to be paid there only (local).
2. Qualified acceptance (Sec 141)
a) Conditional
b) Partial
c) Local (place)
d) As to time
e) Acceptance of some, but not all
The holder may refuse to take QA, and if he does not obtain unqualified acceptance, he may treat
the bill as dishonored (Sec 142)
If QA has been taken --The drawer and indorsers are discharged from liability.
**unless they have expressly or impliedly authorized the holder to take a qualified acceptance,
or subsequently assented thereto.
When the drawer or an indorser receives notice of a QA, he must express his dissent to the
holder within a reasonable time, or he will be deemed to have assented thereto.
PRESENTMENT FOR ACCEPTANCE
When necessary (Sec 143)
1. Payable after sight; or when necessary to fix maturity date
2. Expressly stipulate
3. Payable elsewhere other than residence or place of business of drawee
*the holder must either present it or negotiate it within reasonable time
**Failure to do so, the drawer and all indorsers are discharged. (Sec 144)
How made (Sec 145) ---1. By or on behalf of the holder
2. At a reasonable hour on a business day
3. Before the bill is overdue
4. To the drawee or some other person authorized
a) Drawees not partners ---> all unless one has authority
b) Dead ---> personal representative (permissive)
c) Adjudged a bankcrupt, insolvent, assignment ---> either to him or trustee or assignee
Presentment may be made under Sec 72 and 85. (Sec 146)
Saturday (not holiday) ---> before 12nn

NEGOTIABLE INSTRUMENTS

Where time is insufficient (Sec 147) ------> delay is excused (drawer and indorsers not discharged)
1. Bill drawn payable elsewhere (no.3 of Sec 143)
2. The holder has no time to present the bill for acceptance before presenting it for payment on the
day it falls due
3. With exercise of reasonable diligence
Presentment is excused (Sec 148) --- (the bill may be treated as dishonored)
1. Drawee is dead, absonded, fictitious or no capacity
2. After reasonble exercise of diligence, presentment cannot be made
3. Irregularity of presentment, but acceptance is refused on some other ground
When dishonored by non-acceptance (Sec 149) ---1. Duly presented for acceptance and it is refused or cannot be obtained
2. Presentment is excused and the bill is not accepted
**DUTY: the holder must treat the bill as dishonored or he loses his right of recourse against
the drawer and indorsers (Sec 150)
**RIGHT: the holder has an immediate recourse against the drawer and indorsers;
**no presentment for payment is necessary (Sec 151)
PROTEST
When necessary --> foreign BOE (Sec 152)
**If not protested, drawer and indorsers are discharged
How made (Sec 153) --1. Must be annexed to the bill or must contain a copy thereof
2. Must be under the hand and seal of the notary making it
3. Must specify:
a. Time and place of presentment
B. The fact that presentment was made and the manner thereof
C. the cause or reason for protesting it
D. The demand made and the answer given, if any, or the fact that the drawee/acceptor could
not be found
By whom made (Sec 154)--1. Notary public
2. By any respectable resident where the bill is dishonored in the presence of at least 2 or more
credible witnesses
When to be made (Sec 155) --- on the day of dishonor
**unless delay is excused
**if the bill is duly noted, protest may be subsequently extended as of the date of the noting
Where made (Sec 156) --- at the place where it is dishonored
**except: bill is payable elsewhere and is dishonored by nonacceptance---> must be protested for
nonpayment at the place where it is expressed to be payable (**no further presentment for payment is
necessary)
A bill which has been protested for nonacceptance may be subsequently protested for nonpayment.
(Sec 157)
Protest for better security (Sec 158)

NEGOTIABLE INSTRUMENTS

1. Acceptor has been adjudged a bankcrupt or insolvent or has made an assignment for the benefit of
creditors
2. Before the bill matures
When protest may dispensed with (Sec 159) ---Any circumstances which would dispense with NOD.
**NOD is dispensed with when, after the exercise of reasonable diligence, it cannot be
given (sec 111)
Delay is excused - same with Sec 81 (presentment for payment)
**Delay is excused -> circumstances beyond the control of the holder without fault
Delay ceases to operate -> presentment must be made with reasonable diligence (Sec 81)
Where bill is lost, destroyed or is wrongly detained (Sec 160) --->
Protest may be made on a copy or written particulars thereof
ACCEPTANCE FOR HONOR
1. Bill is protested by non-acceptance or for better security
2. Not overdue
3. Not a party to the instrument
4. With the consent of the holder
**may be for part only of the sum payable
**there may be a further acceptance by a different person (Sec 161)
How made (Sec 162)--1. In writing
2. Indicate that it is AFH
3. Signed by the acceptor for honor
Presumption: for the honor of the drawer (Sec 163)
Liability: to the holder and to all parties subsequent to party for whose honor he has accepted (Sec
164)
Acceptor for honor engages that he will, on due presentment, pay the bill according to the terms of
his acceptance, provided: (conditions precedent)
1. It shall not been paid by the drawee; and
2. It shall have been duly presented for payment and protested for non-payment and NOD be given
to him. (Sec 165)
Bill payable after sight --> maturity date is calculated from the day of noting (Sec 166)
Protest for non-payment before presenting it for payment to the acceptor for honor (Sec 167)
Presentment for payment, how made (Sec 168)--1. In the place where the protest for nonpayment was made ---> not later than the day ffg its maturity
2. In some other place ---> it must be forwarded (Sec 104)
**By mail - must be deposited in the post office in time to go by mail the day ffg; or
If there be no mail at a convenient hour on last day, by the next mail thereafter.
if otherwise than mail, within the time that notice would have been received in due course, if it
had been deposited in the post office within the time specified in the last subdivision

NEGOTIABLE INSTRUMENTS

Delay is excused (Sec 169) ---> apply Sec 81

Dishonor of bill by acceptor for honor (Sec 170) --- must be protested for nonpayment by him
PAYMENT FOR HONOR
1. Bill has been protested for non-payment
2. Any person may intervene and pay supra protest (Sec 171)
How made (Sec 172)
1. Must be attested by a notarial act of honor
2. Which may be appended to the protest or form an extension to it
It has to be made before a notary after a declaration by the payor of his intention to pay for honor
and for whose honor he pays (Sec 173)
Preference: the person whose payment will discharge most parties (Sec 174)
The payor for honor is subrogated for and succeeds to, both the rights and duties of the holder as
regards the party for whose honor he pays and all parties liable to the latter (Sec 175)
**all parties subsequent to the party for whose honor it is paid are discharged.
Holder refuses to receive payment (Sec 176) ---> he loses his right of recourse against any party who
would have been discharged by such payment
Rights of payor for honor (Sec 177)--Entitled to receive both the bill and the protest
BILLS IN SET
Constitutes only one bill - Sec 178
Different parts are negotiated:
Sec 179. to different HIDC ---> the holder whose title first accrues is the true owner
** but it will not affect the right of a person who, in due course, pays or accepts the parts
first presented to him
Sec 180. Indorsement to different persons - liable on every such part as if such parts were separate
bills
Acceptance (Sec 181)
may be written on any part and must be written on one part only.
If acceptor pays without requiring the part bearing his acceptance to be delivered, and the part at
maturity is outstanding in the hands of a HIDC, he is liable thereon. (Sec 182)
Discharging of one in a set is a discharged of the whole bill, except as herein otherwise provided (Sec
183)
PROMISSORY NOTE

NEGOTIABLE INSTRUMENTS

An unconditional promise in writing, made by one person to another, signed by the maker, engaging to
pay on demand, or at a fixed or determinable future time, a sum certain in money to order or to
bearer. Sec 184
Check is a BOE drawn on a bank and payable on demand (Sec 185)
**Presentment for payment - within a reasonable time after issue
***or the drawer will be discharged to the extent of the loss caused by the delay (Sec 186)
**Certification ---> equivalent to acceptance (Sec 187)
***holder procures certification---> drawer and indorsers are discharged (sec 188)
Check does not operate as an assignment of funds to the credit of the drawer and the bank is not liable
**unless the bank accepts or certifies the check. (Sec 189)
NEGOTIABLE DOCUMENTS OF TITLE
*refer to goods, not money
*governed by Civil Code
*it includes any bill of lading, dock warrant, quedan or warehouse receipt or any other document
used in the ordinary course of business in the sale or transfer of goods, as proof of possession or
control of the goods, or authorizing or purporting to authorize the possessor of the document to
transfer or receive goods
*the sale of goods covered is effected by the transfer of said document
*whoever owns the document has title to the goods, unless the bailee never actually received the
goods or the bailor had no title to the goods
*negotiable or non-negotiable (if deliverable to a specified person, to order or to bearer)
*a transferee in good faith, for value and without notice can acquire a better title to the goods than
his transferor had
---> even if he took from one who stole the document, as long as the original bailor of the goods
was the owner thereof, or had apparent authority from the owner
*DUTY OF THE BAILEE
If negotiable ----> he should not deliver the goods without demanding and acquiring the negotiable
instrument, otherwise, he would be liable for damages to whomever is the real owner of such goods.
KINDS AND FUNCTIONS--Warehouseman receipt - agreement by a warehouseman to store goods and deliver them to a named
person or his order or to bearer
Bill of lading - contract by a carrier to ship goods and deliver them to the person named therein or his
order or to bearer.
Not negotiable -straight bill
Negotiable - the owner of such bill can sell the goods by merely negotiating it, and the carrier is
bound to deliver the goods to the legal holder of the bill.
Negotiation--*same as those used in NI
If payable to bearer and later on, it be indorsed to a specified person, the latters indorsement shall be
necessary for further negotiation.

NEGOTIABLE INSTRUMENTS

*NON-NEGOTIABLE stamped upon a DOT in which goods are deliverable to order or to bearer
--> such words will not affect the status of the document as negotiable
Rights of holder ----A. When free from personal defenses --HIDC - holder in good faith, for value and without notice of breach of duty, or loss or theft, FAM,
duress or conversion (art 1518)
Only the owner or a person entrusted by such owner can validly negotiate a document, even if it be a
bearer one. (Art 1512)
**a thief or finder of such document cannot effect a valid negotiation thereof because it was not
entrusted to him by the owner
** a bona fide holder of a document issued over stolen goods cannot acquire title to such goods.
What title acquired --A person to whom a NDOT has been duly negotiated acquires:
1. Title to the goods..
2. Direct obligation of the bailee...
DOT has been transferred, but not negotiated:
1. Title to the goods
**if not negotiable --- notice must be given
A. Right to notify
B. Direct obligation of the bailee
**prior to notification, the obligation of the bailee may be defeated by levy or subsequent
sale
**if negotiable-- *no need to notify bailee
cannot be attached by garnishment or attachment w/o first:
A. Surrendering the document to the bailee, or
B. Its negotiation be enjoined, or
C. Impounded by the court
OTHER FORMS OF COMMERCIAL INSTRUMENTS
1. Special forms of either BOE or PN
2. Quasi-negotiable
3. Negotiable DOT
Certificate of deposits - (PN)
Bonds and debentures -evidence of indebtedness (PN)
*interest coupons
Drafts (BOE)
Letters of credit - one person requested some other person to advance money or give credit to the 3 rd
person ---> not negotiable (no sum certainty; payable to a definite person)
Certificate of stock - evidence of the holders interest to a corporation (quasi-negotiable)