The Professional CPA Review School

Main: 3F C. Villaroman Bldg. 873 P. Campa St. cor Espana, Sampaloc, Manila (032) 735 8901 / 735 9031
Branch: Rudel Bldg. V, Lower Mabini cor Diego Silang, Baguio City (074) 422-1440
email add: crcace@yahoo.com

PRE-WEEK IN BUSINESS LAW ATTY. MARY ANN R. SAGANA

OBLIGATIONS AND CONTRACTS

RIGHT TO THE FRUITS Requisite: Principal is SPECIFIC even without stipulation
1. Ordinary Contracts/Obligations
a. No condition imposed creditor is entitled at the time the obligation to deliver the principal thing
arises (personal right only)
- Real right shall be acquired upon delivery
b. With suspensive condition debtor is entitled to the fruits unless stipulated
2. Contract of Sale buyer / vendee is entitled as early as perfection
3. Contract of Pledge debtor / pledgor is entitled but the fruits shall be subject to pledge unless stipulated

DONT FORGET:
1. Action for future fraud cannot be waived
2. In facultative obligations, the right to choose between the original and substitute prestation is given by law to
the debtor
3. In expromission, the insolvency of the new debtor shall not revive the obligation of the old debtor
4. In delegacion, the old creditor is always preferred in case of insolvency of the debtor

SOLIDARY obligations EXISTS:

1. law so provides or when
2. stipulation so requires
3. nature of the obligation requires solidarity
Important: a. Guarantors - if stipulated
b. Partners - for injuries and damages incurred by third persons as a result of a partnership act (pro rata
/ joint only in case of partnership obligations/liability)
c. Agents only if there is a stipulation to that effect
d. The responsibility of two or more persons who are liable for quasi-delict
e. Directors who violated their three-fold duty
f. When there are two or more bailees (borrowers in commodatum) to whom a thing is loaned in the
same contract
g. Payees who received payment under the principle of solutio indebiti
h. gestors in negotiorum gestio

KINDS OF OBLIGATIONS: MODES OF EXTINGUISHING FACTORS AFFECTING

1. bilateral vs. OBLIGATIONS: OBLIGATIONS:
commutative vs. 1. payment or performance; 1. Delay
onerous 2. loss of the thing due; 2. Fraud
2. simple vs. facultative 3. condonation or remission of 3. Negligence
vs. alternative vs. the debt; 4. Contravention of the tenor
conjoint 4. confusion or merger of rights of the obligation
3. real vs. personal of the debtor and the 5. Fortuitous events
4. pure vs. conditional creditor;
vs. with period 5. compensation;
5. civil vs. natural vs. 6. novation;
legal vs. conventional 7. other modes
6. joint vs. solidary vs.
divisible vs. indivisible

The following contracts are VOID

if orally constituted:
a. Donations of real estate regardless of value
b. Donations of movables if > Php5,000;
c. Stipulation to pay interest in loans only the stipulation as to payment of interest; the contract
of loan is still valid even if orally constituted
d. Agency contract and consequently the contract of sale - sale of LAND through an agent
e. Partnership to which immovables are contributed (an inventory is also necessary)
f. Stipulation limiting carriers liability to less than extra-ordinary diligence;
g. Contracts of antichresis
CRC-ACE: BUSINESS LAW PREWEEK (MAY 2014) Page 2 of 8

The following are UNENFORCEABLE if orally constituted:

a. Agreements not to be performed within one year from the making thereof;
b. Promise to answer for the debt, default or miscarriage of another;
c. Agreement in consideration of marriage other than a mutual promise to marry;
d. Contracts of lease for a period longer than one year;
e. Agreements for the sale of real property or interest therein;
f. Representation as to the credit of a third person.

MNEMONICS:
1. NIC Natural, Industrial and Civil (Fruits/Accessions)
Natural fruits offspring of animals, spontaneous product of soil
Industrial fruit with human intervention
Civil fruit product of a contract e.g. Interest, rent, dividends
2. BEC Better Use, Embellishment, Completion (Accessories)
3. MENTAL Moral, Exemplary, Nominal, Temperate, Actual, Liquidated (Damages)
4. IGIVA Insolvent, Guaranty promised but not furnished, Guaranty furnished but was
Impaired, Violation of undertaking, Attempt to Abscond (Debtor losses right to the
period)
5. SLN Stipulation, Law, Nature of the obligation (solidary liability exists)
6. COC Consent, Object, Cause/Consideration (Elements of a contract)
7. PPP Preparation, Perfection, Performance (Stages of a contract)
8. PHA Parties, Heirs, Assigns (Relativity rule)
9. PDC Pledge, Deposit, Commodatum (Real contracts)
10. AMOR Autonomy, Mutuality, Obligatoriness, Relativity (Characteristics of contracts)
11. DWV Donations (simple and unconditional), Wills, Void contracts (Not Susceptible of
Ratification)

NUMBERS TO REMEMBER:
>1yr. statute of any contract not to be performed within a year must be in writing otherwise the
frauds contract will be unenforceable
4 yrs - to annul voidable contract -from discovery of fraud or mistake
- from stoppage or cessation of intimidation or undue influence
- from attainment of capacity
4 yrs - to sue for damages arising from quasi-delicts
6 yrs to enforce an oral contract
6 yrs to enforce an action arising from quasi-contract
10 yrs to enforce a written contract

SALES AGENCY AND BAILMENTS

1. Guardians cannot buy the properties of the ward
2. DLSU - VOID if entered into by persons guilty of adultery/concubinage; guilty of committing the same
offense; and public officers and employees by reason of public office. Husband and wife general rule
3. The responsibility of two or more agents, even though they have been appointed simultaneously, is joint
Solidary liability must be stipulated
4. Pledge and real mortgage-oral-valid
but not binding to third persons unless: Pledge- PI+DD Real Mortgage- PI+reg.
5. Chattel mortgage-oral-void
For validity and binding effect as to third persons- PI+reg.
6. If the thing pledged will be returned by the pledgee, the contract of pledge is extinguished

FORECLOSURE RULES In case of DEFICIENCY In case of EXCESS

Sale of movables on installment basis
(RECTO LAW Art. 1484)
1. Specific performance (JUDICIAL Recoverable Law is silent goes to the owner
foreclosure) Law is silent- practice--goes to the seller
2. Foreclosure by the seller ABSOLUTE RULE - Not unless stipulated
recoverable (any stipulation to the
contrary is void)
Conventional Pledge ABSOLUTE RULE - Not Goes to Pledgee / Creditor unless stipulated
recoverable
(any stipulation to the contrary is
void)
Legal Pledge Recoverable Goes to Pledgor / Debtor
Chattel Mortgage Recoverable Goes to Mortgagor / Debtor
Real Mortgage Recoverable Goes to Mortgagor / Debtor
CRC-ACE: BUSINESS LAW PREWEEK (MAY 2014) Page 3 of 8

IMPORTANT:
a. Sale Php499.99 movable oral - valid
b. Sale Php500.00 movable oral unenforceable (WI is required)
c. Sale -------------- immovable oral unenforceable (WI is required)

MNEMONICS:
1. ENA Essential, Natural, Accidental (Elements of a contract of sale)
2. CBOCPN Consensual, Bilateral, Onerous, Commutative, Principal Nominate (Characteristics)

3. LSRR Lien, Stoppage in transitu, Resale, Rescission (Rights of an unpaid seller of goods)

4. ARM Goods yet to be Acquired, Raised or Manufactured (Future goods as object of a

contract of sale)
5. DSLU Donation, Sale, Lease, Universal Partnership (void if entered into by persons
relatively incapacitated (NOTE: spouses general rule)
6. RWDEAD? Revocation, Withdrawal of the agent, Death, civil interdiction, insanity or insolvency
of the principal or of the agent, Expiration of the period for which the agency was
constituted, Accomplishment of the object or purpose of the agency, Dissolution of
the firm or corporation which entrusted or accepted the agency (Modes of
extinguishing agency contract)
7. REX Right of redemption in case of extra-judicial foreclosure
8. JEQ Equity of redemption in case of judicial foreclosure
9. PI-DD Public Instrument showing Date and Description of the thing

NUMBERS TO REMEMBER:
1yr. from sale - right of redemption may be exercised in case or extra-judicial foreclosure (in
case of real mortgage)
-right to rescind the sale based on hidden encumbrance or servitude
1 hectare or less -area of rural land-shall give rise to the right of legal pre-emption/redemption on
the part of adjacent owners of land
4 yrs - conventional redemption reservation of right to repurchase was made but no
period was fixed for the exercise of the right
6 months - from - of the movable thing - to discover hidden defects then file rescission / accion
delivery redhibitoria/quanti minoris
6 months from to file reduction of the price or cancellation of the contract of sale of a land in
delivery case the deficiency is at least 10%
10 yrs max. conventional redemption reservation of right to repurchase was made and
period was fixed
30 days from sale under Maceda Law - cancelled
receipt of notice of
cancellation
30 days from - to exercise the right of legal pre-emption / redemption
notice
40 days - from - of the animals - to discover hidden defects then file rescission / accion
delivery redhibitoria/accion quanti minoris

PARTNERSHIPS
1. Unlawful partnership is void ab initio
2. Partnership contract where immovable property is contributed must appear in writing and an inventory of
the property must be attached to the public instrument, otherwise, if orally constituted, the contract of
partnership is void
3. A stipulation in a contract of partnership excluding a partner to share in the profits is void
4. A stipulation in a contract of partnership excluding a partner to share in the losses is void (in so far as
third persons are concerned)
5. Persons who are prohibited by law to enter into a contract of donation cannot form universal
partnerships

IMPORTANT:
a. Partnership capital Php2,999.99 no immovable contributed oral-valid
b. Partnership capital Php3,000.00 or > and no immovable contributed
- (PI required) if oral still valid
c. Partnership to which immovables are contributed P.I. if oral =void
(an inventory necessary)
CRC-ACE: BUSINESS LAW PREWEEK (MAY 2014) Page 4 of 8

Consent of all partners necessary:

1. Assign the partnership property in trust for creditors or on the assignee's promise to pay the debts of the
partnership;
2. Dispose of the good-will of the business;
3. Do any other act which would make it impossible to carry on the ordinary business of a partnership;
4. Confess a judgment;
5. Enter into a compromise concerning a partnership claim or liability;
6. Submit a partnership claim or liability to arbitration;
7. Renounce a claim of the partnership.

MNEMONICS:
1. CBOCPNP Consensual, Bilateral, Onerous, Commutative, Principal Nominate, Preparatory (Characteristics)

2. UPPP Universal Partnership of all Present Property

3. UPAP Universal Partnership of ALL Profits
4. ASA Associate, Sub-partner, Assignee
5. RIDICi Retirement, Insanity, Death, Insolvency, Civil interdiction of a General Partner (modes of dissolution-
limited partnership)
6. AID Act, Insolvency, Death of a partner (effects-contract perfected after dissolution)

NUMBERS TO REMEMBER:
>1yr from date of promise to form a partnership up to actual perfection of the contract
agreement must be in writing to be enforceable unenforceable if oral
3 months from the designation of profits and losses sharing made by a third person any
partner may impugn or question the same for being inequitable

CORPORATIONS
LIMITATIONS ON THE RIGHT TO VOTE:
1. Preferred or redeemable shares may be deprived of the right to vote (EXCEPT MCAIAI 2S)
2. Fractional shares of stock cannot be voted unless they constitute at least one full share.
3. Treasury shares have no voting rights as long as they remain in the treasury
4. Holders of stock declared delinquent by the board of directors for unpaid subscription are not entitled to vote
or a representation at any stockholder's meeting.
5. A transferee of stock cannot vote if his transfer is not registered in the stock and transfer book of the
corporation

RIGHT TO VOTE BY PROXY:

1. election of the board of directors or trustees
2. voting in case of joint ownership of stock
3. voting by trustee under voting agreement
4. pledged or mortgaged share
5. as provided for in its by-laws

WHEN APPRAISAL RIGHT MAY BE EXERCISED:

1. extension of duration of corporate term;
2. change in the rights of shareholder, authorize preferences superior to those of the shareholders, or
restrict the right of any shareholder;
3. shareholders authorized the board to invest corporate funds in another corporation;
4. shareholders authorized board to engage in a purpose other than main purposes stated in the Articles;
5. corporation decides to sell or dispose of all or substantially all assets of corporation;
6. in case of merger or consolidation

INCORPORATORS
1. natural person
2. not less than 5 but not more than 15
3. of legal age
4. majority must be resident of the Phils.
5. each must own or subscribe to at least 1 share
DIRECTORS
1. must own at least one (1) share of the capital stock;
2. share of stock held must be registered in the books of the
corporation;
3. must continuously own at least a share of stock during his term
4. majority must be residents of the Philippines

Additional qualifications - - BOD:

a. Rural Banks BOD 100% Filipino citizens
b. Private development bank - BOD 100% Filipino citizens
c. Registered investment company - BOD 100% Filipino citizens
CRC-ACE: BUSINESS LAW PREWEEK (MAY 2014) Page 5 of 8

d. Domestic bank banking institutions and common carriers - BOD 2/3 Filipino citizens

Disqualifications - - BOD/BOT/OFFICER:
a. CONVICTION by final judgment of an offense punishable by imprisonment for a period exceeding six years,
(>6 yrs.)
b. Violation of the Code, committed within five (5) years prior to the date of his election or appointment

Corporate Act Votes Required NOTE

Amendment of AOI Majority BOD + 2/3 OCS v&nv Appraisal Right
(written assent allowed) available
Elect directors Majority OCS-voting
Call a special meeting to remove directors Majority OCS-voting
Removal of BOD 2/3 OCS voting
Extend or shorten corporate term Majority BOD + 2/3 OCS v&nv If extension of
term Appraisal
Right available
Ratify a contract of a director/trustee/officer 2/3 OCS voting
with the corporation
Increase or decrease the capital stock Majority BOD + 2/3 OCS v&nv
Incur, create or increase bonded Majority BOD + 2/3 OCS v&nv
indebtedness
Sale or other disposition of assets Majority BOD + 2/3 OCS v&nv Appraisal Right
available
Invest corporate funds in another Majority BOD + 2/3 OCS v&nv Appraisal Right
corporation or business or for any purpose available
other than the primary purpose
Declaration of dividends Majority BOD
Majority BOD + 2/3 OCS v -if stock
dividends
Enter into management contract Majority BOD + Maj OCS v
(managing corp.)
Majority BOD + 2/3 OCS v (to be
managed corp.)
Adopt By-Laws Majority OCS v&nv
Amend or repeal the by-laws or adopt new Majority BOD + Maj OCS v&nv
by-laws
Delegate to the board of directors or trustee 2/3 OCS v&nv
the power to amend or repeal the by-laws or
adopt new by- laws
Revoke the preceding power delegated to Majority OCS v&nv
the board of directors or trustees
Fix the issued price of no par value shares Majority of BOD if authorized by AOI
If not Maj. of OCS v
Effect or amend a plan of merger or Majority BOD + 2/3 OCS v&nv Appraisal Right
consolidation available
Deny pre-emptive right 2/3 OCS v
Dissolve the corporation Majority BOD + 2/3 OCS v&nv
Adopt a plan of distribution of assets of a Majority BOT + 2/3 members v
non-stock corporation

NUMBERS TO REMEMBER:
1 centavo - min. issued price of a par value share
1 yr - term of directors
-from discovery of the hidden servitude/encumbrance if 1 yr after the sale to bring
an action for damages
2yrs to formally commence business from issuance of certificate of incorporation
otherwise the corporation will be dissolved
3 minimum # of directors composing the executive committee
3 yrs prescriptive period of claims and cases that can be filed against a corporation
upon its dissolution
3 yrs - term of office of board of trustees
Php5 minimum issued price of a no-par value share
5 minimum # of incorporators/corporators
5 minimum # of directors/trustees
5 yrs continuous inoperation of a corporation ground for suspension /cancellation of
certificate of registration
5 yrs prior to - filing of amended articles of incorporation to extend corporate term
expiration of the
CRC-ACE: BUSINESS LAW PREWEEK (MAY 2014) Page 6 of 8

corporate term-
5 yrs disqualification of stockholders to be elected director from violation of the
corporation code
5 yrs term of management contract
5 yrs term of a proxy agreement if not limited to one meeting
5 yrs term of a voting trust agreement unless premised upon a loan agreement, in
which case it could be longer than 5 yrs but will automatically be revoked upon
payment or satisfaction of the debt
Php5,000 minimum paid-up capital
6 months -from submission/filing-amendment to the AOI-deemed approved by SEC
>6yrs conviction of a crime by final judgment disqualification to be director
10% net corporate income before tax of the previous year (max. compensation of the
members of the board if provided for in the by laws of the corporation)
15 max number of directors in a stock corporation
>15 - no. of trustees in a non-stock corporation
20 maximum owners of a close corporation
>20% - of the outstanding capital stock shall be considered substantial for purposes of
Stockholdings interlocking directors.
25% - of the authorized capital stock must be subscribed
25% - of the subscribed shares must be paid
30 days after AOI filing of by-laws after issuance of the certificate of incorporation
30 days from call to pay subscribed stocks
50 yrs maximum lifetime of a corporation subject to extensions

MNEMONICS:
1. CBOCPNP Consensual, Bilateral, Onerous, Commutative, Principal Nominate, Preparatory (Characteristics)

2. UPPP Universal Partnership of all Present Property

3. UPAP Universal Partnership of ALL Profits
4. ASA Associate, Sub-partner, Assignee
5. RIDICi Retirement, Insanity, Death, Insolvency, Civil interdiction of a General Partner (modes of dissolution-
limited partnership)
6. AID Act, Insolvency, Death of a partner (effects-contract perfected after dissolution)
7. BIC Business Domicile, Incorporation, Control TESTS (to determine nationality of a corporation)
8. PEFECCA 60% Filipino owned Corporations
a. Public utilities d. Coastwise shipping
b. Educational institutions e. Civil aeronautics
(except if established by f. Financing companies
religious orders or charitable org.) g. Atomic energy
c. Exploitation of natural resources
9. PSBA 70% Filipino owned corporations:
Pawnshops; Savings and loan associations (voting stocks); Banking institutions (voting stocks);
Advertising firms
10. MSRRR 100% Filipino owned corporations:
Mass media; Security agencies; Rural banks; Retail trade; Rice and corn industry
11. SITMAW Cannot be amended in the AOI:
1. names of original subscribers to the capital stock of the corporation and their subscribed and paid
up capital
2. names of incorporators
3. treasurer elected by the original subscribers
4. members who contributed to the initial capital of a non-stock corporation
5.date and place of execution of the articles of incorporation (acknowledgment)
6. witnesses
12. BLTBPI Corporations which cannot issue NO PAR value shares:
1. building and loan association 3. banks,
2. trust companies 4. public utilities 5. insurance companies
13. SOMEotherBPI Corporations which cannot be CLOSE:
1. stock exchanges 5. other corporation vested w/ public interest
2. oil companies 6. banks
3. mining companies 7. public utility
4. educational institutions 8. insurance companies
14. OLD Obedience, Loyalty, Diligence (three-fold duty of directors)
15. MCAIAI2S NON-VOTING stocks may also vote:
1. merger or consolidation of corporation
2. corporate dissolution
3. adoption and amendment of by-laws;
4. increase or decrease of bonded indebtedness;
5. amendment of Articles of Incorporation;
6. increase or decrease of capital stock;
7. investments of funds in another corporation or another business purpose; and
CRC-ACE: BUSINESS LAW PREWEEK (MAY 2014) Page 7 of 8

8. sale or disposition of all or substantially all of corporate property

NEGOTIABLE INSTRUMENTS

REQUISITES FOR NEGOTIABILITY:

1. It must be in writing and signed by the maker/drawer;
2. It must contain an unconditional promise/order to pay a sum certain in money;
3. It must be payable on demand, or at a fixed or determinable future time;
4. It must be payable to order or bearer.
5. Where the instrument is addressed to a drawee, he must be named or otherwise
indicated therein with reasonable certainty.

REQUISITES -- HOLDER IN DUE COURSE

1. The instrument is complete and regular upon its face;
2. That he became the holder of it before it was overdue AND without notice that it had been
previously dishonored, if such was the fact,
3. That he took it in good faith and for value;
4. That at the time it was negotiated to him he had no notice of any infirmity in the instrument OR
defect in the title of the person negotiating it.

REQUISITES -- PAYMENT FOR HONOR:

1. The bill has been dishonored by non-payment;
2. It has been protested for non-payment;
3. Payment supra protest is made by any person, even a party thereto;
4. The payment is attested by a notarial act of honor which must be appended to the protest or
form an extension of it;
5. The notarial act must be based on the declaration made by the payee for honor or his agent of
his
intention to pay the bill for honor and for whose honor he pays.

REQUISITES -- ACCEPTANCE FOR HONOR:

1. The bill must have been protested for dishonor by non-acceptance or for better security;
2. The acceptor for honor must be a person not a party already liable thereon;
3. The bill must not be overdue at the time of the acceptance for honor;
4. The acceptance for honor must be with the consent of the holder of the instrument.
5. The acceptance for honor must be in writing;
6. It must indicate that it is an acceptance for honor;
7. It must be signed by the acceptor for honor,
8. It must contain an express or implied promise to pay money;
9. The accepted bill for honor must be delivered to the holder.

BILL may be treated a NOTE:

1. When the drawer and the drawee are the same person
2. When the drawee is a fictitious person
3. When the drawee has no capacity to contract
4. When the instrument is so ambiguous that there is doubt whether it is a bill or note.

EFFECTS OF:
1. Transfer without indorsement of a. The transfer vests in the transferee such title as the transferor had therein;
an order instrument b. The transferee acquires the right to have the indorsement of the transferor.

2. Express waiver of notice of a. Where the waiver is embodied in the instrument it self it is binding upon all
dishonor parties.
b. Where it is written above the signature of an indorser it binds him only.

3. BILL is paid for honor a. All parties subsequent to the party for whose honor it is paid are
discharged;
b. The payer 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.
4. Certification of a check 1. It is equivalent to acceptance
2. It discharges persons secondarily liable if procured by the holder
3. It operates as an assignment of the funds of the drawer in the hands of
the drawee bank
4. The payee or holder, for all intents and purposes, becomes the depositor
of the drawee bank
5. The bank becomes the primary debtor and cannot thereafter refuse to pay
it
6. The drawer may not issue a stop payment order on the certified check
CRC-ACE: BUSINESS LAW PREWEEK (MAY 2014) Page 8 of 8

when PRESENTMENT FOR ACCEPTANCE

NOT NECESSARY NECESSARY EXCUSED
1. the bill is payable on demand 1. Where the bill is payable after sight or 1. When the drawee is dead
2. payable at sight in any other case, where presentment 2. When the drawee has absconded
3. payable on a fixed day for acceptance is necessary in order to 3. When the drawee is a fictitious person
4. payable at a certain number of fix the maturity of the instrument. 4. When the drawee is a person not having
days after a fixed event 2. Where the bill expressly stipulates that capacity to contract by Will
5. payable at a certain number of it shall be presented for acceptance. 5. When, after the exercise of reasonable
days after date 3. Where the bill is drawn payable diligence, presentment cannot be made
elsewhere than at the residence or 6. Where, although presentment has been
place of business of the drawee. irregular, acceptance has been refused
on some other ground

PERSON NEGOTIATING BY
DELIVERY OR BY QUALIFIED
INDORSEMENT
1. That the instrument is genuine
and in all respect what it
purports to be
2. That he has a good title to it
3. That all prior parties have
capacity to contract
4. That he has no knowledge of
any fact which would impair
the validity of the instrument
or render it valueless.
WARRANTIES
GENERAL OR UNQUALIFIED INDORSER DRAWER ACCEPTOR
1. That the instrument is genuine and in all 1. Admits the existence 1. Admits the existence
respects what it purports to be of the payee and his of the drawer, the
2. That he has good title to it then capacity to indorse genuineness of his
3. That all prior parties had capacity to signature, and his
contract 2. Engages that on due capacity and authority
4. That the instrument is at the same time presentment the to draw the instrument
of his indorsement valid and subsisting instrument will be
5. That on due presentment, it shall be accepted or paid, or 2. The existence of the
accepted or paid, or both, as the case both, according to its payee and his then
may be, according to its tenor, and that tenor, and that if it be capacity to indorse.
if it be dishonored, and the necessary dishonored, and the
proceedings on dishonor be duly taken, necessary proceedings
he will pay the amount thereof to the on dishonor be duly
holder, or to any subsequent indorser taken, he will pay the
who may be compelled to pay it. amount thereof to the
holder, or to any
subsequent indorser
who may be compelled
to pay it.

MNEMONICS:
1. SAFI When the holder may treat a bill as a note:
1. When the drawer and the drawee are the same person
2. When the instrument is so ambiguous that there is doubt whether it is a bill or note.
3. When the drawee is a fictitious person
4.When the drawee is incapacitated to enter into contracts
2. IdOdCrGv Requisites for a holder of an instrument to be a holder in due course:
1. That at the time it was negotiated to him he had no notice of any infirmity in the instrument OR
defect in the title of the person negotiating it;
2. That he became the holder of it before it was overdue AND without notice that it had been
previously dishonored, if such was the fact,
3. That it is complete and regular upon its face;
4. That he took it in good faith and for value

Lucrum Malum Aequale Dispendio

(An Evil Gain is Equals to Loss)

THANK YOU! GOODLUCK!!

GOD BLESS YOU ALL!!!

/mrs