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COMMERCIAL LAW
NEGOTIABLE INSTRUMENTS
BILL OF EXCHANGE
- contain an order to pay
FORMS AND INTERPRETATION - in here, the drawer is commanding a drawee
to pay the payer or the holder
3. provisions of NIL, especially sec. 1
maturity.
INTEREST
WRITING does not affect the certainty of the
- hence, it may be handwritten, printed, sum, as there is an unconditional
engraved etc.
INSTALLMENT
signature may be in writing, printed, etc.
W H AT I S I M P O R TA N T F O R
TO BE DETERMINABLE; the ff
requisites:
1. the date of each installment must
SIGNATURE IS be fixed or at least determinable
the maker affixed as his own signature 2. the amount to be paid for each
of authentication installment must also be stated or
IT MUST CONTAIN AN UNCONDITIONAL
at least determinable
PROMISE OR AN ORDER TO PAY
debt does not constitute a promise
the time of payment
UNCONDITIONAL
IT IS CONDITIONAL WHEN
DETERMINABLE FUTURE TIME
F F A R E D E E M E D PAYA B L E A T A
obligation. DETERMINABLE FUTURE TIME; when
- whether suspensive or resolutory
payable
contingency
presentment for acceptance)
rise to the instrument
uncertain.
~ restricts the instrument
15, 2013 subject to the terms and An instrument payable upon a contingency is
conditions of Deed of Sale executed not negotiable, and the happening of the event
by the parties
does not cure the defect.
dapat, reference lang WHEN PAYABLE ON DEMAND
When it is so expressed to be payable on
Pay to X or order 10k, on or before
July 15 of this year. The bill is being
demand, or at sight, or on presentation; or
sale executed by the parties
June 10, 2012
sgd Y
turned out to be insufficient, payment
should still be made.
TO: Z
been made.
Pay X or order 10k
June 10, 2012
sgd Y
TO: Z
demand.
prepared by: ronie ablan
AAA - BASTE / ATB
THE AWESOME NOTES 3 of 37
COMMERCIAL LAW
NEGOTIABLE INSTRUMENTS
PAYABLE TO ORDER OR BEARER
WHEN person or to him or his order. It may be drawn
payable to the order of:
When it is expressed to be so payable; or
A payee who is not maker, drawer, or
Pay to bearer 10k upon demand
June 10, 2012
or bearer; or
sgd Y
Pay X or bearer 10k upon demand
June 10, 2012
sgd Y demand
sgd Y
When it is payable to the order of a fictitious
or non-existing person, and such fact was
sgd: Y
Pay to Superman 10k upon demand
as indorsee
sgd Y
The drawee; or
purport to be the name of any person; or
June 10, 2012
sgd: Z
sgd Y
demand
(di ko to magets)
sgd Y
Two or more payees jointly; or
TO: blank
sgd Y
One or some of several payees; or
sgd Z
The holder of an office for the time being.
sgd: Y
Where the instrument is payable to order, the Sec. 6. Omissions; seal; particular money. -
payee must be named or otherwise indicated The validity and negotiable character of an
therein with reasonable certainty.
REASONABLE CERTAINTY
RATION:
or the place where it is payable; or
4. bears a seal; or
5. designates a particular kind of current
essential for persons who will take a bill of
exchange to know the person who will be
money in which payment is to be made.
primarily liable under the instrument.
OF DRAWEE
TO MR X or MR Y
instrument.
2 or more drawees in the alternative this Act, but any terms are sufficient which
clearly indicate an intention to conform to the
TO MR X or IN HIS ABSENCE OR FAILURE
TO PAY, TO MR. Y
- where the instrument is addressed to
requirements hereof.
2 or more drawees in succession
- TO MR X and MR Y subject to a condition (being subject to
governmental regulation and usually payable
MISCELLANEOUS
payment of money is not negotiable.
documents.
provision or stipulation otherwise illegal.
PROMISSORY NOTE
when the holder present it for payment
4. TRADE ACCEPTANCE; used in contracts
of sake whereby the seller as drawer orders
an unconditional promise in writing made by the buyer (as drawee) to pay a sum certain
one person to another, signed by the maker, to the same seller (payee)
engaging to pay on demand, or at a 5. DRAFT; synonymous with bill of exchange
fixed or determinable future time, (in letter or credit transaction)
a sum certain in money to 6. INLAND BILL; bill which is, or on its face
order or to bearer. purports to be, both drawn and payable
Where a note is drawn to the maker's own within the Phil.
order, it is not complete until indorsed by him
BILL OF EXCHANGE
7. FOREIGN BILL; bill which on its face, does
not purports to be both drawn and payable
within the Phil.
an unconditional order in writing addressed by 8. BANKER'S ACCEPTANCE; a time draft
one person to another, signed by the person across the face of which the drawee which
giving it, is a bank has written word "accepted"
requiring the person to whom it is 9. CLEAN BILL OF EXCHANGE; a bill of
addressed exchange to which no doc/s is/are attached
to pay on demand or at a fixed when presented for payment or acceptance
or determinable future time a 10. DOCUMENTARY BILL OF EXCHANGE; a
sum certain in money to order bill of exchange to which a doc/s is/are
or to bearer. attached when presented for payment or
acceptance
PROMISSORY BILL OF 11. BILLS IN SET; a bill of exchange drawn on
NOTE EXCHANGE a set, each part of the set being numbered
and containing a reference to the other
part, the whole of the part constitutes but
2 parties on its face
ii. DRAWEE; he is
2. BONDS; certificate or evidence of a debt in
which the issuing company or government
by the maker the person who is body promises to pay the bondholder a
being ordered to specified amount if interest for a specified
pay. his liability is length of time, and to repay the loan on the
conditioned upon his expiration date.
acceptance. once 3. DEBENTURE; pn or bond backed by the
accepted, he is general credit of a corporation and usually
not secured by a mortgage or lien on any
called Acceptor
to whom payment W H E N B I L L M AY B E T R E AT E D A S
should be made by PROMISSORY NOTE
the acceptor 1. when the drawer and the drawee of the bill
are the same person
person who signs it the person who 2. drawee is a fictitious person
(maker) is the signs it (drawer) is 3. drawee has no capacity to contract
person primarily secondarily liable 4. when the instrument is so ambiguous that
liable - the person
primarily liable is the
there is a doubt whether is a bill or a note.
drawee-acceptor
presumption.
NOTES
AUTHORITY TO FILL THE BLANKS]
POST DATED; contain a date later Where the instrument is wanting in any
material particular,
than the date of the issuance
than the date of the issuance
filling up the blanks therein.
HOLDER [LIMITATIONS]
In order, however, that any such instrument
IF IN DUE COURSE; the date
appearing in the instrument is when completed may be enforced against any
controlling and not the date of person who became a party thereto prior to its
issuance completion,
it must be filled up
IF NOT IN DUE COURSE; the date
of issuance is controlling and not 1. strictly in accordance with the
the date appearing on the authority given and
instrument.
2. within a reasonable time.
reasonable time.
instrument in any respect.
negotiable instrument.
to fill the amount of 10k on the PN.
subsequently negotiated to B.
delivery.
of warranty of genuineness
and within reasonable time.
against holder in due course. to him so as to make them liable to him is
conclusively presumed.
And where the instrument is no longer in
the possession of a party whose
signature appears thereon,
a valid and intentional delivery
by him is presumed until the
contrary is proved.
prepared by: ronie ablan
AAA - BASTE / ATB
THE AWESOME NOTES 8 of 37
COMMERCIAL LAW
NEGOTIABLE INSTRUMENTS
are necessary to complete the instrument.
PARTIES
to the transferee
purpose only
the instrument
DELIVERY IS EFFECTED BY
is in possession of the complete
instrument.
and that the same is unconditional, for
issuance or negotiation the purposes of transferring title, without
must be either by or under the authority
of the party making, drawing, accepting
any reservation or condition.
ISSUANCE; defined
HENCE; barred to established
that there is no delivery at all and
that the transfer is for special
first delivery of the instrument from the
maker or drawer to the payee/bearer
purpose or conditional
instrument
AUTHORITY TO DELIVER
in the chain of negotiation.
deemed incomplete and revocable. are not familiar with the circumstances of
the transfer.
Q: must there be a SPA?
PRESUMPTION OF DELIVERY
hence, if the negotiation/issuance
is only for special purpose, such
cannot be assailed against a
presumed delivered by the maker/drawer remote party who is in possession
or indorser to another (payee/ indorsee as of a complete instrument.
the case may be) for the purpose of ~ as with regard to him, the
issuing the same or transferring title
thereto.
note: yung transferring title, with respect
instrument is unconditional.
sa maker or drawer. incomplete but
delivered inst
incomplete
undelivered
inst
complete
undelivered
inst
p e r s o n a l real defense p e r s o n a l
defense
exe:
defebse
constituting as
fraud in factum
NOT INCLUDED IN THE SYLLABUS
CONSTRUCTION OF INSTRUMENT
SEC. 17 where the language of the
instrument is ambiguous or there are
omissions therein, the following rules of
construction apply:
1. Where the sum payable is expressed
in words and also in figures and there
is a discrepancy between the two, the
sum denoted by the words is the sum
payable; but if the words are
ambiguous or uncertain, reference may
be had to the figures to fix the amount;
2. Where the instrument provides for the
payment of interest, without specifying
the date from which interest is to run,
the interest runs from the date of the
instrument, and if the instrument is
undated, from the issue thereof;
3. Where the instrument is not dated, it
will be considered to be dated as of the
time it was issued;
4. Where there is a conflict between the
written and printed provisions of the
instrument, the written provisions
prevail;
5. Where the instrument is so ambiguous
that there is doubt whether it is a bill or
note, the holder may treat it as either at
his election;
6. Where a signature is so placed upon
the instrument that it is not clear in
what capacity the person making the
same intended to sign, he is to be
deemed an indorser;
7. Where an instrument containing the
word "I promise to pay" is signed by
two or more persons, they are deemed
to be jointly and severally liable
thereon.
INDORSEMENT BY MINOR OR
SIGNATURE
CORPORATION
EFFECTS
The indorsement or assignment of the
instrument by a corporation or by an infant
passes the property therein,
PRELIMINARY
GEN RULE:
notwithstanding that from want of
capacity,
no person is liable to the instrument whose the corporation or infant may
signature dies not appear thereon.
- necessarily that the maker must sign in
incur no liability thereon.
H O W E V E R ; g a y a s a m i n o r,
8. persons who negotiated by mere
delivery. liable for breach of warranty
corporation can invoke incapacity.
SIGNATURE OF AGENT
2. give a discharge therefor, or
3. enforce payment thereof against
No particular form of appointment is necessary any party thereto,
for this purpose; and the authority of the agent = can be acquired through or under such
may be established as in other cases of
signature,
agency.
ie.
2. the principal is bound only in case the
agent in so signing acted within the actual FORGERY; copying of signature
limits of his authority. without knowledge and consent of
the maker
of D.
WHOLLY INOPERATIVE may mga sample signature kasi
na available whenever checking
AS: forgery is a real defense against
subsequent holder.
account is opened with a bank
HOWEVER:
BUT NOT AGAINST: this only applies to incomplete
the forger and indorsees subsequent to undelivered instrument.
the indorsement made by the forger, - ie. blank check, stolen, and
regardless on whether he is a holder
in due course, being a real defense.
forged the signature of the drawer.
HENCE:
KASAMA DITO if the instrument is complete but
yung forged signature ng indorsee. undelivered
- any party prior to the forgery, has - ie. checks, with stated amount,
real defense against the forger and date and signature of the drawer,
subsequent indorsees
IN HERE:
the title. if payable to bearer Clearing Bank is liable to
kasi, delivery alone is reimburse Drawee Bank
RATION OF LIABILITY:
- as CB guaranteed all
indorsements when it presented
the check to DW for clearing, and
based on their secondary liability on it is clear breach of warranty if the
the instrument, being inoperative as signature of the payee was
against the persons primarily liable
to it (and in case of bill of exchange,
the drawer, secondarily liable)
forged.
parties after the forgery cannot use
the forgery as a defense.
3. persons who ratified the forgery
inoperative.
signature drawer
HENCE IN HERE;
consideration; and
P negotiated a an instrument to A. A
every person whose signature appears
thereon to have become a party thereto for negotiated it to B, and B negotiated it
to C as form of payment. C negotiated
value.
EXAMPLE:
or deliver a thing, or to perform
A purchased a tv from B, and negotiated a PN.
service.
B negotiated the PN to C. B however failed to
WHAT CONSTITUTE VALUE
VALUE IS
deliver the TV to A.
HENCE;
hence; refusal to honor the PN is
only available as against a holder
ONEROUS CONSIDERATION ONY
- bawal ang pagmamahal at pag
not in due course.
of his lien.
NOTE:
PN, 5k.
LIEN; defined
a charge against or interest in property a holder in due course is always a holder for
to secure payment of a debt or value, but a holder for value is not always a
holder in due course.
performance of an obligation.
prepared by: ronie ablan
AAA - BASTE / ATB
THE AWESOME NOTES 13 of 37
COMMERCIAL LAW
NEGOTIABLE INSTRUMENTS
ACCOMMODATION PARTY
MODES OF NEGOTIATION
IF IT IS PAYABLE BEARER
it is negotiated by delivery;
IF PAYABLE TO ORDER
WHO IS AN ACCOMMODATION PARTY it is negotiated by the indorsement of
is one who has signed the instrument as
maker, drawer, acceptor, or indorser,
NOTES:
the holder and completed by delivery
party.
NOTES
indorser.... anu?
applicable law
- NIL
- NCC
accommodation party after payment must
present the instrument to the accommodated type of transaction
party in order to be reimbursed
it is possible that the accommodation party
received consideration from the
or instrument
involved
- negotiable
- contracts and
accommodated party, but only for lending his instruments only assignable rights
name
a corporation cannot be an accommodation
part, unless authorized in its AOI.
as to the nature of
the transferee
- transferee may be - transferee can
a holder in due never become a
course holder in due course
PRELIMINARY
S TA G E S I N T H E L I F E O F
rights than the
transferor if he is a
HDC
greater right than
the transferor as he
merely steps in to
NEGOTIABLE INSTRUMENT the shoes of the
same
PREPARATION; note, requisites
NEGOTIATION; defined
is transferred from one person to another in
such manner as to constitute the transferee
the holder thereof.
prepared by: ronie ablan
AAA - BASTE / ATB
THE AWESOME NOTES 14 of 37
COMMERCIAL LAW
NEGOTIABLE INSTRUMENTS
INDORSEMENT
SPECIAL INDORSEMENT
HOW INDORSEMENT IS APMADE
indorsement.
3. The indorsement must be an indorsement
ie. pay to A. Sgd. P
of the entire instrument.
EXE:
to indorse for the others.
the residue.
(pwede)
RESTRICTIVE INDORSEMENT
Juan dela Cruz. Juan indorsed it to A
or B, payable to A or B, sgd. Juan.
An indorsement is restrictive which either:
2. blank
3. restrictive
4. qualified
Pay to C only. sgd. A
5. conditional
indorser; or
BLANK INDORSEMENT
an indorsement that specifies no indorsee, and
an instrument so indorsed is payable to bearer,
Pay to C, for collection. sgd A
and may be negotiated by mere delivery
the use of some other persons.
character of the indorsement.
indorsement restrictive.
instrument signed by P. 3. to bring any action thereon that the indorser
could bring;
4. to transfer his rights as such indorsee,
where the form of the indorsement
authorizes him to do so.
restrictive indorsement.
QUALIFIED INDORSEMENT
IF BEARER INSTRUMENT IS INDORSED
SPECIALLY
it may nevertheless be further negotiated by
A qualified indorsement constitutes the delivery;
indorser a mere assignor of the title to the but the person indorsing specially is
instrument. liable as indorser to only such holders
BUT: Such an indorsement does not as make title through his indorsement.
impair the negotiable character of the [same liability of an indorser in
instrument.
It may be made by
an order instrument; parang di
na secondarily liable yung
party who did not indorse it
adding to the indorser's signature the words
"without recourse" or any words of similar
specially.
import.
secondary liability
special or blank indorsement.
CONDITIONAL INDORSEMENT
name or spelling)
INDORSEMENT IN REPRESENTATIVE
Where an indorsement is conditional, the party CAPACITY
required to pay the instrument may disregard Where any person is under obligation to
the condition and make payment to the indorse in a representative capacity,
indorsee or his transferee whether the he may indorse in such terms
condition has been fulfilled or not. as to negative personal
But any person to whom an instrument
so indorsed is negotiated will hold the
same, or the proceeds thereof, subject
liability.
to the rights of the person indorsing
conditionally.
payee P.
before April 30, 2013
PRESUMPTION OF PLACE OF
bound to receive the amount that he received. INDORSEMENT
every indorsement is presumed prima facie to
have been made at the place where the
instrument is made, prepared or executed.
law.
C O N T I N U AT I O N O F N E G O T I A B L E
CHARACTER
An instrument negotiable in its origin continues NEGOTIATION
to be negotiable
UNTIL it has been restrictively
indorsed or discharged by payment or
otherwise. HOLDER
is the payee or the indorsee of a bill or a note
STRIKING OUT INDORSEMENT
The holder may at any time strike out any
indorsement which
who is in possession of it or the bearer thereof
the instrument.
assignment.
TRANSFER WITHOUT INDORSEMENT HOLDER IN DUE COURSE
is a holder who has taken the instrument under
Where the holder of an instrument payable to
his order transfers it for value without indorsing
it,
the following conditions:
the transferor.
INSTRUMENT IS COMPLETE
- the negotiation takes effect as of the
time when the indorsement is actually
made.
if it contains all requisites for negotiability
INSTRUMENT IS REGULAR
- from here onward, he is deemed a if on its face, there appears to be no any
holder in due course.
same.
was personally liable.
- is notice to the principal.
C, being an intervening party.
concrete example. 2. incomplete delivered instrument
3. incomplete undelivered instrument
4. complete undelivered instrument
5. forgery
6. material alteration
to fraud
if he acquired it for valuable consideration
HOLDER IN DUE COURSE
title as holder in due course.
defective title.
liable thereon.
length of time after its issue.
see tables of liabilities.
INDORSER:
capacity.
IRREGULAR INDORSER
1. presentment for payment must be made a person who is not really party to the
within the required period instrument, but he affixed his signature on the
2. notice of dishonor should be given, if instrument before its delivery.
promissory note is dishonored by non-
payment by the maker
~ usually, he is an accommodation party.
GENERAL INDORSER
IN RE: BILL OF EXCHANGE is one who indorsed the instrument without any
STEPS TO BE TAKEN TO CHARGE THE
PERSON SECONDARILY LIABLE:
qualifications
elsewhere than at the residence or
place of business of the drawee
ILLUSTRATION.
indorse jointly and severally.
non-acceptance
and not from P.
agent.
~ see page 10
PRELIMINARY
place of business or residence.
TIME OF MATURITY
WHAT CONSTITUTES A SUFFICIENT Every negotiable instrument is payable at
PRESENTMENT
Presentment for payment, to be sufficient,
the time fixed therein without grace.
must be made:
COMPUTATION OF TIME
be delivered up to the party paying it When the instrument is payable at a fixed
EXHIBITION OF AN INSTRUMENT;
period after date, after sight, or after that
happening of a specified event,
the time of payment is determined
that it must be produced by the holder or by
any persons who is presenting it for excluding the day from which
payment. the time is to begin to run, and
by including the date of
HENCE: not proper when it is
done by telephone or by mere
payment.
demand letter or through telegram
RATION:
Sec. 87. Rule where instrument payable at
bank. - Where the instrument is made payable
1. to give the maker or the at a bank, it is equivalent to an order to the
acceptor the change to bank to pay the same for the account of the
determine if the instrument is principal debtor thereon.
genuine
2. to facilitate the surrender of Sec. 88. What constitutes payment in due
the instrument.
received payment
PLACE OF PRESENTMENT
Presentment for payment is made at the
proper place:
1. Where a place of payment is specified
in the instrument and it is there
presented;
2. Where no place of payment is
specified but the address of the person
to make payment is given in the
instrument and it is there presented;
3. Where no place of payment is
specified and no address is given and
the instrument is presented at the
PAYMENT
WHEN PRESENTMENT IS TO BE MADE
instrument, drawee (be) and maker (pn)
it falls due.
IF IT IS PAYABLE ON DEMAND
NOTE: DEEMED EQUIVALENT TO presentment must be made within a
TENDER OF PAYMENT
1. if the instrument is, by its terms,
payable at a special place, and
reasonable time after its issue,
there at maturity,
equivalent to a tender of payment
P R E S E N T M E N T F O R PAY M E N T I S
the last negotiation thereof.
in order to charge the drawer and indorsers. this depends on the
1. nature of the instrument
EXE TO EXE:
IN RE: DRAWER
2. the usage of trade or business
with respect to such instrument;
and
- where he has no right to expect or
require that the drawee or acceptor will
3. the facts of a particular case
charge DR for the check.
affairs.
he has no reason to expect that the
instrument will be paid if presented.
---> during banking hours,
UNLESS
ration: as the indorser here, being an the person to make payment
accomodating party, act as surety and has no funds there to meet
thereby become primarily liable on the it at any time during the
instrument. being such the case, no day,
need for presentment for payment to in which case presentment
person primarily liable. ---> at any hour before the
bank is closed on that day is
IN ADDITION: THE FF INSTANCES
WHERE PRESENTMENT FOR
sufficient.
1. W h e r e , a f t e r t h e e x e r c i s e o f
WHEN DELAY IN PRESENTMENT FOR
PAYMENT IS EXCUSED
when the delay is caused by
reasonable diligence, presentment, 1. circumstances beyond the control of
as required by this Act, cannot be the holder and
made; 2. n o t i m p u t a b l e t o h i s d e f a u l t ,
2. Where the drawee is a fictitious
person;
3. By waiver of presentment, express or
misconduct, or negligence.
protest is necessary. (foreign bill)
reasonable diligence
prepared by: ronie ablan
AAA - BASTE / ATB
THE AWESOME NOTES 21 of 37
COMMERCIAL LAW
NEGOTIABLE INSTRUMENTS
IN GENERAL: the indorsers and drawer.
DEBTOR IS DEAD
IF NO: no place of payment is specified,
IT SHOULD BE MADE TO
his personal representative, if such
there be,
and if, with the exercise of
reasonable diligence, he can
be found.
heirs)
PARTNERS
IF NO: place of payment is specified,
IT SHOULD BE MADE TO
any one of them,
even though there has been a
primarily liable on the instrument
IF NO: place of payment is specified,
IT SHOULD BE MADE TO
them all.
DISHONOR BY NON-PAYMENT
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
holder.
NOTICE TO PARTNERS
notice to any one partner is notice to the
NOTICE OF DISHONOR firm, even though there has been a
dissolution.
PARTIES TO BE NOTIFIED
GEN RULE:
partner is sufficient and will bind
the partnership.
when a negotiable instrument has been NOTICE TO JOINT PERSONS WHO ARE
dishonored by non-acceptance or non-
payment, notice of dishonor must be given
to the drawer and
NOT PARTNERS
GEN RULE:
to each indorser,
OTHERWISE:
notice must be given to each of them.
notice is not given is discharged
the person of the drawer or indorser, or one of them has authority to receive such
EXE:
to their agent in that behalf.
notice for the others.
Except as herein otherwise provided:
diligence, he can be found.
If there be no personal
1. the party himself or
2. to his trustee or assignee.
BY WHOM
deceased.
diligence
himself the same time for giving notice as if the FORM OF NOTICE
agent had been an independent holder. 1. in writing or merely oral and
2. given in any terms which sufficiently identify
EFFECT OF NOTICE GIVEN the instrument, and
3. indicate that it has been dishonored by
IF BY THE HOLDER OR ON BEHALF OF
THE HOLDER
it inures to the benefit of
non-acceptance or non-payment.
given.
ILLUSTRATION
bringing, either verbally or in writing to the
knowledge of the drawer or the indorser of an
instrument, the fact that
M-P-A-B-C (holder) a specified negotiable instrument,
- notice given by C to P, A and B will upon proper proceedings taken, had
not only benefit C, but also A and B, in not been accepted, or has not been
the sense that should they pay the paid
instrument, they need not give any
notice to P for reimbursement.
and that the party notified is expected to pay it.
holders vitiate the notice
UNLESS the party to whom the notice
IF GIVEN BY OR ON BEHALF A PARTY
ENTITLED TO GIVE NOTICE
it inures to the benefit of
is given is in fact misled thereby.
MARTIN v BROWN
1. the holder and NOTICE OF DISHONOR MUST CONTAIN
2. all parties subsequent to the party to whom THE FF:
notice is given.
ILLUSTRATION
1. it must contain sufficient description of the
bill or note
2. a statement that the instrument has been
M order instrument, payee P. delivered dishonored upon presentment for
and indorsed to P-A-B-C. acceptance or for payment
- should M dishonor the the 3. a statement that the instrument has been
instrument, C can give notice to either protested if protest is required
of PAB. 4. an announcement of the intention to look to
- should he give notice to B, and
should he pay, B can ask for
the party addressed for payment.
FORM OF WAIVER
notice of dishonor were given waiver may be expressed or implied.
personally.
WHOM AFFECTED BY THE WAIVER
it is binding upon all parties;
DISPENSATION WITH NOTICE
non-payment is not necessary
accepted.
~ FF NOT INCLUDED IN THE SYLLABUS ~ Sec. 108. Where notice must be sent. -
Where a party has added an address to his
Sec. 102. Time within which notice must be signature, notice of dishonor must be sent to
given. - that address; but if he has not given such
Notice may be given as soon as the instrument address, then the notice must be sent as
is dishonored and, unless delay is excused as follows:
hereinafter provided, must be given within the 1. Either to the post-office nearest to his place
time fixed by this Act. of residence or to the post-office where he
is accustomed to receive his letters; or
Sec. 103. Where parties reside in same 2. If he lives in one place and has his place of
place. - business in another, notice may be sent to
Where the person giving and the person to either place; or
receive notice reside in the same place, notice 3. If he is sojourning in another place, notice
must be given within the following times: may be sent to the place where he is so
1. If given at the place of business of the
person to receive notice, it must be given
before the close of business hours on the
sojourning.
subdivision.
prepared by: ronie ablan
AAA - BASTE / ATB
THE AWESOME NOTES 26 of 37
COMMERCIAL LAW
NEGOTIABLE INSTRUMENTS
the binding effect of the negotiable instrument.
DISCHARGE OF NEGOTIABLE
5. compensation
6. novation
7. annulment or rescission
INSTRUMENT
9. prescription
PAYMENT IN DUE COURSE
REQUISITES:
instrument;
2. By the intentional cancellation of his
signature by the holder;
1. it must be made by or in behalf of the 3. By the discharge of a prior party;
principal debtor or the accommodated 4. By a valid tender or payment made by a
party, where the instrument is made or prior party;
accepted for his accommodation 5. By a release of the principal debtor unless
2. payment must be made to the holder the holder's right of recourse against the
3. the payor must be in gf and without party secondarily liable is expressly
notice that his title is defective; and reserved;
4. payment must be made at or after 6. By any agreement binding upon the holder
BY WHOM MADE
to extend the time of payment or to
postpone the holder's right to enforce the
instrument unless made with the assent of
1. person primarily liable (maker or the party secondarily liable or unless the
acceptor) right of recourse against such party is
2. if the primary party is a surety for a
principal debtor who signed as a
secondary party,
expressly reserved.
debtor
4. payment by accommodated party
subsequent party
M-P-A-B-C-D
HENCE: Where the instrument is ~ discharge of A by C, by canceling the
paid by a party secondarily liable signature of A, B will be released from any
thereon, liability on the instrument.
to the holder.
A.
without any stipulation or condition.
on the instrument.
RENUNCIATION BY HOLDER
RATION: The holder may expressly renounce his rights
kasi, should the holder accepted the against any party to the instrument before, at,
payment, the subsequent party would
have been discharge
or after its maturity.
principal debtor.
reservation of the right of recourse against EXE: does not affect the rights of a
the principal debtor.
~ same rule un Guaranty and Suretyship.
ALSO:
must be express
AS REGARD ALL PRIOR PARTIES 1. unintentionally
2. under a mistake or
ILLUSTRATION:
M-P-A-B-C-A
3. without the authority of the holder,
BURDEN OF PROOF
IN HERE: where an instrument or any signature thereon
in here, when the pn was negotiated back appears to have been cancelled,
to A, A is remitted to his former right, as if lies on the party who alleges that the
he is in his original position.
EFFECT:
cancellation was made unintentionally
or under a mistake or without authority.
now be disregarded.
E X E : W H E N R E S U LT S T O
DISCHARGE OF THE
INSTRUMENT
person primarily liable
alteration.
CONCEPT
5. An alteration of the marginal figures of a
note where the sum stated in words in the
body remained unchanged.
WHEN ALTERATION IS DEEMED MATERIAL 6. The insertion of the legal rate of interest
An alteration is said to be material if it alters where the note had a provision for interest
the effect of the instrument.
IT MEANS
at . . . per cent.
7. A printed form of promissory note had on
the margin the printed words, Extended
unauthorized change in an instrument that to . . . The holder on or after maturity wrote
purports to in the blank space the words May 1, 1913,
modify in any respect the obligation of as a reference memorandum of a promise
a party or made by him to the principal maker at the
unauthorized addition of words or numbers or time the words were written to extend the
other change time of payment.
to an incomplete instrument relating to 8. Where there was a blank for the place of
the obligation of a party.
Instrument Law.
T H E F F A R E D E E M E D M AT E R I A L
was cashier
10. The indorsement of a note by a stranger
after its delivery to the payee at the time the
ALTERATION (PNB vs CA April 25, 1996) note was negotiated to the plaintiff.
1. Substituting the words or bearer for 11. An extension of time given by the holder of
order. a note to the principal maker, without the
2. Writing protest waived above blank
indorsements.
3. A change in the date from which interest is
consent of the a surety co-maker.
EXE:
CTR. The insertion of the figure 5 before 1. when done with the consent of all of the
the figure 9, the instrument being otherwise parties; or
unchanged. 2. as against a party who has himself made,
5. Adding the words with interest with or authorized, or assented to the alteration
without a fixed rate. and subsequent indorsers.
6. An alteration in the maturity of a note, 3. if in the hands of a HDC, he may enforce it
whether the time for payment is thereby according to its original tenor (but only to
curtailed or extended. those who are not party to the alteration,
7. An instrument was payable First Natl hence, as to the person who made such
Bank, the plaintiff added the word and indorsees subsequent to him, are liable
Marion. to the terms of altered instrument, due to
warranty of genuineness)
Sec. 127. Bill not an assignment of funds in (d) The demand made and the answer given, if
hands of drawee. - A bill of itself does not any, or the fact that the drawee or acceptor
operate as an assignment of the funds in the could not be found.
hands of the drawee available for the payment Sec. 154. Protest, by whom made. - Protest
thereof, and the drawee is not liable on the bill may be made by:chanroblesvirtuallawlibrary
unless and until he accepts the same. (a) A notary public; or
Sec. 128. Bill addressed to more than one (b) By any respectable resident of the place
drawee. - A bill may be addressed to two or where the bill is dishonored, in the presence of
more drawees jointly, whether they are two or more credible witnesses.
partners or not; but not to two or more drawees Sec. 155. Protest; when to be made. - When a
in the alternative or in succession. bill is protested, such protest must be made on
the day of its dishonor unless delay is excused
Sec. 129. Inland and foreign bills of exchange. as herein provided. When a bill has been duly
- An inland bill of exchange is a bill which is, or noted, the protest may be subsequently
on its face purports to be, both drawn and extended as of the date of the noting.
payable within the Philippines. Any other bill is
a foreign bill. Unless the contrary appears on Sec. 156. Protest; where made. - A bill must be
the face of the bill, the holder may treat it as an protested at the place where it is dishonored,
inland bill. except that when a bill drawn payable at the
place of business or residence of some person
Sec. 130. When bill may be treated as other than the drawee has been dishonored by
promissory note. - Where in a bill the drawer nonacceptance, it must be protested for non-
and drawee are the same person or where the payment at the place where it is expressed to
drawee is a fictitious person or a person not be payable, and no further presentment for
having capacity to contract, the holder may payment to, or demand on, the drawee is
treat the instrument at his option either as a bill necessary.
of exchange or as a promissory note.
Sec. 157. Protest both for non-acceptance and
Sec. 131. Referee in case of need. - The non-payment. - A bill which has been protested
drawer of a bill and any indorser may insert for non-acceptance may be subsequently
thereon the name of a person to whom the protested for non-payment.
holder may resort in case of need; that is to
say, in case the bill is dishonored by non- Sec. 158. Protest before maturity where
acceptance or non-payment. Such person is acceptor insolvent. - Where the acceptor has
called a referee in case of need. It is in the been adjudged a bankrupt or an insolvent or
option of the holder to resort to the referee in has made an assignment for the benefit of
case of need or not as he may see fit.
XII. PROTEST
creditors before the bill matures, the holder
may cause the bill to be protested for better
security against the drawer and indorsers.
robles virtual law library
Sec. 152. In what cases protest necessary. -
Where a foreign bill appearing on its face to be Sec. 159. When protest dispensed with. -
such is dishonored by nonacceptance, it must Protest is dispensed with by any
be duly protested for nonacceptance, by circumstances which would dispense with
nonacceptance is dishonored and where such notice of dishonor. Delay in noting or protesting
a bill which has not previously been is excused when delay is caused by
dishonored by nonpayment, it must be duly circumstances beyond the control of the holder
protested for nonpayment. If it is not so and not imputable to his default, misconduct,
protested, the drawer and indorsers are or negligence. When the cause of delay
discharged. Where a bill does not appear on ceases to operate, the bill must be noted or
its face to be a foreign bill, protest thereof in protested with reasonable diligence.
case of dishonor is unnecessary.
Sec. 160. Protest where bill is lost and so forth.
Sec. 153. Protest; how made. - The protest - When a bill is lost or destroyed or is wrongly
must be annexed to the bill or must contain a detained from the person entitled to hold it,
protest may be made on a copy or written for payment to the acceptor for honor must be
particulars thereof.
Sec. 165. Agreement of acceptor for honor. - Sec. 173. Declaration before payment for
The acceptor for honor, by such acceptance, honor. - The notarial act of honor must be
engages that he will, on due presentment, pay founded on a declaration made by the payer
the bill according to the terms of his for honor or by his agent in that behalf
acceptance provided it shall not have been declaring his intention to pay the bill for honor
paid by the drawee and provided also that is and for whose honor he pays.
shall have been duly presented for payment
and protested for non-payment and notice of Sec. 174. Preference of parties offering to pay
dishonor given to him. for honor. - Where two or more persons offer to
pay a bill for the honor of different parties, the
Sec. 166. Maturity of bill payable after sight; person whose payment will discharge most
accepted for honor. - Where a bill payable after parties to the bill is to be given the preference.
sight is accepted for honor, its maturity is
calculated from the date of the noting for non- Sec. 175. Effect on subsequent parties where
acceptance and not from the date of the bill is paid for honor. - Where a bill has been
acceptance for honor. paid for honor, all parties subsequent to the
party for whose honor it is paid are discharged
Sec. 167. Protest of bill accepted for honor, but the payer for honor is subrogated for, and
and so forth. - Where a dishonored bill has succeeds to, both the rights and duties of the
been accepted for honor supra protest or holder as regards the party for whose honor he
contains a referee in case of need, it must be pays and all parties liable to the latter.
protested for non-payment before it is
presented for payment to the acceptor for Sec. 176. Where holder refuses to receive
honor or referee in case of need. payment supra protest. - Where the holder of a
bill refuses to receive payment supra protest,
Sec. 168. Presentment for payment to he loses his right of recourse against any party
acceptor for honor, how made. - Presentment who would have been discharged by such
payment.
XV. BILLS IN SET
whole bill is discharged.
~ Fin ~
ACCEPTANCE; defined
will accept the bill;
MANNER
assent to the order of the drawer. ILLUSTRATION
if the bill was presented for acceptance on
July 15, the drawee has 24 hrs to decide
The acceptance must be whether to accept it or not, or up to July 16.
1. in writing however, if the bill states that the payment
2. signed by the drawee; and shall be made within 5 days from
3. It must not express that the drawee will acceptance, and the bill was presented to the
perform his promise by any other means drawee on July 15,
WRITING
PROMISE TO ACCEPT
GEN RULE:
EXE: the date of the acceptance shall be
deemed the date when the first (refused)
presentment for acceptance was made;
not equivalent to acceptance
CONSTRUCTIVE ACCEPTANCE
Where a drawee to whom a bill is
delivered for acceptance, deemed to have
constructively accepted the bill, when he:
1. destroys the same, or
2. refuses within 24 HRS after such
delivery or within such other period as
the holder may allow, to return the bill
accepted or non-accepted to the
holder
RULES GOVERNING ACCEPTANCE
KINDS OF ACCEPTANCE
WHEN THERE IS DEEMED AN
IMPLED AUTHORIZATION FOR
QUALIFIED ACCEPTANCE
When the drawer or an indorser
GENERAL QUALIFIED r e c e i v e s n o t i c e o f a q u a l i fi e d
ACCEPTANCE ACCEPTANCE acceptance,
he must (and fails), within a
nature reasonable time,
- express his dissent to the
assents without
qualification to the
order of the drawer.
in express terms
varies the effect of
the bill as drawn.
holder.
place
UNLESS
makes payment by
the acceptor
dependent on the
it expressly states f u l fi l l m e n t o f a
that the bill is to be condition therein
paid there only and
not elsewhere
stated;
2. Partial; that is to
say, an acceptance
to pay part only of
the amount for
which the bill is
drawn;
3. Local; that is to
say, an acceptance
to pay only at a
particular place;
4. Qualified as to
time;
5. The acceptance
of some, one or
more of the drawees
but not of all.
IN RE: QUALIFIED ACCEPTANCE
RIGHT OF THE PARTIES AS TO QA
dishonored by non-acceptance.
TIME OF PRESENTMENT
A bill may be presented for acceptance
PRESENTMENT FOR - on any day on which negotiable instruments
ACCEPTANCE may be presented for payment ( the day fixed
PRESENTMENT holiday,
presentment for acceptance may be
WHEN PRESENTMENT FOR ACCEPTANCE
MUST BE MADE
1. Where the bill is payable after sight, or in
made before 12 noon on that day.
GEN RULE:
than at the residence or place of business the place of business or residence of the
of the drawee.
EXE:
necessary in order to render any party to the payable elsewhere than at the place of
bill liable. business or the residence of the drawee has
MANNER
Presentment for acceptance must be
no time,
I N H E R E ; D E L AY I N T H E
1. made by or on behalf of the holder PRESENTMENT MAY BE EXCUSED;
2. at a reasonable hour, on a business day provided, in the delay, the holder
and exercised reasonable diligence, to
3. before the bill is overdue,
TO THE
present the bill for acceptance
before presenting it for payment on
the day that it falls due,
drawee or some person authorized to the delay caused by
accept or refuse acceptance on his presenting the bill for
behalf;
to him only;
reasonable diligence, exercised.
E F F E C T O F FA I L U R E TO M A K E
PRESENTMENT
GEN RULE
PROMISSORY NOTES
the drawer and all indorsers are discharged
ie. #3
Where a note is drawn to the maker's own
order,
it is not complete until indorsed by him.
- presentment for acceptance was
made during Holiday, hence irregular.
but the drawee refused the acceptance
on other ground. (ie. insufficiency of CHECKS
funds)
by non-acceptance CHECK; defined
is a bill of exchange drawn on a bank payable
DISHONOR BY NON-ACCEPTANCE
A bill is dishonored by non-acceptance:
1. When it is duly presented for acceptance
on demand.
CERTIFIED CHECKS
is one drawn by a depositor upon funds to his
RIGHT OF THE HOLDER WHERE THE BILL credit in a bank
NOT ACCEPTED which a proper officer of the bank
1. an immediate right of recourse against the certifies will be paid when duly
drawer and indorsers accrues to the holder
and
presented for payment
2. no presentment for payment is necessary. AKIN TO: certificate of deposit of a
certifying bank.
EFFECT OF CERTIFICATION:
is the same as though the money has been
paid by the bank to the holder and
redeposited by him in his own credit.
EXE:
if the bank certifies a check through
mistake or fraud
PRESENTMENT FOR PAYMENT
TIME
- it can revoke its certification if A check must be presented for payment
the rights of 3rd parties are not
affected and
the payee has not changed his
within a reasonable time after its issue
certification.
CROSSED CHECKS
prior indorser. the drawer and all indorsers are
discharged from liability thereon.
the left top portion of the check
KINDS
ASSIGNMENT
A check of itself does not operate as an
assignment of any part of the funds to the
SPECIAL; where the name of the bank credit of the drawer with the bank, and the
or a business institution is written bank is not liable to the holder
between the 2 lines UNLESS AND UNTIL: it accepts or
which means, that the drawee
should pay only with the
intervention of that company
certifies the check.
EFFECTS
1. the check many not be encashed but
only deposited in the bank
2. the check may be negotiated only one,
to the one who has an account with the
bank; and
3. the act of crossing serves as a warning
to the holder that the check has been
issued for a definite purpose so that he
must inquire if he has received the
check pursuant to that purpose.
4. failure to inquire by the holder of the
purpose of the check, cannot be said a
MEMORANDUM CHECK
in the form of an ordinary check with the word
"memorandum, memo or mem" written across
its face
signifying that the maker or drawer
engages to pay the bona fide holder
absolutely,
- without any condition concerning its
presentment.
TRAVELER'S CHECK
are instrument purchased from banks, express
companies, or the like, in various
denomination, which can be used like cash
upon second signature by the purchaser.
Sec. 191. Definition and meaning of terms. - In Sec. 196. Cases not provided for in Act. - Any
this Act, unless the contract otherwise case not provided for in this Act shall be
requires:chanroblesvirtuallawlibrary governed by the provisions of existing
"Acceptance" means an acceptance completed legislation or in default thereof, by the rules of
by delivery or notification;