THE NEGOTIABLE INSTRUMENTS LAW

Historical Background
The Negotiable Instruments Law or Act No 2031 was enacted on February 3,1911 and took effect 90 days after its publication in the Official
Gazette on March 4,1911. It took effect on June 2,1911.

Concept
A negotiable instrument is a written contract for the payment of money which by its form and on its face is intended as a substitute for money
and passes from hand to hand as money so as to give the holder in due course the right to hold the instrument and collect the sum for
himself.

Principal characteristics
1. Negotiability
2.Accumulation of secondary contracts

Functions and importance of negotiable instruments.

1. substitute for money
2. media of exchange for most commercial transactions
3. serve as a medium of credit transaction

Common forms of negotiable instruments.

Promissory note
A promissory note is 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 time a sum certain in money
to order to bearer.
the maker or the promissor who makes the promise to pay
the payee or the person to whom the promise to pay is made
Bill of Exchange
A bill of exchange is 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 bearer.
The drawer the person drawing or making the instrument or the
person giving the order to pay
The drawee the addressee of the order to pay or the person
required to pay the instrument

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It must be in writing and signed by the maker or drawer;
Must contain an unconditional promise or order to pay a sum
certain in money;
Must be payable on demand, or at a fixed or determinable future
time;
Must be payable to order to a bearer; and
The payee the person to whom payment is to be made
It must be in writing and signed by the maker or drawer;
Must contain an unconditional promise or order to pay a sum
certain in money;
Must be payable on demand, or at a fixed or determinable future
time;
Must be payable to order to a bearer; and
Where the instrument is addressed to a drawee, he must be
named or
otherwise indicated therein with reasonable certainty.
When a bill may be treated as a note
1.where the drawer and drawee are the same person
2.where the drawee is a fictitious person
3.where the drawee is a person not having capacity to contract
Where the instrument is so ambiguous that there is doubt on
whether it is a bill or a note the holder may treat it as either at
his option

Formal requirements of negotiability in general.

An instrument to be negotiable must conform to the following requirements:

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

It must be in writing and The writing may be in ink, print or pencil

It may be made on paper, parchment or any other

substitute of paper that may be passed from one hand

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 to another.
signed by the maker or The signature is usually made by writing the name of
drawer; the maker or drawer.It may consist of his full name,
first and second name, initials and surname, initials
only or any form as long as it was intended as a I promise to pay X or order the sum of
signature of the party. It must be shown to have been P200.00 on Oct 1,2013
intended by the party as his signature. Sgd
It may be handwritten, printed, engraved or stamped. Rosa
It is usually placed at the bottom right portion of the
instrument but it may be located anywhere on the face
of the instrument including the body of the instrument
itself.
It must be shown to have been intended by the party as his 1.I promise to pay X or order the sum of
signature. P200.00 on Oct 1,2013
Sgd


Must contain an The promise or order should be absolute. If it is 1.I promise to pay X or order the sum of
unconditional promise or subject to a condition the instrument is not P200.00 on Oct 1,2013
order negotiable and the happening of the condition 2. I agree to pay X or order the sum of
does not cure the defect. P200.00 on Oct 1,2013
3. I oblige myself to pay X or order the
sum of P200.00 on Oct 1,2013
4. I commit to pay X or order the sum of
P200.00 on Oct 1,2013
5. I shall pay X or order the sum of
P200.00 on Oct 1,2013
6. I will pay X or order the sum of P200.00
on Oct 1,2013
7. I acknowledge that I owe X or order the

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An order or promise to pay is An indication of a particular fund out of which
unconditional within the
meaning of this Act even if
coupled with
to pay a sum certain
The sum payable is a sum
certain although it is to be
paid
in The instrument cannot be made payable in a form other
money; than money.Money includes any particular kind of
reimbursement is to be made, or a particular
account to be debited with the amount; or
A statement of the transaction which gives rise to
the instrument.
the sum payable must be certain in money and must
be indicated in the instrument.
With interest; or
By stated installments; or
By stated installments, with a provision that upon
default in payment of any
installment or of interest the whole shall become due;
or
With exchange, whether at a fixed rate or at the
current rate; or
With costs of collection or an attorney’s fee, in case
payment shall not be made at
maturity.
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sum of P200.00 on Oct 1,2012
8. I promise to pay X or order the sum of
P100 if X passes this year’s board exam
9 I promise to pay X or order P100 if Y”s
father dies
10.Pay X or order the sum of P100 if he
graduates this school year.
1.Pay to X or order the sum of P100.00 and
reimburse yourself from my salary
2.Pay to Y or order the sum P100.00 and
debit the amount from my bonus
3.Pay to X or order the sum of P100.00
which is the payment for the shoes which I
purchased
1.Pay to X or order the sum of P100.00
with 10% interest
2.Pay to X or order the sum of P100 in
four installments
3.Pay to X or order the sum of P100 in
four equal installments
4.Pay to X or order the sum of P100 in
four equal monthly installments starting
October 15,2013
 currency which has a fixed value in relation to Phil
money.It need not be Phil legal tender.
An instrument which contains an order or promise to do
any act in addition to the payment of money is not
negotiable.
Authorizes the sale of collateral securities in case the
instrument be not paid at maturity; or
Authorizes a confession of judgment if the instrument
be not paid at maturity; or
Waives the benefit of any law intended for the advantage
or protection of the obligor;
Gives the holder an election to require something to be
done in lieu of payment of money.
Before action
Known as warrant of attorney but if it is in a promissory note
it is known as cognovits note or judgement note
It is void 9the confession is void)
Because it enlarges the field for fraud
Bargains away his day in court
Strikes down the right to appeal
But the instrument is valid
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1.Pay S or order the sum of P100.00 and in case of
failure to pay S may sell my ring
2.I promise to pay S or order the sum of P100 on Sept
15,2013 and if I fail to do so I hereby authorize my
lawyer to confess judgment for the amount of the loan
plus interests, costs and attorney’s fees
2.Pay to X or order the sum of P100 on
Sept 15,2013.Presentment for payment waived I
promise to pay S or order the sum of P100.00 on Sept
15,2013 or to deliver to him a computer at his option.
3.I promise to pay S or order the sum of P100.00 on
Sept 15,2013 or to deliver to him a computer at my
option.
After maturity
1.cognovit actionem a written confession of
judgment by the defendant acknowledging his
debt after the action had been filed
2.relicta verification means his pleading being
abandoned.It is a confession of judgment
accompanied by a withdrawal of the defense.
They are valid and resorted to during the pre-
trial where the parties consider the possibility of
settling the matter
Because confession is performed after maturity and thus
hastens payment of money

Must be payable on When it is expressed to be so payable on demand, or 1.I promise to pay S or order the sum of
demand, at sight, or on presentation; or P100.00 on demand
In which no time for payment is expressed. 2. I promise to pay S or order the sum of
Where an instrument is issued, accepted, or indorsed P100.00 at sight
when overdue, it is, as regards, the person so issuing, 3. I promise to pay S or order the sum of
accepting, or indorsing it, payable on demand. P100.00 upon presentation
4. I promise to pay S or order the sum of
P100.00
or at a fixed or an instrument is payable at a determinable future time, 1.I promise to pay S or order the sum of
determinable future when it is expressed to be payable P100.00 on August 15,2013.
time; At a fixed period after date or sight; or 2. Pay S or order the sum of P100.00 30
On or before a fixed or determinable future time days after date
specified therein; or 3. Pay S or order the sum of P100.00 30
On or at a fixed period after the occurrence of a days after sight
specified event which is certain to happen, though the 4. Pay S or order the sum of P100.00 on or
time of happening is uncertain. before Oct 1,2012
An instrument payable upon a contingency is not 5. Pay S or order the sum of P100.00 30
negotiable, and the happening of the event does not days after the death of A
cure the defect 6. Pay S or order the sum of P100.00 30
days before the death of A
7. Pay S or order the sum of P100.00 30
days after a graduates

Must be payable to The instrument must be payable to order of a specified person or 1.I promise to pay S or order the sum of P100.00
order to him or his order. 2. Pay to the order of myself the sum of P500.00
It may be drawn payable to the order of – 3. Pay to the order of yourself the sum of P500
A payee who is not maker, drawer, or drawee; or 4. Pay to the order A ,B and C the sum of P500
The drawer or maker; or 5. Pay to the order A ,B or C the sum of P500

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 The drawee; or
Two or more payees jointly; or
One or some of several payees; or
The holder of an office for the time being.
When it is expressed to be so payable; or
When it is payable to a person named therein or bearer; or
to a bearer; When it is payable to the order of a fictitious or non-existing
person, and such fact was known to the person making it so
payable; or
When the name of the payee does not purport to be the name of
the person; or
When the only or last indorsement in blank
1.Pay to the order of the president of ABC
corporation
2. “Pay to bearer the sum of P5, 000”
3. “I promise to pay P or bearer the sum of P5,
000”
4. “Pay to the order of CASH P10, 000.00”
5. I promise to pay to the order of Pablo Patricio
the sum of P10, 000.00
6. Pay to Edward Cullen the sum of P100.00

Where the instrument is
addressed to a drawee, he
must be named or otherwise
indicated therein with
reasonable certainty.
This requisite is intended to ensure that the holder will 1. Pay to A or order the sum of P300.00
present the instrument to the right person. A bill may be Sgd
addressed to two or more drawees jointly whether they Anna
are partners but not to two or more drawees in the BPI or SB
alternative or in succession.

Abnormal Negotiable Instruments

Incomplete but delivered instrument

Lacks material particulars Signature on blank paper

The person in possession has a prima facie authority to complete
it by filling up the blanks therein
In case of correct completion
The person who became a party to the instrument prior to
completion will be held liable if the blanks were filled up strictly in
There is prima facie authority to fill up the instrument if the person who
signed the instrument in blank delivers it to another in order that it may
be converted into a negotiable instrument.
The person who became a party to the instrument prior to completion will
be held liable if the blanks were filled up strictly in accordance with the
authority given and it was filled up within reasonable time

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accordance with the authority given and it was filled up within
reasonable time

In case of wrongful completion the holder in due course can
enforce the instrument as if it had been filled up in accordance
with the authority given against:
The parties prior to the wrongful completion
The party guilty thereof
The parties subsequent to wrongful completion
In case of wrongful completion the holder in due course can
enforce the instrument as if it had been filled up in accordance with the
authority given against:
party prior to completion
The party guilty thereof
The parties subsequent to wrongful completion

In case of wrongful completion a holder not in due course In case of wrongful completion a holder not in due course can
can enforce the instrument against the guilty party and enforce the instrument against the guilty party and
Subsequent parties Subsequent parties

Incomplete and undelivered instrument

It is an instrument which lacks material particulars and is undelivered

It is not a valid instrument in the hands of any holder as against the person whose signature appears prior to delivery
The holder can hold the guilty party liable on the instrument
The holder can hold the subsequent parties liable on the instrument because they warrant that the instrument is genuine and in all respects
what it purports to be

Complete but undelivered instrument

Refers to an instrument which is complete but is not delivered

This instrument is generally revocable until the same is delivered for the purpose of giving effect thereto
Holders in due course Holders not in due course
A valid delivery of the instrument is conclusively presumed and A valid delivery is presumed but such a presumption is disputable and
can therefore collect evidence may be introduced to rebut the presumption
The party sought to be charged may prove that
1.he made no delivery

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 2.that if there was delivery he did not authorize the same
3.that if he authorized the delivery it was conditional or for a special
purpose and not for the purpose of transferring the money in the
instrument

Forgery
It refers to counterfeit making or fraudulent alteration of any writing and may consist in the signing of another’s name or the alteration of an
instrument in the name amount, description of the person and the like with the intent to defraud.

Effects of forgery
On the person whose signature is forged On the holder

1.the signature that is forged or made without 1.no right to retain the instrument or
authority is wholly inoperative although the instrument 2. no right to enforce payment thereof against any party thereto
itself and the genuine signatures are valid can be acquired through or under such signature except as to the
2. no right to give a discharge therefore or following:

A.When a party against whom it is sought to enforced such right is

precluded from setting up the forgery or want of authority including the
following
a.those who by their acts, silence, inaction or negligence are
estopped from setting up the defense of forgery
b.those who warrant or admit the genuineness of the signature in
question:the acceptor,the indorser and
c.those who negotiate by mere delivery who warrant that the instrument is

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 genuine and in all respects what it purports to be.

Promissory Note

Of maker’s signature Of indorser’s signature

Holders in due course can hold subsequent parties liable because of their
warranties
No holder can hold the indorser whose signature was forged
liable. Parties who signed prior to the forged signature cannot
also be held liable.
Parties who signed after the forged signature can be held liable
because of their warranties that is that the instrument is genuine
and in all respects what it purports to be.

Bill of Exchange

Of the drawer’s signature Of the indorser’s signature

The drawee bank will suffer the loss if it pays based on the forged The cut off rule shall be applied. Parties who sign prior to the
signature of the drawer forged signature cannot be liable by parties who sign after the
forged signature.
The collecting bank shall suffer the loss

Holders
Classes of holders
Holder is the payee or indorsee of a bill or note who is in possession of it or the bearer thereof.
Rights of holders
To sue on the instrument in his own name
This is true even if the he was holding the instrument as security or for collection only
To receive payment of the instrument and if the payment is in due course the instrument is discharged
Holders for value one who has given value for an instrument issued or negotiated to him. Where value has any time been given for the
instrument the holder is deemed a holder for value in respect to all parties who become such prior to that time.

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Holder in due course

Requisites of a Holder in due course

A holder in due course is a holder who has taken the instrument under the following conditions:

That it is complete and regular upon An instrument is not complete when it has blanks or it is wanting in any material particular
its face; such as the name of the payee or drawee or the amount of the instrument. An instrument is
irregular if it has alterations which are patent on its face
That he became the holder of it An instrument is overdue after the date of maturity. If the instrument is not payable on
before it was overdue, and without demand, the date of maturity may be determined from the face of the instrument itself; from the
notice that it has been previously date of the acceptance such as when the instrument is payable a certain number of days after
dishonored, if such was the fact; sight or from or on the happening of a certain event.
If the instrument is payable on demand and the instrument is a PN the date of maturity is a
reasonable time after its issue and if it is a bill the date of maturity is a reasonable time after its
last negotiation.
Where an instrument payable on demand negotiated an unreasonable time after it is issue the
holder is not a holder in due course
he took it in good faith and for Good faith refers to a state of mind which is manifested by the act of the individual. It consists of
value the honest intention to abstain from taking an unconscionable and unscrupulous advantage of
another. Knowledge of the exact truth is not required. He will be in bad faith if he has knowledge
of any circumstance from which it can be inferred that something is wrong with his taking the
instrument.
value is any consideration sufficient to support a simple contract. The holder is a holder for value if
he acquired the instrument by giving adequate consideration therefore.
That at the time it was negotiated The person to whom the instrument is negotiated has notice of such infirmity or defect when he
to him he had no notice of any has actual knowledge of the infirmity or defect
infirmity in the instrument or defect He has knowledge of such fact that his action in taking the instrument amounted to bad faith.
in the title of the person negotiating If the holder receives notice of any infirmity in the instrument or defect in the title of the person
it. negotiating the same before he has paid the full amount agreed to be paid therefore,he will be
deemed a holder in due course only to the extent of the amount paid by him
The title to the instrument is defective in the following cases

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 1.when he obtained the instrument or any signature thereon through
Fraud,duress,force or fear or other unlawful means of for an unlawful consideration
2.when he negotiates the instrument through any of the following
Breach of faith as when an indorser’s title is defective if he negotiates an note which was given to
him as a mere security or if he negotiates an instrument which was already paid
Circumstances which will amount to fraud as when the payee negotiates an instrument despite
having obtained knowledge that the maker or drawer has no intention to honor it.

Rights of holder in due course Rights of holder not in due course.

He may sue on the instrument on his own name.
He may receive payment and if the payment is in
due course, the instrument is discharged.
He holds the instrument free from any defect of title
of prior parties.
He holds the instrument free from defenses available
to prior parties among themselves.
He may enforce payment of the instrument for the
full amount thereof against all parties liable thereon.
He may sue in the instrument in his own name.
He may receive payment and if the payment is in due course, the instrument is
discharged.
He is entitled to the instrument but hold it subject to the same defenses as if it
were non-negotiable.
He has all the rights of the holder in due course from whom he derives the title
provided he is not himself a party to any fraud or illegality affecting the
instrument.

Defenses in general.

Real defenses are those that attach to the instrument itself and can be set up against the whole
world. They are available against all parties, both immediate and remote including holders in
due course. They are called real because they attach to the instrument regardless of the merit
or demerits of the plaintiff
Personal they grow out of the agreement or conduct of a particular person in regard to the
defenses instrument which renders it inequitable for him though holding legal title to enforce
it against the defendant but which are not available against bona fide purchaser for
value without notice. They are called personal defenses because they are available only

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 against that person or subsequent holder who stands in privity with him that is holder not in
due course They are those available to prior parties among themselves but are not good
against a holder in due course.

Real Defenses Personal Defenses

Want of delivery of incomplete instrument absence or failure of consideration
Forgery simple fraud or fraud in inducement
Minority or other form of incapacity filling up of blanks not in accordance with the authority given
Fraud in factum want of delivery
Discharge innocent alteration or spoilation
Illegality of contract acquisition of the signature in the instrument by force or fear
Duress amounting to forgery fraud in inducement
insertion of wrong date
negotiation of the instrument in breach of faith or under such
circumstances amounting to fraud
discharge by payment or renunciation or release before maturity

Distinctions between fraud in factum and fraud in inducement

Fraud in factum Fraud in inducement
When a person without negligence has signed the instrument and Relates to the quality, quantity ,character or
was deceived as to the character of the instrument and without value of the consideration of the instrument
knowledge
The issuer has no intention to issue the instrument The issuer has the intention to issue the
instrument voluntarily only to be deceived as the
character, quality or cause of the instrument

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Check
A check is a bill of exchange drawn on a bank payable on demand. Except as herein otherwise provided, the provisions of this Act applicable
to a bill of exchange payable on demand apply to a checks

Kinds of checks

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Cashier’s check A check of the bank cashier’s on his bank and accepted in advance by the act of its issuance.
Teller’s check A substitute for a certified check and resembles such a check much more closely than it does a bill of
exchange. It is none the less a check because it is drawn by an executive officer of the bank upon the
institution which he serves.
Manager’s check A check drawn by the manager of the bank upon the bank of which he is the manager.
Memorandum A check in ordinary form with the word “memorandum” written across its face and not intended for
check immediate presentation. Such a check has been regarded as a contact whereby the maker engages to
pay the bona fide holder absolutely, without any condition concerning the presentment.
Banker’s check A check drawn by a banker, as distinguished from a bank by anybody or a check, draft, or other order
for payment of money, drawn by an authorized officer of a bank in which funds of his bank are
deposited.
Certified check A check which has been certified by the drawee bank and bearing on its face the word “certified”.
Stale check A stale check is one where there has been unreasonable delay by the holder in presenting it for
payment.
Traveler’s check A negotiable instrument upon which the holder’s signature must appear twice in order to be a
complete instrument. It is issued by a bank to a holder who must place his instrument at the time it is
issued, and the instrument must be countersigned by the holder before it is paid.
Crossed check A check across the face of which is stamped the name of a certain banker through whom it must be
presented.

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Cashier’s check A check of the bank cashier’s on his bank and accepted in advance by the act of its issuance.
Teller’s check A substitute for a certified check and resembles such a check much more closely than it does a bill of exchange. It is
none the less a check because it is drawn by an executive officer of the bank upon the institution which he serves.
Manager’s check A check drawn by the manager of the bank upon the bank of which he is the manager.
Memorandum check A check in ordinary form with the word “memorandum” written across its face and not intended for immediate
presentation. Such a check has been regarded as a contact whereby the maker engages to pay the bona fide holder
absolutely, without any condition concerning the presentment.
Banker’s check A check drawn by a banker, as distinguished from a bank by anybody or a check, draft, or other order for payment of
money, drawn by an authorized officer of a bank in which funds of his bank are deposited.
Certified check A check which has been certified by the drawee bank and bearing on its face the word “certified”.
Stale check A stale check is one where there has been unreasonable delay by the holder in presenting it for payment.
Traveler’s check A negotiable instrument upon which the holder’s signature must appear twice in order to be a complete instrument. It
is issued by a bank to a holder who must place his instrument at the time it is issued, and the instrument must be
countersigned by the holder before it is paid.
Crossed check A check across the face of which is stamped the name of a certain banker through whom it must be presented.

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Cashier’s check A check of the bank cashier’s on his bank and accepted in advance by the act of its issuance.
Teller’s check A substitute for a certified check and resembles such a check much more closely than it does a bill of exchange. It is
none the less a check because it is drawn by an executive officer of the bank upon the institution which he serves.
Manager’s check A check drawn by the manager of the bank upon the bank of which he is the manager.
Memorandum check A check in ordinary form with the word “memorandum” written across its face and not intended for immediate
presentation. Such a check has been regarded as a contact whereby the maker engages to pay the bona fide holder
absolutely, without any condition concerning the presentment.
Banker’s check A check drawn by a banker, as distinguished from a bank by anybody or a check, draft, or other order for payment of
money, drawn by an authorized officer of a bank in which funds of his bank are deposited.
Certified check A check which has been certified by the drawee bank and bearing on its face the word “certified”.
Stale check A stale check is one where there has been unreasonable delay by the holder in presenting it for payment.
Traveler’s check A negotiable instrument upon which the holder’s signature must appear twice in order to be a complete instrument. It
is issued by a bank to a holder who must place his instrument at the time it is issued, and the instrument must be
countersigned by the holder before it is paid.
Crossed check A check across the face of which is stamped the name of a certain banker through whom it must be presented.

Crossed check
The maker or any legal holder of a check shall be entitled to indicate therein that it be paid to a certain banker or institution, which he
shall do by writing across the face the name of said banker or institution, or only the words “ and company”.
Generally – when the words and company or any abbreviation thereof are written between two parallel transverse lines, or when two
parallel transverse lines simply are drawn across the face of the instrument.
Specially – when the check bears across its face an addition of the name of a banker.
Purpose – It’s object is to provide that drawers or holders of drafts, payable to bearer or order on demand, may be enabled
effectually to direct the payment of the same only to or through some banker, and that the crossing shall have the force of a
direction to the bankers upon whom the check is drawn, that is to be paid to or through some banker, and that the same shall be
payable only to or through some banker. How presented for payment – The holder of a crossed check deposits it for collection with
the bank indicated, if crossed specially, or with any bank where he keeps an account, if crossed generally. This bank then presents
it for payment with the drawee bank.

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Issuing check without funds
Estafa is committed by postdating a check, or issuing a check in payment of an obligation when the offender had no funds in the bank,
or his funds deposited therein were not sufficient to cover the amount of the check. The failure of the drawer of the check within three days
from receipt of notice from the bank and/or the payee or holder that said check has been dishonored for lack or insufficiency of funds shall be
prima facie evidence of deceit constituting false pretense or fraudulent acts.

Estafa B.P Blg 22 or bouncing checks law

By postdating a check, or issuing a check on payment of an
obligation when the offender had no funds in the bank, or his
funds deposited therein were not sufficient to cover the amount
of the check
The failure of the drawer of the check to deposit the amount
necessary to cover his check within three (3) days from receipt
of notice from the bank and/or the payee or holder that said
check dishonored for lack or insufficiency of funds shall be prima
facie evidence of deceit constituting false pretense or fraudulent
act [Art. 315 (2) (d) of the revised penal code as amended by
R.A. 4885]
elements of estafa by issuing a check
1. Postdating or issuing a check in payment of an obligation
contracted at the time the check was issued
2. Lack or insufficiency of funds to cover a check
3. Damage to the payee thereof. (people vs. Panganiban,
335 SCRA 354)
B. evidence of knowledge of insufficiency
of funds
1. Making or drawing and issuing any check
to apply on account or for value,
knowing at the time of issue that he
does not have funds in or credit with the
drawee bank for the payment of such
check, which check is subsequently
dishonored by the drawee bank
2. Having sufficient funds in or credit with
the drawee bank shall fail to keep
sufficient funds or maintain a credit if
presented for payment within a period of
ninety( 90) days from the date appearing
thereon, for which reason it is
dishonored by the drawee bank (sec. 1
B.P Blg 22 )
1. The making, drawing and issuance of a
check the payment of which is refused
by the drawee because of insufficient
funds or credit with such bank, when
presented within ninety (90) days from

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 the check, shall be prima facie evidence
of knowledge of such insufficiency of
funds or credit unless such maker or
drawer pays the holder the amount due
thereon, or makes arrangements for
payment in full by the drawee of such
check within (5) banking days after
receiving notice that such check has not
been paid by the drawee (sec. 2 B.P Blg
22 )
Clearing house on dishonored checks
1. Cause of dishonor
The dishonor of a check may take several forms, some of which are:
a. Technical overdraft- such as DAIF (drawn against insufficient funds) or DAUD (drawn against uncleared deposit).
b. Posting reject- such as account not found, dormant account or stop payment order.
c. Technical defects- such as two signatures required, amount altered, alteration for confirmation, amount in words missing, post-dated check.

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