Notice of Dishonor

Introduction
MEANING
Notice of dishonor is bringing, either verbally or in writing, to the knowledge of the drawer or
indorser of an instrument, the fact that a specified negotiable instrument, upon proper
proceedings taken, has not been accepted or has not been paid and that the party notified is
expected to pay it.

A negotiable instrument is considered to be dishonored:

(1) If it is not accepted when presented for acceptance; or

(2) If it is not paid when presented for payment at maturity; or
(3) If presentment is excused or waived and the instrument is past due and unpaid
SIGNIFICANCE
OBJECT OF NOTICE OF DISHONOR
1. To inform the parties secondarily liable that the maker or acceptor, as the case may be, has failed
to meet his engagement; and
2. To advise such parties that they will be required to make payment

EFFECT OF FAILURE GIVE NOTICE OF DISHONOR

GEN RULE:
when a negotiable instrument has been dishonored by non-acceptance or nonpayment, notice of
dishonor must be given
• to the drawer and
• to each indorser,
OTHERWISE:
any drawer or indorser to whom such notice is not given is discharged
NOTE:
notice may be given either to the person of the drawer or indorser, or to their agent in that
behalf.
MANNER OF GIVING
To whom?
NOTICE WHERE PARTY IS DEAD
1. The notice must be given to a personal representative, if there be one, and if with reasonable
diligence, he can be found.
2. If t here be no personal representative, notice may be sent, to the:
• last residence or
• last place of business of the deceased

NOTICE TO PARTNERS
notice to any one partner is notice to the firm, even though there has been a dissolution.
HENCE; notice to only one partner is sufficient and will bind the partnership.
MANNER OF GIVING
To whom?
NOTICE TO JOINT PERSONS WHO ARE NOT PARTNERS
notice must be given to each of them, as each persons are liable only to the share in the obligation and
not in its entirety

NOTICE TO BANKRUPT
Where a party
• has been adjudged a bankrupt or an insolvent, or
• has made an assignment for the benefit of creditors,
NOTICE MAY BE GIVEN EITHER TO
1. the party himself or
2. to his trustee or assignee.
MANNER OF GIVING
By whom?
THE NOTICE MAY BE GIVEN
1. by or on behalf of the holder, or
2. by or on behalf of any party to the instrument
WHO
• might be compelled to pay it to the holder, and
• upon taking it up, would have a right to reimbursement from the party to whom the notice is
given.