Negotiable Instruments Law Act No. 2031 What are the common forms of negotiable instruments? 1.

. Promissory note - an unconditional promise in writing made by one person to another, signed by the maker engaging to pay on demand or at a fixed determinable future time, a sum certain in momeny to order or to bearer. 2. Bill of Exchange an unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the eprson to whom it is addressed, to pay on demand or at a fixed determinable future time, a sum certain in money to order or to bearer. 3. Check a special kind of bill of exchange drawn on bank, payable on demand. Promissory Note - Signed by a maker - Is an unconditional promise order - Does not need to be presented for acceptance presented for before presentment for payment. acceptance before presentment for payment. - needs to be Bill of Exchange - signed by a drawer - is an unconditional

Bill of Exchange - May or may not be drawn against a bank. a bank. - Payable on demand or on a fixed demand. determinable future time.

Check - always drawn upon

- always payable on

- Must be presented for acceptance presented - May not be drawnon deposit or funds. - Death of drawer does not revoke the revokes the banks banks authority. - Must be presented for payment within for payment a reasonable time after its last negotiation.

- not necessary to be for acceptance. - drawn on a deposit. - deathof drawer Authority. - Must be presented Within a reasonable time

after its issue. Incidents to the life of a negotiable instrument: 1. Issue 2. Negotiation 3. Presentment for Acceptance 4. Acceptance 5.Dishonor by Non-acceptance payment 8. Notice of Dishonor 9, Discharge 6. Presentment for 7. Dishonor by Non-payment

What are the incidents to the life of a promissory note? M P A B C D E

Holder Based on section 190 of NIL, it is a payee or indorsee in possession of ithe instrument, but it depends mainly on the instrument to be a holder. Order instrument should be a payee or indorsee + in possession thereof Bearer instrument 0 it is enough that the person is in pssoession thereof

 With E as holder, what is the next incident to the life of a promissory note? - Presentment for payment If the instrument is dishonored, what should E do as the next incident? E should give a notice of dishonor for non-payment to all prior parties. If E, as holder, wants to ask for payment for any of the prior parties, is he bound by the provision thus he can only ask payment from D, his immediate prior party? - NO, because E as a holder is not bound by that provision because as a holder he may hold any of the prior parties accountabe as long as he has given them notices of dishonor.

What are the incidents to the life of a bill of exchange? M P X A B C D E

With E as a holder, what is the next incident to the life of the bill of exchange? - Presentment for acceptance to X as drawee. In all cases, is presentment for acceptance for a bill of exchange required? -No, presentment for acceptance is required only for thoise cases falling under Sec. 143 of the NiL If X does not accept, what should E do? - As a holder, should give a notice of dishonor for non-acceptance to all the prior parties. If X accepts, what happens?

- X as drawee, now becomes an acceptor, who assents to the order of the drawer and engages to pay the instrument according to the tenor of his acceptance.

Acceptance the signification of the assent of the drawee to the order of the drawer. Why is acceptance needed? - Because unless and until the drawee accepts the bill, the drawee shall not be a party to the instrument, hence shall not be liable to it.

What are the next incidents? - Presentment for payment; if dishonored, the holder should give a notice of dishonor for non-payment to the prior parties.

What is an indorsement? - A transaction effected by writing on the instrument or on an attached paper thereto, of ones own name and signature, specifying to whom or to whose order the negotiable instrument is to be payable. Basic types of indorsement: 1. Special specifies the person to whom or whose order the isntrument is to be payable. 2. Blank does not specify the person to whom or to whose order the instrument is to be payable. 3. Restrictive 4. Qualified 5. Conditional

 Prior to acceptance, there is no party to a bill of exchange who is primarily liable, unless and until the bank or drawee accepts or certifies the negotiable instrument.

Features of negotiable instruments: 1. Negotiability attribute whereby a negotiable instrument passes or may pass from hand to hand similar to money, so as to give the holder in due course the right to hold the instrument and collect the sum payable for himself free from defense. 2. Accumulation of secondary contracts that attribute which negotiable instruments pick up and carry along with them as they are negotiated fromone person to another, or in the course of negotiation of a negotiable instrument, a series of juridical ties between the parties thereto arises by law or by privity. Indorsement is a contract in itsekf,

Negotiabiltity Contracts Pertains to a special class of contracts Defenses

Assignability More comprehensive term pertaining to contracts in general.

The one who takes the The one who takes the instrument is from ostrument is subject to parties. from avaiable defenses the defense of original

Cause Liabilities

Cause is presumed

Cause is presumed

The indorser is not liable on indorsement unless there be presentment for payment and notice

Warranty

A general indorser

An assignor does not

warrants the solvency

warrant the solvency

of the principal debtor. of the principal debtor. An assignee cannot acquire better rights that the assignor, because the assignee merely steps into the shoes of the assignor. Negotiability is determined by: 1. By what appears on the face of the instrument and not elsewhere. 2. If it complies with the requisites of Sec. 1 of the NiL 3. By considering the whole of the instrument.

Is a bill of exhange in order instrument because it is payable to order? - No because a bill of exchange is an order to pay regardless of whether it may be payable to order or to bearer. Section 1. Form of negotiable instruments. - An instrument to be negotiable must conform to the following requirements: (a) It must be in writing and signed by the maker or drawer; (b) Must contain an unconditional promise or order to pay a sum certain in money; (c) Must be payable on demand, or at a fixed or determinable future time; (d ) Must be payable to order or to bearer; and (e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty.