M.

Material Alteration

ii. Constitutes dishonor because Sec.137, NIL uses the word "refuses" d. Acceptance, if , if given, will retroact to date of presentation.

1.

Concept - Any alteration which changes:

(a) The date; (b) The sum payable, either for principal or interest; (c) The time or place of payment: (d) The number or the relations of the parties; (e) The medium or currency in which payment is to be made; (f) Or which adds a place of payment where no place of payment is specified, or any other change or addition which alters the effect of the instrument in any respect, is a material alteration.

General

A general acceptance assents without qualification to the order of the drawer. An acceptance to pay at a particular place is a general acceptance unless it expressly states that the bill is to be paid there only and not elsewhere. (Sec. 140) Qualified

2.

Effect of Material Alteration

A qualified acceptance in express terms varies the effect of the bill as - Where a negotiable instrument is materially altered without the drawn. assent of all parties liable thereon, it is avoided, except as against a party who has himself made, authorized, or assented to the alteration Types: and subsequent indorsers. (a) Conditional; that is to say, which makes payment by the acceptor - But when an instrument has been materially altered and is in the dependent on the fulfillment of a condition therein stated; hands of a holder in due course not a party to the alteration, he may (b) Partial; that is to say, an acceptance to pay part only of the amount for which the bill is drawn; enforce payment thereof according to its original tenor. (c) Local; that is to say, an acceptance to pay only at a particular N. Acceptance place; 1. Definition - the signification by the drawee of (d) Qualified as to time; his assent to the order of the drawer. It is an act 3. Time for Acceptance by which a person on whom the BOE is drawn The drawee is allowed twentyassents to the request of the drawer to pay it four hours after presentment in 2. Manner which to decide whether or not he will accept the bill; the - The acceptance must be communicated or delivered to the holder. acceptance, if given, dates as of the day of presentation. (Sec. 136) - The holder of a bill presenting the same for acceptance may require that the acceptance be written on the bill, and, if such request is 4. Rules Governing Acceptance refused, may treat the bill as dishonored. (Sec. 133) - Where an acceptance is written on a paper other than the bill itself, it does not bind the acceptor except in favor of a person to whom it is shown and who, on the faith thereof, receives the bill for value. (Sec. 134) Types of Acceptance - Actual (a) In writing (b) Signed by the drawee (c) Must not express that the drawee will perform his promise by any other means than payment of money (d) Communicated or delivered to the holder Constructive Acceptance of an INCOMPLETE bill 1. A bill may be accepted: (a) before it has been signed by the drawer, or (b) while otherwise incomplete, or (c) when it is overdue, or (d) after it has been dishonored by a previous refusal to accept, or by non payment 2. But when a bill payable after sight is dishonored by nonacceptance and drawee subsequently accepts it, the holder, in the absence of diff agreement, is entitled to have bill accepted as of date of the 1astpresentment. a) Sec. 138, NIL allows acceptance to be made while the bill is incomplete. b) The bill may be accepted even after it is overdue or dishonored, since an instrument DOES NOT LOSE ITS NEGOTIABILTY the mere fact that its maturity A holder has a right to: 1. require that acceptance be written on the bill and if refused, treat it as if dishonored (Sec.133) 2. refuse to accept a qualified acceptance and may treat it as dishonored (Sec. 142)

Where the drawee: (a) destroys the bill, or (b) refuses within 24hrs or such other period as the holder may allow, to return the bill accepted or non-accepted to the holder (c) Under the clearing house rules, the drawee banks failure to return within the prescribed time will be deemed payment or acceptance of the check. (d) If there is not demand for the return of the bill and the drawee keeps it until after the expiration of said period without expressly accepting or refusing it; two views: i. Constitutes constructive notice

ate has passed or the drawees refusal to accept or pay it. 3. PERIOD within which to accept (a) The drawee is allowed 24 hours after presentment to decide WON he will accept the bill; the acceptance, if given, dates as of the day of presentation. (Sec. 136, NIL)

EXCEPT instruments payable on demand [at the option of the holder before twelve o'clock noon on Saturday WHEN that entire day is not a holiday. (b) at the time fixed therein without grace.

(c) Where the holder has no time, with the exercise of reasonable diligence, to present the bill for acceptance before presenting it for payment, delay is excused and doesnt discharge the drawers and (b) Effect of non-acceptance within the prescribed period indorsers. (Sec. 147, NIL) Where bill is duly presented and is not accepted within prescribed time, the person presenting it must treat the bill When Excused (Sec. 148, NIL) Bill may be treated as dishonored as dishonored by nonacceptance or he loses right of by nonacceptance: recourse against the drawer and indorsers. (Sec. 150, NIL) (a) Where the drawee is (1) dead, (2) absconded, (3) fictitious, (4) Constructive Acceptance does not have capacity to contract by bill. Sec. 137. Where a drawee to whom a bill is delivered for acceptance destroys the same, or refuses within twenty-four hours after such delivery, or within such other period as the holder may allow, to return the bill accepted or non-accepted to the holder, he will be deemed to have accepted the same. (b) Where, after the exercise of reasonable diligence, presentment can not be made. (c)Where, although presentment has been irregular, acceptance has been refused on some other ground. 2. Effect of Failure to make presentment

O. Presentment for Acceptance 1. Time/Place/Manner of Presentment

When presentment for acceptance must be made (a) bill payable after sight, or in other cases where presentment for acceptance necessary to fix maturit (b) where bill expressly stipulates that it shall be presented for acceptance

Failure to present releases drawer and indorser the holder of a bill which is required by the next preceding section to be presented for acceptance must either present it for acceptance or negotiate it within a reasonable time. If he fails to do so, the drawer and all indorsers are discharged. (Sec. 144) 3. Dishonor by Non Acceptance

Dishonor by nonacceptance: 1. When duly presented for acceptance acceptance is refused or can not be obtained; or

(c) where bill is drawn payable elsewhere than at residence or place 2. When presentment for acceptance is excused bill is not accepted. of business of drawee (Sec. 149, NIL) (d) In no other case is presentment for acceptance necessary in order NON ACCEPTANCE of the bill to render any party to the bill liable. 1. Duty of holder: must treat the bill as dishonored by How made (Sec. 145, NIL) nonacceptance or he loses the right of recourse against the drawer and indorsers. (Sec. 150, NIL) (a) BY or ON BEHALF of the holder 2. Right of holder: immediate right of recourse against the drawer (b)AT a reasonable hour, and indorsers and no presentment for payment is necessary. (Sec. 151NIL) (c) ON a business day and before the bill is overdue, (d) TO the drawee or some person authorized to accept or refuse acceptance on his behalf; and NOTICE OF DISHONOR 1. Recipient- (Sec.89, NIL) Except as herein otherwise provided, - bill addressed to drawees not partners, MUST be made to them all to the drawer and to each indorser, unless one has authority to accept or refuse acceptance for all; 2. Effect of omission to give notice of non-acceptance any drawer or indorser to whom such notice is not given is discharged but does - drawee is dead, MAY be made to not prejudice the rights of a HDC subsequent to the omission. (Sec. his personal representative; 117, NIL) - drawee has been adjudged a bankrupt or an insolvent or has made an assignment for the benefit of creditors, MAY be made: 1) to him or 2) to his trustee or assignee. When made (Sec. 146, NIL) (a) on any day on which NIs may be presented for payment under: a. Sec. 72, NIL at a reasonable hour on a business day if Instruments falling due or becoming payable on Saturday next succeeding business day

P. Promissory Note Promissory note - a promise to pay money 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 future time a sum certain in money to order or to bearer where a note is drawn to the makers own order, not complete until indorsed by him (Sec. 184, NIL).

Q. Checks 1. Definitions

A bill of exchange drawn on a bank and payable on demand. (Sec. 185) 2. Kinds

a. Cashier's or manager's - drawn by a bank on itself and its issuance has the effect of acceptance; since the drawer and drawee are thesame, the holder may treat it is either a BE or PN. b. Memorandum check - where the word "memorandum" or "memo" is written across its face, signifying that the drawer will pay the holder absolutely, without need of presentment. c. Traveler's check - upon which the holder's signature must appear twice -- first when it is issued, and again when it is cashed. d. Crossed when the name of a particular banker or a company is written between the parallel lines drawn.

A check, whether a manager's check or ordinary check, and an offer of a check in payment of a debt is not a valid tender of payment and may be refused receipt by the obligee or creditor. The issuance of the check to a person authorized to receive it operates to release the judgment debtor from any further obligations on the judgment.

INTERNATIONAL CORPORATE BANK v GUECO (2001) A managers check is one drawn by the banks manager upon the bank itself. It is similar to a cashiers check both as to effect and use. A cashiers check is a check of the banks cashier on his own or another check. In effect, it is a bill of exchange drawn by the cashier of a bank upon the bank itself, and accepted in advance by the act of its issuance. It is really the banks own check and may be treated as a promissory note with the bank as a maker. The check becomes the primary obligation of the bank which issues it and constitutes its written promise to pay upon demand. The mere issuance of it is considered an acceptance thereof. If treated as promissory note, the drawer would be the maker and in which case the holder need not prove presentment for payment or present the bill to the drawee for acceptance

STATE INVESTMENT HOUSE V. IAC Crossed check should put the payee on inquiry to ascertain the holders title to the check or the nature of his possession. Failing this, the payee is declared guilty of gross negligence to the effect that the holder of the check is not a holder in good faith. Effects of a crossed check: (a) the check may not be encashed but only deposited in the bank; (b) the check may be negotiated only once to one who has an account with the bank; and (c) the act 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, otherwise, he is not a HDC.

EPCIB v ONG (2006) A managers check is an order of the bank to pay, drawn upon itself, committing in effect its total resources, integrity and honor behind its issuance. By its peculiar character and general use in commerce, a managers check is regarded substantially to be as good as the money it represents. 3. Clearing a. Clearing - check collection process b. Clearing house - where representatives of different banks meet every afternoon of every business day to receive the envelopes containing checks drawn against the bank he represents for examination and clearance. 4. Certification a.Definition i. an agreement by which a bank promises to pay the check at any time it is presented for payment ii. When check certified by bank on which it is drawn, equivalent to acceptance b. Requisites for a Valid Certification i. Must be in writing

BATAAN CIGAR & CIGARETTE FAC The negotiability of a check is not affected by its being crossed, whether specially or generally. It may legally be negotiated as long as the one who encashes the check with the drawee bank is another bank, or if it is especially crossed, by the bank mentioned between the parallel lines.

RP v. PNB (1961) Demand drafts have not been presented either for acceptance or for payment, thus the bank never had any chance of accepting or rejecting them; as such, these cannot be subject of escheat.Cashier's check is the substantial equivalent of a certified check and is thus subject to escheat. Telegraphic transfers are likewise subject to escheat because upon making payment complete the transaction insofar as he is concerned, though insofar as the remitting bank is concerned, the contract is executory until the credit is established.

PAL V. CA (1990)

ii. Made on the check or another instrument

Iii. Check must be payable 1) Checks cannot be certified before payable c. Liability i. Bank which certifies 1) Becomes liable as an acceptor 2) REFUSAL to certify a check doesnt constitute dishonor; theholder at that stage cannot exercise his right of recourse against the drawer and the indorsers ii. If procurement by: 1)Holder a) The bank becomes the solidary debtor, and b) The drawer and all Indorsers discharged from all liability (versus ordinary bill of exchange not discharged) 2) Drawer a) secondary parties not released 3. Presentment for Payment (a) Time A check must be presented for payment within a reasonable time after its issue or the drawer will be discharged from liability thereon to the extent of the loss caused by the delay. (Sec. 186) (b) Effect of Delay the drawer will be discharged from liability thereon to the extent of the loss caused by the delay. (Sec. 186)