Nego 1

UP LAW BOC
NEGOTIABLE INSTRUMENTS LAW
MERCANTILE LAW
MERCANTILE LAW
NEGOTIABLE
INSTRUMENTS LAW
10
UP LAW BOC
I. Definition
MERCANTILE LAW
private: Provided, however, That, unless

otherwise fixed by the Monetary Board, coins
shall be legal tender in amounts not exceeding
Fifty pesos (P50.00) for denominations of
Twenty-five centavos and above, and in
amounts not exceeding Twenty pesos
(P20.00) for denominations of Ten centavos or
less.
A. DEFINITION AND PURPOSE

Written contract for the payment of money,
by its form and on its face, intended as
substitute for money and intended to pass
from hand to hand to give the holder in
due course (HDC) the right to hold the
same and collect the sum due.
Instruments are negotiable when they
conform to all the requirements prescribed
by the Negotiable Instruments Law (NIL;
Act 2031, 03 February 1911).
However, the fact that an instrument does
not meet the foregoing requisites will not
affect its validity, the only consequence
being that it will be governed not by the
NIL but by the general law on contracts
(Campos).
Although considered as medium for

payment of obligations, negotiable
instruments are not legal tender.
Negotiable instruments shall produce the
effect of payment only when they have
been encashed or when through the fault
of the creditor they have been impaired.
(Art. 1249, Civil Code)
BUT a CHECK which has been cleared and
credited to the account of the creditor shall
be equivalent to a delivery to the creditor
of cash.
Settled is the rule that payment must be
made in legal tender. A check is not legal
tender and, therefore, cannot constitute a
valid tender of payment. Since a
negotiable instrument is only a substitute
for money and not money, the delivery of
such an instrument does not, by itself,
operate as payment. Mere delivery of
checks does not discharge the obligation
under a judgment. The obligation is not
extinguished and remains suspended until
the payment by commercial document is
actually realized. (BPI vs. Royeca, 2008)
Negotiable Instruments Not Legal tender

Art. 1249, Civil Code. The payment of debts in
money shall be made in the currency
stipulated, and if it is not possible to deliver
such currency, then in the currency which is
legal tender in the Philippines.
The delivery of promissory notes payable to
order, or bills of exchange or other mercantile
documents shall produce the effect of
payment only when they have been cashed, or
when through the fault of the creditor they
have been impaired.
In the meantime, the action derived from the
original obligation shall be held in the
abeyance. (1170)
II. Forms and

Interpretation
Section 52, New Central Bank Act. Legal

Tender Power. - All notes and coins issued by
the Bangko Sentral shall be fully guaranteed
by the Government of the Republic of the
Philippines and shall be legal tender in the
Philippines for all debts, both public and
A. REQUISITES OF NEGOTIABILITY
Section 1, Negotiable Instruments Law (NIL).
Form of negotiable instruments. - An
instrument to be negotiable must conform to
the following requirements:
11
UP LAW BOC
D.
FIRST
REQUIREMENT:
IN
WRITING AND SIGNED BY THE
MAKER OR DRAWER
(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; Must be payable on
demand, or at a fixed or determinable
future time; 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.
Section 18, NIL. Liability of person signing in

trade or assumed name. - No person is liable on
the instrument whose signature does not
appear thereon, except as herein otherwise
expressly provided. But one who signs in a
trade or assumed name will be liable to the
same extent as if he had signed in his own
name.
D.1. IN WRITING
B. REQUISITES OF A PROMISSORY
NOTE
What is considered "In writing" - includes print;

written or typed. Section 191 of the NIL
provides that the word written includes
printed, and writing includes print.
Section 184, NIL. Promissory note, defined. - A

negotiable promissory note within the
meaning of this Act 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
future time, a sum certain in money to order or
to bearer. Where a note is drawn to the
maker's own order, it is not complete until
indorsed by him.
C. REQUISITES
EXCHANGE
OF
BILL
MERCANTILE LAW
Rationale for requirement: Since an instrument

is a document, there must be something in
written form that can be transferred from
person to person. (Abad)
D.2. SIGNED
General Rule: No person is liable on the
instrument whose signature does not appear
thereon.
OF
Notes:
One who signs in a trade or assumed name
will be liable to the same extent as if he
had signed in his own name
Signature of any party may be made by
duly authorized agent; no particular form
of appointment necessary (Sec. 19, NIL)
Signature is binding and may be in ones
handwriting,
printed,
engraved,
lithographed or photographed so long as it
is intended or adopted as the signature of
the signer or made with his authority
(Campos).
Signature may appear on any part of the
instrument. However, if the signature is so
placed upon the instrument that it is not
Section 126, NIL. Bill of exchange, defined. - 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 to
bearer.
Section 184 (defining a promissory note) and
Section 126 (defining a bill of exchange) of the
NIL contain the same requisites as in Section 1.
12
UP LAW BOC
clear in what capacity the person intended

to sign, he is deemed an indorser. (Sec. 17[f],
NIL)
Particular
fund
indicated is not the
direct
source
of
payment.
E.
SECOND
REQUIREMENT:
CONTAINING AN UNCONDITIONAL
PROMISE TO PAY OR ORDER TO PAY
A SUM CERTAIN IN MONEY
E.2. ORDER OR PROMISE TO PAY
(a) An indication of a particular fund out of

which reimbursement is to be made or a
particular account to be debited with the
amount; or
(b) A statement of the transaction which gives
rise to the instrument.
As to promissory note: Promise to pay

should be express on the face of the
instrument (Campos).
The word "promise" is not absolutely
necessary. Any expression equivalent to a
promise is sufficient (Campos).
Mere acknowledgment of a debt is
insufficient (Campos).
As to bill of exchange: Order command
made by the drawer addressed to the
drawee ordering the latter to pay the payee
or the holder a sum certain in money; the
instrument is, by its nature, demanding a
right.
Words which are equivalent to an order are
sufficient.
A mere request or authority to pay does not
constitute an order. Although the mere use
of polite words like "please" does not of
itself deprive the instrument of its
characteristics as an order, its language
must clearly indicate a demand upon the
drawee to pay.
But an order or promise to pay out of a

particular fund is not unconditional.
E.1. UNCONDITIONAL
The promise or order to pay, to be
unconditional, must be unqualified
(Campos).
Must not be dependent upon a contingent
event that is not certain to happen. (Abad)
The fact that the condition appearing on
the instrument has been fulfilled will not
convert it into a negotiable one (see Sec. 4,
NIL)
The drawee pays the

payee from his own
funds afterwards.
The drawee pays
himself from the
particular
fund
indicated.
Particular
fund
indicated is the direct
source of payment.
(Sundiang
and
Aquino)
When conditional: A negotiable instrument is

conditional when reference to the fund clearly
indicates an intention that such fund alone
should be the source of payment. (Metropolitan
Bank vs. CA, 1991)
Section 3, NIL. When promise is unconditional. An unqualified order or promise to pay is

unconditional within the meaning of this Act
though coupled with:
Fund
for Reimbursement
MERCANTILE LAW
Indicating a Particular
Fund
(non-negotiable)
E.3. SUM
CERTAIN
There is only one act

the drawee pays
directly from the
particular
fund
indicated.
PAYABLE
MUST
BE
Section 2, NIL. What constitutes certainty as to

sum. - The sum payable is a sum certain within
the meaning of this Act, although it is to be
paid:
13
UP LAW BOC
(a) with interest; or

(b) by stated installments; or
(c) by stated installments, with a provision
that, upon default in payment of any
installment or of interest, the whole shall
become due; or
(d) with exchange, whether at a fixed rate or at
the current rate; or
(e) with costs of collection or an attorney's fee,
in case payment shall not be made at
maturity.
MERCANTILE LAW
F. PAYABLE ON DEMAND, OR AT A
FIXED OR DETERMINABLE FUTURE
TIME
Rationale: to inform the holder of the
instrument of the date when he may enforce
payment thereof.
F.1. ON DEMAND
Section 7, NIL. When payable on demand. - An
instrument is payable on demand:
(a) When it is so expressed to be payable on
demand, or at sight, or on presentation; or
(b) In which no time for payment is expressed.
Note: A sum is certain if from the face of the

instrument it can be determined even if it
requires
mathematical
computation.
(Sundiang and Aquino)
Where an instrument is issued, accepted, or

indorsed when overdue, it is, as regards the
person so issuing, accepting, or indorsing it,
payable on demand.
E.4. PAYABLE IN MONEY

The instrument must be capable of being
transformed into money, since negotiable
instruments are intended to be substitutes
for money
Money as used in the law is not
necessarily limited to legal tender as
defined by law but includes any particular
kind of current money. (see, Sec. 6(e), NIL
and PNB v. Zulueta)
An agreement to pay in foreign currency is
valid. (RA 8183)
Note: The holder may call for payment any

time; and the maker has an option to pay at
any time The refusal of the holder to accept
payment will terminate the running of interest,
if any, but the obligation to pay the note
remains.
F.2. AT A FIXED TIME

Only on the stipulated date, and not before,
may the holder demand its payment.
Should he fail to demand payment, the
instrument becomes overdue but remains
valid and negotiable. It is merely converted
to a demand instrument with respect to
the person who issued, accepted, or
indorsed it when overdue. (Sec. 7, NIL)
E.5. NON-NEGOTIABLE
An instrument which contains an order or
promise to do an act in addition to the
payment of money (with the exception of
certain acts enumerated in Sec. 5 of the
NIL)
Payable in personal property like
merchandise, shares of stock or gold.
Maker or the person primarily liable has
the option to require something to be done
in lieu of payment of money. (Campos)
But it is negotiable if the option to require
something to be done in lieu of payment of
money is with the holder
F.3. AT A DETERMINABLE FUTURE TIME

Section 4, NIL. Determinable future time; what
constitutes. - An instrument is payable at a
determinable future time, within the meaning
of this Act, which is expressed to be payable:
(a) At a fixed period after date or sight; or
14
UP LAW BOC
F.6. PROVISIONS EXTENDING TIME OF

PAYMENT
(b) On or before a fixed or determinable future

time specified therein; or
(c) On or at a fixed period after the occurrence
of a specified event which is certain to
happen, though the time of happening be
uncertain.
An instrument payable upon a contingency is
not negotiable, and the happening of the event
does not cure the defect.
General rule: Negotiability not affected. Effect

is similar with that of an acceleration clause at
the option of the maker (Campos).
Exception: Where a note with a fixed maturity
provides that the maker has the option to
extend time of payment until the happening of
contingency, the instrument is NOT negotiable.
The time for payment may never come at all.
Note: It is required that the maturity of the

instrument can be absolutely determined with
certainty. (Abad)
G. PAYABLE TO ORDER OR TO
BEARER
Examples:
At a fixed period after date or sight, e.g.,
30 days after date.
On or before a fixed or determinable future
time specified therein, e.g., payable on or
before December 1, 2000
On or at a fixed period after the occurrence
of a specified event which is certain to
happen, though the time of happening be
uncertain, e.g., payable within 60 days
after the death of Jose
F.4.
EFFECT
PROVISIONS
OF
MERCANTILE LAW
G.1 INSTRUMENT MUST

WORDS OF NEGOTIABILITY
CONTAIN
For example:
(1) Pay to the order of Juan Cruz, or I
promise to pay to the order of Juan Cruz
(2) Pay to Juan Cruz or bearer, or I promise
to pay Juan Cruz or bearer
Note: Instrument need not follow the language
of the law, but any term which clearly indicates
an intention to conform to the legal
requirements is sufficient.
ACCELERATION
If option (absolute or conditional) to

accelerate maturity is on the maker, the
instrument is still NEGOTIABLE (Campos).
If option to accelerate is on the holder and
can be exercised only after the happening
of a specified event/act over which he has
no control (conditional), the instrument is
still NEGOTIABLE (Campos).
G.2.
NEGOTIABILITY
DETERMINED
FROM THE FACE OF THE INSTRUMENT
The negotiability or non-negotiability of an
instrument is determined from the face of the
instrument itself. Where words "or bearer"
printed on a check are cancelled by the drawer,
instrument becomes not negotiable. (Caltex vs.
CA, 1992)
Note: If option on the part of the holder is

absolute, the instrument is non-negotiable.
G.3. PAYABLE TO BEARER

Section 9, NIL. When payable to bearer. - The
instrument is payable to bearer:
(a) When it is expressed to be so payable; or
(b) When it is payable to a person named
therein or bearer; or
(c) When it is payable to the order of a
F.5. INSECURITY CLAUSES

Provisions in the contract which allow the
holder to accelerate payment if he deems
himself insecure. The instrument is rendered
non-negotiable. (Sundiang and Aquino)
15
UP LAW BOC
fictitious or non-existing person, and such

fact was known to the person making it so
payable; or
(d) When the name of the payee does not
purport to be the name of any person; or
(e) When the only or last indorsement is an
indorsement in blank.
MERCANTILE LAW
person or to him or his order. It may be drawn

payable to the order of:
(a) A payee who is not maker, drawer, or
drawee; or
(b) The drawer or maker; or
(c) The drawee; or (d) Two or more payees
jointly; or
(d) One or some of several payees; or
(e) (f) The holder of an office for the time
being.
Examples:
(1) Expressed to be so payable - "I promise to
pay the bearer the sum"
(2) Payable to a person named therein or
bearer -"Pay to A or bearer"
(3) Payable to the order of a fictitious person
or non-existing person, and such fact was
known to the person making it so payable Pay to John Doe or order"
(4) Name of payee does not purport to be the
name of any person "Pay to cash"; "Pay
to sundries."
(5) Only or last indorsement is an indorsement
in blank.
Where the instrument is payable to order, the

payee must be named or otherwise indicated
therein with reasonable certainty.
Notes: Without the words "to order" or "to the
order of" the instrument is payable only to the
person designated therein and is therefore
non-negotiable.
(Consolidated
Plywood
Industries vs. IFC Leasing, 1987)
G.6. WHERE THE MAKER IS THE PAYEE

(1) In effect making himself liable to himself.
Thus, the instrument produces no legal
effect.
(2) Will produce legal effects only once the
payee-maker indorses the instrument to
another person because such indorsement
will then give rise to rights and obligations.
(Abad)
G.4. FICTITIOUS PAYEE RULE

It is not necessary that the person referred to in
the instrument is really non-existent or
fictitious to make the instrument payable to
bearer. The person to whose order the
instrument is made payable may in fact be
existing but he is still fictitious or non-existent
under Sec. 9(c) of the NIL if the person making
it so payable does not intend to pay the
specified persons. (PNB v. Rodriguez, 2008)
G.7. IF BILL OF EXCHANGE, DRAWEE

MUST BE NAMED OR DESIGNATED WITH
REASONABLE CERTAINTY
A check drawn payable to the order of "CASH"

is a check payable to bearer, and the bank may
pay it to the person presenting it for payment
without the drawer's indorsement. (Ang Tek
Lian vs. CA, 1950)
(1) Applies only to a bill of exchange

(2) A bill may be addressed to 2 or more
drawees jointly whether they are partners
or not, but not to 2 or more drawees in the
alternative or in succession (Sec. 128, NIL).
G.5. PAYABLE TO ORDER
Examples:
(1) To Juan Cruz and Jose Reyes negotiable
(2) To Juan Cruz or Jose Reyes not
negotiable; no certainty as to drawee
Section 8, NIL. When payable to order. - The

instrument is payable to order where it is
drawn payable to the order of a specified
16
UP LAW BOC
G.8.
DETERMINATION
NEGOTIABILITY
OF
attorney to sign judgment and issue

execution for the value of the instrument,
costs, and attorney's fees. This is also
called a judgment cognivit actionem. If
accompanied by withdrawal of plea, it is
called judgment relicta verificatione.
A confession of judgment is not recognized
in our country, as it is against public policy.
It denies due process, and deprives the
right of appeal. (PNB v. Manila Oil Refining)
In determining the negotiability of an

instrument, the instrument in its entirety
and by what appears on its face must be
considered. It must comply with the
requirements of Sec. 1 of the Negotiable
Instruments Law. (Caltex Phils. v. CA, 1992)
The acceptance of a bill of exchange is not
important in the determination of its
negotiability. The nature of acceptance is
important only on the determination of the
kind of liabilities of the parties involved.
(PBCOM vs. Aruego, 1993)
Omissions and
Additional Provisions
Provisions That Do Not
That Do Not Affect
Affect Negotiability
Negotiability
(1) Non-dating of the
instrument
(2) Non-specification of
value given, or that
any value had been
given
(3) Non-specification of
place where it is
drawn or place
where it is payable
(4) Bears a seal
(5) Designation
of
particular kind of
currency in which
payment is to be
made. (Sec. 6)
MERCANTILE LAW
III. Kinds of Negotiable

Instruments
A. PROMISSORY NOTE
Section 184, NIL. Promissory note, defined. - A
negotiable promissory note within the
meaning of this Act 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
future time, a sum certain in money to order or
to bearer. Where a note is drawn to the
maker's own order, it is not complete until
indorsed by him.
(1) Authorizes the sale

of
collateral
securities
on
default;
(2) Authorizes
confession
of
judgment
on
default;
(3) Waives the benefit
of law intended to
protect the debtor;
or
(4) Allows the creditor
the
option
to
require something
in lieu of money.
(Sec. 5)
A.1. KINDS OF PROMISSORY NOTES

(1) Certificate of deposit a form of promissory
note which is a written acknowledgment of
a bank of its receipt of a certain sum with a
promise to repay the same.
(2) Bonds a certificate or evidence of a debt
on which the issuing company or
governmental body promises to pay the
bondholders a specified amount of interest
for a specified length of time, and to repay
the loan on the expiration date.
(3) Debenture a promissory note or bond
backed by the general credit of a
corporation and usually not secured by a
mortgage or lien on any specific property.
Note: Negotiability is
affected
when
instrument contains a
promise or order to do
any act in addition to
the payment of money.
Notes:
A confession of judgment is provision given
by the maker authorizing the plaintiff's
17
UP LAW BOC
MERCANTILE LAW
B. BILL OF EXCHANGE
Section 17, NIL. Construction where instrument
is ambiguous. - Where the language of the
instrument is ambiguous or there are
omissions therein, the following rules of
construction apply:
Section 126, NIL. Bill of exchange, defined. - 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 to
bearer. (Sec. 126)
x---x
(e) 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;
B.1. KINDS OF BILLS OF EXCHANGE

(1) Draft used synonymously with bill of
exchange although it normally refers to a
bill of exchange used in documentary
exchange like letters of credit transactions.
(2) Inland and foreign bill an Inland bill is a
bill which is, or on its face purports to be,
both drawn and payable within the
Philippines. Any other bill is a foreign bill.
(3) Time draft draft that is payable at a fixed
date.
(4) Sight or demand draft payable when the
holder presents it for payment.
(5) Trade acceptance used in contracts of sale
where the seller as drawer orders the buyer
(as drawee) to pay a sum certain to the
same seller (payee).
(6) Bankers acceptance a time draft across
the face which the drawee has written the
word accepted. (Sundiang and Aquino)
(7) Check - A bill of exchange drawn on a bank
payable on demand (Sec. 185). It is the most
common form of bill of exchange.
x---x
(1) The drawer and the drawee are the same
person;
(2) Drawee is a fictitious person;
(3) Drawee does NOT have the capacity to
contract (Sec. 130, NIL)
(4) Where the bill is drawn on a person who is
legally absent;
(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 (Sec. 17[e], NIL)
Promissory Note
Bill of Exchange
Unconditional promise Unconditional order

Involves 2 parties
Maker
liable
is
Involves 3 parties
primarily Drawer
is
only
secondarily liable
Only one presentment: Two presentments: for

for payment
acceptance and for
payment
B.2. INSTANCES WHEN A BILL OF

EXCHANGE MAY BE TREATED AS A
PROMISSORY NOTE:
Section 130, NIL. When bill may be treated as
promissory note. - Where in a bill the drawer
and drawee are the same person or where the
drawee is a fictitious person or a person not
having capacity to contract, the holder may
treat the instrument at his option either as a
bill of exchange or as a promissory note.
18
UP LAW BOC
Bill of Exchange
Check
Not
necessarily
drawn on a deposit.
The drawee need not
be a bank
It is necessary that a
check be drawn on a
bank
deposit.
Otherwise,
there
would be fraud.
Death of a drawer of a
BOE,
with
the
knowledge of the
bank, does not revoke
the authority of the
drawee to pay.
Death of the drawer of

a check, with the
knowledge of the
bank, revokes the
authority of the banker
to pay.
May be presented for

payment
within
reasonable time after
its last negotiation.
Must be presented for

payment within a
reasonable time after
its issue.
May be payable on Always payable

demand or at a fixed demand
or determinable future
time
MERCANTILE LAW
considered as complete though it in fact may

have blanks as to non-essentials... (Campos)
B. INSERTION OF DATE
Section 13, NIL. When date may be inserted. Where an instrument expressed to be payable
at a fixed period after date is issued undated,
or where the acceptance of an instrument
payable at a fixed period after sight is
undated, any holder may insert therein the
true date of issue or acceptance, and the
instrument shall be payable accordingly. The
insertion of a wrong date does not avoid the
instrument in the hands of a subsequent
holder in due course; but as to him, the date so
inserted is to be regarded as the true date.
Any holder may insert the true date of issue or
acceptance of an instrument where:
(1) The instrument is expressed to be payable
at a fixed period after date is issued
undated; or
(2) The acceptance of an instrument payable at
a fixed period after sight is undated.
on
IV. Completion and

Delivery
C. EFFECT OF ANTE-DATING AND

POST-DATING
Section 12, NIL. Ante-dated and post-dated.The instrument is not invalid for the reason
only that it is ante-dated or post-dated,
provided this is not done for an illegal or
fraudulent purpose. The person to whom an
instrument so dated is delivered acquires the
title thereto as of the date of delivery.
A. TWO STEPS INVOLVED IN THE

EXECUTION
OF
NEGOTIABLE
INSTRUMENTS
(1) Writing of the instrument completely in
accordance with the requisites of
negotiability under Sec. 1.
(2) Delivery of the instrument by the maker or
the drawer to the payee in order to give
legal effect thereto. (Abad)
D. COMPLETION OF BLANKS
Section 14, NIL. Blanks; when may be filled. Where the instrument is wanting in any
material particular, the person in possession
thereof has a prima facie authority to complete
it by filling up the blanks therein. And a
signature on a blank paper delivered by the
person making the signature in order that the
Note: It may sometimes be difficult to locate

the boundary line between a complete and an
incomplete instrument... It would seem that if
an instrument contains all the requisites for
making it a negotiable one, it should be
19
UP LAW BOC
MERCANTILE LAW
F. COMPLETE AND UNDELIVERED

INSTRUMENTS
paper may be converted into a negotiable

instrument operates as a prima facie authority
to fill it up as such for any amount. In order,
however, that any such instrument when
completed may be enforced against any
person who became a party thereto prior to its
completion, it must be filled up strictly in
accordance with the authority given and within
a reasonable time. But if any such instrument,
after completion, is negotiated to a holder in
due course, it is valid and effectual for all
purposes in his hands, and he may enforce it
as if it had been filled up strictly in accordance
with the authority given and within a
reasonable time
Section 16, NIL. Delivery; when effectual; when

presumed. - Every contract on a negotiable
instrument is incomplete and revocable until
delivery of the instrument for the purpose of
giving effect thereto. As between immediate
parties and as regards a remote party other
than a holder in due course, the delivery, in
order to be effectual, must be made either by
or under the authority of the party making,
drawing, accepting, or indorsing, as the case
may be; and, in such case, the delivery may be
shown to have been conditional, or for a
special purpose only, and not for the purpose
of transferring the property in the instrument.
But where the instrument is in the hands of a
holder in due course, a valid delivery thereof by
all parties prior 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.
E. INCOMPLETE AND UNDELIVERED

INSTRUMENTS
Section 15, NIL. Incomplete instrument not
delivered. - Where an incomplete instrument
has not been delivered, it will not, if completed
and negotiated without authority, be a valid
contract in the hands of any holder, as against
any person whose signature was placed
thereon before delivery.
Non-delivery of a complete instrument is a

personal defense (Campos)
The maker or drawer of the instrument may
withhold release.
Delivery of an instrument is a prerequisite for
liability. If the instrument is complete in all
its particulars, but is not delivered, there is
no contract. However if the instrument is no
longer in the possession of a party who has
signed it, a delivery is presumed until the
contrary is proved (Campos).
If the holder of the instrument is a holder in
due course, the instrument is not merely
prima facie deemed delivered, but this fact is
conclusively presumed (Campos).
Until the same is delivered, the instrument
remains revocable.
In this case a real defense exists and not even a

holder in due course can recover on the
instrument, for the law is specific that it is not a
valid contract in the hands of any holder
(Campos).
There is no chance for it to become a
negotiable instrument.
Note: A drawee bank whose negligent custody
of the checks, after partial execution,
contributed to its escape, is stopped from
raising the real defense under Sec. 15 of the
NIL (Campos).
20
UP LAW BOC
(5) A person negotiating by delivery (as in the

case of a bearer instrument) is liable only to
his immediate indorsee.
G. INCOMPLETE AND DELIVERED

INSTRUMENTS (Sec. 14, NIL)
(1) Holder has prima facie authority to fill up
the instrument, but he must first prove that
he has the authority to fill up. For such
presumption to apply, issuance is necessary.
(2) The instrument must be filled up strictly in
accordance with the authority given and
within reasonable time
(3) HDC may enforce the instrument as if filled
up according to (2) above.
A. SIGNING IN TRADE NAME

One who signs in a trade or assumed name will
be liable to the same extent as if he had signed
in his own name (Sec. 18, NIL)
B. SIGNATURE OF AGENT
Sec. 19. Signature by agent; authority; how
shown. - The signature of any party may be
made by a duly authorized agent. No particular
form of appointment is necessary for this
purpose; and the authority of the agent may be
established as in other cases of agency.
This provision merely raises a personal defense

(Campos)
H. COMPLETE
INSTRUMENTS
AND
MERCANTILE LAW
DELIVERED
Sec. 20. Liability of person signing as agent, and

so forth. - Where the instrument contains or a
person adds to his signature words indicating
that he signs for or on behalf of a principal or
in a representative capacity, he is not liable on
the instrument if he was duly authorized; but
the mere addition of words describing him as
an agent, or as filling a representative
character, without disclosing his principal,
does not exempt him from personal liability.
In a complete and delivered instrument, rights

and liabilities under the negotiable
instruments law attach.
V. Signature
Sec. 18. Liability of person signing in trade or
assumed name. - No person is liable on the
instrument whose signature does not appear
thereon, except as herein otherwise expressly
provided. But one who signs in a trade or
assumed name will be liable to the same
extent as if he had signed in his own name.
Signature of any party may be made by duly

authorized agent, established as in ordinary
agency.
General rule: One whose signature does not

appear on the instrument shall not be liable
thereon.
C. SIGNATURE PER PROCURATION

A signature per procuration operates as
notice to the holder that the agent has a
limited authority to sign, and the principal is
bound only in case the agent in so signing
acted within the actual limits of his authority
(Sec. 21, NIL)
According to the majority rule, the words
per proc or procuration must appear on
the note for this rule in Section 21 to be
applicable (Campos)
Exceptions:
(1) The principal who signs through an agent
(2) The forger
(3) One who indorses in a separate instrument
(allonge) OR where an acceptance is written
on a separate paper
(4) One who signs his assumed or trade name
21
UP LAW BOC
MERCANTILE LAW
latter can rightfully recover from the maker,

free from the defense of minority (Campos).
REAL defense but available only to the
incapacitated party (i.e. the minor or the
corporation).
D. LIABILITY OF AN AGENT
General rule: Where a person adds to his
signature words indicating that he signs on
behalf of a principal, then he is not liable if he
was duly authorized.
F. FORGERY
Exceptions:
(1) Mere addition of words describing him as an
agent WITHOUT disclosing his principal
(Sec. 20, NIL)
(2) Where a broker or agent negotiates an
instrument without indorsement, he incurs
all liabilities in Sec. 65 of the NIL, unless he
discloses name of principal and the fact that
he is only acting as an agent. (Sec. 69, NIL)
Sec. 23. Forged signature; effect of. - When a

signature is forged or made without the
authority of the person whose signature it
purports to be, it is wholly inoperative, and no
right to retain the instrument, or to give a
discharge therefor, or to enforce payment
thereof against any party thereto, can be
acquired through or under such signature,
unless the party against whom it is sought to
enforce such right is precluded from setting up
the forgery or want of authority.
Requisites to negative personal liablity of

agent:
(1) He must be duly authorized;
(2) He must act within the scope of his
authority
(3) He must indicate in the instrument that he
is signing merely as agent; and
(4) He must disclose his principal.
Counterfeit making or fraudulent alteration of

any writing, which may consist of:
(1) Signing of anothers name with intent to
defraud; or
(2) Alteration of an instrument in the name,
amount, name of payee, etc. with intent to
defraud.
E. INDORSEMENT BY MINOR OR
CORPORATION
General rule: When a signature is forged or

made without the authority of the person, only
the forged signature (not the instrument itself
and the other genuine signatures) is wholly
inoperative
The indorsement or assignment of the

instrument by a corporation or by an infant
(minor) passes the property therein,
notwithstanding that from want of capacity,
the corporation or infant may incur no
liability thereon (Sec. 22, NIL).
The above provision does not change the rule
in civil law on minor's contracts, which
provides that a contract enetered into by a
minor is voidable, and the minor cannot be
held liable thereon unless he ratifies it upon
reaching majority.
However, under Section 22 of the NIL, should
the minor indorse a negotiable instrument,
although he cannot be held liable on his
contract of indorsement, title to the
instrument passes to his indorsee and the
Effects:
(1) No right to retain the instrument
(2) No right to give a discharge therefor
(3) No right to enforce payment thereof against
any party thereto can be acquired through
or under such signature
Exception: The party against whom it is sought
to be enforced is precluded from setting up the
forgery or want of authority as a defense (Sec.
23, NIL).
22
UP LAW BOC
F.1 PERSONS PRECLUDED FROM

SETTING UP DEFENSE OF FORGERY
(CAMPOS)
MERCANTILE LAW
Neal). Drawee cannot recover from the

collecting bank because there is no privity
between the collecting bank and the drawer.
The collecting bank does not give any
warranty re: the drawers signature.
(Associated Bank vs. CA)
(3) Indorsers subsequent to forgery are liable
(such as collecting bank or last endorser)
(4) Party who made the forgery is liable
(1) Those who warrant or admit the

genuineness of the signature in question.
This includes indorsers, persons negotiating
by delivery and acceptors.
(2) Those who, by their acts, silence, or
negligence, are estopped from setting up
the defense of forgery.
Payees signature forged

(1) Payee is not liable
(2) Drawer is still secondarily liable
(3) Drawee is liable if it paid or accepted the
instrument (Sec. 62, NIL; Price v. Neal), but it
may pass liability back through the
collection chain
(such as collecting bank)
(5) Party who made the forgery is liable
F.2 RULES ON FORGERY

F.2.A. PROMISSORY NOTE
Makers signature forged
(1) Maker is not liable because he never
became a party to the instrument.
because of their warranties.
(3) Party who made the forgery is liable.
Indorsers signature forged

(1) Drawer, payee, indorser whose signature/s
was/were forged and all indorsers
preceding the forgery are not liable.
instrument (Sec. 62, NIL; Price v. Neal).
(3) Indorsers subsequent to forgery are liable.
(such as collecting bank)
Payees signature forged

(1) Payee is not liable.
(2) Maker is still liable. (REASON: Indorsement
is not necessary to title and the maker
engages to pay holder)
Indorsers signature forged
(1) Maker, payee, indorser whose signature/s
was/were forged, and all indorsers
preceding the forgery are not liable.
G. ACCEPTANCE
UNDER MISTAKE
AND
PAYMENT
Sec. 62. Liability of acceptor. - The acceptor, by

accepting the instrument, engages that he will
pay it according to the tenor of his acceptance
and admits:
(a) The existence of the drawer, the
genuineness of his signature, and his
capacity and authority to draw the
instrument; and
(b) The existence of the payee and his then
capacity to indorse.
F.2.B. BILL OF EXCHANGE

Drawers signature forged
(1) Drawer is not liable because he was never a
party to the instrument.
instrument (no recourse to drawer) because
he admitted the genuineness of the
drawers signature (Sec. 62, NIL; Price v.
23
UP LAW BOC
(1) When the drawee accepts or pays a forged

instrument
Price v. Neal doctrine: As between equally
innocent persons, the drawee who pays
money on, or accepts, a check or draft the
signature on which was forged CANNOT
recover the money from the one who
received it. The drawee is bound to know
the signature of its depositor.
A bank is bound to know the signatures of
its depositors. If a bank pays a forged
check it must be considered as making
the payment out of its own funds and
cannot charge the account of the
depositor whose signature was forged.
(PNB vs. Quimpo, 1988)
A bank is liable, irrespective of its good
faith, in paying a forged check. (Samsung
vs. Far East Bank, 2004)
MERCANTILE LAW
The negligence of the depositor/drawer

would consist of the failure to to carefully
examine bank statements, cancelled
checks, his check stubs, and other
pertinent records within a reasonable
time and to report any errors without
unreasonable delay to the drawee bank.
If a drawer/depositors negligence and
delay should cause a bank to honor a
forged check, the drawer cannot later
complain should bank refuse to recredit
his account (Campos).
(4)
Effect of Payment under Forged

Indorsements
In the case of a drawee's acceptance or
payment of a bill on which only an
INDORSEMENT has been forged, the drawee
can recover the amount paid out by him.
RATIONALE: The drawee makes no warranty
as to the genuineness of any indorsement
(Campos).
(2) Extensions of Price v. Neal doctrine

Notes: The bar to recovery on the part of a
drawee who pays money on, or accepts, a
check or draft, is extended to overdrafts
and stop payment orders.
(5) Effect of negligence of drawee in informing

recipient of forgery
The rule is that a drawee's acceptance or
payment of a bill on which only an
INDORSEMENT has been forged is not a
bar to his right to recover the amount paid
out by him; however, there is an exception
to this rule.
If it is shown that the drawee on learning
of the forgery did not give prompt notice
of it to the holder and that damage
resulted to said holder, recovery by the
drawee is barred (Clearfield Trust Co. v. US,
1943)
(a) Overdraft occurs when a check is issued

for an amount more than what the
drawer has in deposit with the drawee
bank. Rule: The drawee who pays the
holder of the bill cannot recover from the
holder what he paid under mistake
(Campos)
(b) Stop Payment Order is one issued by the
drawer of a check countermanding his
first order to the drawee bank to pay the
check. Rule: The drawee bank is bound to
follow the order, provided it is received
prior to its certification or payment of the
check (Campos).
(6) Effect of negligence of drawer in case of

forged indorsement on checks
The drawer, as soon as he comes to know of a
forged indorsement should promptly notify the
drawee bank. Otherwise, should his negligent
delay be the proximate cause of any
(3) Effects of Negligence of Depositor

If such negligence of the depositor was
the proximate cause of the loss, the
drawee-bank would NOT be liable
24
UP LAW BOC
subsequent loss to the bank, the latter may

properly charge it to the drawer's account.
(7) Comparing the liability of a collecting bank
and a drawee bank
A collecting bank is only liable for forged
indorsements and not forgeries of the drawer
or makers signature (PNB v CA, 1968).
MERCANTILE LAW
the degree of negligence of each will be

weighed in considering the amount of loss
which each should bear (BPI v CA, 1992)
VI. Consideration
Section 25, NIL. Value, what constitutes.
Value is any consideration sufficient to support
a simple contract. An antecedent or preexisting debt constitutes value; and is deemed
such whether the instrument is payable on
demand or at a future time.
Rationale: In presenting the checks for clearing,

the collecting agent made an express
guarantee on the validity of all the prior
endorsements.
The collecting bank or last indorser generally
suffers the loss because it has the duty to
ascertain the genuineness of all prior
indorsements considering that the act of
presenting the check for payment to the
drawee is an assertion that the party making
the presentment had done its duty to
ascertain
the
genuineness
of
the
indorsements (BPI v CA, 1992).
A drawee bank is not liable for forged
indorsements.
Section 191, NIL. Definition and meaning of

terms. - In this Act, unless the contract
otherwise requires:
x---x
"Value" means valuable consideration;
x---x
Value and consideration are generally
convertible terms. However, they may have
different implications. When the payee of a
noet sues the maker, or the payee of a bill
sues the drawer, or an indorsee sues his
immediate
indorser,
the
word
consideration is the more proper term to
use. But where a holder sues any party to the
instrument with whom he himself has not
dealt, the term value is more appropriate.
An antecedent or pre-existing debt
constitutes value; and is deemed such
whether the instrument is payable on
demand or at a future time. (Sec. 25, NIL)
Value need not be full and a holder will be
one for value even if he gave less than the
face value of the instrument, provided the
intention of the transferor is to transfer the
full amount represented by the instrument.
Rationale: The drawee bank is not similarly

situated as the collecting bank because the
former makes no warranty as to the
genuineness of any indorsement. The drawee
banks duty is but to verify the genuineness of
the drawers signature and not of the
indorsement because only the drawer is its
client.
Note:
However, it should be noted that as an
exception to the rule that a drawee bank is
not liable for a forged indorsement, when the
negligence of the drawee bank is the
proximate cause of the collecting banks
payment of a check with a forged
indorsement, the drawee bank may be held
liable to the collecting bank.
Furthermore, when both the collecting bank
and the drawee bank are guilty of negligence,
25
UP LAW BOC
VII.
Party
A. WHO IS A HOLDER FOR VALUE

(HFV)?
(1) A holder of an instrument for which value,
which need not be in full, has been given at
any given time but only with respect to all
parties who have become parties to the
instrument prior to the time at which value
has been given. (Sec 26, NIL)
(2) A holder who has a lien on the instrument
but only to the extent of his lien. (Sec 27,
NIL)
Section 24, NIL. Presumption of consideration. Every negotiable instrument is deemed prima
facie to have been issued for a valuable
consideration; and every person whose
signature appears thereon to have become a
party thereto for value.
WANT
Accommodation
Section 29, NIL. Liability of accommodation

party. - An accommodation party is one who
has signed the instrument as maker, drawer,
acceptor, or indorser, without receiving value
therefor, and for the purpose of lending his
name to some other person. Such a person is
liable on the instrument to a holder for value,
notwithstanding such holder, at the time of
taking the instrument, knew him to be only an
accommodation party.
B.
BURDEN
OF
PROOF
PRESUMPTION OF CONSIDERATION
C. EFFECT OF
CONSIDERATION
MERCANTILE LAW
An accommodation party is one who has

signed the instrument as maker, drawer,
acceptor, or indorser, without receiving value
therefor, and for the purpose of lending his
name to some other person.
A.
LIABILITY
OF
ACCOMMODATION PARTY
OF
AN
Section 28 of the NIL states that the holder

for value to whom the instrument thus
executed is subsequently negotiated has a
right of recourse against the accommodation
party in spite of the formers knowledge that
no consideration passed between the
accommodation and accommodated parties.
Does this mean that the accommodation
party is liable to a holder even if he is not a
holder in due course, provided he is a holder
for value? The Supreme Court has ruled that
an accommodation party is liable ONLY to a
HOLDER IN DUE COURSE. However, the
mere fact that the holder knew of the
accommodation does not prevent him from
being a holder in due course in order to
recover from the accommodation party.
(Stelco Marketing Corp. v. CA, 1992)
Section 28, NIL. Effect of want of consideration.

- Absence or failure of consideration is a matter
of defense as against any person not a holder in
due course; and partial failure of consideration
is a defense pro tanto, whether the failure is an
ascertained and liquidated amount or
otherwise.
Absence or failure of consideration is a
matter of defense as against any person not
a holder in due course, hence, it is a personal
defense
Partial failure of consideration is a defense
pro tanto, meaning a defense to the extent of
the failure (Abad).
26
UP LAW BOC
B. ACCOMMODATION PARTY
SURETY
Transfer is a broader term than negotiation. If

an instrument is transferred without
negotiation, the transfer is a mere assignment
which constitutes the transferee as a mere
assignee, not a holder, subject to all defenses
existing among prior parties. Transfer thus
includes both an ordinary assignment and a
negotiation (Campos).
AS
An accommodation Party
is generally
regarded as a surety for the party
accommodated
When the accomodation party makes
payment to holder of the note, he has the
right to sue the accommodated party for
reimbursement. (Agro Conglomerates, Inc. v.
CA, YEAR)
Note: A corporation cannot act as an
accommodation party.
The issue or
endorsement of negotiable instruments by a
corporation without consideration and for
the accommodation of another is ultra vires
(Crisologo v. CA, YEAR)
B. MODES OF NEGOTIATION
B.1. BY DELIVERY IF PAYABLE TO
BEARER (SEC. 30)
otherwise requires:
x---x
"Delivery" means transfer of possession, actual
or constructive, from one person to another;
x---x
"Issue" means the first delivery of the
instrument, complete in form, to a person who
takes it as a holder;
x---x
VIII. Negotiation
Section 30, NIL. What constitutes negotiation. An instrument is negotiated when it is
transferred from one person to another in such
manner as to constitute the transferee the
holder thereof. If payable to bearer, it is
negotiated by delivery; if payable to order, it is
negotiated by the indorsement of the holder
and completed by delivery.
Delivery means transfer of possession of

instrument by the maker or drawer, with
intent to transfer title to the payee and
recognize him as holder thereof
Issuance is the FIRST delivery of the
instrument complete in form to a person who
takes it as a holder.
A. NEGOTIATION DISTINGUISHED
FROM ASSIGNMENT
Negotiation
Assignment
The transfer of the

instrument from one
person to another so
as to constitute the
transferee the holder
thereof (Sec.30, NIL).
The transferee does

not become a holder,
nor can he become a
holder in due course;
and he merely steps
into the shoes of the
transferor. As such,
any defense available
against the transferor
is available against the
transferee.
MERCANTILE LAW
Requisites
(1) Mechanical act of writing the instrument
completely and in accordance with the
requirements of Section 1 of the NIL; and
(2) The delivery of the complete instrument by
the maker or drawer, with the intention of
giving effect to it, to the payee or holder..
Presumption of delivery
(1) Where the instrument is no longer in the
possession of a party whose signature
27
UP LAW BOC
appears thereon, a valid and intentional

delivery by him is presumed until the
contrary is proved (Sec. 16, NIL)
(2) If it is in the hands of a holder in due course,
the presumption of a valid delivery is
conclusive (Sec. 16, NIL)
MERCANTILE LAW
(3) Must be of the ENTIRE instrument

Section 32, NIL. Indorsement must be of entire
instrument. - The indorsement must be an
indorsement of the entire instrument. An
indorsement which purports to transfer to the
indorsee a part only of the amount payable, or
which purports to transfer the instrument to
two or more indorsees severally, does not
operate as a negotiation of the instrument. But
where the instrument has been paid in part, it
may be indorsed as to the residue.
Presumption as to date
(1) Date is not an essential element of
negotiability; it is not included in the
requirements for an instrument to be
negotiable under Sec. 1 of the NIL.
(2) An undated instrument is considered to be
dated as of the time it was issued (Sec. 17 (c),
NIL)
(a) CANNOT indorse a part only of the

amount payable; BUT if the instrument
has been paid in part, then the instrument
may be indorsed as to the residue (Sec.
32,) NIL
(b) CANNOT transfer the instrument to two
or more indorsees severally (Sec. 32, NIL)
(c) If not an indorsement of the entire
instrument, the transfer remains valid,
but as a mere assignment which subjects
the holder to all defenses on the
instrument (Campos)
B.2. BY INDORSEMENT COMPLETED BY

DELIVERY IF PAYABLE TO ORDER
(SEC. 30)
otherwise requires:
x---x
"Indorsement" means
an
indorsement
completed by delivery;
x---x
(4) If name misspelled in indorsement,

indorsement will be prima facie deemed not
valid.
B.2.A. INDORSEMENT; HOW DONE

Section 31, NIL. Indorsement; how made. - The
indorsement must be written on the
instrument itself or upon a paper attached
thereto. The signature of the indorser, without
additional words, is a sufficient indorsement.
Section 43, NIL. Indorsement where name is

misspelled, and so forth. - Where the name of a
payee or indorsee is wrongly designated or
misspelled, he may indorse the instrument as
therein described adding, if he thinks fit, his
proper signature.
(1) Where placed The indorsement must be

written (Sec. 31, NIL):
(a) On the instrument itself (Sec. 31, NIL) , or
(b) On a separate piece of paper attached to
the instrument called allonge(Sec. 31,
NIL)
(a) The indorsement should be made by the

holder in the manner he was designated,
otherwise the signature will prima facie
not be a valid indorsement of the
instrument (Sec 43, NIL)
(2) Signature of the indorser, without additional

words, is a sufficient indorsement (Sec. 31,
NIL)
28
UP LAW BOC
(5) Indorsement where there are joint payees

(a)Where the instrument is payable or
indorsed to A and B, they are joint
payees and an indorsement by either A
or B only will not constitute a valid
negotiation, UNLESS the one indorsing is
authorized by the other (Campos).
(b) But where the instrument is payable to
A or B, they payees are merely in the
alternative, and either one may valdily
negotiate the same (Campos).
MERCANTILE LAW
Section 40, NIL. Indorsement of instrument

payable to bearer. - Where an instrument,
payable to bearer, is indorsed specially, it may
nevertheless be further negotiated by delivery;
but the person indorsing specially is liable as
indorser to only such holders as make title
through his indorsement.
Section 35, NIL. Blank indorsement; how
changed to special indorsement. - The holder
may convert a blank indorsement into a special
indorsement by writing over the signature of
the indorser in blank any contract consistent
with the character of the indorsement.
B.2.B. KINDS OF INDORSEMENT

Section 33, NIL. Kinds of indorsement. - An
indorsement may be either special or in blank;
and it may also be either restrictive or qualified
or conditional.
There are four bases of classification of
indorsements under the NIL:
(1) Special or in blank
(2) Restrictive or Non-Restrictive
(3) Qualified or unqualified
(4) Conditional or unconditional
(1) Special
(a) Specifies the person to whom/to whose
order the instrument is to be payable;
indorsement of such indorsee is
necessary to further negotiation.
(b) A special indorser is liable to all
subsequent
holders,
unless
the
instrument is an originally bearer
instrument, in which case he is liable
only to those who take title through his
indorsement (Sec. 40, NIL).
(c) An instrument, payable to bearer, and
indorsed specially, may nevertheless be
further negotiated by delivery. (Sec 40,
NIL)
Originally bearer instrument always
remains a bearer instrument (Sundiang
and Aquino)
All of the four bases of classification coexist

with each other; thus, an indorsement may be
special and qualified at the same time. It may
also be special and unqualified, special and
restrictive,
special,
unrestrictive
and
unqualified and so on (Campos).
C. AS TO MANNER OF FUTURE
METHOD OF NEGOTIATION
Section
34,
NIL. Special
indorsement;
indorsement in blank. - A special indorsement
specifies the person to whom, or to whose
order, the instrument is to be payable, and the
indorsement of such indorsee is necessary to
the further negotiation of the instrument. An
indorsement in blank specifies no indorsee,
and an instrument so indorsed is payable to
bearer, and may be negotiated by delivery.
(2) Blank
(a) Specifies no indorsee, instrument so
indorsed is payable to bearer, and may
be negotiated by delivery
(b) The holder may convert a blank
indorsement into a special indorsement
by writing over the signature of the
indorser in blank any contract consistent
with the character of the indorsement.
(Sec 35, NIL)
29
UP LAW BOC
(c) An order instrument may be converted

into a bearer instrument by means of a
blank indorsement, and may be later
reconverted into an order instrument by
a subsequent special indorsement
MERCANTILE LAW
(c) Transfer his rights as such indorsee, but

all subsequent indorsees acquire only
the title of first indorsee under restrictive
indorsement. (Sec 37, NIL)
(2) Non-restrictive
D. AS TO TITLE TRANSFERRED
F. AS TO KIND OF
ASSUMED BY INDORSER
Section 36, NIL. When indorsement restrictive. An indorsement is restrictive which either:
(a) Prohibits the further negotiation of the
instrument; or
(b) Constitutes the indorsee the agent of the
indorser; or
(c) Vests the title in the indorsee in trust for or
to the use of some other persons.
But the mere absence of words implying power
to negotiate does not make an indorsement
restrictive.
Section 38, NIL. Qualified indorsement. - A

qualified indorsement constitutes the indorser
a mere assignor of the title to the instrument. It
may be made by adding to the indorser's
signature the words "without recourse" or any
words of similar import. Such an indorsement
does not impair the negotiable character of the
instrument.
(1) Qualified
(a) Constitutes indorser as mere assignor of
title
(b) Made by adding the words without
recourse (Sec. 38, NIL).
(c) But this does not mean that the
transferee only has the rights of an
assignee; transfer remains a negotiation
and transferee can still be a holder
capable of acquiring a title free from
defenses of prior parties.
(d) Effects:
(i) Relieves the qualified indorser of his
liability to pay the instrument should
the maker be unable to pay
(ii) The qualified indorser does not
guarantee the solvency of the maker,
but merely his legal title to the
instrument
(iii)
The instrument may still be
further negotiated; no effect on its
negotiability
(2) Non-qualified
Section 37, NIL. Effect of restrictive indorsement;

rights of indorsee. - A restrictive indorsement
confers upon the indorsee the right:
(a) to receive payment of the instrument;
(b) to bring any action thereon that the
indorser could bring;
(c) to transfer his rights as such indorsee,
where the form of the indorsement
authorizes him to do so.
But all subsequent indorsees acquire only the
title of the first indorsee under the restrictive
indorsement.
(1) Restrictive Such indorsement either:
(a) Prohibits
further
negotiation
of
instrument
(b) Constitutes indorsee as agent of indorser
(c) Vests title in indorsee in trust for another
(Sec 36, NIL)
E.
RIGHTS
INDORSEE
OF
LIABILITY
RESTRICTIVE
(a) Receive payment

(b) Bring any action thereon that the
indorser could bring.
30
UP LAW BOC
MERCANTILE LAW
G. AS TO PRESENCE/ABSENCE OF
EXPRESS LIMITATIONS
IX. Rights of the Holder
Section 39, NIL. Conditional indorsement. Where an indorsement is conditional, the

party required to pay the instrument may
disregard the condition and make payment to
the indorsee or his transferee whether the
condition has been fulfilled or not. But any
person to whom an instrument so indorsed is
negotiated will hold the same, or the proceeds
thereof, subject to the rights of the person
indorsing conditionally.
A. DEFINITION OF A HOLDER
otherwise requires:
x---x
"Holder" means the payee or indorsee of a bill
or note who is in possession of it, or the bearer
thereof;
A holder is a payee or indorsee of a bill or note
who is in possession of it, or the bearer thereof
(Sec. 191, NIL). He has the following rights (Sec.
51, NIL):
(1) Conditional
(a) Additional condition
annexed to
indorsers liability; such condition must
be expressed
(b) Where an indorsement is conditional, a
party required to pay the instrument may
disregard the condition, and make
payment to the indorsee or his transferee,
whether condition has been fulfilled or
not.
(c) But any person to whom an instrument
so indorsed is negotiated, will hold the
same, or the proceeds thereof, subject to
the rights of the person indorsing
conditionally. (Sec. 39, NIL)
(2) Unconditional
(1) To sue on the instrument in his own name

Unindorsed intruments: Section. 49, NIL.
Transfer without indorsement; effect of.
Where the holder of an instrument
payable to his order transfers it for value
without indorsing it, the transfer vests in
the transferee such title as the transferor
had therein, and the transferee acquires
in addition, the right to have the
indorsement of the transferor. But for the
purpose of determining whether the
transferee is a holder in due course, the
negotiation takes effect as of the time
when the indorsement is actually made.
Note: This section applies only to an
instrument payable to the order of the
transferor. This cannot apply to bearer
instruments.
Cancellation of indorsement: Section 48,
NIL. Striking out indorsement. The holder
may at any time strike out any
indorsement which is not necessary to his
title. The indorser whose indorsement is
struck out, and all indorsers subsequent
to him, are thereby relieved from liability
on the instrument.
Indorsement by agent: Section 20, NIL.
Liability of person signing as agent, and so
forth. Where the instrument contains or a
H. OTHER KINDS OF INDORSEMENT

(1) Absolute One by which the indorser binds
himself to pay, upon no other condition
than the failure of prior parties to do so, and
of due notice to him of such failure
(2) Joint Where instrument payable to the
order of two or more payees or indorsees
not partners, all must indorse, unless the
one indorsing has authority to endorse for
the others (Sec. 41, NIL)
(3) Irregular Where a person, not otherwise a
party to the instrument, places thereon his
signature in blank before delivery, he is
liable as indorser
31
UP LAW BOC
person adds to his signature words

indicating that he signs for or on behalf of
a principal or in a representative capacity,
he is not liable on the instrument if he was
duly authorized; but the mere addition of
words describing him as an agent, or as
filling a representative character, without
disclosing his principal, does not exempt
him from personal liability.
(2) Payment in due course to the holder
discharges instrument
MERCANTILE LAW
the instrument was defective, the burden is on

the holder to prove that he or some person
under whom he claims acquired the title as
holder in due course. But the last-mentioned
rule does not apply in favor of a party who
became bound on the instrument prior to the
acquisition of such defective title.
B.1. WHO ARE HDCS:

(1) Holder in due course (HDC) under Sec. 52,
NIL
(2) HDC under Sec. 58, NIL: A holder who
DERIVES title to the instrument through a
HDC has all the rights of the latter even
though he himself satisfies none of the
requirements of due course holding
HDC under Sec. 59, NIL (presumption):
Every holder is deemed prima facie to be a
holder in due course
B. HOLDER IN DUE COURSE (HDC)

Section 52, NIL. What constitutes a holder in due
course. - A holder in due course is a holder who
has taken the instrument under the following
conditions:
(a) That it is complete and regular upon its
face;
(b) That he became the holder of it before it
was overdue, and without notice that it has
been previously dishonored, if such was the
fact;
(c) That he took it in good faith and for value;
(d) That at the time it was negotiated to him,
he had no notice of any infirmity in the
instrument or defect in the title of the
person negotiating it.
Sec. 191 of the NIL defines holder as the payee

or indorsee of a bill or note, who is in
possession of it, or the bearer thereof. The
word holder in the first clause of Sec. 52 and
in the second subsection thereof may be
replaced by the definition in Sec. 191 so as to
read a holder in due course as a payee or an
indorsee in possession, etc. (De Ocampo v.
Gatchalian, 1961)
Section 58, NIL. When subject to original

defense. - In the hands of any holder other than
a holder in due course, a negotiable
instrument is subject to the same defenses as if
it were non-negotiable. But a holder who
derives his title through a holder in due course,
and who is not himself a party to any fraud or
illegality affecting the instrument, has all the
rights of such former holder in respect of all
parties prior to the latter.
B.2. THE SIGNIFICANCE OF DUE COURSE

HOLDING
A holder in due course can acquire a better
title than his predecessors because he takes
the instrument free from any defect of title of
prior parties. He is furthermore free from
defenses available to prior parties among
themselves (Campos).
A holder not in due course, on the other hand,
takes the instrument subject to all defenses
because he is treated as a transferee of a
non-negotiable paper. Real defenses,
however, which attach to the instrument
itself would be available even against a
holder in due course (Campos).
Section 59, NIL. Who is deemed holder in due

course. - Every holder is deemed prima facie to
be a holder in due course; but when it is shown
that the title of any person who has negotiated
32
UP LAW BOC
MERCANTILE LAW
B.4. REQUISITES OF A HOLDER IN DUE

COURSE (SEC. 52, NIL)
When is the question of whether a holder is a

holder in due course relevant. It should be
kept in mind that the question of whether a
holder is a holder in due course or not is
signifant only when there is an existing
defense between prior parties (Campos).
Sec. 52, NIL. What constitutes a holder in due

course. A holder in due course is a holder who
has taken the instrument under the following
conditions:
(a) That it is complete and regular upon its
face;
(b) That he became the holder of it before it
was overdue, and without notice that it has
been previously dishonored, if such was the
fact;
(c) That he took it in good faith and for value;
(d) That at the time it was negotiated to him,
he had no notice of any infirmity in the
instrument or defect in the title of the
person negotiating it.
B.3. RIGHTS OF A HOLDER IN DUE

COURSE
Section 51, NIL. Right of holder to sue;
payment. - The holder of a negotiable
instrument may to sue thereon in his own
name; and payment to him in due course
discharges the instrument.
Section 57, NIL. Rights of holder in due course. A holder in due course holds the instrument
free from any defect of title of prior parties, and
free from defenses available to prior parties
among themselves, and may enforce payment
of the instrument for the full amount thereof
against all parties liable thereon.
That the instrument is complete and regular

upon its face
(1) It is incomplete when it is wanting in any
material particular or particular proper to be
inserted in a negotiable instrument without
which the same will not be complete.
Section 58, NIL. When subject to original

defense. - In the hands of any holder other than
a holder in due course, a negotiable
instrument is subject to the same defenses as if
it were non-negotiable. But a holder who
derives his title through a holder in due course,
and who is not himself a party to any fraud or
illegality affecting the instrument, has all the
rights of such former holder in respect of all
parties prior to the latter.
B.4.A. MATERIAL PARTICULARS

Section 125, NIL. What constitutes a material
alteration. - Any alteration which changes:
(a) Date
(b) Sum payable, either for principal or interest
(c) Time or place of payment
(d) Number or relations of the parties
(e) 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
(g) Or any other change or addition which
alters the effect of the instrument in any
respect
(1) To sue on the instrument in his own name

(Sec. 51, NIL)
(2) To receive payment on the instrument (Sec.
51, NIL)
(3) Holds instrument free of any defect of title
of prior parties (Sec. 57, NIL)
(4) Free from defenses available to prior
parties among themselves (Sec. 57, NIL)
(5) May enforce payment of instrument for full
amount, against all parties liable (Sec. 57,
NIL)
The items enumerated under Sec. 125 of the

NIL are material particulars.
33
UP LAW BOC
(2) That he became the holder of it before it was

overdue and without notice that it had been
previously dishonored, if such was the fact
MERCANTILE LAW
Value
(1) Any consideration sufficient to support a
simple contract (Sec. 25, NIL).
(2) An antecedent or pre-existing debt
constitutes value, whether the instrument is
payable on demand or at a future time (Sec.
25, NIL)
Section 53, NIL. When person not deemed holder

in due course. - Where an instrument payable
on demand is negotiated on an unreasonable
length of time after its issue, the holder is not
deemed a holder in due course.
Holder for value

(1) Where value has at 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 (Sec. 26,
NIL); and
(2) Where the holder has a lien on the
instrument, he is deemed a HFV to the
extent of his lien (Sec .27, NIL).
(3) The holder is a holder for value only to the
extent that the consideration agreed upon
has been paid, delivered, or performed.
OVERDUE THE FOLLOWING CANNOT BE

HDCS:
(a) A holder who became such after the date of
maturity of the instrument (instrument is
overdue; Sec. 53, NIL);
(b) In case of demand instruments: a holder
who negotiates it after an unreasonable
length of time after its issue (Sec. 53, NIL)
(c) Instruments with fixed maturity but subject
to acceleration: ultimate date of maturity is
the date of maturity for the purpose of
determining whether a purchaser is a HDC
(d) Undated
instruments:
Prima
facie
presumption that it was negotiated before it
was overdue (Sec. 45, NIL)
Presumption: Every negotiable instrument is

deemed prima facie issued for valuable
consideration; and every person whose
signature appears thereon is deemed to have
become a party thereto for value (Sec. 24, NIL).
Notes:
(1) An overdue instrument is still negotiable,
but it is subject to the defenses (real and
personal) existing at the time of the transfer.
(2) As to what constitutes a reasonable time,
regard is to be had to the nature of the
instrument, the usage of trade or business
with respect to such instrument, and the
facts of the particular case. (Sec. 193, NIL)
(3) An instrument is not invalid for the reason
only that it is ANTE-DATED OR
POSTDATED provided it is not done for an
illegal or fraudulent purpose. The person to
whom an instrument so dated is delivered
acquires the title thereto as of the date of
delivery (Sec. 12, NIL).
Such presumption cannot be overcome by the

petitioners bare denial of receipt of the
consideration. (Bayani vs. People, 2004)
Good faith
Holder must have taken the instrument in
good faith and that at the time it was
negotiated to him he had no notice of any
infirmity in the instrument or defect in the title
of the person negotiating it.
Actual knowledge
What constitutes notice of defect. To constitute
notice of an infirmity in the instrument or
defect in the title of the person negotiating the
same, the person to whom it is negotiated
B.4.B. THAT HE TOOK IT IN GOOD FAITH

AND FOR VALUE
34
UP LAW BOC
must have had actual knowledge of the infirmity

or defect, or knowledge of such facts that his
action in taking the instrument amounted to
bad faith. (Sec. 56, NIL)
MERCANTILE LAW
accordance with the particular circumstances

of each case (Campos).
Suspicious circumstances
General rule: A purchaser of an instrument is
not required to investigate every suspicious
circumstance; failure to investigate such
circumstances does not constitute him as
being in bad faith or having a notice of defect
(Campos).
That at the time it was negotiated to him he

had no NOTICE of any infirmity in the
instrument or defect in the title of the person
negotiating it
Section 55, NIL. When title defective. - The title
of a person who negotiates an instrument is
defective within the meaning of this Act when
he obtained the instrument, or any signature
thereto, by fraud, duress, or force and fear, or
other unlawful means, or for an illegal
consideration, or when he negotiates it in
breach of faith, or under such circumstances as
amount to a fraud.
Rationale: The general principle that a

purchaser who has knowledge of certain facts
is put on inquiry does not operate to its full
extent in the law of negotiable instruments.
Negotiable instruments are usually issued in
pursuance of commercial transactions where
time is of the essence. To require investigation
of every suspicious circumstance would
hamper their function of facilitating exchange;
thus negligence in tracking down a suspicious
circumstance which would put a prudent man
on inquiry is not of itself sufficient to prevent
recovery (Campos).
Section 56, NIL. What constitutes notice of

defect. - To constitutes notice of an infirmity in
the instrument or defect in the title of the
person negotiating the same, the person to
whom it is negotiated must have had actual
knowledge of the infirmity or defect, or
knowledge of such facts that his action in
taking the instrument amounted to bad faith.
Exceptions:
(a) Suspicious circumstances TOGETHER WITH
other circumstances, may be admitted as
evidence of bad faith.
(b) Where the suspicious circumstances are so
cogent and obvious
B.4.C. WHAT CONSTITUTES NOTICE OF

DEFECT OR BAD FAITH
Under Section 56, in order to constitute notice,
the holder must:
(a) have ACTUAL and not merely
constructive knowledge of the defect; OR
(b) have acted in bad faith (Campos)
A check with 2 parallel lines in the upper left

hand corner means that it could only be
deposited and may not be converted to cash.
Consequently, such circumstance should put
the payee on inquiry and upon him devolves the
duty to ascertain the holders title to the check
or the nature of his possession. Failing in this
respect, the payee is declared guilty of gross
negligence amounting to legal absence of good
faith and as such the consensus of authority is
to the effect that the holder of the check is not
Gross negligence IN ITSELF would not

constitute notice since it is not the equivalent
of actual knowledge nor of bad faith (Campos).
The question of good faith or bad faith is a
question of fact which must be determined in
35
UP LAW BOC
a holder in good faith. (State Investment House

vs. IAC, 1989)
MERCANTILE LAW
(2) But the last mentioned rule does not apply

in favor of a party who became bound on
the instrument prior to the acquisition of
such defective title. (Sec. 59, NIL)
Defective title
Title is NOT defective when at the time it was
negotiated to him, he had NO notice of:
(1) any infirmity in instrument
(2) any defect in title of person negotiating
C.2. HOLDER NOT IN DUE COURSE

(1) One who became a holder of an instrument
without any, some or all of the requisites
under Sec. 52 of the NIL
(2) With respect to demand instruments, if it is
negotiated an unreasonable length of time
after its issue, the holder is deemed not a
holder in due course. (Sec. 53, NIL)
(3) Rights of a holder not in due course (Sec. 51,
NIL):
(a) To sue on the instrument under in his own
name
(b) To enforce the instrument
Title is DEFECTIVE when (Sec. 55, NIL)

(1) instrument/signature obtained by fraud,
duress, force or fear or other unlawful
means OR for an illegal consideration; or
(2) instrument is negotiated in breach of faith,
or fraudulent circumstances
NOTICE of infirmity or defect actual
knowledge of the infirmity or defect OR
knowledge of such facts that his action in
taking the instrument amounted to bad faith
(Sec.56, NIL)
The only disadvantage of a holder who is not a

holder in due course is that the negotiable
instrument is subject to defenses as if it were
non-negotiable. [Chan Wan vs. Tan Kim (1960)]
RIGHT of a transferee who receives NOTICE of

any infirmity or defect BEFORE he has PAID
THE FULL amount for the instrument. He will
be deemed a HDC only to the extent of the
amount therefore paid by him (Sec.54, NIL)
X. Liabilities of Parties
Primary liability: The unconditional promise
attaches the moment the maker makes the
instrument while the acceptors assent to the
unconditional order attaches the moment he
accepts the instrument. No further act is
necessary in order for the liability to accrue.
Presentment for payment is all that is
necessary.
C. DEFENSES AGAINST THE

HOLDER
C.1. PRESUMPTION IN FAVOR OF DUE
COURSE HOLDING
Every holder is deemed prima facie to be a
holder in due course (Sec. 59, NIL).
(1) BURDEN SHIFTS when it is shown that the
title of any person who has negotiated the
instrument was defective. Holder MUST
then PROVE that he or some person under
whom he claims acquired the title as a
holder in due course.
A. PARTIES PRIMARILY LIABLE

(Sec. 60 and 62)
Persons who by the terms of the instrument
are absolutely required to pay the same
36
UP LAW BOC
A.1. MAKER (SEC. 60)
MERCANTILE LAW
negativing/limiting his own liability to the

holder.
Promises to pay according to the tenor of the

instrument (promissory note)
B.2. INDORSERS
A.2. ACCEPTOR (SEC. 62)
The following indorsers assume the liability to

pay the instrument:
(1) General or Unqualified Indorser; and
(2) Irregular Indorser
Upon acceptance of the bill of exchange,

engages to pay the bill according to the tenor
of the acceptance.
Unconditionally liable; he is duty-bound to pay
the holder at date of maturity, WON holder
demands payment from him, and he is not
relieved from liability even if the instrument
should become overdue due to failure of holder
to make such demand.
B.2.A. GENERAL OR
INDORSER (SEC. 66)
UNQUALIFIED
Engages that he will pay the amount of the

instrument to the holder or to any subsequent
indorser who may be compelled to pay the
same if the instrument be dishonored upon
due presentment and proceedings on dishonor
be taken.
Note: Until he accepts the bill of exchange, the

drawee assumes no liability to pay the
instrument.
Who is a General or Unqualified Indorser? Every

person who indorses WITHOUT qualification
(Sec. 66)
B. PARTIES SECONDARILY LIABLE

Secondary liability: A party secondarily liable is
not bound to pay unless the following have
been fulfilled:
(1) Due presentment or demand to the primary
party
(2) Dishonor by such party
(3) Notice of dishonor to secondary party, and,
in cases of foreign bills of exchange, protest
of the bill
A person placing his signature upon an

instrument other than as a maker, drawer, or
acceptor unless he indicates by appropriate
words his intention to be bound in some other
capacity (Sec. 63).
A person, who places his signature on an
instrument negotiable by delivery, incurs all
the liabilities of an indorser (Sec. 67).
B.1. drawer (sec. 61)

(1) Engages that the instrument will be
accepted or paid, or both, according to its
tenor on due presentment;
(2) Engages that he will pay the amount of the
instrument to the holder or to any
subsequent indorser who may be compelled
to pay the same if the instrument be
dishonored upon due presentment and
proceedings on dishonor be taken,
Note: A qualified indorser does not assume the

liability to pay the instrument since he is
merely an assignor of the title to the
instrument. However, he becomes liable once
he breaches a warranty.
Who is a qualified indorser? One who is
constituted as a mere assignor of the title to
the instrument by adding to his signature the
words "without recourse" or any words of
similar import.
Limiting liability: Drawer may insert in the

instrument
an
express
stipulation
37
UP LAW BOC
B.2.B. IRREGULAR INDORSER
MERCANTILE LAW
(2) His then capacity to indorse (Sec. 60)
When a person not otherwise a party to an

instrument, places thereon his signature in
blank before delivery, he is liable as an
indorser, in accordance with these rules:
(1) Instrument payable to order of 3rd person:
liable to payee and to all subsequent parties
(2) Instrument payable to the order of
maker/drawer, or payable to bearer: liable
to all parties subsequent to maker/drawer
(3) Signs for accommodation of payee: liable
to all parties subsequent to payee (Sec. 64)
DRAWERS WARRANTIES
(1) The drawer admits the existence of the
payee AND
(2) His then capacity to endorse
ACCEPTORS WARRANTIES
(1) As to the drawer, the acceptor admits:
(a) His existence
(b) Genuineness of his signature
(c) Capacity and authority to draw the
instrument
(2) As to the payee, the acceptor admits:
(a) His existence
(b) His then capacity to indorse (Sec. 62)
B.2.C. ORDER OF LIABILITY AMONG

INDORSERS (SEC. 68)
(1) Among themselves: liable prima facie in the
order they indorse, but proof of another
agreement admissible
(2) As to the Holder: Holder may sue any of the
indorsers,
regardless of
order
of
indorsement
(3) Joint payees/indorsees deemed to indorse
solidarily
The acceptor is precluded from setting up

certain defenses by reason of his warranties
like the defense that the drawer is a minor or
the signature of the drawer is forged. (Aquino)
GENERAL INDORSERS WARRANTIES
(1) That the instrument is genuine in and in all
respects what it purports to be
(2) That he has a good title to it
(3) That all prior parties had capacity to
contract
(4) That the instrument is, at the time of his
indorsement, valid and subsisting (Sec. 66)
XI. Warranties
The primary or secondary liability of the parties
should be distinguished from their warranties.
(1) Primary or secondary liability of the parties
makes them liable to pay the sum certain
in money stated in the instrument.
(2) Warranties are affirmations of the fact on
the part of the parties that impose no
direct obligation to pay in the absence of
breach thereof. (Aquino)
These warranties are in favor of all subsequent

holders in due course. (Ang Tiong v. Ting,
1968)
QUALIFIED INDORSERS WARRANTIES
(1) That the instrument is genuine in and in all
respects what it purports to be
(2) That he has a good title to it
(3) That all prior parties had capacity to
contract
(4) That he has no knowledge of any fact
which would impair the validity of the
instrument or render it valueless. (Sec. 68)
In case of breach of warranties, the person who

breached the same may either be liable or he
may be barred from asserting a particular
defense.
MAKERS WARRANTIES
(1) The maker admits the existence of the
payee AND
38
UP LAW BOC
XII. Presentment for

Payment
When NOT necessary:

(1) To charge the person primarily liable on
the instrument (Sec. 70)
(2) To charge the drawer where he has no
right to expect or require that the drawee
or acceptor will pay the instrument. (Sec.
79)
(3) To charge an indorser where the
instrument was made or accepted for his
accommodation and he has no reason to
expect that the instrument will be paid if
presented. (Sec. 80)
(4) When the bill of exchange has previously
been dishonored by non-acceptance and
has not been subsequently accepted
A. PRESENTMENT MEANS
(1) The production of a Bill of Exchange to the
drawer or acceptor for payment; or
(2) The production of a Promissory Note to the
party liable for payment.
B.
DATE
AND
PRESENTMENT
TIME
MERCANTILE LAW
OF
(1) Bearing fixed maturity/not payable on

demand on the day it falls due if day of
maturity falls on Sunday or a holiday, the
instruments falling due or becoming
payable on Saturday are to be presented for
payment on the next succeeding business
day (Sec. 85)
(2) Payable on demand within a reasonable
time after its issue, iv at the option of the
holder, may be presented for payment
before twelve o'clock noon on Saturday
when that entire day is not a holiday (Sec.
85)
(3) Demand bill of exchange within a
reasonable time after the last negotiation.
(Sec. 71)
D.
PARTIES
TO
WHOM
PRESENTMENT FOR PAYMENT
SHOULD BE MADE
General rule: Presentment for payment must
be made to the person primarily liable on the
instrument or if he is absent or inaccessible, to
any person found at the place where the
presentment is made.
Exceptions: Where the person primarily liable
is/are:
(1) Dead presentment for payment must be
made to his personal representative
(2) Partners presentment for payment may be
made to any one of them, even though there
has been a dissolution of the firm
(3) Several persons, not partners (joint debtors)
presentment for payment must be made
to them all
Note: Although presentment was made within

a reasonable time from last negotiation, it may
have been made within an unreasonable time
from issuance. Thus holder may still not be a
holder in due course under Sec. 71.
C. NECESSITY OF PRESENTMENT
FOR PAYMENT
E.
DISPENSATION
WITH
PRESENTMENT FOR PAYMENT
When necessary: In order to charge the drawer

and indorsers (Sec. 70)
When Excused:
(1) Where, after the exercise of reasonable
diligence, presentment cannot be made;
(2) Where the drawee is a fictitious person;
(3) By waiver of presentment, express or
implied. (Sec. 82)
39
UP LAW BOC
MERCANTILE LAW
discharged. Notice may be given to the party

himself or to his agent.
F. 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
is overdue and unpaid (Sec. 83).
B. WHEN GIVEN
Notice may be given as soon as the instrument
is dishonored (Sec. 102)
C. WHEN NOT NECESSARY TO GIVE

TO DRAWER
In case of waiver of protest, whether in the case

of a foreign bill of exchange or other NI
deemed to be a waiver not only of a formal
protest but also of presentment and notice of
dishonor (Sec. 111)
Notice of dishonor is not required to be given

to the drawer in any of the following cases:
(1) Drawer and drawee are the same;
(2) Drawee is a fictitious person or not having
the capacity to contract;
(3) Drawer is the person to whom the
instrument is presented for payment;
(4) The drawer has no right to expect or require
that the drawee or acceptor swill honor the
instrument;
(5) Where the drawer has countermanded
payment (Sec. 114)
XIII. Notice of Dishonor

Notice given by holder or his agent to party or
parties secondarily liable that the instrument
was dishonored by:
(1) Non-acceptance by the drawee of a bill; or
(2) Non-payment by the acceptor of a bill; or
(3) Non-payment by the maker of a note (Sec.
89)
D. WHEN NOT NECESSARY TO GIVE

TO INDORSER
Requisites:
(1) Given by holder or his agent, or by any party
who may be compelled by the holder to pay
(Sec. 90)
(2) Given to secondary party or his agent (Sec.
97)
(3) Given within the periods provided by law
(Sec. 102)
(4) Given at the proper place (Secs. 103 and 104)
Notice of dishonor is not required to be given

to an indorser in the following cases:
(1) Drawee is a fictitious person or does not
have the capacity to contract, and indorser
was aware of that fact at the time he
indorsed the instrument;
(2) Indorser is the person to whom the
instrument is presented for payment;
(3) Instrument was made or accepted for his
accommodation. (Sec. 115)
A. PARTIES TO BE NOTIFIED
E. WHO WILL BENEFIT
(1) Non-acceptance (bill) to persons

secondarily liable, namely, the drawer and
indorsers as the case may be
(2) Non-payment (both bill and note) to
indorsers
If given by or on behalf of the holder (Sec. 92):

(1) All subsequent holders
(2) All prior parties (as to holder) who have a
right of recourse against the party to whom
it is given.
Note: Notice must be given to persons

secondarily liable. Otherwise, such parties are
40
UP LAW BOC
If given by the indorser (Sec. 93):

(1) Holder
(2) All parties subsequent to the party to whom
notice is given.
MERCANTILE LAW
I. WAIVER
Notice of dishonor may be waived either
before the time of giving notice has arrived or
after the omission to give due notice, and the
waiver may be expressed or implied. (Sec. 109)
Where the waiver is embodied in the
instrument itself, it is binding upon all
parties; but, where it is written above the
signature of an indorser, it binds him only.
(Sec. 110)
F. PARTIES WHO MAY GIVE NOTICE

OF DISHONOR
The notice may be given by or on behalf of the
holder, or by or on behalf of any party to the
instrument who might be compelled to pay it
to the holder, and who, upon taking it up,
would have a right to reimbursement from the
party to whom the notice is given. (Sec. 90)
J. DISPENSATION WITH NOTICE

(1) When party to be notified knows about the
dishonor, actually or constructively (Secs.
114-117)
(2) If waived (Sec. 109)
(3) When after due diligence, it cannot be given
(Sec. 112).
F.1. WHO SHOULD GIVE (SEC. 90)

(1) Holder
(2) Agent or representative of holder.
(3) Any party who may be compelled to pay like
indorsers.
(4) Agent of any party who may be compelled.
K. EFFECT OF FAILURE TO GIVE

NOTICE
G. EFFECT OF NOTICE
Failure to give notice to parties secondarily

liable discharges such parties
An omission to give notice of dishonor by
non-acceptance does not prejudice the rights
of a holder in due course subsequent to the
omission (Sec. 117)
Notice of dishonor is required to charge

parties secondarily liable.
Upon valid notice of dishonor, immediate
right of recourse against the indorser arises.
It is as if the indorser becomes primarily
liable in the sense that the holder need not
claim payment from the person primarily
liable (Sundiang and Aquino).
XIV. Discharge of
Negotiable Instrument
H. FORM OF NOTICE (SEC. 96)

The notice may be:
(1) In writing; or
(2) Merely oral
Discharge: The release of all parties, whether

primary or secondary, from the obligation on
the instrument. It renders the instrument
without force and effect and, consequently,
non-negotiable (De Leon)
The notice may be given in any terms which:

(1) Sufficiently identify the instrument; and
(2) Indicate that it has been dishonored by
non-acceptance or non-payment
A. DISCHARGE
INSTRUMENT
OF
NEGOTIABLE
A negotiable instrument is discharged:

(1) By payment in due course by or on behalf of
the principal debtor;
It may in all cases be given by delivering it

personally or through the mails
41
UP LAW BOC
MERCANTILE LAW
(2) By payment in due course by the party

accommodated, where the instrument is
made or accepted for his accommodation;
(3) By the intentional cancellation thereof by
the holder;
(4) By any other act which will discharge a
simple contract for the payment of money;
(5) When the principal debtor becomes the
holder of the instrument at or after maturity
in his own right. (Sec. 119)
D. BY INTENTIONAL CANCELLATION
B. BY PAYMENT IN DUE COURSE

(ASKED IN 2000)
E. BY OTHER ACTS THAT DISCHARGE

A SIMPLE CONTRACT
A cancellation made unintentionally or under

a mistake or without the authority of the
holder, is inoperative.
But where an instrument or any signature
thereon appears to have been cancelled, the
burden of proof lies on the party who alleges
that
the
cancellation
was
made
unintentionally or under a mistake or without
authority. (Sec. 123)
Payment is made in due course when it is

made at or after the maturity of the payment to
the holder thereof in good faith and without
notice that his title is defective. (Sec. 88)
FOR PAYMENT OF MONEY

Any other act which discharges a simple
contract for payment of money (Art. 1231 of the
Civil Code), ex. issuance of a renewal note
(novation).
Requisites:
(1) Payment must be made at or after maturity.
(2) Payment must be made to the holder.
(3) Payment must be made in good faith and
without notice that holders title is defective.
F. BY REACQUISITION OF PRINCIPAL
DEBTOR IN HIS OWN RIGHT
Principal debtor becomes holder of instrument
at or after maturity in his own right
If payment is made before maturity and the

note is negotiated to a HDC, the latter may
recover on the instrument.
Payment to one of several payees or
indorsees in the alternative discharges the
instrument, but payment to one of several
joint payees or joint indorsers is not a
discharge. The party receiving payment must
have been authorized by others to receive
payment.
G. BY MATERIAL ALTERATION
Material alteration without assent of all parties
liable avoids instrument except as against
party to alteration and subsequent indorsers
(Sec. 124)
H.
DISCHARGE
OF
SECONDARILY LIABLE
PARTIES
GROUNDS UNDER SEC. 120

A person secondarily liable on the instrument
is discharged:
(1) By any act which discharges the instrument;
(2) By the intentional cancellation of his
signature by the holder;
(3) By the discharge of a prior party;
(4) By a valid tender or payment made by a
prior party;
(5) By a release of the principal debtor unless
the holder's right of recourse against the
party secondarily liable is expressly
C. BY WHOM MADE:
(1) payment in due course by or on behalf of
principal debtor
(2) payment in due course by party
accommodated where party is made/
accepted for accommodation
42
UP LAW BOC
reserved;
(6) By any agreement binding upon the holder
to extend the time of payment or to
postpone the holder's right to enforce the
instrument unless made with the assent of
the party secondarily liable or unless the
right of recourse against such party is
expressly reserved. (Sec. 120)
(1) Where it is payable to the order of a third

person, and has been paid by the drawer;
(2) Where it was made or accepted for
accommodation, and has been paid by the
party accommodated. (Sec. 121)
J. RENUNCIATION BY HOLDER (SEC.

122)
The holder may expressly renounce his rights
against any party to the instrument before,
at, or after its maturity. An absolute and
unconditional renunciation of his rights
against the principal debtor made at or after
the maturity of the instrument discharges
the instrument.
Renunciation must be in writing unless the
instrument is delivered up to the person
primarily liable thereon
Renunciation does not affect the rights of an
HDC without notice
OTHER GROUNDS
(1) Failure to make due presentment (Secs. 70,
144)
(2) Failure to give notice of dishonor
(3) Certification of check at instance of holder
(4) Reacquisition by prior party
(5) Where instrument negotiated back to a
prior party, such party may reissue and
further negotiate, but not entitled to enforce
payment against any intervening party to
whom he was personally liable
(6) Where instrument is paid by party
secondarily liable, it is not discharged, but
(a) the party so paying it is remitted to his
former rights as regard to all prior
parties
(b) and he may strike out his own and all
subsequent indorsements, and again
negotiate instrument, except: where it is
payable to order of 3rd party and has
been paid by drawer or where its
made/accepted for accommodation and
has been paid by party accommodated
(7) By taking a qualified acceptance
I.
RIGHT
OF
PARTY
DISCHARGED INSTRUMENT
MERCANTILE LAW
XV. Material Alteration

A. CONCEPT
Any change in the instrument which affects
or changes the liability of the parties in any
way.
Any alteration which changes the date, sum
payable, time or place of payment, number
of relation of the parties, or medium of
currency of payment where none is specified
or which alters the effect of the instrument in
any respect (PNB v. CA, GR No. L-26001, Oct.
21, 1968)
An alteration is said to be material if it alters
the effect of the instrument. In other words, a
material alteration is one which changes the
items which are required to be stated under
Sec. 1 of the NIL (ibid.)
WHO
Where the instrument is paid by a party

secondarily liable thereon, it is not discharged;
but the party so paying it is remitted to his
former rights as regards to all prior parties,
and he may strike out his own and all
subsequent indorsements, and again negotiate
the instrument, except:
43
UP LAW BOC
B. CHANGES IN THE FOLLOWING

CONSTITUTE
MATERIAL
ALTERATIONS (SEC. 125):
C. KINDS OF ACCEPTANCE:
(1) General assents without qualification to
the order of the drawer
(2) Qualified which in express terms varies
the effect of the bill as drawn:
(a) Conditional makes payment by the
acceptor dependent on the fulfillment of
a condition therein stated
(b) Partial an acceptance to pay part only
of the amount for which the bill is drawn.
(c) Local an acceptance to pay only at a
particular place.
(d) Qualified as to time
(e) The acceptance of some one or more of
the drawees but not of all. (Sec. 141)
(1) Date
(2) Sum payable, either for principal or interest
(3) Time or place of payment
(4) Number or relations of the parties
(5) Medium or currency in which payment is to
be made
(6) That which adds a place of payment where
no place of payment is specified
(7) Any other change or addition which alters
the effect of the instrument in any respect.
C.
EFFECT
ALTERATION
OF
MERCANTILE LAW
MATERIAL
D.
PROOF
OF
ACCEPTANCE
(SUNDIANG AND AQUINO):
(1) Alteration by a party Avoids the instrument

except as against the party who made,
authorized, or assented to the alteration
and subsequent indorsers. However, if an
altered instrument is negotiated to a HDC,
he may enforce payment thereof according
to its original tenor regardless of whether
the alteration was innocent or fraudulent.
(2)
the
effect is the same as where the alteration
was made by a party wherein a HDC can
recover on the original tenor of the
instrument (Sec. 124).
The written acceptance may be in the

instrument itself or in a separate instrument.
However, under Sec. 133, the holder of a bill
presenting the same for acceptance may
require the acceptance be written on the bill,
and, if such request is refused, may treat the
bill as dishonored
Effects: When an acceptance is written on a
paper 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.
XVI. Acceptance
E. MANNER
A. DEFINITION
E.1. EXPRESS ACCEPTANCE
The signification by the drawee of his assent to

the order of the drawer (Sec. 132)
Must be in writing and signed by the drawee

and must not express that the drawee will
perform his promise by any other means than
the payment of money. (Sec. 132) If request for
a written acceptance is refused, the holder may
treat the bill as dishonored (Sec. 133)
B. REQUISITES (SEC. 132):

(1) Must be in writing
(2) Signed by the drawee
(3) Must not express that the drawee will
perform his promise by and other means
than the payment of money
44
UP LAW BOC
E.2. IMPLIED ACCEPTANCE
MERCANTILE LAW
acceptance, he may treat the bill as dishonored

by non-acceptance.
(1) If the drawee refuses to return the

instrument within 24 hours after it was
delivered for acceptance.
(2) If the drawee destroys the same.
(3) If the drawee makes an unconditional
promise in writing before the instrument is
drawn, with respect to every person who,
upon the faith thereof, receives the bill for
value.
Where a qualified acceptance is taken, the

drawers and indorsers are discharged from
liability on the bill unless they have expressly
or impliedly authorized the holder to take a
qualified acceptance, or subsequently assent
thereto.
When the drawer or indorser receives notice of
a qualified acceptance, he must, within a
reasonable time, express his dissent to the
holder or he will be deemed to have assented
thereto.
F. TIME FOR ACCEPTANCE (SEC. 136)

The drawee is allowed twenty-four hours
after presentment in which to decide
whether or not he will accept the bill.
The acceptance, if given, dates as of the day
of presentation.
However, acceptance is presumed to be

unqualified or absolute. (Sundiang and
Aquino)
G. RULES GOVERNING ACCEPTANCE
XVII. Presentment for

Acceptance
Q: What is the implication of payment without

acceptance by a drawee?
A: Act No. 2031, or the Negotiable Instruments
Law (NIL), explicitly provides that the
acceptor, by accepting the instrument,
engages that he will pay it according to the
tenor of his acceptance. This provision
applies with equal force in case the drawee
pays a bill without having previously
accepted it. His actual payment of the
amount in the check implies not only his
assent to the order of the drawer and a
recognition of his corresponding obligation
to pay the aforementioned sum, but also,
his clear compliance with that obligation.
Actual payment by the drawee is greater
than his acceptance, which is merely a
promise in writing to pay. The payment of a
check includes its acceptance. (FEBTC vs.
Gold Palace Jewellery Co,, Nachura, 2008)
A. REQUISITES:
(1) By the holder, or by some person authorized
to receive payment on his behalf;
(2) At a reasonable hour on a business day;
(3) At a proper place as herein defined;
(4) To the person primarily liable on the
instrument, or if he is absent or
inaccessible, to any person found at the
place where the presentment is made.
General rule: Presentment for acceptance is
not necessary in order to render any party to
the bill liable. (Sec. 143, last par.)
B. WHEN PRESENTMENT
ACCEPTANCE NECESSARY:
FOR
Presentment for acceptance must be made:

(1) Where the bill is payable after sight, or in
any other case, where presentment for
Right to unqualified acceptance: The holder

may refuse to take a qualified acceptance and
if he does not obtain an unqualified
45
UP LAW BOC
acceptance is necessary in order to fix the

maturity of the instrument; or
(2) Where the bill expressly stipulates that it
shall be presented for acceptance; or
(3) Where the bill is drawn payable elsewhere
than at the residence or place of business of
the drawee.(Sec. 143)
(1) By the holder, or by some person authorized

to receive payment on his behalf;
(2) At a reasonable hour on a business day;
(3) At the proper place as herein defined (see
Sec. 73);
(4) To the person primarily liable on the
instrument or if he is absent or inaccessible,
to any person found at the place where the
presentment is made. (Sec. 72)
Note: It is not necessary to present a check for

acceptance because it is not one of those
required under Sec. 143.
C. WHEN PRESENTMENT
ACCEPTANCE EXCUSED:
Time of maturity: Every negotiable instrument

is payable at the time fixed therein without
grace. When they day of maturity falls upon
Sunday, or a holiday, the instrument is payable
on the next succeeding business day.
Instruments falling due or becoming payable
on Saturday are to be presented for payment
on the next succeeding business day, except
that instrument payable on demand may, at
the option of the holder be presented for
payment before twelve oclock noon on Saturday
when that entire day is not a holiday. (Sec. 85)
FOR
Presentment for acceptance is excused and a

bill may be treated as dishonored by nonacceptance in either of the following cases:
(1) Where the drawee is dead, or has
absconded, or is a fictitious person or a
person not having capacity to contract by
bill.
(2) Where, after the exercise of reasonable
diligence, presentment cannot be made.
(3) Where, although presentment has been
irregular, acceptance has been refused on
some other ground. (Sec. 148)
D.
TIME/PLACE/MANNER
PRESENTMENT
MERCANTILE LAW
F. HOW MADE (SEC. 145)

In general:
(1) By or on behalf of the holder
(2) At a reasonable hour
(3) On a business day
(4) Before the bill is overdue
(5) To the drawee or his agent
OF
D.1. WHEN MADE
Where a bill is addressed to 2 or more drawees

who are not partners presentment must be
made to them all XPT. One has authority to
accept/refuse for all
A bill may be presented for acceptance on any

day on which negotiable instruments may be
presented for payment under the provisions of
Sections 72 and 85 of this Act. When Saturday
is not otherwise a holiday, presentment for
acceptance may be made before twelve o'clock
noon on that day. (Sec. 146)
Where the drawee is dead presentment may

be made to his personal representative
Where the drawee has been adjudged a
bankrupt or insolvent or has made an
assignment for the benefit of creditors
presentment may be made to him or to his
trustee or assignee.
E. WHAT CONSTITUTES SUFFICIENT

PRESENTMENT?
Presentment for payment, to be sufficient,
must be made:
46
UP LAW BOC
MERCANTILE LAW
There are originally 2 parties in a promissory

note:
(1) Maker party who executes the written
promise to pay.
(2) Payee party in whose favor the promissory
note is made payable.
G. EFFECT OF FAILURE TO MAKE

PRESENTMENT
(SEC. 144)
Failure to make presentment discharges the
drawer and all indorsers (Sec. 144).
H. DISHONOR BY NON-ACCEPTANCE
XIX. Checks
When dishonored by non-acceptance: A bill is

dishonored by non-acceptance:
(1) When it is duly presented for acceptance
and such an acceptance as is prescribed by
this Act is refused or cannot be obtained; or
(2) When presentment for acceptance is
excused and the bill is not accepted. (Sec.
149)
A. DEFINITION
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 check. (Sec. 185)
B. KINDS
Duty of holder: Where a bill is duly presented

for acceptance and is not accepted within the
prescribed time, the person presenting it must
treat the bill as dishonored by non-acceptance
or he loses the right of recourse against the
drawer and indorsers. (Sec. 150)
(1) Cashiers Check One drawn by the cashier

of a bank, in the name of the bank against
the bank itself payable to a third person. It
is a primary obligation of the issuing bank
and accepted in advance upon issuance
(Tan vs. CA 1994).
(2) Managers Check A check drawn by the
manager of a bank in the name of the bank
itself payable to a third person. It is similar
to the cashiers check as to the effect and
use.
In issuing a managers check, the bank
assumed the liabilities of the acceptor
under Sec. 62, NIL (Equitable PCI Bank v.
Ong (2006)
(3) Memorandum Check A check given by a
borrower to a lender for the amount of a
short loan, with the understanding that it is
not to be presented at the bank, but will be
redeemed by the maker himself when the
loan falls due and which understanding is
evidenced
by
writing
the
word
memorandum, memo or mem on the
check.
(4) Certified Check An agreement whereby
the bank against whom a check is drawn
Effect: When a bill is dishonored by nonacceptance, an immediate right of recourse

against the drawer and indorsers accrues to
the holder and no presentment for payment is
necessary. (Sec. 151)
XVIII. Promissory Notes

A promissory note is:
(1) An unconditional promise in writing
(2) Made by one person to another
(3) Signed by the maker
(4) Engaging to pay on demand, or at a fixed or
determinable future time
(5) A sum certain in money to order or to bearer
(6) Where a note is drawn to the maker's own
order, it is not complete until indorsed by
him. (Sec. 184)
47
UP LAW BOC
undertakes to pay it at any future time when

presented for payment (Sec. 187)
(a) Certification is equivalent to acceptance.
(Sec. 187)
(b) Where the holder of a check procures it
to be accepted or certified, the drawer
and all indorsers are discharged from
liability. (Sec. 188)
(c) A check of itself does not operate as an
assignment of any part of the funds to
the credit of the drawer with the bank,
and the bank is not liable to the holder
unless and until it accepts or certifies the
check. (Sec. 189)
(5) Crossed Check The NIL is silent with
respect to crossed checks, although the
Code of Commerce makes reference to such
instruments.
MERCANTILE LAW
C. EFFECTS
(1) The check may not be encashed; it may only
be deposited with the bank;
(2) The check may be negotiated only once to a
person who has an account with the bank;
and
(3) It serves as a warning to a holder that the
check has been issued for a definite
purpose. (Bataan Cigar vs. CA, 1994)
D. PRESENTMENT FOR PAYMENT

A check of itself does not operate as an
assignment of any part of the funds to the
credit of the drawer with the bank. The bank is
not liable to the holder, unless and until it
accepts or certifies the check. (Sec. 189)
D.1. TIME
When to present? A check must be presented
for payment within reasonable time after its
issue.
Article 541 of the Code of Commerce states:

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.
F. EFFECT OF DELAY
The drawer will be discharged from liability
thereon to the extent of the loss caused by the
delay. (Sec. 186)
Certification of checks: An agreement whereby
the bank against whom a check is drawn,
undertakes to pay it at any future time when
presented for payment
Under usual practice, crossing a check is done

by placing two parallel lines diagonally on the
left top portion of the check (State Investment
House vs. IAC, 1989).
Effects:
(1) Equivalent to acceptance (Sec. 187) and is
the operative act that makes banks liable
(2) Assignment of the funds of the drawer in
the hands of the drawee (Sec. 189)
(3) If obtained by the holder, discharges the
persons secondarily liable thereon (Sec. 188)
TYPES: SPECIAL AND GENERAL

The crossing may be special wherein between
the two parallel lines is written the name of a
bank or a business institution, in which case
the drawee should pay only with the
intervention of that bank or company, or
crossing may be general wherein between two
parallel diagonal lines are written the words
"and Co." or none at all as in the case at bar, in
which case the drawee should not encash the
same but merely accept the same for deposit
(supra).
Refusal of drawee bank to certify: The holder

has no action against the bank but he has a
right of action against the drawer. The drawer
in turn has right of action against the bank
based on the original contact of deposit
between them.
48

Nego 1

Transféré par

Informations du document

Titre original

Copyright

Formats disponibles

Partager ce document

Partager ou intégrer le document

Options de partage

Avez-vous trouvé ce document utile ?

Ce contenu est-il inapproprié ?

Droits d'auteur :

Formats disponibles

Nego 1

Transféré par

Droits d'auteur :

Formats disponibles

UP LAW BOC

NEGOTIABLE INSTRUMENTS LAW

NEGOTIABLE INSTRUMENTS LAW

private: Provided, however, That, unless

A. DEFINITION AND PURPOSE

Although considered as medium for

Negotiable Instruments Not Legal tender

II. Forms and

Section 52, New Central Bank Act. Legal

NEGOTIABLE INSTRUMENTS LAW

(a) It must be in writing and signed by the

Section 18, NIL. Liability of person signing in

What is considered "In writing" - includes print;

Section 184, NIL. Promissory note, defined. - A

Rationale for requirement: Since an instrument

Section 126, NIL. Bill of exchange, defined. - A

NEGOTIABLE INSTRUMENTS LAW

clear in what capacity the person intended

E.2. ORDER OR PROMISE TO PAY

(a) An indication of a particular fund out of

As to promissory note: Promise to pay

But an order or promise to pay out of a

The drawee pays the

When conditional: A negotiable instrument is

Section 3, NIL. When promise is unconditional. An unqualified order or promise to pay is

There is only one act

Section 2, NIL. What constitutes certainty as to

NEGOTIABLE INSTRUMENTS LAW

(a) with interest; or

Note: A sum is certain if from the face of the

Where an instrument is issued, accepted, or

E.4. PAYABLE IN MONEY

Note: The holder may call for payment any

F.2. AT A FIXED TIME

F.3. AT A DETERMINABLE FUTURE TIME

NEGOTIABLE INSTRUMENTS LAW

F.6. PROVISIONS EXTENDING TIME OF

(b) On or before a fixed or determinable future

General rule: Negotiability not affected. Effect

Note: It is required that the maturity of the

G.1 INSTRUMENT MUST

If option (absolute or conditional) to

Note: If option on the part of the holder is

G.3. PAYABLE TO BEARER

F.5. INSECURITY CLAUSES

NEGOTIABLE INSTRUMENTS LAW

fictitious or non-existing person, and such

person or to him or his order. It may be drawn

Where the instrument is payable to order, the

G.6. WHERE THE MAKER IS THE PAYEE

G.4. FICTITIOUS PAYEE RULE

G.7. IF BILL OF EXCHANGE, DRAWEE

A check drawn payable to the order of "CASH"

(1) Applies only to a bill of exchange

G.5. PAYABLE TO ORDER

Section 8, NIL. When payable to order. - The

NEGOTIABLE INSTRUMENTS LAW

attorney to sign judgment and issue

In determining the negotiability of an

III. Kinds of Negotiable

(1) Authorizes the sale

A.1. KINDS OF PROMISSORY NOTES

NEGOTIABLE INSTRUMENTS LAW