NEW ERA UNIVERSITY

COLLEGE OF BUSINESS ADMINISTRATION

LEGAL MANAGEMENT
NEGOTIABLE INSTRUMENTS LAW
COURSE OUTLINE
ATTY. VICTOR ESTEBAN S. BENITEZ

REFERENCE: The Philippine Negotiable Instruments Law by Hector S. De

Leon

I. BASIC CONCEPTS

A. Definition and Nature of Negotiable Instruments

Caltex Phil. Inc. v. Court of Appeals, 212 SCRA 448
Development Bank of Rizal v. Sima Wei, 219 SCRA 736

B. Most Common Forms of Negotiable Instrument

1. Promissory Note
Definition (Section 184, NIL)
General Characteristics
Special Types of Promissory Note
i.e. certificate of deposit, bonds, bank notes & due bills
Sierra v. Court of Appeals, 211 SCRA 785
Jimenez v. Bucoy, 103 Phil. 40

2. Bills of Exchange
Definition (Section 126, NIL)
General Characteristics
Special Types of Bills of Exchange
i.e. draft, trade acceptance, bankers acceptance, treasury
warrant, money orders, bills of exchange, bills in set,
inland bills and foreign bills
Distinction with respect to a Promissory Note

3. Checks
Definition (Section 185, NIL)
General Characteristics
Special Types of Checks
i.e. cashiers check, managers check, memorandum check,
certified check & crossed check
Distinction with respect to Bills of Exchange
People v. Nitafan, 215 SCRA 79

4. Instruments which are Not Negotiable

i.e. postal money order, warehouse receipts, treasury warrant, letter
of credit, certificate of stock, pawn ticket, etc.
Article 568, Code of Commerce

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 Abubakar v. Auditor General, 31 July 1948
Philippine Educational Co. Inc., v. Soriano, 39 SCRA 587
Sesbreo v. Court of Appeals, 222 SCRA 466

C. Parties to Negotiable Instruments

1. Promissory Note
2. Bills of Exchange
3. Check
4. Other parties

D. Negotiation, Indorsement and Assignability

E. Functions of Negotiable Instruments

1. Substitute for Money
New Pacific Timber v. Seneris, 101 SCRA 686
2. Increases the purchasing medium

F. Principal features of Negotiable Instruments

1. Negotiability
2. Accumulation of Secondary Contracts
Crystal v. Court of Appeals, 71 SCRA 443

II. INCIDENTS IN LIFEOF NEGOTIABLE INSTRUMENT

A. Issue

1. Form and Interpretation

Requisites of Negotiable Instrument (Section 1, NIL)
Caltex v. Court of Appeals, Ibid
Jimenez v. Bucoy, Ibid
Consolidated Plywood Industries, Inc. v. IFC Leasing, 149 SCRA 448
Certainty as to Sum (Section 2, NIL)
Unconditional Promise (Section 3, NIL)
Determinable Future Time (Section 4, NIL)
Provisions Not Affecting Negotiability (Section 5, NIL)
Omissions (Section 6, NIL)
Payable on Demand (Section 7, NIL)
De Leon v. RFC, 36 SCRA 289
Payable to Order (Section 8, NIL)
GSIS v. Court of Appeals, 170 SCRA 533
Consolidated Plywood Industries, Inc. v. IFC Leasing, Ibid
Payable to Bearer (Section 9, NIL)
Sufficiency of Terms (Section 10, NIL)
Presumption as to Date (Section 11, NIL)
Ante-Dated/Post-Dated (Section 12, NIL)
When Date Maybe Inserted (Section 13, NIL)
Incomplete but Delivered Instrument (Section 14, NIL)
Incomplete and Undelivered Instrument (Section 15, NIL)

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 Complete but Undelivered Instrument (Section 16, NIL)
Rules in Case the Instrument is Ambiguous (Section 17, NIL)
PNB v. Concepcion Mining Co., 5 SCRA 705
Liability of a Person Signing in a Trade or Assumed Name (Section
18, NIL)
Signature by an Agent and his Liability/Signature by Procuration
(Section 19-21, NIL)
Indorsement by an Infant or Corporation (Section 22, NIL)
Forgery (Section 23, NIL)
Republic Bank v. Ebrada, 65 SCRA 680
PNB v. National City Bank, 63 Phil. 711
San Carlos Milling v. BPI, 59 Phil. 59

2. Consideration
Presumption (Section 24, NIL)
Ngo v. People, 14 July 2004
Value (Section 25, NIL)
Holder for Value (Section 26, NIL)
Holder for Values Lien (Section 27, NIL)
Effect of Lack of Consideration (Section 28, NIL)
Accommodation Party (Section 29, NIL)
Phil. Bank of Commerce v. Aruego, 102 SCRA 530
Claude Bautista v. Auto Plus, G.R. No. 166405, 06 August 2008

B. Negotiation

1. Negotiation
What Constitutes Negotiation (Section 30)
How Made (Section 31-32)
Kinds of Indorsement (Section 33)
Special (Section 34)
Blank (Section 35)
Restrictive (Section 36-37)
Qualified (Section 38)
Conditional (Section 39)
Indorsement of Payable to Bearer (Section 40)
Indorsement When Payable to Two or More Persons (Section 41)
When Drawn or Indorsed to a Person as Cashier (Section 42)
Indorsement When Name is Mispelled (Section 43)
Indorsement in Representative Capacity (Section 44)
Time of Indorsement (Section 45)
Place of Indorsement (Section 46)
Continuation of Negotiable Character (Section 47)
Striking Out Indorsement (Section 48)
Transfer Without Indorsement (Section 49)
When Prior Party May Negotiate Instrument (Section 50)

2. Rights of the Holder

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 Rights of a Holder in General (Section 51)
Who is a Holder In Due Course (Section 52)
When is a Person Not Deemed a Holder In Due Course (Sec. 53)
Notice Before Full Amount Paid (Section 54)
When Title is Defective (Section 55)
What Constitutes Notice of Defect (Section 56)
Rights of a Holder in Due Course (Section 57)
When Subject to Original Defenses (Section 58)
Personal Defenses
Real Defenses

3. Liabilities of Parties

Liability of Maker (Section 60)

Liability of Drawer (Section 61)
Liability of Acceptor (Section 62)
When Person Deemed Indorser (Section 63)
Ang Tiong v. Ting, 22 SCRA 713
Liability of Irregular Indorser (Section 64)
Warranty Where Negotiation by Delivery (Section 65)

Liability of General Indorser (Section 66)

PNB v. CA, 25 SCRA 698
BDO & Mortgage Bank v. Equitable Banking
Corp, 157 SCRA 197
Liability of Indorser Where Negotiated by Delivery (Sec. 67)
Indorsers Order of Liability (Section 68)
Liability of an Agent or Broker (Section 69)

C. Presentment for Acceptance in Certain Kinds of Bills of Exchange

D. Acceptance

E. Dishonor by Non-Acceptance

F. Presentment for Payment

Effect of Lack of Demand on the Principal Debtor (Section 70)

Presentment of Instruments Not Payable on Demand
And Payable on Demand (Section 71)
What Constitutes Presentment (Section 72)
Place of Presentment (Section73)
Instrument Must Be Exhibited (Section 74)
Where Instrument is Payable at Bank (Section 75)
Where Principal Debtor is Dead (Section 76)
Persons Liable as Partners (Section 77)
Joint Debtors (Section 78)
Presentment Not Required to Charge the Drawer (Section 79)

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 When Presentment Not Required to Charge the Indorser (Section 80)
When Delay in Making Presentment is Excused (Section 81)
When Presentment May be Dispensed (Section 82)

G. Dishonor by Non-Payment

When Instrument Dishonored by Non-Payment (Section 83)

Liability of Person Secondarily Liable When Dishonored (Section 84)
Time of Maturity (Section 85)
How Computed (Section 86)
Rule Where Instrument Payable at Bank (Section 87)
Payment in Due Course (Section 88)

H. Notice of Dishonor

To Whom Must Be Given (Section 89)

By Whom (Section 90)
Notice Given by Agent (Section 91)
Effect of Notice on Behalf of Holder (Section 92)
Effect Where Notice is Given By Party Entitled (Section 93)
When Agent May Give Notice (Section 94)
When Notice Sufficient (Section 95)
Form of Notice (Section 96)
To Whom Notice Maybe Given (Section 97)
Notice Where Party is Dead (Section 98)
Notice to Partners (Section 99)
Notice to Persons Jointly Liable (Section 100)
Notice to Bankrupt (Section 101)
Time Within Which Notice Must be Given (Section 102)
Where Parties Reside in Same Place (Section 103)
Where Parties Reside in Different Places (Section 104)
When Sender Deemed to Have Given Due Notice (Section 105)
Deposit in Post Office, What Constitutes (Section 106)
Notice to Subsequent Party (Section 107)
Where Notice Must be Sent (Section 108)
Waiver of Notice (Section 109)
Whom Affected by Waiver (Section 110)
Waiver of Protest (Section 111)
When Notice is Dispensed With (Section 112)
Delay in Giving Notice of Dishonor, How Excused (Section 113)
When Notice Need Be Given to Drawer (Section 114)
When Notice Need Not Be Given to Indorser (Section115)
Notice of Non-Payment Where Accepted Refused (Section 116)
Effect of Omission to Give Notice of Non-Acceptance (Section 117)
When Protest Need Not be Made; When Must be Made (Section 118)

I. Discharge of Instruments

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 Instrument, how discharged (Section 119)
When persons secondarily liable on the instruments are discharged
(Section 120)
Rights of party who discharges instrument (Section 121)
Renunciation by holder (Section 122)
Cancellation of instrument (Section 123)
Alteration of instrument (Section 124)
Banco Atlantico v. Auditor General, 81 SCRA 335
Material alteration (Section 125)

III. BILLS OF EXCHANGE

A. Form and Interpretation

Definition (Section 126)

Nature (Section 127)
When addressed to more than one drawee (Section 128)
Inland and Foreign bills of exchange (Section 129)
When bill may be treated as promissory note (Section 130)
Referee (Section 131)

B. Acceptance

How made (Section 132)

Acceptance on face of bill (Section 133)
Acceptance by a separate instrument (Section 134)
Promise to accept (Section 135)
Time allowed (Section 136)
Liability of drawee when retained or destroyed (Section 137)
Acceptance of incomplete bill (Section 138)
Kinds of acceptance (Section 139)
General Acceptance (Section 140)
Qualified Acceptance (Section 141)
Rights of parties in qualified acceptance (Section 142)

C. Presentment for Acceptance

When made (Section 143)

Failure to present, effect (Section 144)
How made (Section 145)
Days presentment must be made (Section 146)
Where time is insufficient (Section 147)
When is it excused (Section 148)
When dishonored by non-acceptance (Section 149)
Rights of holder where bill not accepted (Section 150)

D. Protest
When is it necessary (Section 152)

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 How, whom, when and where made (Sections 153, 154, 155, 156)
Protest for non-acceptance & non-payment (Section 157)
Protest before maturity (Section 158)
When protest dispensed with (Section 159)
Protest where bill is lost (Section 160)

E. Acceptance for Honor

When bill may be accepted for honor (Section 161)

How made (Section 162)
When deemed to be acceptance for honor of the drawer 9Section 163)
Liability of acceptor for honor (Section 164)
Agreement of acceptor for honor (Section 165)
Maturity of bill payable after sight (Section 166)
Protest of bill accepted for honor (Section 167)
Presentment for payment to acceptor for honor, how made (Section 168)
When delay is excused (Section 169)
Dishonor of bill by acceptor for honor (Section 170)

F. Payment for Honor

Who make payment for honor (Section 171)

How made (Section 172)
Declaration before payment for honor (Section 173)
Preference of parties (Section 174)
Effect on subsequent parties where bill is paid (Section 175)
Holder refuses to receive payment (Section 176)
Rights of payor (Section 177)

G. Bills in Set

Definition (Section 178)

Rights of holder where different parts are negotiated (Section 179)
Liability of holder who indorses two or more parts of a set to different
Persons (Section 180)
Acceptance of bills drawn in sets (Section 181)
Payment by acceptor of bills drawn in sets (Section 182)
Effect of discharging one of a set (Section 183)

IV. PROMISSORY NOTES AND CHECKS

Promissory Note, Definition (Section 184)

Check (Section 185)
Within what time a check must be presented (Section 186)
Certification of check (Section 187)
Effect when accepted or certified (Section 188)
When check operates as an assignment (Section 189)
-NOTHING FOLLOWS-

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