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Negotiable Instruments

Section 1 is very important

requisites of a negotiable instrument
Section 1. Form of Negotiable Instruments. � An instrument to be negotiable must
conform to the following requirements:
a) It must be in writing and signed by the maker or drawer
b) Must contain an unconditional promise or order to pay a sum certain in money
c) Must be payable on demand, or at a fixed or determinable future time
d) Must be payable to order or to bearer
e) Where the instrument is addressed to a drawee, he must be named or other
indicated therein with reasonable certainty.

Payable to bearer section 9

Sec. 9. 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 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.

Once the instrument is negotiable it continues to be negotiable until discharge

1. Bearer instrument-delivery
2. Order instrument - delivery and indorsement

types of indorsement
Sec. 33. Kinds of indorsement. � An indorsement may be either special or in blank;
and it may also be either restrictive or qualified, or conditional.
Classification of indorsement.
(1) As to the methods of negotiation:
(a) special (Sec. 34.); or
(b) blank, (ibid.)
(2) As to the kind of title transferred: (a) restrictive; or
(b) non-restrictive. (Sec. 36.)
(3) As to scope of liability of indorser:
(a) qualified; or
(b) unqualified or general. (Sees. 38,66.)
(4) As to presence or absence of limitations:
(a) conditional; or
(b) unconditional. (Sec. 39.)
(5) The other kinds of indorsements are:
(a) joint (Sec. 41.);
(b) successive (see Sees. 50,68.);
(c) irregular or anomalous (Sec. 64.); and
(d) facultative, (see Sec. 111.)

fictious person

how is indorsement made

-in writting on the instrument itself or a paper attached thereto
(section 31)

irregular indorser (section 64)

-a party who is not a party to an instrument, places thereon his signature
in blank before delivery he is liable as an indorser
-signature of the indorser is neccessary

general endorser (section 66)

Accomodation party (section 29)

(section 29) 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
-this is an exception to the persona defense of lack of consideration
-the accomadating party can avail of the defenses available to the
accomodated party
-accomadation party is liable but only to a holder for value (in due course)

example of instrument payable to order

presentment for payment to the person primarily liable=collect

or further endorse the instrument

two kinds of defenses


once an instrument is negotionable it continues to be unless

restrictively indorsed or discharge

restrictive endorsement

endorsee and at the same time a holder of an instrument

prior and subsequent parties

immediate and remote parties

holder in due course

dishonored instrument= send a notice of dishonor to all parties liable

-unconditional promise or order to pay a sum certain in money
-certain in money (section 2)
-payable on demand(section 7) or fixed or determinable future time (section 4)
-the happening of an event does not cure the effect
-payable to order
-payable to bearer
-delivery and indorsement
-payment of a prior parties discharges the subsequent parties
-indorsers cannot avail of the defense of forgery
-forgery = will not affect the character of the negotiability of the instrument as
long as there is a signature then that satifies the requirement of negotiability
-forgery of endorsement = the party whose endorsement is forged and parties prior
to him including the maker cannot be held liable by the holder whether that holder
is a HDC or not

-maker signature is forged = not liable

-once there is a valid defese(forgery) = then it will be dishonored
=then issue notice of dishonor to all parties secondarily liable
-section 89 notice of dishonor
-section 84 immediate right of recourse(also give a notice of dishonor)
-section 93
-section 107
-indorser=warranties the geniuness of the instrument
-secondary contracts =during transfer of instrument
-section 28 partial failure of consideration

-section 23 "signature is wholly inoperative"

-material alteration
-forgery = refers to a signature that is not yours

Sec. 52. 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 had previously dishonoured, if such was the fact
(c) That he took 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.

A forged indorsement prevents any subsequent party from acquiring any right as
against any party whose name appears