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Negotiable Instruments
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OVERVIEW
INTRODUCTION
• Instruments are negotiable when they
conform to all the requirements prescribed
by the Negotiable Instruments Law (NIL) -
Act 2031 enacted February 3, 1911.
Kinds of negotiable instruments
• Two main groups:
o Promissory note (Sec. 184); and
!
Evidences a promise to pay
money
!
E.g. normal promissory note,
certificate of deposit and the
bond
o Bill of Exchange (Sec. 126)
!
An order made by one
person to another to pay
money to third person
!
E.g. checks, draft
LEGISLATIVE HISTORY OF THE NIL
• Verbatim reproduction of Uniform
Negotiable Instruments Law of US (1896)
o This statute was patterned after
English Bill of Exchange Act (1882)
• Since 1911, no amendment to the NIL has
been made
APPLICABILITY OF NIL
• NIL applies only to negotiable instruments
i.e. to those instruments which conform
with the requisites laid down in Sec. 1.
NEGOTIABLE INSTRUMENTS; DEFINITIONS
Section 1
Form of negotiable instruments.
An instrument to be negotiable must conform to
the following requirements:
(a) It must be in writing and signed
by the maker or drawer;
(b) Must contain an unconditional
promise or order to pay a sum certain in
money;
(c) Must be payable on demand, or
at a fixed or determinable future time;
(d) Must be payable to order or to
bearer; and
(e) Where the instrument is
addressed to a drawee, he must be
named or otherwise indicated therein
with reasonable certainty.
• In effect gives definition of a negotiable
instrument
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another by signing it at the
back, he is said to have
negotiated or indorsed the
same and thereby becomes
an indorser.
!
The person to whom he
negotiates it is the indorsee,
who, by such negotiation
becomes the holder of the
instrument.
• As to nature of liabilities:
o Primary party – is the one who is
absolutely and unconditionally
required to pay the instrument
when it falls due.
!
The maker is the person
primarily liable in a of the possession or control of the goods, or
promissory note
!
No person is primarily liable
in a bill of exchange, until
and unless the drawee
accepts the order of the
drawer to pay. If drawee
accepts, he becomes an
acceptor who is absolutely
bound to pay on the date
specified on the bill. The
drawer of a bill of exchange
and the indorsers of either a
note or a bill are the
secondary parties.
ROLE OF NEGOTIABLE; LEGAL TENDER
Section 52, RA 7653
Legal Tender Power.
All notes and coins issued by the Bangko Sentral
shall be fully guaranteed by the Government of
Search
the Republic of the Philippines and shall be legal
tender in the Philippines for all debts, both public
and 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
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Twenty-five centavos and above, and in amounts of 18
Scribd Membership not exceeding Twenty pesos (P20.00) for
denominations of Ten centavos or less.
• Does not constitute as a legal tender but
often take place of money as a means of
Home payment.
• A 1249 of CC states that a “delivery of
promissory notes payable to order or bills
of exchange and other mercantile
documents shall produce the effect of
Saved payment only when they have been cashed
or when through the fault of the creditor
they have been impaired…”
• Tender of a check is sufficient to compel
redemption of foreclosed property since
such redemption is not an obligation but a
Bestsellers
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CHAPTER 2
Audiobooks FORMS AND INTERPRETATION
WRITTEN AND DULY SIGNED
Snapshots Section 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.
Magazines
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.
Documents Section 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
Sheet Music the authority of the agent may be established
as in other cases of agency.
• In writing includes print and includes not
only what is written with pen or pencil, but
also what has been typed.
• Signature is binding whether it is one’s
handwriting, or printed, engraved,
lithographed or photographed, as long as it
is intended or adopted as the signature of
the signer or made with his authority.
• Signature may appear on any part of the
instrument (usually appears at lower right
hand corner)
• If signature is so placed upon an
instrument that it is not clear in what
capacity the person intended to sign, he is
deemed an indorser (Sec. 17f)
Related
Section 3 titles
UNCONDITIONAL ORDER OR PROMISE TO PAY
When promise is unconditional. - An unqualified
order or promise to pay is unconditional within
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the meaning of this Act though coupled with:
(a) An indication of a particular fund
Books,
out audiobooks,
of which and more.
reimbursement is to be
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made or a particular account to be
debited with the amount; or
(b) A statement of the transaction
which gives rise to the instrument.
But an order or promise to pay out of a
particular fund is not unconditional.
•Mere acknowledgement of debt does not
constitute a promise. There should be an
Agency Reviewer Negotiable
express promise on the face of the
instrument to pay the money.
Nego Exam With
•
Instruments
In a bill of exchange, wordsLaw … are
which Answer
equivalent to an order are sufficient. Order
is a command orReviewer
imperative direction. Mere
the amount for which it stands for is
specified and definite.
• An agreement to pay interest does not
render the sum uncertain.
o Exact amount thereof can be
computed without looking beyond
the instrument.
• Stipulation to pay higher rate of interest if
the note is not paid at maturity or a lower
rate if it is paid on or before maturity does
not render the instrument non-negotiable
since it is entirely without force until either
the maturity thereof or is payment before
maturity.
• Sum is certain although payable in
instalments as long as the latter are stated
i.e. the amount of each instalment and its
due date are fixed in the instrument.
• Acceleration provision based on default will
not render sum uncertain.
• An instrument expressed in a foreign
currency may contain a provision that the
same is payable in Philippine currency at a
fixed rate of exchange or at the rate
current at the time payment is made. This
provision does not affect the negotiability
of the instrument.
• A provision in an instrument or attorney’s
fees, but leaving the amount thereof blank,
amounts to a promise to pay a reasonable
sum as attorney’s fees and does not make
instrument non- negotiable. Such amount
may be fixed by the court.
Payable in money
• In order to be negotiable, an instrument
must be payable in money.
• Rationale: negotiable instruments are
intended to be substitutes for money, to
properly perform such function they must
necessarily be capable of being
transformed into money if holder so
wishes.
• Money – as used in the law – means not
only legal tender but any kind of current
money.
• An instrument which contains an order or
promise to do an act IN ADDITION to the
payment of money is NOT negotiable. (Sec.
5)
o Rationale: Retain simplicity of form
which is absolutely necessary to the
free use of negotiable instruments
in the place of money.
• But if the order or promise gives the holder
an election to require something to be
done IN LIEU of payment of money, an
instrument otherwise negotiable would not
be affected thereby.
which clearly indicates an intention to
conform to the legal requirements is
sufficient (Sec. 10)
When instrument payable to order
• Two ways by which an instrument may be
made payable to order:
o It is drawn payable to the order of a
specified person; and
o It is drawn payable to the order of a
specified person or his order.
• 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.
o Subsequent purchaser mere
assignor not holder.
When instrument payable to bearer
Examples:
Sec. 9(a)
• I promise to pay bearer/ holder the sum of
P100
Sec 9(b)
• Pay to Jose Reyes or bearer
Sec 9(c)
• Pay to John Doe or order
• A name is fictitious when it is feigned or
pretended
• Requisite:
o The fact that the payee is a
fictitious or non-existing person
must be known to the maker or
drawer
o The theory is that since the payee is
not capable of indorsing and since
the maker or drawer knew of this
fact, he must have intended the
instrument to be transferred by
mere delivery
• If the maker or drawer is no aware that the
person he named as payee is fictitious or
non-existent, then the instrument is not a
bearer instrument but an order one.
• A note payable to the order of an estate of
a person still alive at the time of the
execution of the note has been held to
constitute a valid bearer paper, since it is
payable to a non-existing person.
• A note payable to the order of the estate of
an already deceased person, although not
an order note because the name of the
payee does not purport to be the name of
any person.
Sec. 9(d)
An instrument may be made payable to anyone of
the following as payees:
• to the order of payee who is not a maker,
drawer, or drawee
• to the order of maker or the drawer
• to the order of the drawee
• to two or more payees jointly
o Pay to the order of Juan Cruz and
Jose Santos (jointly not alternative)
• to one or some of several payees in
alternative
o Pay to the order of Juan Cruz or Jose
Santos
o Only one of them may demand
payment for the full amount
o Only one of them need to indorse
when negotiating the instrument
• to the holder of an office for the time being
o Campos views this as a floating
promise – the payee may be the
person who happens to be secretary
at any particular moment
Section 128
Bill addressed to more than one drawee.
A bill may be addressed to two or more
drawees jointly, whether they are partners or
not; but not to two or more drawees in the
alternative or in succession.
Section 130
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.
• When instrument is addressed to a drawee,
he must be name or otherwise indicated
therein with reasonable certainty.
• May be addressed to two or more drawees
jointly i.e. To Juan Cruz and Jose Reyes
• But not to two or more drawees in the
alternative or in succession
• Where drawer and drawee are the same
person, or where the drawee is a fictitious,
or a person having no capacity to contract,
the holder may treat the instrument either
as a bill or a note because otherwise no
one can ever be made primarily liable on
the bill
CERTAIN TIMES OF PAYMENT
Section 4
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:
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PROVISIONS AFFECTING NEGOTIABILITY
Section 5
Additional provisions not affecting negotiability.
- An instrument which contains an order or
promise to do any act in addition to the
payment of money is not negotiable. But the
negotiable character of an instrument otherwise
negotiable is not affected by a provision which:
(a) authorizes the sale of collateral securities
in case the instrument be not paid at
maturity; or
(b) authorizes a confession of judgment if
the instrument be not paid at maturity; or
(c) waives the benefit of any law intended
for the advantage or protection of the
obligor; or
(d) gives the holder an election to require
something to be done in lieu of payment
of money.
But nothing in this section shall validate any
provision or stipulation otherwise illegal.
OMISSIONS
Section 6
Omissions; seal; particular money. - The validity
and negotiable character of an instrument are
not affected by the fact that:
(a) it is not dated; or
(b) does not specify the value given, or that
any value had been given therefor; or
(c) does not specify the place where it is
drawn or the place where it is payable; or
(d) bears a seal; or
(e) designates a particular kind of current
money in which payment is to be made.
But nothing in this section shall alter or repeal
any statute requiring in certain cases the
nature of the consideration to be stated in the
instrument.
DATES OF INSTRUMENT
Section 11
Date, presumption as to. - Where the
instrument or an acceptance or any
indorsement thereon is dated, such date is
deemed prima facie to be the true date of the
making, drawing, acceptance, or indorsement,
as the case may be.
Section 12
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.
Section 13
When date may be inserted. - Where an
specifying the date from which interest is
to run, the interest runs from the date of
the instrument, and if the instrument is
undated, from the issue thereof;
(i) Where the instrument is not
dated, it will be considered to be dated
as of the time it was issued;
(j) Where there is a conflict between
the written and printed provisions of the
instrument, the written provisions
prevail;
(k) 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;
(l) Where a signature is so placed
upon the instrument that it is not clear in
what capacity the person making the
same intended to sign, he is to be
deemed an indorser;
Where an instrument containing the word "I
promise to pay" is signed by two or more
persons, they are deemed to be jointly and
severally liable thereon.
CHAPTER 3
CONSIDERATION
PRESUMPTION
Section 24
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.
VALUE
Section 25
Value, what constitutes. — Value is any
consideration sufficient to support a simple
contract. An antecedent or pre-existing debt
constitutes value; and is deemed such whether
the instrument is payable on demand or at a
future time.
HOLDER FOR VALUE
Section 26
What constitutes holder for value. - Where
and intentional delivery by him is presumed
until the contrary is proved.
Section 191
Definition and meaning of terms. - In this Act,
unless the contract otherwise requires:
"Acceptance" means an acceptance
completed by delivery or notification;
"Action" includes counterclaim and set-off;
"Bank" includes any person or association of
persons carrying on the business of banking,
whether incorporated or not;
"Bearer" means the person in possession of a
bill or note which is payable to bearer;
"Bill" means bill of exchange, and "note"
means negotiable promissory note;
"Delivery" means transfer of possession,
actual or constructive, from one person to
another;
"Holder" means the payee or indorsee of a bill
or note who is in possession of it, or the bearer
thereof;
"Indorsement" means an indorsement
completed by delivery;
"Instrument" means negotiable instrument;
"Issue" means the first delivery of the
instrument, complete in form, to a person who
takes it as a holder;
"Person" includes a body of persons, whether
incorporated or not;
"Value" means valuable consideration;
"Written" includes printed, and "writing"
includes print.
NEGOTIATION; HOLDER
Section 30
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.
INDORSEMENT
(c) Vests the title in the indorsee in trust for
By Signature
or to the on
useInstrument orpersons.
of some other On Allonge
Section 31 absence of words implying power
But the mere
Indorsement;
to negotiate doeshow notmade. - The
make indorsement
an indorsement
must be written on the instrument itself or upon
restrictive.
a paper attached thereto. The signature of the
indorser,
Section 37without additional words, is a
sufficient
Effect of indorsement.
restrictive indorsement; rights of
indorsee. - A restrictive indorsement confers
Where
upon theName is Misspelled
indorsee the right:
Section 43
(a) to receive payment of the instrument;
Indorsement where name is misspelled, and so
(b) to bring any action thereon that the
forth. - Where the name of a payee or indorsee
indorser could bring;
is wrongly designated or misspelled, he may
(c) to transfer his rights as such indorsee,
indorse the instrument as therein described
where the form of the indorsement
adding, if he thinks fit, his proper signature.
authorizes him to do so.
But all subsequent indorsees acquire only the
title of the first indorsee under the restrictive
indorsement.
QUALIFIED INDORSEMENTS
Section 38
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.
CONDITIONAL INDORSEMENT
Section 39
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.
INDORSEMENT TO OR BY COLLECTING BANK
UNINDORSED INSTRUMENTS
Section 49
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.
CANCELLATION OF INDORSEMENTS
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Agency Reviewer Negotiable Nego Exa
Instruments Law … Answer
Reviewer
Search document
• Any instrument which has the requisites of
enumerated therein is negotiable and is
governed by the NIL. All other instruments
are non-negotiable.
• Note that the fact that an instrument does
not meet the requisites will not affect its
validity. Only consequence is that it will not
be governed by the NIL but by the general
law on contracts (New Civil Code).
Functions of Negotiable Instruments
• A negotiable instrument may serve any of
the following functions:
o As a substitute for money in
payment for property or services;
o As a means of creating and
transferring credit; and
o To facilitate sale of goods
KINDS OF NEGOTIABLE INSTRUMENTS &
PARTIES
Section 126
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
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.
Parties and the Nature of their Liability
Parties and the nature of their liabilities
• Two parties to a promissory note:
o Maker – the promissory
o Payee – the person to whom the
promise to pay is made
• Three parties in a bill of exchange:
o Drawer – the person who gives the
order to pay in a bill of exchange
o Drawee – the addressee of the
order
o Payee – person to whom the
payment is to be made
!
Note that when the payee of
an instrument transfers it to
right. However, such tender is not in itself
payment that relieves the redemptioner
from his liability to pay the redemption
price.
NEGOTIABLE NON-NEGOTIABLE
INSTRUMENTS
Warehouse Receipts
Document of Title
Article 1636, CC
"Document of title to goods" includes any bill of
lading, dock warrant, "quedan," or warehouse
receipt or order for the delivery of goods, or any
other document used in the ordinary course of
business in the sale or transfer of goods, as proof
authorizing or purporting to authorize the
possessor of the document to transfer or receive,
either by endorsement or by delivery, goods
represented by such document.
Letter of Credit
Certificate of Stocks
Certificate of Deposit
• Is an instrument issued by a bank reciting a
deposit of certain sum of money, payable
either at a fixed time or on demand, to the
depositor named therein.
Other instruments:
• Bond – is an evidence of indebtedness
issued by a corporation, public or private,
payable at a definite date in the future,
usually for a long term. It is in effect a
written promise of the corporation to pay a
Upload EN
definite sum of money.
• Draft – is a form of bill of exchange used
mainly in transactions between persons
physically remote from each other. It is an
order made by one person (e.g. buyer of
goods)Search
addresseddocument
to a person having in his
possession funds of such buyer, ordering
addressee to pay the purchase price to the
seller of goods.
o Where irder is made by one bank to
another bank it is referred to as a
bank draft.
NON-NEGOTIABLE; EXCEPTION
Estoppel – see Banco de Oro v Equitable Bank
request or authority to pay does not
constitute an order. But mere use of polite
words does not deprive the instrument its
characteristics as an order.
When unconditional
• The promise or order to pay to be
unconditional must be unqualified.
Rationale: realty increases the
o
ability of a negotiable instrument to
pass freely from one person to
another.
• On bills of exchange, mere indication of the
particular fund out of which reimbursement
is to be made, or an indication of a
particular account to be debited with the
amount will not render an order
unconditional.
o Reimbursement also presupposes
previous disbursement.
o Note that reimbursement and debit
refers to a separate transaction
between the drawer and the drawee
(Vasquez)
o As a rule, unless reference to the
fund clearly indicates an intention
that such fund alone should be the
source of payment, courts usually
decide in favour of negotiability.
• Recital of the transaction for which the
instrument was issued does not make the
promise or order unconditional unless:
o It appears through the recital that it
qualifies the time of payment or the
sum to be paid ( Powell v Greenleaf )
• The fact that the condition appearing on
the instrument has been fulfilled will not
convert it to a negotiable one (Sec. 4)
Section 2
This document is...
CERTAIN SUM PAYABLE
What constitutes certainty as to sum. - The sum
Useful Not useful
payable is a sum certain within the meaning of
this Act, although it is to be paid:
(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
with costs of collection or an attorney's fee, in
case payment shall not be made at maturity.
Question & Answer Credit Transa
The amount payable must be certain.
•
Rationale:Negotiable…
• Reviewer
An instrument cannot function
Instrument Law
properly as a substitute for money unless
o Should be given to PAYEE not to
MAKER or the person primarily
liable
PAYABLE TO ORDER OR TO BEARER
Section 8
When payable to order. - The instrument is
payable to order where it is drawn payable to
the order of a specified 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
(e) One or some of several payees;
or
(f) The holder of an office for the
time being.
Where the instrument is payable to order, the
payee must be named or otherwise indicated
therein with reasonable certainty.
Section 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
When the only or last indorsement is an
indorsement in blank.
Section 184
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.
• Instrument in order to be negotiable must
contain the “words of negotiability” – i.e.
must be payable to order or bearer.
• These words serve as an expression of
consent that the instrument may be
transferred.
• Note that the instrument need not follow
the language of the law, but any term
• Pay to cash or pay or sundries.
• It is presumed that the maker or drawer, by
using an impersonal payee, intends the
instrument to be payable to bearer.
Sec. 9(e)
• When the last or only indorsement is an
indorsement in blank, the instrument
becomes payable to bearer even if
originally payable to order of a specified
person.
• A blank instrument cannot however convert
a non-negotiable note to a negotiable one.
NOTE: Only instruments under Sec. 9 a and b are
expressly made payable to bearer.
CERTAIN DESIGNATION OF PARTIES
• Maker of a note or the drawer of a bill must
sign the instrument (usually at lower right-
hand corner)
• Drawee’s name – lower left hand corner,
although in checks the bank’s name
sometimes appears across the top
• The payee and successive indorsees
negotiate the instrument by signing on the
back
• As long as parties to the bill or note comply
with these long established and recognized
customs, it would be clear in what capacity
the parties signed. However, once a party
to an instrument deviates from the
commercial usage with respect to the place
of signature, and is not clear from the
instrument in what capacity he signs,
ambiguity arises.
• The law solves this by considering such a
person as an indorser and not as a maker
or drawer.
Section 8
When payable to order. - The instrument is
payable to order where it is drawn payable to
the order of a specified person or to him or his
order. It may be drawn payable to the order of:
(g) A payee who is not maker,
drawer, or drawee; or
(h) The drawer or maker; or
(i) The drawee; or
(j) Two or more payees jointly; or
(k) One or some of several payees;
or
(l) The holder of an office for the
time being.
Where the instrument is payable to order, the
payee must be named or otherwise indicated
therein with reasonable certainty.
(a) At a fixed period after date or
sight; or
(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.
Section 11
Date, presumption as to. - Where the
instrument or an acceptance or any
indorsement thereon is dated, such date is
deemed prima facie to be the true date of the
making, drawing, acceptance, or indorsement,
as the case may be.
Section 17
Construction where instrument is ambiguous. -
Where the language of the instrument is
ambiguous or there are omissions therein, the
following rules of construction apply:
(a) Where the sum payable is
expressed in words and also in figures
and there is a discrepancy between the
two, the sum denoted by the words is the
sum payable; but if the words are
ambiguous or uncertain, reference may
be had to the figures to fix the amount;
(b) Where the instrument provides
for the payment of interest, without
specifying the date from which interest is
to run, the interest runs from the date of
the instrument, and if the instrument is
undated, from the issue thereof;
(c) Where the instrument is not
dated, it will be considered to be dated
as of the time it was issued;
(d) Where there is a conflict between
the written and printed provisions of the
instrument, the written provisions
prevail;
(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;
(f) Where a signature is so placed
upon the instrument that it is not clear in
what capacity the person making the
same intended to sign, he is to be
deemed an indorser;
Where an instrument containing the word "I
promise to pay" is signed by two or more
persons, they are deemed to be jointly and
severally liable thereon.
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.
BLANKS; WHEN FILED
Section 14
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 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.
INCOMPLETE INSTRUMENTS
Section 15
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.
CONSTRUCTION
Section 17
Construction where instrument is ambiguous. -
Where the language of the instrument is
ambiguous or there are omissions therein, the
following rules of construction apply:
(g) Where the sum payable is
expressed in words and also in figures
and there is a discrepancy between the
two, the sum denoted by the words is the
sum payable; but if the words are
ambiguous or uncertain, reference may
be had to the figures to fix the amount;
(h) Where the instrument provides
for the payment of interest, without
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.
LIEN HOLDER; HOLDER FOR VALUE
Section 27
When lien on instrument constitutes holder for
value. — Where the holder has a lien on the
instrument arising either from contract or by
implication of law, he is deemed a holder for
value to the extent of his lien.
EFFECT OF WANT OF CONSIDERATION
Section 28
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.
ACCOMMODATION PARTY
Section 29
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.
CHAPTER 4
TRANSFER AND NEGOTIATION
ISSUANCE AND DELIVERY
Section 16
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
INDORSEMEN
INSTRUMENT
Section 32
Indorsement m
indorsement m
entire instrum
purports to tran
of the amount
transfer the
indorsees seve
negotiation of
instrument ha
indorsed as to t
KINDS OF IND
Section 33
Kinds of indorse
either special
either restrictiv
Special and B
Section 34
Special indorse
special indorse
whom, or to wh
be payable, a
indorsee is nec
of the instrum
specifies no in
indorsed is pa
negotiated by d
Section 35
Blank indorsem
indorsement. -
indorsement in
writing over th
blank any c
character of the
Payable to Be
Section 40
Indorsement of
Where an
Section 48 inst
indorsedout
Striking spec
ind
further
any timenegotia
strike
indorsing speci
not necessary
such holdersis
indorsement
indorsement.to
subsequent
liability on the i
Restrictive Ind
Section
INDORSEMEN 36
When indorsem
Section 44
is restrictive whi
Indorsement
(a) Prohibits
Where any pers
in a representa
instrume
such(b)terms as t
Constitut
indorser;
Section 20
Liability of per
forth. - Where
person adds to
that he signs fo
a representativ
the instrument
the mere addit
an agent, or
character, with
not exempt him
PRESUMPTION
Time
Section 45
Time of indors
where an indo
maturity of the
deemed prima
before the instr
Place
Section 46
Place of indor
where the cont
is presumed pr
the place where
Payee
Section 42
Effect of instru
person as cash
drawn or indor
other fiscal offic
deemed prima
or corporation
may be negotia
the bank or co
the officer.
CONTINUATIO
Section 47
Continuation o
instrument neg
be negotiable