Upload
xirkul-tupas
View
219
Download
0
Embed Size (px)
DESCRIPTION
dshsadgsdsgd
Citation preview
7/17/2019 1007 Negotiable Instrumentshgsdghamgs
http://slidepdf.com/reader/full/1007-negotiable-instrumentshgsdghamgs 1/24
1007-Negotiable Instruments
NEGOTIABLE INSTRUMENTS
NATURE OF NEGOTIABLE INSTRUMENTS
Commercial Functions of Negotiable Instruments (Bar 1951)
1. To supplement the current of the government and
2. To substitute for money and increase the purchasing medium.
Characteristics or features of negotiable instruments (Bar 196)
(1)Negotiability is that !uality or attribute "#hereby a bill$ note or chec%
passes or may pass from hand to hand similar to money$ so as to give the
holder in due course the right to hold the instrument and collect the sum
payable for himself free from defenses&.
(2)Accumulation of secondary contracts as they are transferred from one hand
to another.
Negotiable Instruments an Non!negotiable instruments istinguis"e
Negotiable Instruments Non!negotiable Instruments
'ontains all the re!uisites of ec. 1. oes not has any$ some or all of the
re!uisites mentioned in said la#
Transferred by negotiation Transferable by assignment
*older in due course of a negotiable
instruments can have rights better
than his transferor
+ transferee ac!uires no right no
better than his transferor
,rior parties to a negotiable
instruments #arrant payment.
,rior party to a non-negotiable
instruments does not #arrant
payment but merely the legality of
his title.
Rig"ts ac#uire b$ a bona fie transferee for %alue uner an assignment an t"e rig"ts ac#uire uner a negotiation istinguis"e (Bar 199)
Assignment Negotiation
Better right /o better right than his
transferor
(if a holder in due
course) may ac!uire
rights better than his
predecessors
0ight of recourse *as no right of recourse
for payment against
intermediate parties.
'an hold the dra#er and
the indorsers liable if
the party primarily
liable does not pay.
Doubt resolved in favor of negotiability
here the meaning is doubtful$ the courts have adopted the policy of resolving
in favor of the negotiability of the instrument.
Instruments with limited negotiability
There are certain documents of title (,art ) #ith limited negotiability
#hich are also #idely used in commercial transactions but have been held to be
non-negotiable because they do not have the re!uisites that are essential
under the /egotiable nstruments 3a#. They are beyond the scope of the
/egotiable nstruments 3a# and are$ therefore$ governed by other la#s.
Cabarles Notes 15
7/17/2019 1007 Negotiable Instrumentshgsdghamgs
http://slidepdf.com/reader/full/1007-negotiable-instrumentshgsdghamgs 2/24
1007-Negotiable Instruments
Among suc" ocuments &it" limite negotiabilit$ are t"e follo&ing'
(1) 3etter of credit 4 it is in favor of a specified person and not to order.
(2) Treasury #arrant 4 it is payable out of a specific fund or appropriation.
() ,ostal money order 4 it is subect to restrictions and limitations under
postal la#s and regulations (only one indorsement is allo#ed) inconsistent
#ith the character of negotiable instrument.
() Bill of lading 4 it is #ithout an unconditional promise or order to pay a
sum certain in money.
(5) 'ertificate of stoc% 4 it is also #ithout an unconditional promise or
order to pay a sum certain in money.
(6) arehouse receipt 4 it is li%e#ise #ithout an unconditional promise or
order to pay a sum certain in money.
(rinci)al Classes of Negotiable Instruments (Bar 1965$ 195$1951$ 199)
1. ,romissory notes7
2. Bill of e8change7 and
. 'hec%$ #hich is ust a special form of a bill of e8change.
(romissor$ Note * is an unconditional promise in #riting by one person to
another signed by the ma%er engaging to pay on demand or at
a fi8ed or determinable future time$ a sum certain in money$to order or bearer.
Bill of E+c"ange * is an unconditional order in #riting addressed by one
person to another$ signed by the person giving it$ re!uiring
the person to #hom it is addressed to pay on demand or at a
fi8ed or determinable future time a sum certain in money to
order or bearer.
C"ec, * is a bill of e8change dra#n on a ban% payable on demand.
-ifferences bet&een a (romissor$ Note an a Bill of E+c"ange
(romissor$ Note Bill of E+c"ange
+s to contents nconditional promise nconditional order
+s to number of parties There are t#o original
parties
There are three
+s to liability of
original issuer
The original issuer is
primarily liable
The original issuer is
secondarily liable
+s to number of
presentment
:nly one presentment
(for payment) is needed.
T#o presentments (for
acceptable and for
payment) are generally
needed.
Cabarles Notes 16
7/17/2019 1007 Negotiable Instrumentshgsdghamgs
http://slidepdf.com/reader/full/1007-negotiable-instrumentshgsdghamgs 3/24
1007-Negotiable Instruments
FORM AN- INTER(RETATION OF NEGOTIABLE
INSTRMENTS
Re#uisites of a negotiable Instruments .Sec/ 01
(Bar 2;;;$ 1996$ 199$ 1992$ 19<9$ 196<$196$ 195$ 195)
+n instrument to be negotiable must conform to the follo#ing re!uirements=
(1) t must be in #riting and signed by the ma%er or dra#er7
(2) >ust contain an unconditional promise or order to pay a sum certain in
money7
() >ust be payable on demand$ or at a fi8ed or determinable future time7
() >ust be payable to order or to bearer7 and
(5) here the instrument is addressed to a dra#ee$ he must be named or
other#ise indicated therein #ith reasonable certainty.
Formal reuirements of negotiability in general
n determining the negotiability of an instrument$ the follo#ing must be
considered=
(1) the #hole instrument7
(2) only #hat appears on the face of the instrument7 and
() the provision of the /egotiable nstruments 3a# especially ection 1
thereof #hich gives the re!uirements of negotiability.
Re#uisites of a (romissor$ Note
(Bar 2;;;$ 19<9$ 19<<$ 19;$ 1966$ 1961$ 195;$ 199)
(1) t must be in #riting and signed by the ma%er7
(2) t must contain an unconditional promise to payment a sum certain in
money7
() t must be payable on demand or at a fi8ed or determinable future time7
() t must be payable to order or bearer.
Re#uisites of a Bill of E+c"ange (Bar 1961$ 1959)(1) t must be in #riting and signed by the dra#er7
(2) t must contain an unconditional order to pay a sum certain in money7
() t must be payable on demand or a fi8ed or determinable future time7
() t must be payable to order or to bearer7
(5) The dra#ee must be named or other#ise indicated #ith reasonable certainty.
MEANING OF (ARTICULAR RE2UISITES
Unconitional (romise or Orer (Sec/ 3)
here the promise or order to pay is made to depend on a contingent event$ it
is conditional$ and ma%es the instrument non-negotiable.
The conditional nature of the promise or order is not affected by=
(1) an indication of a particular fund from #hich the acceptor reimburses
himself after paying the holder7 and
(2) a statement of the transaction #hich gives rise to the instrument.
Cabarles Notes 17
7/17/2019 1007 Negotiable Instrumentshgsdghamgs
http://slidepdf.com/reader/full/1007-negotiable-instrumentshgsdghamgs 4/24
1007-Negotiable Instruments
Certaint$ as to sum (Sec. 2)The sum payable is a sum certain #ithin the meaning of this act$ although it
is to be paid=
(a) ith interest7 or
(b) By stated installments7 or
(c) By stated installments$ #ith a provision that$ upon default in payment of
any installment or of interest$ the #hole shall become due7 or
(d) ith e8change$ #hether at a fi8ed rate or at the current rate7 or
(e) ith costs of collection or an attorney?s fee$ in case payment shall not
be made at maturity.
In mone$
General Rule'
f some other act besides payment of money is promised or ordered$ the
instrument becomes non-negotiable.
The follo#ing acts$ ho#ever$ do not affect negotiability=
1. +uthori@es the sale of collateral securities in default7
2. +uthori@es confession of udgment on default7
. aives the benefit of la# intended to protect the debtor7 and. allo#s the creditor the option to re!uire something in lieu of money.
4"en )a$able on eman (Sec. 7) (Bar 1952)+n instrument is payable on demand
(a) hen it is so e8pressed to be payable on demand$ or at sight$ or on
presentation7 or
(b) n #hich no time for payment is e8pressed.
here an instrument is issued$ accepted$ or indorsed #hen overdue$ it is$ as
regards the person so issuing$ accepting$ or indorsing it$ payable on demand.
Determinable future time (Sec. )
+n instrument is payable at a determinable future time$ #ithin the meaning ofthis +ct$ #hich is e8pressed to be payable A
(a) +t a fi8ed period after date or sight7 or
(b) :n or before a fi8ed or determinable future time specified therein7 or
(c) :n or at a fi8ed period after the occurrence of a specified event #hich is
certain to happen$ though the time of happening be uncertain.
+n instrument payable upon a contingency is not negotiable$ and the happening
of the event does not cure the defect.
!"en #a$able t% %r&er . (Sec. '.)The instrument is payable to order #here it is dra#n payable to the order of a
specified person or to him or his order. t may be dra#n payable to the order
of(a) + payee #ho is not ma%er$ dra#er$ or dra#ee7 or
(b) The dra#er or ma%er7 or
(c) The dra#ee7 or
(d) T#o or more payees ointly7 or
(e) :ne or some of several payees7 or
(f) The holder of an office for the time being.
here the instrument is payable to order$ the payee must be named or other#ise
indicated therein #ith reasonable certainty.
Cabarles Notes 18
7/17/2019 1007 Negotiable Instrumentshgsdghamgs
http://slidepdf.com/reader/full/1007-negotiable-instrumentshgsdghamgs 5/24
1007-Negotiable Instruments
!"en #a$able t% bearer . ( Sec. .) (Bar 1980, 1960)The instrument is payable to bearer
(a) hen it is e8pressed to be so payable7 or
(b) hen it is payable to a person named therein or bearer7 or
(c) hen it is payable to the order of a fictitious or non-e8isting person$
and such fact #as %no#n to the person ma%ing it so payable7 or
(d) hen the name of the payee does not purport to be the name of any person7
or
(e) hen the only or last indorsement is an indorsement in blan%.
Omii%n* eal* #articular m%ne$ (Sec. 6)The validity and negotiable character of an instrument are not affected by the
fact that=
(a) t is not dated7 or
(b) oes not specify the value given$ or that any value had been given
therefor7 or
(c) oes not specify the place #here it is dra#n or the place #here it is
payable7 or
(d) Bears a seal7 or
(e) esignates a particular %ind of current money in #hich payment is to be
made.
But nothing in this section shall alter or repeal any statute re!uiring in
certain cases the nature of the consideration to be stated in the instrument.
Rules on -atesThere are several important principles as to dates in negotiable instruments.
These are=
(1) here the instrument$ its acceptance$ or indorsement is dated$ such date
is presumed to be the corresponding true date. (ec. 11)
(2) ate is important
(a) here the instrument is payable #ithin a specified period after date$
or after acceptance$ in #hich case the date of the instrument and the
date of acceptance are needed to determine the date of maturing of theinstrument7 in these cases$ the holder may insert the true date7 (ec.
1)
(b) hen the instrument is payable on demand$ date is necessary to
determine #hether the instrument #as presented #ithin reasonable time
from issue in the case of notes or from last negotiation in the case
of bills$ as these facts #ill sho# #hether the last holder in due
course is not7 nad
() +ntedating and postdating an instrument does not affect validity or
negotiability$ unless done for illegal or fraudulent purpose. (ec. 12)
!"en &ate ma$ be inerte& (Sec. +,)here an instrument
a) e8pressed to be payable at a fi8ed period after date is issued undated$ orb) #here the acceptance of an instrument payable at a fi8ed period after sight
is undated$ any holder
1) may insert therein the true date of issue or acceptance$ and
2) the instrument shall be payable accordingly.
) The insertion of a #rong date does not avoid the instrument in the hands of
a subse!uent holder in due course7
) but as to him$ the date so inserted is to be regarded as the true date.
Cabarles Notes 19
7/17/2019 1007 Negotiable Instrumentshgsdghamgs
http://slidepdf.com/reader/full/1007-negotiable-instrumentshgsdghamgs 6/24
1007-Negotiable Instruments
!ffect of insertion of wrong date
The insertion of a #rong date in an undated instrument by one having %no#ledge
of the true date of issue or acceptance #ill avoid the instrument as to him
but not as to a subse!uent holder in due course #ho may enforce the same
not#ithstanding the improper date. n the hands of a holder in due course$
the date inserted even if #rong$ is to be regarded as the true date. (ec. 1)
The insertion of a #rong date constitutes a material alteration.
Rules on Inter)retation of Instruments .Sec/ 051 (Bar 1965)
(1) iscrepancy bet#een the amount in figures and that of #ords 4 the #ords
prevail$ but if the #ords are ambiguous$ reference #ill be made to the
figures to fi8 the amount7
(2) nstrument is not dated 4 considered dated on date of issue.
() 'onflict bet#een #ritten and printed 4 provisions 4 #ritten provisions
prevail.
() nterest ,rovided for$ but /o starting ate specified 4 starting date is
the date of instrument$ in the absence of said date$ from date of issue.
Instrument Ambiguous t"at t"ere is oubt &"et"er it is a bill or a note
(Bar 199<$ 196)The holder may treat it as a note or a bill at his option.
Rule is signature is so )lace u)on an instrument t"at it is not clear in &"at
ca)acit$ t"e )erson ma,ing t"e same intene to sign/ (Bar 196)
*e is deemed to be an indorser.
Rule &"ere (N &ore 6I )romise to (a$7 is signe b$ t&o ma,ers
(Bar 2;;1$ 1969$ 196)
The parties bind themselves ointly and severally.
Blan-* "en ma$ be fille& . (Sec. +)here the instrument is #anting in any material particular$
1) the person in possession thereof has a prima facie authority to complete itby filling up the blan%s therein.
2) +nd a signature on a blan% paper delivered by the person ma%ing 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.
) n order$ ho#ever$ that any such instrument #hen completed may be enforced
against any person #ho became a party thereto prior to its completion$
a) it must be filled up strictly in accordance #ith the authority given and
b) #ithin a reasonable time.
c) But if any such instrument$ after completion$ is negotiated to a holder
in due course$
1) it is valid and effectual for all purposes in his hands$ and
2) he may enforce it as if it had been filled up strictly in
accordance #ith the authority given and #ithin a reasonable time.
Cabarles Notes 20
7/17/2019 1007 Negotiable Instrumentshgsdghamgs
http://slidepdf.com/reader/full/1007-negotiable-instrumentshgsdghamgs 7/24
1007-Negotiable Instruments
ABNORMAL AN- SIMILARL8 -EFICIENT NEGOTIABLE
INSTRUMENTS
Situations 4"ere Subse#uent 9oler in -ue Course not Affecte b$ Abnormalit$
or -eficienc$
1. ncomplete but delivered negotiable instruments72. 'omplete but undelivered /egotiable nstruments7
. 'omplete and delivered instruments issued
(a) #ithout consideration$ or
(b) #ith a consideration consisting of a promise #hich the payee
failed to comply #ith
8ception= case of accommodation.
Situations 4"ere a Subse#uent 9oler in -ue Course is Affecte b$ t"e
Abnormalit$ or -eficienc$
1. ncomplete and undelivered negotiable instruments (ec. 15)
2. ignature of ma%er or dra#er is forged
8ceptions= here the forgery consists of an alteration of material
particular in the instrument.
Deli/er$* "en effectual* "en #reume&. ( Sec. +0.)very contract on a negotiable instrument is incomplete and revocable until
delivery of the instrument for the purpose of giving effect thereto.
+s bet#een immediate parties and as regards a remote party other than a holder
in due course$
1) the delivery$ in order to be effectual$ must be made either by or under the
authority of the party ma%ing$ dra#ing$ accepting$ or indorsing$ as the
case may be7 and$
2) in such case$ the delivery may be sho#n to have been conditional$ or for a
special purpose only$ and not for the purpose of transferring the propertyin the instrument.
) But #here 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 ma%e them liable to
him is conclusively presumed.
) +nd #here the instrument is no longer in the possession of a party #hose
signature appears thereon$ a valid and intentional delivery by him is
presumed until the contrary is proved.
RULES UN-ER T9E NEGOTIABLE INSTRUMENTS LA4
Incom)lete but eli%ere (Bar 192)
(1) *older has prima facie authority to complete the instrument7
(2) 'ompletion to be done #ithin a reasonable time and according to theauthority given7
() *older in due course of the instrument previously completed in breach of
instructions can enforce the same as if regularly completed.
Cabarles Notes 21
7/17/2019 1007 Negotiable Instrumentshgsdghamgs
http://slidepdf.com/reader/full/1007-negotiable-instrumentshgsdghamgs 8/24
1007-Negotiable Instruments
Com)lete but uneli%ere (Bar 1961)
(1) Bet#een immediate parties and a remote party not a holder in due course$
delivery to be effectual must be made by or under the authority of the
ma%er$ dra#er$ acceptor or indorser$ as the case may be7
(2) f the instrument is in the hands of a holder in due course$ all prior
deliveries are conclusively presumed valid7
() f the instrument is out of the hands of the person #ho signed it$ a valid
intentional delivery is disputably presumed.
Incom)lete instrument not eli%ere .Sec/ 0:1
(Bar 199$ 19<5$ 19<2$ 19<$ 191)
t #ill not$ if completed and negotiated #ithout authority$ be a valid
contract in the hands of any holder$ as against any person #hose signature #as
placed thereon before delivery.
"ules where instrument incom#lete and undelivered
(1)-efense e%en against a "oler in ue course/
The fact that an incomplete instrument$ completed #ithout authority$ had
not been delivered$ is a defense even against a holder in due course.
(2)-efense a%ailable to )arties )rior to eli%er$/
The invalidity of the above instrument is only #ith reference to theparties #hose signature appear on the instrument before and not after
delivery.
Absence or Failure of Consieration (Bar 19<9$ 19<6$ 191$ 1969$ 196<)
(1) +bsence of consideration is the total lac% of consideration$ no
consideration$ or illegal consideration.
(2) Cailure of consideration is failure to the agreed consideration to
materiali@e.
() Both absence and failure of consideration are defenses personal to the
preudiced party$ and available against any person not a holder in due
course.
Forger$ (Bar 1995$ 19<9$ 19<)
(1) Corgery is the counterfeit ma%ing or fraudulent alteration of any #riting.
(2) t may consist of=
(a) igning of anotherDs name #ith intent to defraud7
(b) +lteration of an instrument in the name$ amount$ description of payee$
etc. #ith intent to defraud7
() The signature is #holly inoperative$ and no right to retain the
instrument$ or to give a discharge therefore$ or to enforce payment
thereof against any party to it$ is ac!uired through or under such
signature.
Cabarles Notes 22
7/17/2019 1007 Negotiable Instrumentshgsdghamgs
http://slidepdf.com/reader/full/1007-negotiable-instrumentshgsdghamgs 9/24
1007-Negotiable Instruments
MATERIAL ALTERATION OF INSTRUMENT (Bar 1999$ 1996$ 19<$ 19$ 192)
Material Alteration -efine
+ny alteration #hich changes the
(1) date7
(2) sum payable7 (Bar 199$ 191)
() time and place of payment7() number or relation of the parties7 or
(5) medium or currency of payment7 or
(6) adds a place of payment #here none is specified$ or
() #hich alters the effect of the instrument in any respect
is material alteration.
Effect of material alteration
+ material alteration avoids the instruments e8cept as against the party #ho
made$ authori@ed or assented to the alteration$ and subse!uent
indorsers.
here the altered instrument$ ho#ever$ is in the hands of a holder in due
course$ not a party to the alteration$ he may enforce payment thereof
according to its original tenor.
A11OMMODATION
(Bar 1996$ 199$ 1991$ 199;$ 19<5$ 196$ 195$ 191$ 196$1952)
+ccommodation is a legal arrangement under #hich a person called the
accommodation party lends his name and credit to another called the
accommodated party$ #ithout consideration.
+ person to #hom the instrument thus e8ecuted is subse!uently negotiated$ has
a right of recourse against the accommodation party inspite of the formerDs
%no#ledge that no consideration passed bet#een the accommodation and
accommodated parties.
Re#uisites of Accommoation
(1) The accommodation party must sign as ma%er$ dra#er$ acceptor or indorser7
(2) /o value is received by the accommodation party from the accommodated
party7 and
() The purpose is to lend the name.
Accommoation )art$ * a person #ho has signed the instrument as ma%er$ dra#er$
acceptor or indorser #ithout receiving value therefore$ and
for the purpose of lending his name to some other person$ is
under the la# liable on the instrument to a holder for value
not#ithstanding that such holder at the time of ta%ing the
instrument %ne# him only to be an accommodation party.
Rig"ts of Against Accommoation )art$
The accommodation party$ is obliged to pay to a holder of value$ can see%
reimbursement from the accommodated party.
Cabarles Notes 23
7/17/2019 1007 Negotiable Instrumentshgsdghamgs
http://slidepdf.com/reader/full/1007-negotiable-instrumentshgsdghamgs 10/24
1007-Negotiable Instruments
Against t"e Co!accommoation )art$
The /egotiable nstruments 3a# does not define the right of an accommodation
ma%er to see% reimbursement from another accommodation ma%er$ this deficiency
should be supplied by +rt. 2; of the /e# 'ivil 'ode. here a solidary
accommodation ma%er paid to the ban% the balance due on a promissory note$ he
may see% contribution from the other solidary accommodation ma%er$ in the
absence of a contrary agreement bet#een them.
+ solidary accommodation ma%er
(1) may demand from the principal debtor reimbursement of the amount #hich
he paid on the promissory note$ and
(2) he may demand contribution from his co-accommodation ma%er$ #ithout
first directing his action against the principal debtor$ provided that
(a) he made the payment by virtue of a udicial demand7 orE
(b) the principal debtor is insolvent.
FORGER8 OF C9EC;S
2%r3e& i3nature (Sec. 4,)hen a signature is forged or made #ithout the authority of the person #hose
signature it purports to be$
a) it is #holly inoperative$ and
b) no right to retain the instrument$ or
c) to give a discharge therefor$ or
d) to enforce payment thereof against any party thereto$ can be ac!uired
through or under such signature$
e) unless the party against #hom it is sought to enforce such right is
precluded from setting up the forgery or #ant of authority.
Forger$ in Signature of t"e -ra&er on a C"ec, (Bar 1992$ 19<$ 19$ 199)
The dra#er is not liable and his dra#ee ban% cannot charge the dra#erDs
account for said chec% because a ban% is supposed to %#on the signatures of
its customers$ and bears the damage in case it pays under a forged signature
of its dra#er-customer
Effect if customer ra&er i not e+ercise orinar$ care &"ic" substantiall$
contribute to t"e ma,ing of t"e forge signature
ra#er is precluded from asserting the forgery. f at the same time the
dra#ee ban% #as also negligent to the point of contributing to the loss$ then
such loss from forgery can be apportioned bet#een the negligent dra#er and the
negligent ban%.
Forger$ in t"e Signature of Inorsers(Bar 199;$ 19<$ 19<2$ 196$ 19;$ 195$ 195;$ 19<)
T$)es of Forger$ of Inorser<s signature
1. Corgery #as accomplished by a person not associated #ith the dra#er7
2. the indorsement #as forged by an agent of the dra#er.
Cabarles Notes 24
7/17/2019 1007 Negotiable Instrumentshgsdghamgs
http://slidepdf.com/reader/full/1007-negotiable-instrumentshgsdghamgs 11/24
1007-Negotiable Instruments
Effect of Forger of t"e signature of inorser
The loss #ill be borne by the
(1) Corger or
(2) By party subse!uent to said forger
() ncluding the collecting ban% #here the chec% #as eventually deposited.
Rig"t of ra&ee ban, to ebit t"e account of t"e ra&er in case of forger of
signature of inorser
The dra#ee ban% may debit the dra#erDs account. hile the dra#ee ban% must be
cautious in the scrutiny of the signatures of dra#ers of chec%s dra#n on it
under the theory that it should %no# the signatures of its o#n clients$ it has
ho#ever no responsibility for the signatures of indorsers$ the payee being one
of them.
n ban%ing practice$ the signatures of the indorsers$ as a prere!uisite to
clearing$ are guaranteed by the ban% #here the chec% may be deposited by the
last holder. f any of these indorsements are forgeries$ immediate
responsibility #ill be on that ban% #hich guaranteed the indorsements$ not on
the dra#ee ban% of the chec%.
E=ECUTION AN- NEGOTIATION OF T9E
INSTRUMENTS B8 AGENTS AN- OT9ERS
E+ecution b$ Agents
Re#uisites' (+)
1. The agent must be authori@ed7
2. *e must disclose his principal7
. *e must sign for and in behald of his principal.
Si3nature b$ a3ent* aut"%rit$* "% "%n (Sec. +)The signature of any party
1) may be made by a duly authori@ed agent.
2) /o particular form of appointment is necessary for this purpose7 and
) the authority of the agent may be established as in other cases of agency.
Liabilit$ %f #er%n i3nin3 a a3ent5 an& % f%rt" (Sec. 46)here the instrument contains or a person adds to his signature #ords
indicating that he signs for or on behalf of a principal or in a
representative capacity$
1) he is not liable on the instrument if he #as duly authori@ed7
2) but the mere addition of #ords describing him as an agent$ or as filling a
representative character$ #ithout disclosing his principal$ does not
e8empt him from personal liability.
Si3nature b$ #r%curati%n (Sec. 4+)+ signature by FprocurationF
a) operates as notice that the agent has but a limited authority to sign$ and
b) the principal is bound only in case the agent in so signing acted #ithin
the actual limits of his authority.
Cabarles Notes 25
7/17/2019 1007 Negotiable Instrumentshgsdghamgs
http://slidepdf.com/reader/full/1007-negotiable-instrumentshgsdghamgs 12/24
1007-Negotiable Instruments
$eaning of #rocuration
(rocuration is the act by #hich a principal gives po#er to another to act in
his place as he could himself. t is ordinarily understood in the same sense
as agency or pro8y$ for one #ho signs is merely acting as agent for another.
Liabilit$ %f #er%n i3nin3 in tra&e %r aume& name (Sec. +')/o person is liable on the instrument #hose signature does not appear thereon$
e8cept as herein other#ise e8pressly provided.
But one #ho signs in a trade or assumed name #ill be liable to the same e8tent
as if he had signed in his o#n name.
Effect %f in&%rement b$ infant %r c%r#%rati%n (Sec. 44) (Bar 1998, 1989)The indorsement or assignment of the instrument by a corporation or by an
infant
a) passes the property therein$ not#ithstanding that from #ant of capacity$
b) the corporation or infant may incur no liability thereon.
!ffect of indorsement by inca#acitated #ersons
(1) Minors * +s a general rule= 'ontracts entered into by a minor are
voidable (+rt. 12$ 129$ 19;$ 'ivil 'ode) at his instance or at theinstance of his guardian.
(a) hile a minor is not bound by his indorsement for lac% of capacity$ he
is$ ho#ever$ not incapacitated to transfer certain rights. >inority
is not a even a personal defense #hich may be set up by parties other
than the minor7 but it is a real defense available to the minor.
(b) + minor may be held bound by his signature in an instrument #here he
is guilty of actual fraud committed by specifically stating he is of
age #hen$ in fact he is not. (>ercado vs. spiritu$ ,hil. 215)
(2) Ot"er Inca)acitate (ersons * other persons$ besides minors$ #ho have no
capacity to give consent are insane or demented persons and deaf-mutes #ho
does not %no# ho# to #rite. (+rt. 12$ 'ivil 'ode). +s far as such
persons themselves are concerned$ their capacity is a real defense$ thatis$ it is available even against a holder in due course. (ec. 5 and 5<)
!ffect of indorsement by a cor#oration
+s regards to corporation$ ection 22 applies to cases #here the corporation
has committed ulta vires acts or acts beyond its po#ers. t has been held
that a corporation is not liable on notes in a suit thereon by an indorsee$
#here the corporation is #ithout capacity to ma%e a contract in fulfillment of
#hich they #ere e8ecuted.
Cabarles Notes 26
7/17/2019 1007 Negotiable Instrumentshgsdghamgs
http://slidepdf.com/reader/full/1007-negotiable-instrumentshgsdghamgs 13/24
1007-Negotiable Instruments
LIABILITIES OF (ARTIES
(arties (rimaril$ Liable (Bar 1999$ 19)(1) >a%er7
(2) +cceptor or the ra#ee ho +ccepts the nstruments7
4arrant$ of t"e Ma,er
(1) ngages to pay according to the tenor of the instrument7
(2) +dmits the e8istence of the payee and his capacity to indorse.
4arrant$ of t"e Acce)tor or t"e -ra&ee &"o acce)ts t"e instrument
(1) ngages to pay according to the tenor of his acceptance7
(2) +dmits the e8istence of the dra#er$ the genuineness of his signature$ and
his capacity and authority to dra# the instrument.
() +dmits the e8istence of the payee and his capacity to indorse.
(arties Seconaril$ Liable(1) The dra#er7
(2) The general indorser7
() The irregular indorser.
4arrant$ of t"e -ra&er (Bar 199$ 19<6)
(1) +dmits the e8istence of the payee and his capacity to endorse.
(2) ngages that the instrument #ill be accepted or paid by the party
primarily liable.
() ngages that if the instrument is dishonored and proper proceedings are
brought$ he #ill pay to the party entitled to be paid.
4arrant$ of t"e General Inorser (Bar 19<1$ 196)
(1) arrants
(2) ngages that the instrument #ill be paid by the party primarily liable.
() ngages that if the instrument is dishonored$ and proper proceedings are
ta%en$ he #ill pay to the party entitled to be paid.
4arrant$ of t"e Irregular Inorser (Bar 19<1$ 196)
Defined
+n irregular indorser is one #ho affi8es his signature in blan% on an
instrument before delivery.
Rules as to liability
(1) nstrument payable to order of this person 4 irregular indorser liable to
payee and to subse!uent parties7
(2) nstrument payable to order of ma%er or dra#er 4 he is liable to all
parties subse!uent to the ma%er or dra#er7
() rregular indorser signs for accommodation of payee 4 he is liable to all
parties subse!uent to the payee.
Cabarles Notes 27
7/17/2019 1007 Negotiable Instrumentshgsdghamgs
http://slidepdf.com/reader/full/1007-negotiable-instrumentshgsdghamgs 14/24
1007-Negotiable Instruments
(arties &it" Limite Liabilit$(1) The !ualified indorser7
(2) ,erson negotiating by delivery.
4arranties of a 2ualifie Inorser (196)
(1) That the instrument is genuine and in all respects #hat is purports to be7
(2) That he has good title to it7
() That all prior parties had capacity to contract7
() That he has no %no#ledge of any fact #hich #ould impair the validity of
the instrument$ or render it valueless.
+ !ualified indorsement constitutes the indorser a mere assignor of the title
to the indorser a mere assignor of the title to the instrument. t may made
by adding to the indorserDs signature the #or%s "#ithout recourse& or any #ord
of similar import.
4arranties Negotiating b$ -eli%er$ (Bar 199)
(1) arranties 4 same as those of a !ualified indorser7
(2) arranties e8tend to immediate transferee only.
49EN SECON-AR8 LIABILIT8 ATTAC9ES
Acts Neee before Seconar$ Liabilit$ Attac"es (Bar 19<$ 196$ 196)
(1) ,resentment for payment in notes and present for acceptance andGor payment
in bills of e8change7
(2) ishonor by non-payment in notes and dishonor by non-acceptance andGor
non-payment in bills of e8change7
() /otice of dishonor to secondary parties.
Orer in 4"ic" Inorses Liable
They are liable in the order in #hich their indorsements appear in the
instrument 4 the latter ones having a right of recourse against the prior
ones.
Cabarles Notes 28
7/17/2019 1007 Negotiable Instrumentshgsdghamgs
http://slidepdf.com/reader/full/1007-negotiable-instrumentshgsdghamgs 15/24
1007-Negotiable Instruments
INCI-ENTS IN T9E LIFE OF AN INSTRUMENTS
AFTER ITS ISSUE
Negotiation -efine (Bar 196)
/egotiation is the transfer of a negotiable instrument from one person to
another as to constitute the transferee the holder thereof.
Rig"ts Transferre b$ Negotiation (Bar 199)
/egotiation constitutes the transferee a holder of the instrument. + holder
is entitled to collect the instrument from the party primarily liable$ and if
dishonored$ from the secondary parties. *e can sue in court on the
instrument. f the holder is a holder in due course$ he ta%es the instrument
free from defects of title of prior parties$ fee from defenses of prior
parties among themselves$ and he can enforce the instrument for the full
amount thereof against all parties liable thereon.
Classes of Negotiation (Bar 199<$ 19<<$ 195$ 196)
Manner of Negotiation 4"en a))licable
By delivery of the
instrument alone
nstrument is originally payable to bearer
or
:riginally payable to order #here last indorsement is
in blac%
By indorsement follo#ed
by delivery
nstrument payable to the order specified person.
Classes of Inorsements (Bar 195$ 1969$ 196<$ 196;$ 195;$ 19<)
+n indorsement #hether of a chec% or other negotiable instrument may be
(1) special or
(2) in blan% or
() it may be restrictive$() !ualified$
(5) conditional$
(6) general$
() regular$ or
(<) irregular.
S)ecial inorsement * the name of the indorsee is specified.
Blan, inorsement * is an indorsement #hich does not specify the name of the
indorsee$ and usually consists of the indorserDs
signature$ and nothing else$ found at the bac% of the
instrument.
Restricti%e inorsement * limits the right of the indorsee by restricting
further negotiation$ or ma%ing the indorsee the
collecting agent of the indorser$ or ma%ing him
(indorsee) a trustee of a person named in the
indorsement.
Cabarles Notes 29
7/17/2019 1007 Negotiable Instrumentshgsdghamgs
http://slidepdf.com/reader/full/1007-negotiable-instrumentshgsdghamgs 16/24
1007-Negotiable Instruments
2ualifie inorsement 4 is one #here the indorser places under his signature
the #ords "#ithout recourse& or the li%e. The
!ualified indorser does not become liable secondarily
under his indorsement.
Regular inorsement 4 is one placed after the issue of the instrument.
Irregular inorsement * is one placed in blan% before the issue of the
instrument.
Stri,ing Out of Inorsements
The holder may stri%e out indorsements not necessary to his title. The
indorser #hose indorsement is struc% out and all indorsers subse!uent to him
are relieved from liability on the instruments.
RIG9TS OF 9OL-ER
Rig"ts of 9oler in General
The holder of a negotiable instrument may sue thereunder in his o#n name$ andpayment to him in due course discharges the instrument.
Classes of 9olers
(1) *older in ue 'ourse7
(2) *older not in due 'ourse.
%hat constitute a holder for value. (&ec. 2')
A "oler for %alue is one #ho has given a valuable consideration for the
instrument issued or negotiated to him. The holder is deemed as such not only
as regards the party to #hom value has been given by him but also in respect
to all those #ho became parties prior to the time value #as given.
+ holder of a negotiable instrument is presumed to be a holder for value untilthe contrary be sho#n by any party #ho claims other#ise.
Re#uisites to be a "oler in ue course
(1) ho ta%es the instrument "in good faith and for value&7
(2) +t the time the instrument #as negotiated to him he nod no notice of any
defect in the title of the person negotiating it7
() ,rovides that every that every holder is deemed prima facie to be a holder
in due course.
4"en is a "oler of an instruments a "oler in ue course
(Bar 2;;;$ 1996$ 1992$ 1966$ 1952$ 196)
+ holder in due course is a holder #ho has ta%en the instrument under the
follo#ing conditions=
(1) that it is complete and regular upon its face7(2) that he became the holder of it before it #as overdue and #ithout notice
that it had been previously dishonored if such #as the fact7
() that he too% it for value and in good faith7
() that at the time #as negotiated to him he had no notice of any infirmity
in the instrument or defect in the title of the person negotiating it.
Cabarles Notes 30
7/17/2019 1007 Negotiable Instrumentshgsdghamgs
http://slidepdf.com/reader/full/1007-negotiable-instrumentshgsdghamgs 17/24
1007-Negotiable Instruments
Rig"ts of a "oler in -ue Course (Bar 1996$ 196)
3i%e any holder$ a holder in due course may enforce the instrument and sue
thereon in his o#n name.
(1) *e holds the instrument free from any defect of title of prior parties7
(2) Cree fron defenses of prior parties among themselves$ and
() *e may enforce payment of the instrument for full amount thereof$
against all parties liable thereon.
9oler Not in -ue Course (Bar 19$ 1962)+ holder not in due course is one #ho became a holder of an instrument #ithout
any$ some$ or all of the re!uisites under ec. 52 of the /egotiable
nstruments 3a#.
Rig"ts of 9oler not in -ue Course (Bar 196)
+ holder not in due course can enforce the instrument and sue under it in his
o#n name. ,rior parties$ ho#ever$ even though remote$ can avail against him
any defense among these prior parties and prevent the said holder from
collecting in #hole or in part the amount stated in said instrument.
-EFENSES OF (RIOR (ARTIES AGIANST T9E 9OL-ER
Classes of -efenses
(1) 0eal or absolute efenses
(2) ,ersonal or !uitable efenses
Real or Absolute -efenses -efine (Bar 1955)
s a defense #hich attaches to the instrument irrespective of the parties and
is predicated on the principle that the right sought to be enforced has never
e8isted or has ceased to e8ist.
Examples
1. Corger or unauthori@ed signature7
2. Hoid contract7. >aterial alteration7
. ncomplete and undelivered instrument.
Against Whom Available
+ real defense is available against all holders$ #hether in due course or not.
(erson or E#uitable -efenses (Bar 2;;1$ 19<)
s a defense gro#ing out of an agreement or conduct of a particular person in
regard to an instrument #hich renders it ine!uitable for him$ although o#ner
of it$ to enforce it against the defendant.
Examples
1. 'omplete but undelivered instrument
2. delivered but incomplete instrument. absence or failure of consideration
. defect of title
Against Whom Available
Cabarles Notes 31
7/17/2019 1007 Negotiable Instrumentshgsdghamgs
http://slidepdf.com/reader/full/1007-negotiable-instrumentshgsdghamgs 18/24
1007-Negotiable Instruments
The defense is available against all holders not in due course$ e8cept those
#ho derive their rights from holders in due course and #ho are not parties to
any fraud or illegality affecting the instrument.
(RESENTMENT
(ROMISSOR8 NOTES
(ur)ose of (resentment for (a$ment
/ot necessary to ma%e the ma%er liable$ but it is necessary to ma%e the
secondary parties liable.
Re#uisites of (resentment (Bar 2;;;)
(1) >ade #ithin a reasonable time after issue7
(2) By the holder or his agent7
() To the party liable under it7
() +t a reasonable hour on a business day7 and
(5) +t the proper place.
The holder must e8hibit the instrument to the debtor and should deliver it to
said debtor if the latter pays.
4"en (resentment is not Re#uire
(1) hen after due diligence presentment cannot be made7
(2) hen presentment is #aived$ and
() hen the indorser is an accommodated party.
4"en Instrument Consiere -is"onore
(1) hen after due presentment for payment$ payment is refused$ and
(2) hen presentment being e8cused$ the instrument is overdue and unpaid.
IN BILLS OF E=C9ANGE
;ins of (resentment in bills of E+c"ange
1. ,resentment for acceptance and
2. ,resentment for payment.
(RESENTMENT FOR ACCE(TANCE OF A BILL (Bar 199)
(ur)se
To gent acceptance of the dra#ee for the purpose of ma%ing him liable
primarily as an acceptor. t is also a prere!uisite to the accrual of
secondary liability against the dra#er and the indorsers.
4"en Necessar$
(1) To fi8 the maturity date7(2) here the bill e8pressly stipulates presentment
() here the bill is dra#n payable else#here than at the residence or place
of business of the dra#ee.
Re#uisites
,resentment for acceptance must be made #ithin a reasonable time$ by the
holder or his agent$ to the dra#ee or his agent at a reasonable hour on a
business day$ before the bill is overdue.
4"en (resentment for Acce)tance is E+cuse
Cabarles Notes 32
7/17/2019 1007 Negotiable Instrumentshgsdghamgs
http://slidepdf.com/reader/full/1007-negotiable-instrumentshgsdghamgs 19/24
1007-Negotiable Instruments
,resentment for acceptance is e8cused=
(1) #here the dra#ee is dead$ hides$ or is a fictitious or incapacitated
person7
(2) #hen after due diligence$ presentment cannot be made7
() #hen acceptance is refused on another ground although presentment is
irregular.
4"en instrument -is"onore b$ Non!acce)tance
The instrument is considered dishonored by non-acceptance=
(1) #here such acceptance is refused or cannot be obtained7 and
(2) #here acceptance being e8cused$ the bill is not accepted.
(RESENTMENT FOR (A8MENT OF ACCE(TE- BILL
(ur)ose
The purpose of presentment for payment of an accepted bill is to collect from
the acceptor$ and if refused$ to collect from the secondary parties.
Re#uisites
The accepted bill must be presented for payment #ithin a reasonable time from
the last negotiation by the holder or his agent$ to the acceptor or his agent$at a reasonable hour on a business day$ and the proper place as defined. The
bill must be e8hibited to the acceptor and surrendered to him #hen he pays.
4"en E+cuse
,resentment for payment is e8cused=
(1) #hen after due diligence$ it cannot be made
(2) #hen the dra#ee is a fictitious person$ and
() #here there is a #aiver of presentment.
ACCE(TANCE IN BILLS OF E=C9ANGE (Bar 19)
-efine
+cceptance is the signification by the dra#ee of his assent to the order ofthe dra#er.
Re#uisites
The acceptance must be in #riting$ signed by the dra#ee$ and must not e8press
that the dra#ee #ill perform his promise by means other than money payment.
9o& mae
The acceptance may be on the bill$ on a separate paper$ and may even be made
in #riting before the bill is dra#n.
The dra#ee$ if he #ants to dishonor$ must do so e8pressly #ithin t#enty four
(2) hours from presentment to him. f he refuses to act$ tears the bill$ or
refuses to return the bill #ithin said period of t#enty four hours$ he is
deemed to have accepted the bill.
Classes of Acce)tance
(1) Ieneral and !ualified
(2) 8press and 'onstructive
General Acce)tance Assents * #ithout !ualification to the order of the dra#er.
2ualifie Acce)tance * varies the effect of the bill as dra#n. The acceptance
is !ualified if it is=
Cabarles Notes 33
7/17/2019 1007 Negotiable Instrumentshgsdghamgs
http://slidepdf.com/reader/full/1007-negotiable-instrumentshgsdghamgs 20/24
1007-Negotiable Instruments
(a) 'onditional7
(b) ,artial
(c) 3ocal
(d) Jualified as to time
(e) +ccepted by some or more of the dra#ees but not by
all
E+)ress * if it is #ritten on the instrument by the dra#ee.
Constructi%e 4 if the dra#ee$ #ithin t#enty four hours from presentment to him
of the instrument$ destroys the same$ or refuses or
fails to return the bill accepted or unaccepted.
-IS9ONOR
-is"onor in (romissor$ Notesn a promissory note$ dishonor by non-payment ta%es place #hen it is duly
presented for payment and payment is refused or cannot be obtained7 or if
presentment is e8cused$ the instrument is overdue and unpaid.
-is"onor in Bills of E+c"angehere bill is presented for acceptance and is returned dishonored$ or #ithin
t#enty four hours from presentment$ is not returned accepted or unaccepted$
there is a dishonor by non-acceptance.
There is a dishonor by non-payment if the bill$ after it has been accepted$ is
not paid #hen presented for payment$ or presentment being e8cused$ is not paid
on the date of maturity.
NOTICE OF -IS9ONOR (Bar 1996$ 1952)
-efine t is a notice given by the holder or his agent to the party or parties
secondarily liable that the instrument #as dishonored by non-acceptance by the
dra#ee of a bill$ or by non-payment by the acceptor of a bill or by non-
payment by the ma%er of a note.
(ur)ose
The notice of dishonor is given by the holder to the parties secondarily
liable$ for the purpose of preserving his right of recourse against them.
Re#uisites
The notice is given=
(1) by the holder or his agent$ or by any party #ho may be compelled by the
holder to pay7
(2) to the secondary party or his agent
() #ithin the periods provided for by la# and
() at the proper place.
4"en -is)ense &it"
/otice of dishonor may be dispensed #ith
(1) if #aived
(2) #hen after due diligence$ it cannot be given$ and
Cabarles Notes 34
7/17/2019 1007 Negotiable Instrumentshgsdghamgs
http://slidepdf.com/reader/full/1007-negotiable-instrumentshgsdghamgs 21/24
1007-Negotiable Instruments
() #hen the party to be notified %no#s about the dishonor$ actually or
constructively.
4"en notice of is"onor not re#uire to be gi%en to t"e -ra&er
(1) #hen the dra#er and the dra#ee are the same person7
(2) #hen the dra#ee is a fictitious or incapacitated person7
() #hen the dra#er is the person to #hom the instrument is presented for
payment7
() #hen the dra#er has no right to e8pect that the dra#ee #ill accept$ or
that the acceptor #ill pay$ the instrument.
4"en notice of is"onor not re#uire to be gi%en to t"e Inorser
(1) #hen the dra#ee is a fictitious or incapacitated person and the indorser
#as a#are of it at the time of his indorsement7
(2) #here the indorser is the person to #hom the instrument #as presented for
payment$ and
() #here the instrument #as made or accepted for his accommodation.
(ROTEST IN LIEU OF -IS9ONOR IN FOREIG9 BILLS
Foreign Bill -efine
+ foreign bill is a bill of e8change #hich is not on its face dra#n and made
payable #ithin the ,hilippines.
(ROTEST
(rotest -efine
+ protest is a formal instrument$ e8ecuted by a notary or other competent
person$ certifying that the facts necessary to the dishonor of the instrument
by non-acceptance or non-payment have ta%en place.
4"en Re#uire
hen a foreign bill is dishonored by non-acceptance it must be protested for
non-acceptance. f dishonored by non-payment$ it must be protested for non-
payment. f not so protested$ the dra#er and indorsers are discharged. t
must be made on the day of dishonor. There may also be a protest for better
security.
9o& mae (Bar 19<)
+ protest is made by a notary or by a respectable citi@en of the place of
dishonor of the bill in the presence of t#o or more credible #itnesses.
t must be anne8ed to the bill$ or must contain a copy thereon$ and must
specify
(1) the time and place of presentment7(2) the fact that presentment #as made and the manner thereof7
() the cause of protest7
() the demand made and ans#er given$ or that the dra#ee or the acceptor
could not be found.
Cabarles Notes 35
7/17/2019 1007 Negotiable Instrumentshgsdghamgs
http://slidepdf.com/reader/full/1007-negotiable-instrumentshgsdghamgs 22/24
1007-Negotiable Instruments
4"en (rotest -is)ense &it"
,rotest is dispensed #ith in those cases #here notice of dishonor is dispensed
#ith.
-ISC9ARGE OF T9E INSTRUMENT AN- OF T9E (ARTIES
Causes for -isc"arge of t"e Instrument an -isc"arge of All (arties(1) ,ayment by the debtor7
(2) ,ayment by the accommodated party7
() ntentional cancellation by the holder of the instrument7
() +ny other act discharging a simple money obligation7 and
(5) ebtor becomes holder of the instrument at or after maturity in his o#n
right.
Causes for -isc"arge of Seconar$ (arties (Bar 19)
(1) +ny act discharging the instrument7
(2) 'ancellation of indorserDs signature by the holder7
() ischarge of a prior party.
FOREIGN BILLS
Acce)tance for 9onor .Acce)tance Su)ra (rotest1 -efine
t is an underta%ing by a stranger to the bill after protest$ for the benefit
of all parties subse!uent to the person for #hose honor it is accepted$ and
conditioned to pay the bill #hen it becomes due$ if the original dra#ee does
not pay it.
(a$ment for 9onor .(a$ment Su)ra (rotest1 -efine
+ payment for honor is a payment made through a notarial act of honor of a
party liable under$ or a stranger to the bill after$ said bill had been
dishonored by non-payment by the acceptor and protested for non-payment by the
holder.
Legal Conse#uences
(1) all parties subse!uent to the party for #hose honor payment is made
are discharged7 and
(2) the payer for honor is subrogated and succeeds to both. The rights
and duties of the holder$ as regards the party for #hose honor payment
is made$ and all parties liable to the latter.
Bills in Set efine + bill in a set is a bill of e8change dra#n in several parts$ each part of the
set being numbered and containing a reference to the other parts$ the #hole of
the parts constituting ust one bill.
Liabilit$ uner t"e Bill
The acceptance and payment of one part discharges all parts$ as a general
rule.
There are$ ho#ever$ instances #here more than one liability may attach to the
#hole of the set$ and these are=
(a) #here more than one part is negotiated by the same holder7 and
(b) #here the dra#ee accepts one part$ but pays the unaccepted part.
Cabarles Notes 36
7/17/2019 1007 Negotiable Instrumentshgsdghamgs
http://slidepdf.com/reader/full/1007-negotiable-instrumentshgsdghamgs 23/24
1007-Negotiable Instruments
C9EC; C"ec, -efine
+ chec% is a bill of e8change dra#n on a ban% and payable on demand.
-ifference bet&een a c"ec, an an orinar$ bill of e+c"ange
C"ec, Orinar$ Bill1. +s to dra#ee +l#ays a ban% +ny capacitated person
2. +s to demandability +l#ays payable on demand + bill need not be so
payable
. +s to discharge of
indorsers and dra#er
+ certified chec% or
accepted$ the dra#er and
indorsers are
discharged.
The dra#er and indorsers
remain liable.
-is"onor of Fune C"ec,s (Bar 19<6)
The depositor has a right of action against the ban% for refusal to encash
chec%s #hich are fully funded.
Sto) (a$ment Orer b$ -ra&er (Bar 1991$ 199)
+ chec% by itself does not operate as an assignment of any part of the funds
to the credit of the dra#er #ith a ban%. Before the ban% accepts or certifies
the chec%$ the dra#er may countermand or stoc% payment of a chec% issued by
him. f the ban% for any reason$ and in spite of said stop payment order$
allo#ed then it becomes liable to the dra#er or to any subse!uent la#ful
holder.
Certifie C"ec,
t is an agreement #hereby the ban% binds itself to pay the chec% at any
future time #hen presented for payment.
Effect of Certification (Bar 199<$ 19;$ 1965)
The certification is e!uivalent to an acceptance of the chec% by the dra#ee
ban%$ and the dra#er and the indorsers are discharged from liability thereon.
C"ec, use as )a$ment of Obligation (Bar 196;)
The obligation to pay a sum certain in money may be paid in money$ #hich is
the legal tender$ or by the use of a chec%. + chec% is not a legal tender$
and therefore cannot constitute valid tender of payment. ince a negotiable
instrument is only a substitute for money and not money$ the delivery of such
as instrument does not$ by itself$ operate as payment.
Crosse C"ec,s -efine (Bar 1996$ 1995$ 199$1991$ 1965)
+ crossed chec% is a chec% #hich in addition to the usual contents of an
ordinary chec% contains also the name of a certain ban%er or business entitythrough #hom it must be presented for payment. The ban%erDs or entityDs name
is usually stamped across the face of the chec%.
9o& mae
'rossing of a chec% is usually done by placing t#o parallel lines diagonally
on the left top portion of the chec%.
Cabarles Notes 37
7/17/2019 1007 Negotiable Instrumentshgsdghamgs
http://slidepdf.com/reader/full/1007-negotiable-instrumentshgsdghamgs 24/24
1007-Negotiable Instruments
Effects of a crosse C"ec,s
The effects of crossing a chec% are as follo#s=
(1) the chec% may not be encashed but only deposited in a ban%7
(2) the chec% may be negotiated only once 4 to one #ho has an account #ith
a ban%7
() the act of crossing a chec% serves as a #arning to the holder that the
chec% has been issued for a definite purpose so that he must in!uire if
he has received the chec% pursuant to that purpose.