NOTICE OF DISHONOR

Group 2

CONCEPT
Notice of dishonor means bringing either orally or in writing, to the
knowledge of the drawer or indorser of an instrument the fact that
a specified negotiable instrument, upon proper proceedings taken,
has not been accepted or has not been paid, and that the party
notified is expected to pay it.

WHEN CONSIDERED
DISHNORED
A negotiable instrument is considered to be dishonored:
1.) if it is not accepted when presented for acceptance;
2.) if it is not paid when presented for payment at maturity; or
3.) if presentment is excused or waived and the instrument is past
due and unpaid.

PURPOSE
To enable the party to be charged to preserve and protect his rights
against prior parties.

NECESSITY OF GIVING
NOTICE OF DISHONOR
1. As against party primarily liable
Notice of dishonour need not be given to the party primarily liable
to make them liable because he is very person who dishonoured
the instrument. Thus, notice need not be given to the maker nor
the acceptor of a bill of exchange

NECESSITY OF GIVING
NOTICE OF DISHONOR
2. As against party secondarily liable
Notice of dishonour must be given to the drawer and to each indorser to make them liable.
Exceptions: (the drawers and indorsers are liable even without notice of dishonor in the
following cases:
a. In case of waiver
b. When notice is dispensed with
c. As regards the drawer in the following cases
d. As regards the indorser in the following cases(3)
e. When notice of dishonour by non-acceptance was previously given
f. As regards a holder in due course without notice.

REQUISITE OF NOTICE OF
DISHONOR
1. By whom notice is given
2. How notice is given
3. To whom notice is given
4. When notice must be given
5. Where notice must be sent

BY WHOM NOTICE IS GIVEN

1.) By the holder
2.) By another in behalf of the holder
3.) By a party to the instrument who may be compelled to pay it to
the holder and who, upon taking it up, would have a right to
reimbursement from the party to whom the notice is given
4.) By another person in behalf of such party

EXAMPLE

HOLDER

EFFECT OF NOTICE ON
BEHALF OF HOLDER
It inures to the benefit of:
(1) all holders subsequent to the holder who has given notice, and
(2) all parties prior to the holder but subsequent to the party to
whom notice has been given and against whom they have a right of
recourse.

EXAMPLE

HOLDER

SUBSEQUENT
HOLDER

EFFECT WHERE NOTICE IS GIVEN

BY PARTY ENTITLED THERETO
It inures to the benefit of:
(1) the holder, and
(2) all parties subsequent to the party to whom notice is given,
including parties subsequent to the holder who gave notice.

EXAMPLE

HOLDER

SUBSEQUENT
HOLDER

WHEN AGENT MAY GIVE

NOTICE
The agent, in case the instrument is dishnored in his hands, may
give notice either to:
(1) his principal, or
(2) directly to the parties secondarily liable

CRIMINAL LIABILITY FOR

DISHONOURED CHECKS
1. Estafa
2. Violation of bouncing checks law
Estafa vs. Violation of bouncing checks law