ATTORNEYSOATH I,dosolemnlyswearthatIwillmaintainallegiancetotheRepublicofthePhilippines,IwillsupporttheConstitutionandobeythe lawsaswellasthelegalordersofthedulyconstitutedauthoritiestherein;Iwilldonofalsehood,norconsenttothedoingofanyin court;Iwillnotwittinglyorwillinglypromoteorsueanygroundless,false,orunlawfulsuit,orgiveaidnorconsenttothesame;Iwill delaynomanformoneyormalice,andwillconductmyselfasalawyeraccordingthebestofmyknowledgeanddiscretion,withall good fidelity as well to the courts as to my clients; and I impose upon myself

these voluntary obligations without any mental reservationorpurposeofevasion.SohelpmeGod. WEEK1 Chapter1:RequisitesofNegotiability Sec.1 FormofnegotiableinstrumentsAninstrumenttobenegotiablemust (5pts.) conformtothefollowingrequirements: a) Itmustbeinwritingandsignedbythemakerordrawer; b) Must contain an unconditional promise or order to pay a sum certaininmoney; c) Must be payable on demand, or at a fixed or determinable futuretime; d) Mustbepayabletoorderortobearer;and e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty. 184 Promissory note, defined A negotiable promissory note within the (5) meaningofthisActisan unconditionalpromisein writingmadebyone persontoanother,signedbythemaker,engagingtopayondemand,or atafixeddeterminablefuturetime,asumcertaininmoneytoorderor to bearer. Where the note is drawn to the makers order, it is not completeuntilindorsedbyhim. (2) OriginalPartiesinPN: Maker Payee 126 Billofexchange,definedAbillofexchangeisan unconditionalorder (5) in writing addressed by one person to another, signed by the person givingit[drawer],requiringthepersontowhomitisaddressed[drawee] to pay on demand or at a fixed or determinable future time a sum certaininmoneytoorderortobearer. (3) OriginalPartiesinBE: Drawer Drawee Payee WrittenFormandSignature 18 Liability of person signing in trade or assumed name No person is (1) liable on the instrument whose signature does not appear thereon, exceptashereinotherwise expresslyprovided.But onewhosignsina trade or assumed name will be liable to the same extent as if he has signedinhisownname. 19 Signaturebyagent;authority;howshownThe signatureof anyparty (1) may be made by a duly authorized agent. No particular form of appointment is necessary for this purpose; and the authority of the agentmaybeestablishedasinothercasesofagency. UnconditionalOrderorPromisetoPay: 3 When promise is unconditional An unqualified order or promise to WhenUnconditional (3) payisunconditionalwithinthemeaningofthisActthoughcoupledwith: a) Anindicationofaparticularfundoutofwhich reimbursement is to be made or a particular account to be debited with the amount;or b) A statement of the transaction which gives rise to the instrument. Butanorderorpromisetopayoutofaparticular funisnotunconditional. SumPayableMustbeCertain 2 What constitutes certainty as to sum The sum payable is a sum (5) certainwithinthemeaningofthisAct,althoughitistobepaid: a) Withinterest;or KHerrera2A11

CertaintyofTimeofPayment:WhenPayable onDemand

7 (3)

CertaintyofTimeofPayment:Payableata DeterminableFutureTime

4 (4)

11 (1)

17 (7)

MustbePayabletoOrderortoBearer: WheninstrumentisPayabletoOrder

8 (7)

b) Bystatedinstallments;or c) By stated installments, with a provision that, upon default in payment of any installment or of interest, the whole shall becomedue[accelerationclause];or d) With exchange,whetheratafixedrateoratthecurrentrate; or e) With costsofcollectionoran attorneysfee,incasepayment shallnotbemadeatmaturity. WhenpayableondemandAninstrumentispayableondemand: a) Whenitis soexpressedtobepayable ondemand,or atsight, oronpresentation;or b) Inwhichnotimeforpaymentisexpressed. Whereaninstrumentisissued,accepted,orindorsedwhenoverdue,it is,asregardsthepersonsoissuing,accepting,orindorsingit,payableon demand. Determinablefuturetime;whatconstitutesAninstrumentispayable ata determinablefuturetime,withinthemeaningofthisAct,whichis expressedtobepayable: a) Atafixedperiodafterdateorsight;or b) On or before a fixed or determinable future time specified therein;or c) Onoratafixedperiodaftertheoccurrenceofaspecifiedevent which is certain to happen, though the time of happening be uncertain. An instrument payable upon a contingency is not negotiable, and the happeningoftheeventdoesnotcurethedefect[incurable]. Date, presumption as to Where the instrument or an acceptance or anyindorsementthereonisdated,suchdateis deemed primafacieto bethetruedateofthemaking,drawing,acceptance,orindorsement,as thecasemaybe. ConstructionwhereinstrumentisambiguousWherethelanguageof the instrument is ambiguous or there are omissions therein, the followingruledofconstructionapply: a) Where the sum payable is expressed in words and also in figures and there is discrepancy between the two, the sum denotedbythewordsisthesumpayable; butifthewordsare ambiguousoruncertain,referencemaybehadtothefiguresto fixtheamount; b) Where the instrument provides for the payment of interest, withoutspecifyingthedatefromwhichinterestistorun,the interest runs from the date of the instrument, and if the instrumentisundated,fromtheissuethereof; c) Wheretheinstrumentis notdated,itwillbeconsideredtobe datedasofthetimeitwasissued; d) Where there is conflict between the written and printed provisionsoftheinstrument,thewrittenprovisionsprevail; e) Where the instrument is so ambiguous that there is doubt whetheritisabillornote,theholdermay treatitaseitherat hiselection; f) Where a signature is so placed upon the instrument that it is not clear in what capacity the person making the same intendedtosign,heisdeemedanindorser; g) WhereaninstrumentcontainingthewordIpromisetopayis signedbytwoormorepersons,theyare deemedtobe jointly andseverallyliablethereon[solidaryliability]. WhenpayabletoorderTheinstrumentispayabletoorderwhereitis drawnpayabletotheorderofaspecifiedpersonortohimorhisorder. KHerrera2A11

MustbePayabletoOrderortoBearer: WhenInstrumentisPayabletoBearer

9 (5)

PartiesMustbeDesignatedwithCertainty: Payee

PartiesMustbeDesignatedwithCertainty: Drawee

128

130

ProvisionsNotAffectingNegotiability

5 (4)

OmissionsNotAffectingNegotiability

6 (5)

Itmaybedrawnpayabletotheorderof: a) Apayeewhoisnotthemaker,drawer,ordrawee;or b) Thedrawerormaker;or c) Thedrawee;or d) Twoormorepayeesjointly;or e) Oneorsomeofseveralpayees;or f) Theholderofanofficeforthetimebeing. Wheretheinstrumentispayabletoorder,thepayee mustbenamed or otherwiseindicatedthereinwithreasonablecertainty. WhenpayabletobearerTheinstrumentispayabletobearer: a) Whenitisexpressedtobesopayable;or b) Whenitispayabletoapersonnamedthereinorbearer;or c) When it is payable to the order of a fictitious or nonexisting person, and such fact was known to the person making it so payable;or d) Whenthenameofthepayeedoesnotpurporttobethename ofanyperson;or e) Whentheonlyorlastindorsementisanindorsementinblank. WEEK2 WhenpayabletoorderTheinstrumentispayabletoorderwhereitis drawnpayabletotheorderofaspecifiedpersonortohimorhisorder. Itmaybedrawnpayabletotheorderof: a) Apayeewhoisnotthemaker,drawer,ordrawee;or b) Thedrawerormaker;or c) Thedrawee;or d) Twoormorepayeesjointly;or e) Oneorsomeofseveralpayees;or f) Theholderofanofficeforthetimebeing. Wheretheinstrumentispayabletoorder,thepayee mustbenamed or otherwiseindicatedthereinwithreasonablecertainty. Bill addressed to more than one drawee A bill may be addressed to twoormoredrawees jointly,whethertheyarepartnerornot; butNOT totwoormoredraweesinthealternativeorinsuccession. 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 not having capacity to contract, the holder may treat the instrument at his option either as a bill of exchange or as a promissorynote. AdditionalprovisionsnotaffectingnegotiabilityAninstrumentwhich containsanorderorpromisetodoanyactinadditiontothepaymentof moneyisnotnegotiable. But the negotiable character of an instrument otherwise negotiable is notaffectedbyaprovisionwhich: a) Authorizes the sale of collateral securities in case the instrumentbenotpaidatmaturity;or b) Authorizes a confession of judgment if the instrument be not paidatmaturity;or c) Waives the benefit of any law intended for the advantage or protectionoftheobligor;or d) Givestheholderanelectionto requiresomethingtobedone INLIEUofpaymentofmoney. But nothing in this section shall validate any provision or stipulation otherwiseillegal. Omissions; seal; particular money The validity and negotiable characterofaninstrumentarenotaffectedbythefactthat: a) Itisnotdated;or b) Does not specify the value given, or that any value had been KHerrera2A11

RulesofConstruction

17

Chapter2:TransferDeliveryandIssuance

16

Negotiation

30 (3)

191

giventherefor;or Doesnotspecifytheplacewhereitisdrawnortheplacewhere itispayable;or d) Bearsaseal;or e) Designates a particular kind of current money in which paymentistobemade. 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. ConstructionwhereinstrumentisambiguousWherethelanguageof the instrument is ambiguous or there are omissions therein, the followingruledofconstructionapply: a) Where the sum payable is expressed in words and also in figures and there is discrepancy between the two, the sum denotedbythewordsisthesumpayable; butifthewordsare ambiguousoruncertain,referencemaybehadtothefiguresto fixtheamount; b) Where the instrument provides for the payment of interest, withoutspecifyingthedatefromwhichinterestistorun,the interest runs from the date of the instrument, and if the instrumentisundated,fromtheissuethereof; c) Wheretheinstrumentis notdated,itwillbeconsideredtobe datedasofthetimeitwasissued; d) Where there is conflict between the written and printed provisionsoftheinstrument,thewrittenprovisionsprevail; e) Where the instrument is so ambiguous that there is doubt whetheritisabillornote,theholdermay treatitaseitherat hiselection; f) Where a signature is so placed upon the instrument that it is not clear in what capacity the person making the same intendedtosign,heisdeemedanindorser; WhereaninstrumentcontainingthewordIpromisetopayis signed by two or more persons, they are deemed to be jointly and severally liablethereon[solidaryliability]. Delivery; when effectual; when presumed Every contract on a negotiableinstrumentis incompleteandrevocableuntildeliveryofthe instrument for the purpose of giving effect thereto. As between the immediatepartiesandasregardsaremotepartyotherthanaholderin duecourse,the delivery,inordertobe effectual,mustbe madeeither by or under the authority of the party, drawing, accepting, or indorsing, as the case may be; and, in such case, the delivery may be showntobe conditional,or foraspecialpurposeonly,andnotforthe purpose of transferring the property in 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 and intentionaldeliverybyhimispresumeduntilthecontraryisproved. WhatconstitutesnegotiationAninstrumentis negotiatedwhenitis transferred from one person to another in such a manner as to constitutethetransfereetheholderthereof.If payabletobearer,itis negotiated by delivery; if payable to order, it is negotiated by the indorsementoftheholderandcompletedbydelivery. Definition and meaning of terms In this Act, unless the contract otherwiserequires: Acceptance means an acceptance completed by delivery or notification; c) KHerrera2A11

HowIndorsementisMade:BySignatureon InstrumentoronAllonge HowIndorsementisMade:IfName Misspelled

31

43

IndorsementMustbeofEntireInstrument

32

KindsofIndorsement KindsofIndorsement:SpecialIndorsement &BlankIndorsement

33 (3) 34

40

35

KindsofIndorsement:QualifiedIndorsement

38

KindsofIndorsement:Conditional Indorsement

39

Actionincludescounterclaimandsetoff; Bankincludesanypersonorassociationofpersonscarryingon thebusinessofbanking,whetherincorporatedornot; Bearermeansthepersoninpossessionofabillornotewhichis payabletobearer; Bill means bill of exchange, and note means negotiable promissorynote; Delivery means transfer of possession, actual or constructive, fromonepersontoanother; Holdermeansthepayeeorindorseeofabillornotewhoisin possessionofit,orthebearerthereof; Indorsementmeansanindorsementcompletedondelivery; Instrumentmeansnegotiableinstrument; Issue means the first delivery of the instrument, complete in form,toapersonwhotakesitasaholder; Person includes a body of persons, whether incorporated or not; Valuemeansvaluableconsideration; Writtenincludesprinted,andwritingincludesprint. Indorsement, how made The indorsement must be written on the instrumentitselforuponapaperattachedthereto.Thesignatureofthe indorser,withoutadditionalwords,isasufficientindorsement. Indorsementwherenameismisspelled,andsoforthWherethename of a payee or indorsee is wrongly designated or misspelled, he may indorsetheinstrumentasthereindescribedadding,ifhethinksfit,his propersignature. IndorsementmustbeofentireinstrumentTheindorsementmustbe an indorsement of the entire instrument. An indorsement which purportstotransfertotheindorseeapartonlyoftheamountpayable, orwhichpurportstotransfertheinstrumenttotwoormoreindorsees severally, does not operate as a negotiation of instrument. But where the instrument has been paid in part, it may be indorsed as to the residue. Kinds of indorsement An indorsement may either be special or in blank;anditmayalsobeeitherrestrictiveorqualifiedorconditional. Special indorsement; indorsement in blank A special indorsement specifiesthepersontowhom,ortowhoseorder,theinstrumentistobe payable, and the indorsement of such indorsee is necessary to the furthernegotiationoftheinstrument.Anindorsementinblankspecifies no indorsee, and an instrument so indorsed is payable to bearer, and maybenegotiatedbydelivery. Indorsement of instrument payable to bearer Where an instrument, payable to bearer, is indorsed specially, it may nevertheless be further negotiated by delivery; but the person indorsing specially is liable as indorsertoonlysuchholdersasmaketitlethroughhisindorsement. Blankindorsement;howchangedtospecialindorsementTheholder mayconvertablankindorsementintoaspecialindorsementbywriting overthesignatureoftheindorserinblankanycontractconsistentwith thecharacteroftheindorsement. Qualified indorsement A qualified indorsement constitutes the indorsera mereassignorofthetitletotheinstrument.Itmaybemade by adding to the indorsers signature the words without recourse or anywordsofsimilarimport.Suchanindorsement doesnotimpairthe negotiablecharacteroftheinstrument. Conditional indorsement Where an indorsement is conditional, the party required to pay the instrument may disregard the condition and makepaymenttotheindorseeorthistransfereewhetherthecondition KHerrera2A11

KindsofIndorsement:Restrictive Indorsement

36 (3)

37

NegotiationbyJointorAlternativePayeesor Indorsees

41

UnindorsedInstruments

49

CancellationofIndorsements

48

IndorsementbyAgent

44

PresumptionsastoIndorsements

45

46

42

ContinuationofNegotiableCharacter

47

Chapter3:HolderinDueCourse

52 (4)

has been fulfilled or not. But any person to whom an instrument so indorsed is negotiated will hold the same, or the proceeds thereof, subjecttotherightsofthepersonindorsingconditionally. When indorsement restrictive An indorsement is restrictive which either: a) Prohibitsthefurthernegotiationoftheinstrument;or b) Constitutestheindorseetheagentoftheindorser;or c) Veststhetitleintheindorseeintrustforortotheuseofsome otherperson. But the mere absence of the words implying power to negotiate does notmakeanindorsementrestrictive. Effect of restrictive indorsement; rights of indorsee A restrictive indorsementconfersupontheindorseetheright: a) Toreceivepaymentoftheinstrument; b) Tobringanyactionthereonthattheindorsercouldbring; c) To transfer his right as such indorsee, where the form of the indorsementauthorizeshimtodoso. Butallsubsequentindorseesacquireonlythetitleofthefirstindorsee undertherestrictiveindorsement. Indorsement where payable to two or more persons Where an instrumentispayabletotheorderoftwoormorepayeesorindorsees who are not partners, all must indorse unless the one indorsing has authoritytoindorsefortheothers. Transfer without indorsement; effect of Where the holder of an instrumentpayabletohisordertransfersitforvaluewithoutindorsing 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 whetherthetransfereeisaholderinduecourse,thenegotiationtakes effectasofthetimewhentheindorsementisactuallymade. Striking out indorsement The holder may at any time strike out any indorsement which is not necessary to his title. The indorser whose indorsementisstruckout,andallindorserssubsequenthim,arethereby relievedfromliabilityontheinstrument. Indorsement in representative capacity Where any person is under obligation to indorse in a representative capacity, he may indorse in suchtermsastonegativepersonalliability. Time of indorsement; presumption Except where an indorsement bears date after the maturity of the instrument, every negotiation is deemed primafacietohavebeeneffectedbeforetheinstrumentwas overdue. Place of indorsement; presumption Except when the contrary appears, every indorsement is presumed prima facie to have been madeattheplacewheretheinstrumentisdated. EffectofinstrumentdrawnorindorsedtoapersonascashierWhere an instrument is drawn or indorsed to a person as cashier or other fiscal officer of a bank or corporation, it is deemed prima facie to be payabletothebankorcorporationofwhichheissuchofficer,andmay benegotiatedbyeithertheindorsementofthebankorcorporationor theindorsementoftheofficer. Continuationofnegotiablecharacter Aninstrumentnegotiableinits origincontinuestobenegotiableuntilithasbeenrestrictivelyindorsed ordischargedbypaymentorotherwise. WEEK3 What constitutes a holder in due course A holder in due course is a holderwhohastakentheinstrumentunderthefollowingconditions: a) Thatitiscompleteandregularupontheface; KHerrera2A11

RightsofaHolderinDueCourse

57 (3)

58 (2)

HolderforValue:WhatConstitutesValue

24

25

HolderforValue:WhatConstitutesaHolder forValue HolderforValue:WhereHolderhasaLienon Instrument

26 (1) 27

HolderforValue:BurdenofProof

24

HolderinGoodFaith

55 (7)

56 (3)

EffectofNoticeBeforeFullPayment

54 (1)

NoticeofAccommodationNotNoticeof Defect

29 (4)

b) That he became the holder of it before it was overdue, and withoutnoticethatithasbeenpreviouslydishonored,ifsuch wasthefact; c) Thathetookitingoodfaithandforvalue; d) Thatatthetimeitwasnegotiatedtohim,hehadnonoticeof any infirmity in the instrument or defect in the title of the personnegotiatingit. Rights of holder in due course A holder in due course holds the instrument freefromanydefectoftitleofpriorparties,and freefrom defensesavailabletopriorpartiesamongthemselves,andmayenforce payment of the instrument for the full amount thereof against all partiesliablethereon. When subject to original defense In the hands of any holder other than a holder in due course, a negotiable instrument is subject to the same defenses as if it were nonnegotiable. But a holder who derives histitlethroughaholderinduecourse,andwhois nothimselfaparty toanyfraudorillegalityaffectingtheinstrument,has alltherightsof suchformerholderinrespectofallpartiespriortothelatter. PresumptionofconsiderationEverynegotiableinstrumentis deemed primafacietohavebeenissuedforavaluableconsideration;andevery person whose signature appears thereon to have become a party theretoforvalue. Value, what constitutes Value is any consideration sufficient to support a simple contract. An antecedent or preexisting debt constitutes value; and is deemed such whether the instrument is payableondemandoratafuturetime. WhatconstitutesholderforvalueWhere valuehasatanytimebeen given for the instrument, the holder is deemed a holder for value in respecttoallpartieswhobecomesuchpriortothattime. When lien on instrument constitutes holder for value Where the holder has a lien on the instrument arising either from contract or by implicationoflaw,heis deemedaholderforvaluetotheextentofhis lien. PresumptionforconsiderationEverynegotiableinstrumentisdeemed primafacietohavebeenissuedforavaluableconsideration;and every person whose signature appears thereon to have become a party theretoforvalue. WEEK4 When title defective The title of a person who negotiates an instrumentisdefectivewithinthemeaningofthisActwhenheobtained theinstrument,oranysignaturethereto,by fraud, duress,or force and fear,orother unlawfulmeans,orforan illegalconsideration,orwhen he negotiates it in breach of faith, or under such circumstances as amounttoafraud. WhatconstitutesnoticeofdefectToconstitutesnoticeofaninfirmity in the instrument or defect in the title of the person negotiating the same, the person to whom it is negotiated must have had actual knowledge of the infirmity or defect, or knowledge of such facts that hisactionintakingtheinstrumentamountedtobadfaith. Notice before full amount is paid Where the transferee receives notice of any infirmity in the instrument or defect in the title of the personnegotiatingthesame beforehehaspaidthefullamountagreed tobepaidtherefore,hewillbe deemedaholderinduecourseonlyto theextentoftheamountthereforepaidbyhim. Liability of accommodation party An accommodation party is one who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving value therefore, and for the purpose of KHerrera2A11

HolderinDueCourse

52

CompleteandRegular

124 (2)

HolderAtorAfterMaturity&Without NoticeofDishonor

53 (1)

HolderinDueCourse

52

EffectofPostDatingorAnteDating

12 (2)

RightsofaPurchaserfromaHolderinDue Course

58

PresumptioninFavorofDueCourseHolding

59 (2)

TransferofUnindorsedInstrument

49 (3)

lending his name to some other person. Such person is liable on the instrument to a holder for value, notwithstanding such holder, at the timeoftakingtheinstrument, knewhimtobeonlyanaccommodation party. WEEK5 What constitutes a holder in due course A holder in due course is a holderwhohastakentheinstrumentunderthefollowingconditions: a) Thatitiscompleteandregularupontheface; b) That he became the holder of it before it was overdue, and withoutnoticethatithasbeenpreviouslydishonored,ifsuch wasthefact; c) Thathetookitingoodfaithandforvalue; d) Thatatthetimeitwasnegotiatedtohim,hehadnonoticeof any infirmity in the instrument or defect in the title of the personnegotiatingit. Alteration of instrument; effect of Where a negotiable instrument is materiallyalteredwithouttheassentofallpartiesliablethereon,itis AVOIDED, exceptasagainstapartywhohashimselfmade,authorized, orassentedtothealterationandsubsequentindorsers. Butwhenaninstrumenthasbeenmateriallyalteredandisinthehands ofa holderinduecoursenotapartytothealteration,hemayenforce paymentthereofaccordingtoitsoriginaltenor. WhenpersonnotdeemedholderinduecourseWhereaninstrument payable on demand is negotiated on an unreasonable length of time afteritsissue,theholderisnotdeemedaholderinduecourse. WEEK6 What constitutes a holder in due course A holder in due course is a holderwhohastakentheinstrumentunderthefollowingconditions: a) Thatitiscompleteandregularupontheface; b) That he became the holder of it before it was overdue, and withoutnoticethatithasbeenpreviouslydishonored,ifsuch wasthefact; c) Thathetookitingoodfaithandforvalue; d) Thatatthetimeitwasnegotiatedtohim,hehadnonoticeof any infirmity in the instrument or defect in the title of the personnegotiatingit. AntedateandpostdatedTheinstrumentIsnotinvalidforthereason onlythatitisantedatedorpostdated, providedthisis notdone foran illegal or fraudulentpurpose.Thepersontowhomaninstrumentisso datedisdeliveredacquiresthetitletheretoasofdateofdelivery. When subject to original defense In the hands of any holder other than a holder in due course, a negotiable instrument is subject to the samedefensesasifitwerenonnegotiable.Butaholderwhoderiveshis title through a holder in due course, and who is not himself a party to anyfraudorillegalityaffectingtheinstrument,hasalltherightsofsuch formerholderinrespectofallpartiespriortothelatter. Who is deemed holder in due course Every holder is deemed prima facietobeaholderinduecourse;butwhenitisshownthatthetitleof any person who has negotiated the instrument was defective, the burdenisontheholdertoprovethatheorsomepersonunderwhom he claims acquired the title as holder in due course. But the last mentionedrule doesnotapplyinfavorofapartywhobecamebound ontheinstrumentpriortotheacquisitionofsuchdefectivetitle. Transfer without indorsement; effect of Where the holder of an instrumentpayabletohisorder transfersitforvaluewithoutindorsing it, the transfer vests in the transferee such title as the transferor had KHerrera2A11

Chapter4:Defenses&Equities Defenses&EquitiesinGeneral

57

58

55

Incapacity

22

Forgery:InGeneral

23 (5)

18

Forgery:Acceptance&PaymentUnder MistakeWhenDraweeAcceptsorPays ForgedInstrument

62 (2)

MaterialAlteration:InGeneral

124

125 (7)

therein, and the transferee acquires in addition, the right to have the indorsement of the transferor. But for the purpose of determining whetherthetransfereeisaholderinduecourse,thenegotiationtakes effectasofthetimewhentheindorsementisactuallymade. WEEK7 Rights of holder in due course A holder in due course holds the instrument freefromanydefectoftitleofpriorparties,and freefrom defensesavailabletopriorpartiesamongthemselves,andmayenforce payment of the instrument for the full amount thereof against all partiesliablethereon. When subject to original defense In the hands of any holder other than a holder in due course, a negotiable instrument is subject to the same defenses as if it were nonnegotiable. But a holder who derives histitlethroughaholderinduecourse,andwhois nothimselfaparty toanyfraudorillegalityaffectingtheinstrument,has alltherightsof suchformerholderinrespectofallpartiespriortothelatter. When title defective The title of a person who negotiates an instrumentisdefectivewithinthemeaningofthisActwhenheobtained theinstrument,oranysignaturethereto,by fraud, duress,or force and fear,orother unlawfulmeans,orforan illegalconsideration,orwhen he negotiates it in breach of faith, or under such circumstances as amounttoafraud. Effect of indorsement by infant or corporation The indorsement or assignment of the instrument by a corporation or by an infant passes the property therein, notwithstanding that from want of capacity, the corporationorinfantmayincurnoliabilitythereon. Forged signature, effect of When a signature is forged or made withouttheauthorityofthepersonwhosesignatureitpurporttobe,it iswhollyinoperative,andnorighttoretaintheinstrument,ortogivea discharge thereof, or to enforce payment thereof against any party thereto, can be acquired through or under such signature, unless the partyagainstwhomitissoughttoenforcesuchrightis precludedfrom settinguptheforgeryorwantofauthority. Liability of person signing in trade or assumed name No person is liable on the instrument whose signature does not appear thereon, exceptashereinotherwise expresslyprovided.But onewhosignsina trade or assumed name will be liable to the same extent as if he has signedinhisownname. Liability of acceptor The acceptor, by accepting the instrument, engagesthat hewillpayitaccordingtothetenorofhisacceptanceand admits: a) The existenceofthedrawer,the genuinenessofhissignature, andhiscapacityandauthoritytodrawtheinstrument;and b) Theexistenceofthepayeeandhiscapacitytoindorse. Alteration of instrument; effect of Where a negotiable instrument is materiallyalteredwithouttheassentofallpartiesliablethereon,itis AVOIDED, exceptasagainstapartywhohashimselfmade,authorized, orassentedtothealterationandsubsequentindorsers. Butwhenaninstrumenthasbeenmateriallyalteredandisinthehands ofa holderinduecoursenotapartytothealteration,hemayenforce paymentthereofaccordingtoitsoriginaltenor. WhatconstitutesamaterialalterationAnyalterationwhichchanges: a) Thedate; b) Thesumpayable,eitherforprincipalorinterest; c) Thetimeorplaceofpayment; d) Thenumberortherelationsoftheparties; KHerrera2A11

CompleteInstrumentiswhichisUndelivered

16

IncompleteInstrumentiswhichis Undelivered

15

IncompleteInstrumentiswhichisDelivered

14

Consideration

28 (2)

Chapter5:LiabilityofParties InGeneral

192 (1)

70 (3)

LiabilityofMaker

60 (2) 127

StatusofDraweePriortoAcceptanceor

Themediumorcurrencyinwhichpaymentistobemade; Orwhich addsaplaceofpaymentwherenoplaceofpayment is specified, or any other change or addition which alters the effectoftheinstrumentinanyrespect,isamaterialalteration. Delivery; when effectual; when presumed Every contract on a negotiableinstrumentis incompleteandrevocableuntildeliveryofthe instrument for the purpose of giving effect thereto. As between the immediatepartiesandasregardsaremotepartyotherthanaholderin duecourse,the delivery,inordertobe effectual,mustbe madeeither by or under the authority of the party, drawing, accepting, or indorsing, as the case may be; and, in such case, the delivery may be showntobe conditional,or foraspecialpurposeonly,andnotforthe purpose of transferring the property in 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 and intentionaldeliverybyhimispresumeduntilthecontraryisproved. 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 beforedelivery. Blanks; when may be filled Where the instrument is wanting in any materialparticular,the personinpossessionthereofhasa primafacie 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,operatesasa primafacieauthoritytofillitupassuchfor any amount. In order, however, that any such instrument when completed may be enforced against any person who became a party thereto prior its completion, it must be filled up strictly in accordance withtheauthoritygivenandwithinareasonabletime.Butifanysuch instrument,aftercompletion,is negotiatedtoaholderinduecourse,it isvalidandeffectualforallpurposesonhishands,andhemayenforce it as if it had been filled up strictly in accordance with the authority givenandwithinreasonabletime. Effectofwantofconsideration Absenceorfailureofconsiderationis a matter of defense against any person NOT a holder in due course; and partialfailureofconsiderationisa defense protanto,whetherthe failureisanascertainedandliquidatedamountorotherwise. WEEK8 Persons primarily liable on instrument The person primarily liable onaninstrumentisthepersonwho,bythetermsoftheinstrument,is absolutelyrequiredtopaythesame.Allotherpartiesaresecondarily liable. Effect of want of demand on principal debtor Presentment for paymentisnotnecessaryinordertochargethepersonprimarilyliable on the instrument; but if the instrument is, by its terms, payable at a special place, and he is able and willing to pay it there at maturity, such ability and willingness are equivalent to a tender of payment upon his part. But except as herein otherwise provided, presentment forpaymentisnecessaryinordertochargethedrawerandindorsers. LiabilityofmakerThemakerofanegotiableinstrument,bymakingit, engages that he will pay according to its tenor, and admits the existenceofthepayeeandhisthencapacitytoindorse. Bill not an assgnment of funds in hands of drawee A bill itself does KHerrera2A11

e) f)

Payment;EffectofStopOrder

(2)

189 (2)

LiabilityofAcceptor

62

FormalRequisitesofAcceptance

191

132 (3)

133

138

ConstructiveAcceptance

136

137

150

AcceptanceonaSeparateInstrument

134

135

KindsofAcceptanceGeneralAcceptance

139

not operate as an assignment of the funds in the hands of the drawee available for the payment thereof, and the drawee is not liable on the billunlessanduntilheacceptsthesame. When check operates as an assignment A check itself does not operate as an assignment of any part of the funds to the credit of the drawerwiththebank,andthebankisnotliabletotheholderunlessand untilitacceptsorcertifiesthecheck. Liability of acceptor The acceptor, by accepting the instrument, engagesthat hewillpayitaccordingtothetenorofhisacceptanceand admits: a) The existenceofthedrawer,the genuinenessofhissignature, andhiscapacityandauthoritytodrawtheinstrument;and b) Theexistenceofthepayeeandhiscapacitytoindorse. Definition and meaning of terms In this Act, unless the contract otherwiserequires: Acceptance means an acceptance completed by delivery or notification. Acceptance,howmade,byandsoforthTheacceptanceofabillisthe signification by the drawee of his assent to the order of the drawer. The acceptance must be in writing and signed by the drawee. It must not express that the drawee will perform his promise by another meansthanthepaymentofmoney. Holder entitled to acceptance on face of bill The holder of a bill presentingthesameforacceptancemayrequirethattheacceptancebe writtenonthebill,and,ifsuchrequestofrefused,maytreatthebillas dishonored. Acceptance of incomplete bill A bill may be accepted before it has beensignedbythedrawer,orwhileotherwiseincomplete,orwhenitis overdue,orafterithasbeendishonoredbyapreviousrefusaltoaccept, orbynonpayment.Butwhenabillpayableaftersightisdishonoredby nonacceptanceandthedraweesubsequentlyacceptsit,theholder,in the absence of any different agreement, is entitled to have the bill acceptedasofthedateofthefirstpresentment. Time allowed drawee to accept The drawee is allowed twentyfour hours after presentment in which to decide whether or not he will accept the bill; the acceptance, if given, dates as of the day of presentation. Liability of drawee returning or destroying bill Where a drawee to whom a bill is delivered for acceptance destroys the same, or refuses within twentyfour hours after such delivery or within such other period as the holder may allow, to return the bill accepted or non acceptedtotheholder,hewillbedeemedtohaveacceptedthesame. DutyofholderwherebillnotacceptedWhereabillis dulypresented for acceptance and is not accepted within the prescribed time, the person presenting it must treat the bill as dishonored by non acceptance or he loses the right to recourse against the drawer and indorsers. Acceptance by separate instrument Where an acceptance is written onapaperotherthanthebillitself,itdoesnotbindtheacceptorexcept infavorofapersontowhomitisshownandwho,onthefaiththereof, receivesthebillforvalue. Promise to accept; when equivalent to acceptance An unconditional promiseinwritingtoacceptabillbeforeitisdrawnisdeemedanactual acceptance in favor of every person who, upon the faith thereof, receivesthebillforvalue. Kinds of acceptance An acceptance is either general or qualified. A KHerrera2A11

140

QualifiedAcceptance

141

142

CHECKS:Definition,NatureandKinds

185 (4) 63

CertificationandItsEffects

187 (1) 188 (1) 189

LiabilityofSecondaryParties

70

LiabilityofDrawer

61 (4)

general acceptance assents without qualification to the order of the drawer.Aqualifiedacceptanceinexpresstermsvariestheeffectofthe billasdrawn. What constitutes a general acceptance An acceptance to pay at a particular place is a general acceptance unless it expressly states that thebillistobepaidthereonlyandnotelsewhere. QualifiedacceptanceAnacceptanceisqualifiedwhichis: a) Conditional; that is to say, which makes payment by the acceptor dependent on the fulfillment of a condition therein stated; b) Partial; that is to say, an acceptance to pay part only of the amountforwhichthebillisdrawn; c) Local; that is to say, an acceptance to pay only at a particular place; d) Qualifiedastotime; e) Theacceptanceofsome,oneormoreofthedraweesbutnotof all. Rightsofpartiesastoqualifiedacceptancetheholdermayrefuseto take a qualified acceptance and if he does not obtain an unqualified acceptance, he may treat the bill as dishonored by nonacceptance. Where a qualified acceptance is taken, the drawer and indorsers are discharged from liability on the bill unless they have expressly or impliedly authorized the holder to take a qualified acceptance, or subsequently assent thereto. When the drawer or an indorser receives notice of a qualified acceptance, he must, within a reasonable time, expresshisdissenttotheholderorhewillbedeemedtohaveassented thereto. WEEK9 Check,defined Acheckisa billofexchangedrawnonabankpayable ondemand.Exceptashereinotherwiseprovided,theprovisionsofthis Acttoabillofexchangepayableondemandapplytoacheck. Whenapersondeemedindorser Apersonplacinghissignatureupon an instrument otherwise than as maker, drawer, or acceptor, is deemed to be an indorser unless he clearly indicates by appropriate wordshisintentiontobeboundinsomeothercapacity. Certificationofcheck;effectofWhereacheckiscertifiedbythebank onwhichitisdrawn,thecertificationifequivalenttoacceptance. Effect where the holder of check procures it to be certified Where a holderofacheckprocuresittobeacceptedorcertified,thedrawerand allindorsersaredischargedfromliabilitythereon. When check operates as an assignment A check itself does not operate as an assignment of any part of the funds to the credit of the drawerwiththebank,andthebankisnotliabletotheholderunlessand untilitacceptsorcertifiesthecheck. Effect of want of demand on principal debtor Presentment for paymentisnotnecessaryinordertochargethepersonprimarilyliable on the instrument; but if the instrument is, by its terms, payable at a special place, and he is able and willing to pay it there at maturity, such ability and willingness are equivalent to a tender of payment upon his part. But except as herein otherwise provided, presentment forpaymentisnecessaryinordertochargethedrawerandindorsers. LiabilityofdrawerThedrawerbydrawingtheinstrument admitsthe existence of the payee and his capacity to indorse; and engages that, onduepresentment, theinstrumentwillbeacceptedorpaid,orboth, according to its tenor, and that if it be dishonored and the necessary proceedingsondishonorbedulytaken, hewillpaytheamountthereof totheholderortoanysubsequentindorserwhomaybecompelledto KHerrera2A11

LiabilityofQualifiedIndorserandOne NegotiatingbyDelivery

65 (5)

LiabilityofGeneralorUnqualifiedIndorser

66 (4)

67 (1) 63

40

OrderofLiabilityAmongIndorsers

68 (3)

LiabilityofAccommodationParty

29

63

64

pay it. But the drawer may insert in the instrument an express stipulationnegativingorlimitinghisownliabilitytotheholder. Warranty where negotiation by delivery and so forth Every person negotiating an instrument by delivery or by a qualified indorsement warrants: a) That the instrument is genuine and in all respects what it purportstobe; b) Thathehasagoodtitletoit; c) Thatallpriorpartieshadcapacitytocontract; d) Thathehas noknowledgeofanyfactwhichwouldimpairthe validityoftheinstrumentorrenderitvalueless. But when the negotiation is by delivery only, the warranty extends in favorofnoholderotherthantheimmediatetransferee. Theprovisionsofsubdivision(c)ofthissectiondonotapplytoaperson negotiatingpublicorcorporationsecuritiesotherthanbillsandnotes. Liability of general indorser Every indorser who indorses without qualification,warrantstoallsubsequentholdersinduecourse: a) The matters and things mentioned in subdivisions (a), (b), and (c)ofthenextprecedingsection;and b) Thattheinstrumentis,atthetimeofhisindorsement,validand subsisting; And, in addition, he engages that, on due presentment, it shall be acceptedorpaid,orboth,asthecasemaybe,accordingtoitstenor,and that if it be dishonored and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequentindorserwhomaybecompelledtopayit. Liability of indorser where paper negotiable by delivery Where a personplaceshisindorsementonaninstrumentnegotiablebydelivery, heincursalltheliabilityofanindorser. Whenapersondeemedindorser Apersonplacinghissignatureupon an instrument otherwise than as maker, drawer, or acceptor, is deemed to be an indorser unless he clearly indicates by appropriate wordshisintentiontobeboundinsomeothercapacity. Indorsement of instrument payable to bearer Where an instrument, payable to bearer, is indorsed specially, it may nevertheless be further negotiated by delivery; but the person indorsing specially is liable as indorseronlytosuchholdersasmaketitlethroughhisindorsement. Order in which indorsers are liable As respect on another, indorsers areliableprimafacieintheorderinwhichtheyindorse;butevidenceis admissibletoshowthat,asbetweenoramongthemselves,theyhave agreed otherwise. Joint payees or joint indorsees who indorse are deemedtoindorsejointlyandseverally. Liability of accommodation party An accommodation party is one who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving value therefore, and for the purpose of lending his name to some other person. Such person is liable on the instrument to a holder for value, notwithstanding such holder, at the timeoftakingtheinstrument, knewhimtobeonlyanaccommodation party. Whenapersondeemedindorser Apersonplacinghissignatureupon an instrument otherwise than as maker, drawer, or acceptor, is deemed to be an indorser unless he clearly indicates by appropriate wordshisintentiontobeboundinsomeothercapacity. Liability of irregular indorser Where a person, not otherwise a party KHerrera2A11

LiabilityofanAgent

19

20

21

69

SignaturebyTradeName

18

PresentmentforAcceptanceWhen Necessary;EffectofNonPresentment

143 (3)

144 (1)

193

PresentmentforAcceptanceHowand WhenMade

145

toaninstrument,placesthereonhissignatureinblankbeforedelivery, heliableasindorser,inaccordancewiththefollowingrules: a) Iftheinstrumentispayabletotheorderofathirdperson,heis liabletothepayeeandtoallsubsequentparties. b) If the instrument is payable to the order of the maker or drawer, or is payable to bearer, he is liable to all parties subsequenttothemakerordrawer. c) Ifhesignsfortheaccommodationofthepayee,heisliableto allpartiessubsequenttothepayee. WEEK10 Signaturebyagent;authority;howshownThe signatureof anyparty may be made by a duly authorized agent. No particular form of appointment is necessary for this purpose; and the authority of the agentmaybeestablishedasinothercasesofagency. Liability of persons signing as agent, and so forth Where the instrument contains or a person adds to his signature words indicating that he signs for or on behalf of a principal or in a representative capacity,heis notliableontheinstrumentifhewasdulyauthorized; butthemereadditionofwordsdescribinghi,asanagent,orasfillinga representative character, without disclosing his principal, does not exempthimforpersonalliability. Signature by procuration; effect of A signature by procuration operatesas noticethattheagenthasbut limitedauthoritytosign,and theprincipalisboundonlyincasetheagentinsosigningacted within theactuallimitsofhisauthority. Liability of an agent or broker Where a broker or other agent negotiates an instrument without indorsement, he incurs all the liabilities prescribed by Section 65 of this Act, unless he discloses the nameofhisprincipalandthefactthatheisactingonlyasagent. Liability of person signing in trade or assumed name No person is liable on the instrument whose signature does not appear thereon, exceptashereinotherwise expresslyprovided.But onewhosignsina trade or assumed name will be liable to the same extent as if he has signedinhisownname. When presentment for acceptance must be made Presentment for acceptancemustbemade: a) Where the bill is payable after sight, or in any other case, where presentment for acceptance is necessary in order to fix thematurityoftheinstrument;or b) Wherethebillexpresslystipulatesthatitshallbepresentedfor acceptance;or c) Where the bill is drawn payable elsewhere than at the residenceorplaceofbusinessofthedrawee. In no other case is presentment for acceptance necessary in order to renderanypartytothebillliable. When failure to present releases drawer and indorser Except as hereinotherwiseprovided,theholderofabillwhichisrequiredbythe next preceding section to be presented for acceptance must either presentitforacceptanceornegotiatewithinreasonabletime.Ifhefails todoso,thedrawerandallindorsersaredischarged. Reasonable time, what constitutes In determining what is a reasonabletimeregardistobehadtothe natureoftheinstrument, theusageoftradeorbusinesswithrespecttosuchinstruments,andthe factsoftheparticularcase. Presentment; how made Presentment for acceptance must be made by or on behalf of the holder at a reasonable hour, on a business day andbeforethebillisoverdue,tothedraweeorsomepersonauthorized KHerrera2A11

146

PresentmentforAcceptanceWhen Excused

148

147

DishonorandItsEffects

149 (2)

150

151 (2)

89 (3)

117 (1) PresentforPaymentWhenNecessary; 70

toacceptorrefuseacceptanceonhisbehalf;and a) Whereabillisaddressedtotwoormoredraweeswhoarenot partners, presentment must be made to them all unless one has authority to accept or refuse acceptance for all, in which casepresentmentmustbemadetohimonly; b) Where the drawee is dead, presentment may be made to his personalrepresentative; c) Where the drawee has been adjudged a bankrupt or an insolvent or has made an assignment for the benefit of creditors,presentmentmaybemadetohimortohistrusteeor assignees. OnwhatdayspresentmentmaybemadeAbillmaybepresentedfor acceptance on any day on which negotiable instrument may be presentedforpaymentundertheprovisionsofSection72and85ofthis Act. When Saturday is not otherwised a holiday, presentment for acceptancemaybemadebefore12noononthatday. WhenpresentmentisexcusedPresentmentforacceptanceisexcused and bill may be treated as dishonored by non=acceptance in either of thefollowingcases: a) Wherethedraweeisdead,orhasabsconded,orisafictitious personorapersonnothavingcapacitytocontractbybill. b) Where,aftertheexerciseofreasonablediligence,presentment cannotbemade. c) Where, although presentment has been irregular, acceptance hasbeenrefusedonsomeotherground. Presentment where time is insufficient Where the holder of a bill drawn payable elsewhere than the place of business or the residence ofthedraweehasnotime,withtheexerciseofreasonablediligence,to presentthebillforacceptancebeforepresentingitforpaymentonthe dayitfallsdue, thedelaycausedbypresentingthebillforacceptance beforepresentingitforpaymentisexcusedanddoesnotdischargethe drawersandindorsers. When dishonored by nonacceptance A bill is dishonored by non acceptance: a) When it is duly presented for acceptance and such an acceptanceasisprescribedbythisActis refusedorcannotbe obtained; b) When presentment for acceptance is excused and the bill is notaccepted. DutyofholderwherebillnotacceptedWhereabillis dulypresented for acceptance and is not accepted within the prescribed time, the person presenting it must treat the bill as dishonored by non acceptance or he loses the right to recourse against the drawer and indorsers. RightsofholderwherebillnotacceptedWhenabillisdishonoredby nonacceptance,animmediaterightofrecourseagainstthedrawerand indorsers accrues to the holder and no presentment for payment is necessary. TowhomnoticeofdishonormustbegivenExceptashereinotherwise provided, when a negotiable instrument has been dishonored by non acceptance or nonpayment, notice of dishonor must be given to the drawerandtoeachindorser,andanydrawerorindorsertowhomsuch noticeisnotgiven. Effect of omission to give notice of nonacceptance An omission to givenoticeofdishonorbynonacceptancedoesnotprejudicetherights ofaholderinduecoursesubsequenttheomission. Effect of want of demand on principal debtor Presentment for KHerrera2A11

EffectofNonPresentment

WhenNOTNecessaryastoDrawer

79 (1) 80 (2)

WhenNOTNecessaryastoIndorser

WhenNOTNecessaryastoallSecondary Parties

82

151

111

DateandTimeofPresentmentofInstrument BearingFixedMaturity

71

85

86

194

DateofPresentmentofDemandNotes

71

paymentisnotnecessaryinordertochargethepersonprimarilyliable on the instrument; but if the instrument is, by its terms, payable at a special place, and he is able and willing to pay it there at maturity, such ability and willingness are equivalent to a tender of payment upon his part. But except as herein otherwise provided, presentment forpaymentisnecessaryinordertochargethedrawerandindorsers. WhenpresentmentnotrequiredtochargethedrawerPresentmentis not required in order to charge the drawer where he has no right to expectorrequirethatthedraweeoracceptorwillpaytheinstrument. WhenpresentmentnotrequiredtochargetheindorserPresentment isnotrequiredinordertochargeanindorserwhenthe instrumentwas made or accepted for his accommodation and he has no reason to expectthattheinstrumentwillbepaidifpresented. WhenpresentmentforpaymentisexcusedPresentmentforpayment isexcused: a) Where,aftertheexerciseofreasonablediligence,presentment, asrequiredbythisAct,cannotbemade; b) Wherethedraweeisafictitiousperson; c) Bywaiverofprsentment,expressorimplied. RightsofholderwherebillnotacceptedWhenabillisdishonoredby nonacceptance,animmediaterightofrecourseagainstthedrawerand indorsers accrues to the holder and no presentment for payment is necessary. WaiverofprotestAwaiverofprotest,whetherinthecaseofaforeign billofexchangeorothernegotiableinstrument,is deemedtobewaiver not only of a formal protest but also of presentment and notice of dishonor. Presentment where instrument is not payable on demand and where payableondemandWheretheinstrumentisnotpayableondemand, presentmentmustbemadeon thedayitfallsdue.Whereitis payable ondemand,presentmentmustbemadewithinareasonabletimeafter itsissue,exceptthatinthecasesofabillofexchange,presentmentfor payment will be sufficient if made within a reasonable time after the lastnegotiationthereof. Time of maturity Every negotiable instrument payable at the time fixed therein without grace. When the day of maturity falls upon Sundayoraholiday,theinstrumentfallingdueorbecomingpayableon Saturday are to be presented for payment on the next succeeding business day except that instruments payable on demand may, at the option of the holder, be presented for payment before 12 noon on Saturdaywhenthatentiredayisnotaholiday. Time; how computed When the instrument is payable at a fixed perioed after date, after sight, or after that happening of a specified event, the time of payment is determined by excluding the day from which the time is to begin to run, and by including the date of payment. Time;howcomputed;whenlastdayfallsonholidayWheretheday, orthelastdayfordoinganyacthereinrequiredorpermittedtobedone falls on a Sunday or a holiday, the act may be done on the next succeedingsecularorbusinessday. Presentment where instrument is not payable on demand and where payableondemandWheretheinstrumentisnotpayableondemand, presentmentmustbemadeon thedayitfallsdue.Whereitis payable ondemand,presentmentmustbemadewithinareasonabletimeafter itsissue,exceptthatinthecasesofabillofexchange,presentmentfor payment will be sufficient if made within a reasonable time after the lastnegotiationthereof. KHerrera2A11

DateofPresentmentofChecks

185

186

WhenDelayinPresentmentExcused

81

MannerofPresentment

74

WhatConstitutesSufficientPresentment

72 (4)

WhatConstitutesSufficientPresentment: TimeofPresentment

72(b) 75

WhatConstitutesSufficientPresentment: PlaceofPresentment

73

WhatConstitutesSufficientPresentment:To WhomPresentmentMustbeMade

72(d)

76

77

Check,defined Acheckisa billofexchangedrawnonabankpayable ondemand.Exceptashereinotherwiseprovided,theprovisionsofthis Acttoabillofexchangepayableondemandapplytoacheck. Within what time a check must be presented A check must be presented for payment within reasonable time after its issue or the drawer will be discharged from liability thereon to the extent of the losscausedbythedelay. When delay in making presentment is excused Delay in making presentment for payment is excused when the delay is caused by circumstancesbeyondthecontroloftheholderand notimputableto his default, misconduct, or negligence. When the cause of the delay ceases to operate, presentment must be made with reasonable diligence. Instrument must be exhibited The instrument must be exhibited to thepersonfromwhompaymentisdemanded,andwhenitispaid,must bedelivereduptothepartypayingit. WhatconstitutesasufficientpresentmentPresentmentforpayment, tobesufficient,mustbemade: a) By the holder, or by some person authorized to receive paymentonhisbehalf; b) Atareasonablehouronabusinessday; c) Ataproperplaceashereindefined; d) To the person primarily liable on the instrument, or if he is absentorinaccessible,toanypersonfoundattheplacewhere thepresentmentismade. Presentment for payment, to be sufficient, must be made at a reasonablehouronabusinessday. Presentment where instrument payable at bank Where the instrument is payable at a bank, presentment for payment must be made duringbankinghours,unlessthepersontomakepaymenthasno funds there to meet it at any time during the day, in which case presentment at any hour before the bank is closed on that day is sufficient. PlaceofpresentmentPresentmentforpaymentismadeattheproper place: a) Wheretheplaceofpaymentisspecifiedintheinstrumentand itistherepresented; b) Wherenoplaceofpaymentisspecifiedbuttheaddressofthe person to make payment is given in the instrument and it is therepresented; c) Wherenoplaceofpaymentisspecifiedandnoaddressisgiven andtheinstrumentispresentedattheusualplaceofbusiness orresidenceofthepersontomakepayment; d) Inanyothercaseifpresentedtothepersontomakepayment wherever he can be found, or if presented at his last known placeofbusinessorresidence. Presentmentforpayment,tobesufficient,mustbemade totheperson primarilyliableontheinstrument,orifheisabsentorinaccessible,to anypersonfoundattheplacewherethepresentmentismade. Presentment where principal debtor is dead Where th person primarily liable on the instrument is dead and no place of payment is specified, presentment for payment must be made to his personal representative,ifsuchtherebe,andif,withtheexerciseofreasonable diligence,hecanbefound. Presentment to persons liable as partners Where the persons primarilyliableontheinstrumentarepartnersandnoplaceofpayment isspecified,presentmentforpaymentmaybemadetoanyoneofthem, KHerrera2A11

eventhoughtherehasbeendissolutionofthefirm. Presentment to joint debtors Where there are several persons, not partners,primarilyliableontheinstrumentandnoplaceofpaymentis specified,presentmentmustbemadetoallofthem. WhatConstitutesDishonorbyNonPayment 83 When instrument dishonored by nonpayment the instrument is (2) dishonoredbynonpaymentwhen: a) It is duly presented for payment and payment is refused or cannotbeobtained;or b) Presentment is excused and the instrument is overdue and unpaid. EffectofDishonorbyNonPayment 84 Liability of person secondarily liable, when instrument dishonored (1) SubjecttotheprovisionsofthisAct,whentheinstrumentisdishonored by nonpayment, an immediate right of recourse to all parties secondarilyliablethereonaccruestotheholder. WEEK11 94 WhenagentmaygivenoticeWheretheinstrumenthasbeendishonoredinthehandsofanagent,hemay (4) eitherhimselfgivenoticetothepartiesliablethereon,orhemaygivenoticetohisprincipal.Ifhegivesnotice tohisprincipal,hemustdosowithinthesametimeasifheweretheholder,andtheprincipal,uponthereceipt ofsuchnotice,hashimselfthesametimeforgivingnoticeasiftheagenthadbeenanindependentholder. 97 TowhomnoticemaybegivenNoticeofdishonormaybegiveneithertothepartyhimselfortohisagentin (2) thatbehalf. 98 Notice where party is dead When any party is dead and his death is known to the party giving notice, the noticemustbegiventoapersonalrepresentative,iftherebeone,andifwithreasonablediligence,hecanbe found.Iftherebenopersonalrepresentative,noticemaybesenttothelastresidenceorlastplaceofbusiness ofthedeceased. 99 NoticetopartnersWherethepartiestobenotifiedarepartners,noticetoanyonepartnerisnoticetothe firm,eventhoughtherehasbeendissolution. Art.1794[Civil Every partner is responsible for the partnership for damages suffered by it through his fault, and he cannot Code] compensate them with the profits and benefits which he may have earned for the partnership by industry. however, the courts may equitably lessen his responsibility if through the partners extraordinary efforts in otheractivitiesofthepartnership,unusualprofitshavebeenrealized. Art.1818[Civil Every partner is an agent of the partnership for the purpose of its business, and the act of every partner, Code] includingtheexecutinginthepartnershipnameofanyinstrument,forapparentlycarryingontheusualwaythe businessofthepartnershipofwhichheisamemberbindsthepartnership,unlessthepartnersoactinghasin factnoauthoritytoactforthepartnershipintheparticularmatter,andthepersonwithwhomheisdealinghas knowledgeofthefactthathehasnoauthority. ANactofapartnerwhichisnotapparentlyforthecarryingonofbusinessofthepartnershipintheusualway doesnotbindthepartnershipunlessauthorizedbytheotherpartners. Exceptwhenauthorizedbytheotherpartnersorunlesstheyhaveabandonedthebusiness,oneormorebut lessthanallthepartnershavenoauthorityto: 1. Assignthepartnershippropertyintrustforcreditorsorontheassigneespromisetopaythedebtsof thepartnership; 2. Disposeofthegoodwillofthebusiness; 3. Doanyotheractwhichwouldmakeitimpossibletocarryontheordinarybusinessofapartnership; 4. Confessajudgment; 5. Enterintoacompromiseconcerningapartnershipclaimorliability; 6. Submitapartnershipclaimorliabletoarbitration; 7. Renounceaclaimofthepartnership. Noactofapartnerincontraventionofarestrictiononauthorityshallbindthepartnershiptopersonshaving knowledgeoftherestriction. 100 NoticetopersonsjointlyliableNoticetojointpersonswhoarenotpartnersmustbegiventoeachofthem unlessoneofthemhasauthoritytoreceivesuchnoticefortheothers. 101 NoticetobankruptWhereapartyhasbeenadjudgedbankruptoraninsolvent,orhasmadeanassignment forthebenefitofcreditors,noticemaybegiveneithertothepartyhimselfortohistrusteeorassignee. 78 KHerrera2A11

92

93

112 116

151

109 (2) 110 114 (5)

115 (3)

89

117 152

129

157 153

154

Effect of notice on behalf of holder Where notice is given by or on behalf of the holder, it inures to the benefitofallsubsequentholdersandallpriorpartieswhohavearightofrecourseagainstthepartytowhomit isgiven. EffectwherenoticeisgivenbypartyentitledtheretoWherenoticeisgivenbyoronbehalfofapartyentitled togivenotice,itinurestothebenefitoftheholderandallpartiessubsequenttothepartytowhomnoticeis given. When notice is dispensed with Notice of dishonor is dispense with when, after the exercise of reasonable diligence,itcannotbegiventoordoesnotreachthepartiessoughttobecharged. Notice of nonpayment where acceptance refused Where due notice of dishonor by nonacceptance has been given, notice of a subsequent dishonor by nonpayment is not necessary unless in the meantime the instrumenthasbeenaccepted. RightsofholderwherebillnotacceptedWhenabillisdishonoredbynonacceptance,animmediaterightof recourse against the drawer and indorsers accrues to the holder and no presentment for payment is necessary. WaiverofnoticeNoticeofdishonormaybewaivedeitherbeforethetimeofgivingnoticehasarrivedorafter theomissiontogiveduenotice,andthewaivermaybeexpressedorimplied. Whom affected by waiver Where the waiver is embodied in the instrument itself, it is binding upon all parties;but,whereitiswrittenabovethesignatureofanindorser,itbindshimonly. When notice need not be given to drawer Notice of dishonor is not required to be given to the drawer in eitherofthefollowingcases: a) Wherethedrawerandthedraweearethesameperson; b) Whenthedraweeisafictitiouspersonorapersonnothavingcapacitytocontract; c) Whenthedraweristhepersontowhomtheinstrumentispresentedforpayment; d) Where the drawer has no right to expect or require that the drawee or acceptor will honor the instrument; e) Wherethedrawerhascountermandedpayment. WhennoticeneednotbegiventoindorserNoticeofdishonorisnotrequiredtobegiventoanindorserin eitherofthefollowingcases: a) Whenthedraweeisafictitiouspersonorapersonnothavingcapacitytocontract,andtheindorser wasawareofthatfactatthetimeheindorsedtheinstrument; b) Wheretheindorseristhepersontowhomtheinstrumentispresentedforpayment; c) Wheretheinstrumentwasmadeoracceptedforhisaccommodation. To whom notice of dishonor must be given Except as herein otherwise provided, when a negotiable instrumenthasbeendishonoredbynonacceptanceornonpayment,noticeofdishonormustbegiventothe drawerandtoeachindorser,andanydrawerorindorsertowhomsuchnoticeisnotgiven. EffectofomissiontogivenoticeofnonacceptanceAnomissiontogivenoticeofdishonorbynonacceptance doesnotprejudicetherightsofaholderinduescoursesubsequenttheomission. Inwhatcasesprotestnecessary Whereaforeignbullappearingonitsfacetobesuchisdishonoredbynon acceptance,itmustbedulyprotestedfornonacceptance,andwheresuchabillwhichhasnotbeenpreviously dishonoredbynonacceptanceisdishonoredbynonpayment,itmustbedulyprotestedfornonpayment.Ifit is not protested, the drawer and indorsers are discharged. Where a bill does not appear on its face to be a foreignbill,protestthereofincaseofdishonorisunnecessary. Inlandandforeignbillsofexchange Aninlandbillofexchangeisabillwhichis,oronitsfacepurportstobe, bothdrawnandpayablewithinthePhilippines.Anyotherbillisaforeignbill.Unlessthecontraryappearson thefaceofthebill,theholdermaytreatitasaninlandbill. Protestbothfornonacceptanceandnonpayment Abillwhichhasbeenprotestedfornonacceptancemay besubsequentlyprotestedfornonpayment. Protest; how made The protest must be annexed to the bill or must contain a copy thereof, and muct be underthehandandsealofthenotarymakingitandmustspecify: a. Thetimeandplaceofpresentment b. Thefactthatpresentmentwasmadeandthemannerthereof c. Thecauseorreasonforprotestingthebill d. Thedemandmadeandtheanswergiven,ifany,orthefactthatthedraweeoracceptorcouldnotbe found Protest,bywhmmadeProtestmaybemadeby: a. Anotarypublic b. Byanyrespectableresidentoftheplacewherethebillisdishonored,inthepresenceoftwoormore KHerrera2A11

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crediblewitnesses. Protest; when to be made When a bill is protested, such protest must be made on the day of its dishonor unlessdelayisexcusedashereinprovided.Whenabillhasbeendulynoted,theprotestmaybesubsequently extendedasofthedateofthenoting. Protest; where made A bill must be protested at the place where it is dishonored, except that when a bill drawn payable at the place of business or residence of some person other than the drawee has been dishonoredbynonacceptance,itmustbeprotestedfornonpaymentattheplacewhereitisexpressedtobe payable,andnofurtherepresentmentforpaymentto,ordemandon,thedraweeisnecessary. Protestbeforematuritywhereacceptorisinsolvent Wheretheacceptorhasbeenadjudgessbankruptoran insolventorhasmadeanassignmentforthebenefitofcreditorsbeforethebillmatures,theholdermaycause thebilltobeprotestedforbettersecurityagainstthedrawerandindorsers. When protest dispensed with Protest is dispensed with by any circumstances which would dispense with notice of dishonor. Delay in noting or protesting is excused when delay is caused by circumstances beyond control of the holder and not imputable to his default, misconduct, or negligence. When the cause of delay ceasestooperate,thebillmustbenotedorprotestedwithreasonablediligence. When notice is dispensed with Notice of dishonor is dispense with when, after the exercise of reasonable diligence,itcannotbegiventoordoesnotreachthepartiessoughttobecharged. Waiverofprotest Awaiverofprotest,whetherinthecaseofaforeignbillofexchangeorothernegotiable instrument,isdeemedtobewaivernotonlyofformalprotestbutalsoofpresentmentandnoticeofdishonor. Protestwherebillislostandsoforth Whenabillislostordestroyedoriswronglydetainedfromtheperson entitledtoholdit,protestmaybemadeonacopyorwrittenparticularsthereof. When bill may be accepted for honor When a bill of exchange has been protested for dishonor by non acceptance or protested for better security and is not overdue, any person not being a party already liable thereonmay,withtheconsentoftheholder,interveneandacceptthebill supra protestforthehonorofany party liable thereon or for the honor of the person for whose account the bill is drawn. The acceptance for honormaybeforpartonlyofthesumforwhichthebillisdrawn;andwheretherehasbeenanacceptancefor honorforoneparty,theremaybeafurtheracceptancebyadifferentpersonforthehonorofanotherparty. Refereeincaseofneed Thedrawerofabillandanyindorsermayinsertthereonthenameofapersonto whomtheholdermayresortincaseofneed;thatistosay,incasethebillisdishonoredbynonacceptanceor nonpayment. Such person is called a referee in case of need. It is the option of the holder to resort to the refereeincaseofneedornotashemayseefit. Who may make payment for honor Where a bill has been protested for nonpayment, any person may interveneandpayitsupraprotestforthehonorofanypersonliablethereonorforthehonorofthepersonfor whoseaccountitwasdrawn. WhenpayableondemandAninstrumentispayableondemand: a. Whenitissoexpressedtobepayableindemand,atsight,oronpresentation b. Inwhichnotimeforpaymentisexpressed Whereaninstrumentisissued,accepted,orindorsedwhenoverdue,itis,asregardsthepersonso issuing,accepting,orindorsingit,payableondemand. Rulewhereinstrumentpayableatbank Wheretheinstrumentismadepayableatabank,itisequivalentto anordertothebanktopaythesamefortheaccountoftheprincipaldebtorthereon. Bills in set constitute one bill Where a bill is drawn in a set, each part of the set being numbered and containingareferencetotheotherparts,thewholeofthepartsconstitutesonebill. Rightofholderswheredifferentpartsarenegotiated Wheretwoormorepartsofasetarenegotiatedto different holders in due course, the holder whose titles first accrues is, as between such holders, the true ownerofthebill.Butnothinginthissectionaffectstherightifapersonwho,induecourse,acceptsorpaysthe partsfirstpresentedtohim Liabilityofholderwhoindorsestwoormorepartsofasettodifferentparsons Wheretheholderofaset indorsestwoormorepartstodifferentpersonsheisliableoneverysuchpart,andeveryindorsersubsequent tohimisliableontheparthehashimselfindorsed,asifsuchpartswereseparatebills. Acceptanceofbilldrawninsets Theacceptancemaybewrittenonanypartanditmustbewrittenonone partyonly.Ifthedraweeacceptsmorethanonepartandsuchacceptedpartsnegotiatedtodifferentholdersin duecourse,heisliableoneverysuchpartasifitwereaseparatebill. Payment by acceptor of bills drawn in sets When the acceptor of a bill drawn in a set pays it without requiringthepartbearinghisacceptancetobedelivereduptohim,andthepartatmaturityisoutstandingin thehandsofaholderinduecourse,heisliabletotheholderthereon. EffectofdischargingoneofasetExceptashereinotherwiseprovided,whereanyonepartofabilldrawnina KHerrera2A11

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setisdischargedbypaymentorotherwise,thewholebillisdischarged. Thevendoringoodfaithshallberesponsiblefortheexistenceandlegalityofthecreditatthetimeofthesale, unless it should have been sold as doubtful; but not for the solvency of the debtor, unless it has been so expresslystipulatedorunlesstheinsolvencywaspriortothesaleandofcommonknowledge. WEEK12 Instrument;howdischargedAnegotiableinstrumentisdischarged: a) Bypaymentinduecoursebyoronbehalfoftheprincipaldebtor; b) Bypaymentinduecoursebythepartyaccommodated,wheretheinstrumentismadeoracceptedfor hisaccommodation; c) Bytheintentionalcancellationthereofbytheholder; d) Byanyotheractwhichwilldischargeasimplecontractforthepaymentofmoney; e) Whentheprincipaldebtorbecomestheholderoftheinstrumentatoraftermaturityinhisownright. Rightofaholdertosue;paymentTheholderofanegotiableinstrumentmaysuethereoninhisownname; andpaymenttohiminduecoursedischargestheinstrument. What constitutes payment in due course Payment is made in due course when it is made at or after the maturityofthepaymentoftheholderthereofingoodfaithandwithoutnoticethathistitleisdefective. Thepaymentofdebtsinmoneyshallbemadeinthecurrencystipulated,andifitisnotpossibletodeliversuch currency,theninthecurrencywhichislegaltenderinthePhilippines. The delivery of promissory notes payable to order, or bills of exchange or other mercantile documents shall produce the effect of payment only when they have been cashed, or when through the fault of the creditor theyhavebeenimpaired. Inthemeantime,theactionderivedfromtheoriginalobligationshallbeheldintheabeyance. Cancellation; unintentional; burden of proof A cancellation made unintentionally or under a mistake or withouttheauthorityoftheholder,isinoperative.Butwhereaninstrumentornaysignaturethereonappears to have been cancelled, the burden of proof lies on the party who alleges that the cancellation was made unintentionallyorunderamistakeorwithoutauthority. Renunciation by holder the holder may expressly renounce his rights against any party to the instrument before,at,orafteritsmaturity.Anabsoluteandunconditionalrenunciationofhisrightsagainsttheprincipal debtor made at or after maturity of the instrument discharges the instrument. But a renunciation does not affect the rights of a holder in due course without notice. A renunciation must be in writing unless the instrumentisdelivereduptothepersonprimarilyliablethereon. Alterationofinstrument;effectofWhereanegotiableinstrumentismateriallyalteredwithouttheassentof all parties liable thereon, it is AVOIDED, except as against a party who has himself made, authorized, or assentedtothealterationandsubsequentindorsers. Butwhenaninstrumenthasbeenmateriallyalteredandisinthehandsofaholderinduecoursenotapartyto thealteration,hemayenforcepaymentthereofaccordingtoitsoriginaltenor. WhatconstitutesamaterialalterationAnyalterationwhichchanges: a) Thedate; b) Thesumpayable,eitherforprincipalorinterest; c) Thetimeorplaceofpayment; d) Thenumberortherelationsoftheparties; e) Themediumorcurrencyinwhichpaymentistobemade; Orwhich addsaplaceofpaymentwherenoplaceofpaymentisspecified,oranyotherchangeoraddition whichalterstheeffectoftheinstrumentinanyrespect,isamaterialalteration. WEEK13 When persons secondarily liable on the instrument are discharged A person secondarily liable on the instrumentisdischarged: a) Byanactwhichdischargestheinstrument; b) Bytheintentionalcancellationofhissignaturebytheholder; c) Bythedischargeofapriorparty; d) Byavalidtenderorpaymentmadebyapriorparty; e) Byareleaseoftheprincipaldebtorunlesstheholdersrightofrecourseagainstthepartysecondarily liableisexpresslyreserved; f) Byanyagreementbindingupontheholdertoextendthetimeofpaymentortopostponetheholders KHerrera2A11

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righttoenforcetheinstrumentunlessmadewiththeassentofthepartysecondarilyliableorunless therightofrecourseagainstsuchpartyisexpresslyreserved. Cancellation; unintentional; burden of proof A cancellation made unintentionally or under a mistake or withouttheauthorityoftheholder,isinoperative.Butwhereaninstrumentornaysignaturethereonappears to have been cancelled, the burden of proof lies on the party who alleges that the cancellation was made unintentionallyorunderamistakeorwithoutauthority. StrikingoutindorsementTheholdermayatanytimestrikeoutnayindorsementwhichisnotnecessarytohis title.Theindorserwhoseindorsementisstruckout,andallindorsessubsequenthim,aretherebyrelievedfrom liabilityontheinstrument. Renunciation by holder the holder may expressly renounce his rights against any party to the instrument before,at,orafteritsmaturity.Anabsoluteandunconditionalrenunciationofhisrightsagainsttheprincipal debtor made at or after maturity of the instrument discharges the instrument. But a renunciation does not affect the rights of a holder in due course without notice. A renunciation must be in writing unless the instrumentisdelivereduptothepersonprimarilyliablethereon. Rightsofpartiesastoqualifiedacceptancetheholdermayrefusetotakeaqualifiedacceptanceandifhe does not obtain an unqualified acceptance, he may treat the bill as dishonored by nonacceptance. Where a qualifiedacceptanceistaken,thedrawerandindorsersaredischargedfromliabilityonthebillunlesstheyhave expressly or impliedly authorized the holder to take a qualified acceptance, or subsequently assent thereto. Whenthedraweroranindorserreceivesnoticeofaqualifiedacceptance,hemust,withinareasonabletime, expresshisdissenttotheholderorhewillbedeemedtohaveassentedthereto. Effectofwantofdemandonprincipaldebtor Presentmentforpaymentisnotnecessaryinordertocharge thepersonprimarilyliableontheinstrument;butiftheinstrumentis,byitsterms, payableataspecialplace, andheisableandwillingtopayitthereatmaturity,suchabilityandwillingnessareequivalenttoatenderof payment upon his part. But except as herein otherwise provided, presentment for payment is necessary in ordertochargethedrawerandindorsers. WhenfailuretopresentreleasesdrawerandindorserExceptashereinotherwiseprovided,theholderofa billwhichisrequiredbythenextprecedingsectiontobepresentedforacceptancemusteitherpresentitfor acceptance or negotiate within reasonable time. If he fails to do so, the drawer and all indorsers are discharged. To whom notice of dishonor must be given Except as herein otherwise provided, when a negotiable instrumenthasbeendishonoredbynonacceptanceornonpayment,noticeofdishonormustbegiventothe drawerandtoeachindorser,andanydrawerorindorsertowhomsuchnoticeisnotgiven. Effect where the holder of check procures it to be certified Where the holder of a check procures it to be acceptedorcertified,thedrawerandallindorsersaredischargedfromliabilitythereon. Rights of a party who discharges instrument Where the instrument is paid by a party secondarily liable thereon,itisnotdischarged;butthepartysopayingitisremittedtohisformerrightsasregardallpriorparties, andhemaystrikeouthisownandallsubsequentinsdorsementsandagainnegotiatetheinstrument,except: a) Whereitispayabletotheorderofathirdpersonandhasbeenpaidbythedrawer;and b) Whereitwasmadeoracceptedforaccommodationandhasbeenpaidbythepartyaccommodated. WhenpriorpartymaynegotiateinstrumentWhereaninstrumentisnegotiatedbacktoapriorparty,such partymay,subjecttotheprovisionsofthisAct,reissueandfurthernegotiatethesame.Butheisnotentitledto enforcepaymentthereofagainstanyinterveningpartytowhomhewaspersonallyliable.

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