JULY 7, 2015

Q: What are the two general types of negotiable instruments? Define.

A: Promissory Note and bill of exchange
Section 184. A negotiable promissory note within the meaning of this Act is an
unconditional promise in writing made by one person to another, signed by the maker,
engaging to pay on demand, or at a fixed or determinable future time, a sum certain in
money to order or to bearer.
** What is not included in relation to Sec. 1: (e) where the instrument is addressed to a
drawee, he must be named or otherwise indicated therein with reasonable certainty.
Sec 126. A bill of exchange is an unconditional order in writing addressed by one person
to another, signed by the person giving it, requiring the person to whom it is addressed
to pay on demand or at a fixed or determinable future time a sum certain in money to
order or to bearer.
Q: What is a check?
Sec 185. A check is a bill of exchange drawn on a bank payable on demand.
Q: What is the position of the bank?
A: Drawee. Payable of demand. So, wait for the date to be payable on demand.
Q: Who are the parties to the negotiable instrument?
A: Promissory Note: Maker and payee. So if handed to another, there is the acceptor/
indorsee or indorser. Bill of exchange: drawer, drawee, Payee. After transferred, the
person is indorsed/indorsee.
Q: who cant be a holder?
A: Promissory Note: Holder because primarily liable of the instrument.
Bill of exchange: Drawee, because he is the one ordered to pay.
The holder can demand payment. He is the person in possession of the instrument
hence, becomes the owner. There must be possession and legal title.
Types of holder:
1. Due course
Sec. 52. A holder in due course is a holder who has taken the instrument under
the following conditions: chanroblesvirtuallawlibrary
(a) That it is complete and regular upon its face;
** Complete means compliance with Sec 1 of NIL; regular means no alteration,
superimpositions, or anything that causes suspicion.

(b) That he became the holder of it before it was overdue, and without
notice that it has been previously dishonoured, if such was the fact;
**that it be negotiated before maturity. Dishonored by non acceptance. If not
accepted by drawee, it means its dishonoured.
Dishonored by non-acceptance = dishonoured by non-payment.
If it doesnt reach maturity, its not dishonoured by non-payment.
(c) That he took it in good faith and for value;
**absence bad faith; for value is the consideration that must be sufficient to
support a contract (money, services, obligations, properties etc.). Love and
affection doesnt give value.
(d) That at the time it was negotiated to him, he had no notice of any infirmity in
the instrument or defect in the title of the person negotiating it.
** Infirmity like unsigned or signed but with a different intent.
Defect: have known that it was stolen.
So, C-O-F-I for, complete, overdue, faith/value and Infirmity.