An instrument to be negotiable must conform: (a) It must be in writing and signed by the maker or drawer (b) It must contain an unconditional promise or order to pay a sum certain in money (c) Must be payable on demand or at a fixed or determinable future time (d) Must be payable to order or bearer (e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty Commercial paper written promises or obligations that arise out of commercial transactions Negotiable Instrument obligation to pay money
contractual
*negotiable or non-negotiable depends
entirely on its form and content *a valid instrument is not necessarily negotiable In determining negotiability of an instrument, ff. must be considered: (1) The whole of the instrument (2) Only what appears on the face of the instrument; and (3) The provisions of the NIL especially in Section 1 must meet in order to be negotiable Applicability of formal requirements
(1) Subsections (a) to (d) are necessary in
order that a promissory note may be negotiable while subsections (a) to (e) are necessary in order that a bill of exchange may be negotiable (2) Under (a) Maker person issuing promissory note Drawer person issuing bill of exchange (3) Under (b), instrument must contain unconditional promise if it is a promissory note unconditional order if it is a bill of exchange (4) Subsections (c) and (d) are both applicable to each of the two kinds of instruments, but subsection (e) is applicable only to bills of exchange
Formal requirements explained
(1) The instrument must be in writing. The term instrument indicates writing. (a) Writing includes also that which is in print or has been typed. (usual way written or printed in durable paper) (b) No such thing as an oral negotiable instrument. (difficult to determine liability & create danger of fraud) (2) The instrument must be signed by the maker or drawer. General rule placed at the lower right hand corner of the instrument It may appear in any part thereof, it will be valid and binding as long as it appears that a person intended to make the instrument his own. (a) His signature is prima facie evidence of his intention (b) Signature is usually written, preferable that full name or at least surname should appear. (c) Genuineness of signature is denied, the party against whom it operates
must provide evidence of its
invalidity. (so as the party asserting its validity)
(3) The instrument must contain an
unconditional promise or order to pay. Must contain either a promise to pay or an order to pay.
(4) The instrument must be payable in a
sum certain in money. (reason) money is the one standard of value in actual business Money medium of exchange authorized or adopted by a domestic or foreign government as part of its currency Legal tender that currency which a debtor can legally compel a creditor to accept (5) The instrument must be payable at a fixed or determinable future time or on demand. (Sec. 4&7) (6) The instrument must be payable to order. (Sec. 8) (7) The instrument must be payable to bearer. (Sec. 9) (8) The drawee must be named. Applies only to bills and checks. (a) Bill would be sufficient if the drawee is indicated therein with reasonable certainty though he is not named. (b) (reason) to enable the payee or holder to know upon whom he is call for acceptance or payment (c) A promissory note has no drawee. (payee must be named with reasonable certainty)
Non-negotiable instrument
Instrument which is not negotiable
Instrument which does not meet the requirements laid down to qualify an instrument negotiable Instrument which in its inception was negotiable but has lost its quality of negotiability
(a) N.I. ceases to be negotiable if the
indorsement prohibits the further negotiation of the instrument. (b) Non-N.I. may be assigned or transferred (c) Transfers of non-N.I. are governed by the provisions of the Civil Code on assignment of contract rights. (d) Persons who transfer or assign contractual or non-negotiable rights pass only the rights that they had.
Promissory note a written promise to pay a
sum of money. It may be a demand instrument but it is normally a time instrument.
Original parties to a promissory note
This class of N.I. is a promise paper, or twoparty paper. (1) 2 parties in a promissory note Maker one who makes the promise and signs the instrument Payee the party to whom the promise is made or instrument is payable (2) Payee may be specifically designated by name, office, title, or may be unspecified. (3) He may seek payment personally or further negotiate the instrument. (4) Makers signature must appear on the face of the note for him to be liable person.
Place and date are not essential to the
negotiability of the instrument except in certain cases. for value received consideration given for the note (consideration is presumed) I promise to pay absolute and unconditional promise to pay the payee or to a holder. (essential) to the order of or order indicate a promise to pay as ordered or commanded by the payee on or before September 5, 2013 indicate the date of maturity or the time when the promise to pay is to be fulfilled Not all instruments are payable at a fixed future time. Where no time for payment is expressed, an instrument is payable on demand.
Bill of exchange an order made by one
person to another to pay money to a third person (check most common type of B.O.E.)
Original parties to a bill of exchange
This class of N.I. is known as order paper, or three-party paper. (1) Drawer person who issues and draws the order bill (2) Drawee the party upon whom the bill is drawn, the person to whom the bill is addressed, who is ordered and expected to pay Becomes an acceptor when he indicates his willingness to pay the bill. (3) Payee the party in whose favor the bill is originally issued or is payable
Idea and purpose of a bill of exchange
(1) Drawers funds in hands of drawee. The drawer has funds in the hands of the drawee which the former desires to be paid to the payee. (2) Liability of drawee for non-payment. If drawee accepts primarily liable to holder If drawee refuses liable to drawer