8/30/18

1. Section 9. Payable to bearer

1. when it is expressed to be so payable
2. when it is payable to a person named therein or to bearer
EX. I promise to pay to bearer
EX. I promise to pay to X or bearer
“I promise to pay to bearer X"
bearer is not a word of negotiability but merely descriptive of X
3. when it is payable to the order of a fictitious or non-existing person and
such fact was known to the person making the instrument
EX. I promise to pay P1,000 to Superman or order
knows Superman does not exist: bearer instrument
does not know: non-negotiable because it cannot be issued
4. when the name does not purport to be the name of a person
EX. Pay to the order of Cash
“pay to cash"
not negotiable as it lacks words of negotiability
5. when the last or only indorsement was in indorsement in blank
in instruments payable to order where at the back, the instrument no
longer contain a specific person to whom the instrument can be
negotiated thus it is intended to become a bearer instrument
order instrument converted into a bearer instrument
2. Section 8. Payable to order
where the instrument is drawn payable to the order of a specified person or
to him or his order
1. payee who is not the maker, drawer, or drawee
2. drawer or maker
3. drawee
4. two or more payees jointly
required that all payees make the indorsement
5. one or more of several payees
6. holder of an office for the time being
3. Section 19. Signature by agent
GR: person has to sign on the instrument to be liable on such instrument
EXC: person signs an instrument but will not be held liable
agent
duly authorized
indicate representative capacity
disclose principal
 EX. XYZ Corp … by: JG (sgd.)
minor
corporation
4. Section 22. Indorsement by minor or corporation
minor
able to sign an instrument but it will ot hold himself liable
corporation
able to sign an instrument but if the corporation is not authorized
to engage in such transaction then it will also not be held liable and the
one who signs will be personally liable
considered an ultra vires act
a person dealing with a corporation is behooved to require
the presentation of abroad resolution or a secretary certificate
5. Section 21. Signature by procuration
signing of an agent in a agency limited in it authority
agent can only bind the principal if he acts within the limit of his authority
“Pre Proc” to serve as a notice to whoever is dealing with the instrument
to inquire as to limit of his or her liability
6. Section 6. Omissions
it is not dated
law presumes it is the date of issuance
does not specify the value given or that any value had been given therefor
law presumes consideration was given
does not specify the place where it was drawn or where it is payable
law presumes it is the residence or principal place of business of the
person principally liable
maker; or
drawee-acceptor
bears a seal
copied from US
has no bearing of PH instruments as they need not be notarized to be
negotiable
designates a particular kind of current money in which payment is to be
made
refers to foreign instruments issued abroad which are payable in PH thus
there is a need exchange the currency into PH currency as payment
to payee or bearer
does not mean that you need not indicate the currency as involved
otherwise you will not know what to pay to the payee
7. Section 10. Terms, when sufficient
sufficient for as long as the terms clearly indicate the intention to conform to
the requirements
 EX. “Please” pay to P or order P10,000
still negotiable as long as it contains words of negotiability
8. Section 13. When date may be inserted
instances
1. when the instrument is payable at a fixed period after date but is
undated
2. when the instrument is payable at a fixed period after sight but the
acceptance is undated
purpose
date is to be inserted in order to ascertain the date of maturity
insertion of wrong date
does not avoid the instrument in the hands of a subsequent holder in due
course
date so inserted is regarded as the true date
9. Section 12. Ante-dating and post-dating
GR: allowed, instrument is not invalid for the sole reason that it is ante-dated or
post-dated
ante-dated: making it appear that the instrument was issued earlier
post-dated: making it appear that the instrument was issued later
EXC: illegal or fraudulent purpose
invalid and illegal but does not affect negotiability
negotiability is determined from the face of the instrument and
Section 1
validity =/= negotiability
EX. ante-dating to hasten maturity, ante-dating to gain more interest
GR: date so inserted is regarded as the true date
EXC: holder is not in due course then the maker or drawer can set up the
defense of insertion of wrong date
10. Section 52. Holder in due course [COFI]
1. complete and regular upon its face
2. became a holder before it was overdue and without notice of
previous dishonor, if such was the fact
3. took it in good faith and for value
4. at the time it was negotiated to him, he had no notice of an infirmity in
the instrument or any defect in the title of the person negotiating it
11. personal defense
cannot be set up against a HDC or HtHDC
must by inferred by the particular provisions in NIL
12. Section 58. Shelter principle
HNDC is grant all the rights of a prior holder as to any prior parties
derives his title through a HDC
not himself a party to the fraud or illegality
13. Section 59. Prima facie HDC
every holder is deemed prima facie to be a HDC
14. Section 65. Warranties
every person negotiating an instrument by delivery or by qualified indorsement
warrants
1. instrument is genuine and in all respects what it purports to be
2. he has a good title to it
3. all prior parties had the capacity to contract
4. no knowledge of any fact that would impair the validity of the
instrument or render it valueless
when negotiation is by delivery only then the warrant extends in favor of
no holder other than the immediate transferor