AW Negotiable Instrument NEGOTIABLE INSTRUMENTS LAW TRUMEN Itis a written contract payment of money and passes from one person to another as n in such manner as 2 holder in due course the fight to hold the instru ree. from defense available to prior patties (SUNDIANG & AQUINC Requisites (WU-POA) Just ng and signed by the maker or Must contain an Unconditional proftiise or order to pay a sunt certain in mone Must be Payable on demand, or at a fixed or 1. Must be payable to Order or to bea hen the instrument is Addressed to a dravree, he must be named INSTRUMENTS LAW. § Governing Laws Negotiable Instruments Law (Act No. 2031) The provisions of the NIL apply ONLY to negotiable instruments, (AQUINO, Notes and Cases. on Banking Lews and Negotiab inst Law (2044), p.3-fhereinatter AQUINO, Negotiable Instruments) Note: If the instrument is not negotiable, the pertinent provisions of th i Code _ot perfinent special laws should apply ( G.R. No. L-40824, February 23. 1989) 2 Code of Commerce — Negotiable instruments are also governed by the provisions of the Code {Commerce that were not impliedly repealed fi the NIL. (AQUINO, supra at 2). FRECUTIVE COMMITTEE SUBJECT COMMITTEE TARIA REGGIELEENE.§. CARL. RON. F. VILLAMIL DIONISIO over-all chairperson, subject chair, LAARNT. A. LYAND, Me JUANICO CABRERA sistant subj hairperson for mic chair, JAVZEN SMITH T "1 TYRONE LEWIS TD. FERRER edp, MARY JUDIT ONG» chair fl operations. DANIEL P. A NA ALYZ TEFFERSON fh FERNANDT Cpr ee-chairperson for secretntiat, inst Ta, JUSTINE haiperson for finance, EROL, intellect pr TEPIEN B. PISEC JENNEL st PATRICK STEPITEN —instran KLARENCE vecks are still sion in the NIL Note for that deals with cro hhecks (Chan Wan v Tan K 15360, September 30, 1960) 3, Civil Code (R.A. 386) — Applies suppletorily Functions (SMC-PP) 1. Itoperates as a Substitute for money Lis a Medium of exchange. It is a Credit instrument that incteases credit Itincreases the Purchasing power in circulation. 5. tis a Proof of transaction 2) instrument is not a legal tender (id. at Money Money commonly tn ash or government bills, hotes arid coin re means to buy goods 0 services oF indebtedness: they are medium of exchange and \ PAL Negotiable Instruments Law [ pS) Legal Tender Without referring ticular country, it is: that kind of currency which the law compels a creditor t feceive in payrment of a debt, be il public, or privat provided itis tendered in the right amount All notes and coins issue .e Bangko Sentral shall be fully guaranteed by the Government of the Republic of the Philippines and shall be the le tender in the Philippines for all debts, both pu and_ private (NEW RAL BANK ACT (RA 7653), Sec 537, Series of 2006) Maximum Amount of Coins Considered as Legal Tend: PS P1000 MEMBER: KRISTINE EJERCITC TRAY PDIONF ERI RECINT: RA FR ELLISON,Checks representing demand deposits do not have legal tender power and their acceptance in the payment of debis, both public and private, is at the option of the creditor: Provided, however, that a check which has been cleared and credited to the account of the creditor shall be equivalent to a delivery to the creditor of cash in an amount equal to the amount credited to his account (NCBA, Sec. 60). Impairment Clause The delivery of promissory notes payable to order, sa 3 or bills of exchange or other mercantile shall produce the effect of payment/ai have been encasher!) or when thr ‘of creditor, they have Beeh impaired (CIVIL CODE, Art. 1249). Features 1. Negotiability ~ It is What altibute or property whereby a bill or nbta ior checkemay-pass:from hand to hand similar fo Mroney, g0 as to give the holder in due coursesthe right to hpld_ the instrument and to collest the sym ‘payable for himself free from personal defenses /AQUINO, supra at 11-12) ‘Accumulation of Secondary |Contracts When negotiable instruments through negotiation, secondary ante accumulated because the indorsers. Secondary liable not ‘only 6. theit in transferees, but also to any holder of any These indorsers are abla, to said ‘holder whoever may be comple) to Bay the instruments (Iie). KINDS OF NEGOTIABLE INSTRUMENT: Promissory Note (PN) Itis 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 (NIL, Sec. 184). Parties 4. Maker — person who makes the promissory note ‘and promises to pay the amount stated therein; Payee - person who is to receive payment (AQUINO, supra at 18). 2 SAN BEDA COLLEGE OF Law “NEGOTIABLE INSTRUMENTS LA anemia W seis i May 1, 2095 | Manila | pt0,000 poe Ten (10) days ater date, 1 promise to pay to Mr. A or order the sum of ten thousand pesos (10,000), He faker <— Sad. Mr. B Payee Kinds 1. Certificate of deposit — a form of promissory note which is a written acknowledgment of a bank of its receipt of a certain sum with a promise to repay the same. Bond — certificate or evidence of a debt on which the issuing company or governmental body promises to pay the bondholders a specified amount of interest for a specified lengthisefi.time and to repay the loan on exp Deane is a promigorynote backed by general credit of a corporation and usually not Sectited by a mortgage pr lien on any specific property, Bank. nata/S/ promissory note of the issuing bank which, is payable to bearer on demand H(AQUINO, spre at 15:17). Bill of Exchange (BoE) ae reap ‘order, in writing, addressed my on to arither, signed by the person : " fequiring the person to whom it is BREE so Sa 08 derand or ol ted or mingble (fufurey time, @ sum certain in money, tO order 9r to bearer (NIL, Sec. 126). ties, y Drawer — pers@n who draws the bill of exchange and orders the drawee to pay a sum certain in mofey; Drawee the person to whom the order to pay Is addressed in. bill of exchange. He becomes the|aegeptor when he accepts the order to pay ‘made by thé drawer. It is only when he becomes an-acceptor that he becomes primarily liable (SUNDIANG & AQUINO, supra at 13). Pa % Thus, prior to the acceptance of a bill of exchange, there is no party primarily liable. Legal Basis: A bill of itself does not operate as ‘an assignment of funds in the hands of the drawee available for payment thereof, and the drawee is not liable until and unless he accepts the same (NIL, Sec. 127) 3. Payee — party in whose favor the bill is drawn or is payable.: NEGOTIABLE INSTRUMENTS LAW e | May 1, 2015 Payee, Manila 10, 000 Ten (10) days after date, pay Mr_A or order the sum ten thousand pesos (10,000). Drawer « To: Mr.Z, —> Drawee / Acceptor President, XYZ Corp | Mendiola, Manila The patties need not all be distinct persons. Indeed, a bill wll be valid where there is only one party to it for one may draw on himself payable 10 his own order, that is, the two parties to the bill can be the same person (DE LEON, The Philippine Negotiable, Instruments Law (and alied laws) Agnotatéd (2013), P.23 [hereinafter DE LEON, Negotiable Instruments: Law). Kinds (ST?-BC’D) 1. Sight or demand aft — payable, when. the holder presents it fot Baymert 2.. Time draft - payable ata fixed date 3. Trade acceptance .=\the seller (as drawer) orders the buyer (as Brawee) to pay/& sum Certain to the same seller (payee). 4. Banker's acceplance,~ atime draff across fhe face of which the drawép bank has written/the word “accepted.” The bahk i normally an accommodation payor that lends it cred to the buyer, who in. return) will paypsthessbank. commissions and other charges. Clean bill of exchange = no dooument is attached when presentment for payment oF acceptance is made. 6. Check — it is the most'GomMmon form Of Bill of exchange. It is a bill of éx¢hafiye drawn of a bank payable on demand (Nikj-See. 185) 7. Documentary bill of exchange. "documents is/are attached when preseniéd:tor aymient oF acceptance (AQUINO, supra at 14245). Promissory Note v. Bill of Exchange Prom ged een ict Unconditional order. ERI | Unconditional | Involves three (3) | | parties. | Involves two (2) parties. | However, a drawee is not a party until he accepts the bill Drawee-acceptor is Maker is primarily | primarily liable. Drawer liable. is only secondarily liable. May involve two. (2) ents: nly one (1 robert for 1) for acceptance (in farina cases. provided in. Sec. 143), and 2) for | payment Right to limit liability Maker of nole may not | Drawer may insert in the insert an express | instrument an express stipulation limiting or | stipulation limiting or negating his own liability | negating his own liability to the holder (NIL, Sec. | to the holder (NIL, Sec. 61). 61). (ld. at Instances when a Bill of Exchange may be TREATED-as a Promissory Note at the election of the HOLDER: (CAFS) Ae DtaWee does not have the Capacity to contract (NIL, See. 130), 2: pWhere the bill is AmbigtloUS that there is doubt whether itis a bill or note (NIL, Sec.17(e)). 3) [Drawes is a fictitious perscn (NIL, Sec. 130); or 40 'The “drawer “and the drawee are the Same“ personi{Nils Sec 130), Bill of Excharige v. Check Ceaser ied May be. payable-/on demand or at a fixed or determinable, ¢tulure tie Always demand. payable _ on Need not be presented Must Joe! preseited- tor | fo" poses However i fe holst cochighce fa) See ppeifics | requis ara | banker desires, banker may accept. NSSUNOT Ee rannon Meieet sence soa Rocbery iat no "| oravn on dap drawer of biter | olerwise, there would erchange should have _| be aus (SUNDIANG & funds the hands ofthe] AQUING, supa al) trawee(SUNDIANG & AQUINO supra at Ue oye ned May be presented for payment win feoronable_tine ‘ater reasonable We ater east negation (ML | uae (ML, 100) See eee Must be presented for payment within a it accepted - drawer | "Seid = crawed [ndorser remains abi, | reer re SAN BEDA COLLEGE OF LAW