NEGOTIABLE INSTRUMENTS LAW
Morillo Notes
INTRODUCTION
AND
GENERAL PROVISIONS
Q: What is Negotiable Instrument Law?
A: ___
Q: What is a negotiable instrument?
A: Any instrument that complies with the requirements
imposed under Sec. 1 of the Negotiable Instrument Law.
Some Definition of Terms under Sec. 191, NIL:
 Acceptance – an acceptance completed by delivery or
notification;
 Action – includes counterclaim and set-off;
 Bank – any person or association of persons carrying on
the business of banking, whether incorporated or not;
 Bearer – the person in possession of a bill or note which is
payable to bearer;
 Bill and Note – Bill means Bill of exchange, while Note
refers to Promissory Notes;
 Delivery – the transfer of possession, actual or
constructive, from one person to another;
 Holder – the payee or indorsee of a bill or notes who is in a
possession of it, or the bearer thereof;
 Indorsement – an indorsement completed by delivery;
 Instrument – means negotiable instrument;
 Issue – the first delivery of the instrument, complete in
form, to a person who takes it as a holder;
 Person – includes a body of persons, whether
incorporated or not;
 Value – means valuable consideration;
 Written – includes printed; and
 Writing – includes print.
Q: What is the purpose of the Negotiable Instrument Law?
A: The purpose of the law is to facilitate, and not hinder or
hamper the transactions of commercial papers [State
Investment House, Inc. vs. CA, 217 SCRA 32]
Q: What are the functions or importance of a negotiable
instrument?
A:
1. As a substitute for money;
2. As a medium of exchange for most commercial
transactions
3. As a medium of credit transactions;
4. As a means, in the case of check, of making
immediate payment
Q: What are the characteristics or features of a negotiable
instruments?
A:
1. Negotiability – A negotiable instrument may pass
from hand to hand similar to money, as to give
holder in due course the right to hold the instrument
and collect the sum payable for himself free from
any defect in the titl of any of the parties, or
defenses available to them among themselves.
[Secs. 52 & 57, NIL]
2. Accumulation of Secondary Contracts – negotiable
instruments are transferred from one person to
another.
Q: What is the theory of negotiable instruments?
A: By sending a negotiable instrument into the world, the
maker thereof is estopped from urging, as against a
bona fide holder who has received it from anyone in
possession, a defect of title. The holder, though without
title, has the capacity to give title because he is the
apparent owner of the instrument. [Manhattan Savings
vs. New York National Bank, 62 NE 1079]
Q: What are the forms of negotiable instruments?
A:
Common Special
 Promissory notes  Certificates of deposits;
 Bills of exchange **
 Bank check ***  Bank notes; **
 Due bills; **
 Bonds; **
 Drafts;
 Trade acceptances; ***
and
 Banker’s acceptances
***
Notes: ** - Special types of promissory notes
*** - Special types of bills of exchange
Q: What is the generally rule when there is doubt in the
interpretation of a negotiable instruments?
A: Where the meaning of the negotiable instrument is
doubtful, the courts have shall resolve the said doubt in
favor of the negotiability of the instrument. The purpose
is to encourage the free circulation of the negotiable
papers because of the admittedly indispensable function
they perform in mercantile business transactions in any
given country and the world at large. [De Leon,
Philippine Negotiable Instruments Law, 2016, p. 8]
Q: Who are persons primarily liable on the instrument?
NEGOTIABLE INSTRUMENTS LAW 1
 NEGOTIABLE INSTRUMENTS LAW
Morillo Notes

A: These are the persons who, by the terms of the

instrument, is absolutely required to pay the negotiable
instrument. All other parties are “secondarily” liable.
[Sec. 192, NIL]

Q: What are the similarities and differences between

Contracts and Negotiable Instruments?
A:

TITLE 1
NEGOTIABLE INSTRUMENTS IN GENERAL

CHAPTER 1 – FORM AND INSTERPRETATION

Q: __

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