Negotiable

Instruments Law
GROUP 1
ABAGA, AGUILA, BAGING, BERNARDO, BOLANTE
Bill of Exchange
Article 126
EIANN ABAGA
Article 126
Bill of Exchange
A Bill of Exchange is unconditional Order in
writing addressed by one person to another,
signed by the person to another, signed by the
person giving it, requiring the person whom it is
addressed to pay on demand or at fixed or
determinable future time a sum certain in money
to order or to bearer.
BILL V. NOTE
BILL NOTE
CONTENT Contains an Unconditional Order Contains an Unconditional
addressed by one person to Promise made by one person to
another requiring the latter to pay another to pay it.
the instrument.
PARTIES Three Parties: Two Parties:
- Drawer - Maker
- Drawee - Payee or Bearer
- Payee or Bearer
LIABILITY The drawer, the one who issues The Maker, the one who issues
the instrument, is only secondarily the Instrument, is Primarily Liable
liable.
BILL V. NOTE
BILL
INDORSEMENT Drawn payable to the drawer’s
own order is complete without
indorsement, provided it has been
accepted by the Drawee.
PRESENTMENT FOR ACCEPTANCE Must be presented for acceptance
in certain cases (sec 143)., the
drawee is not liable unless and
until he accepts the same.
PRESENTMENT FOR PAYMENT Payable on demand must be
presented for payment within
reasonable time from its last
negotiation.
NOTE
Drawn payable to the maker’s
own order is not complete until
indorsed by him.
There is no need of presentment
for acceptance.
Payable on demand must be
presented for payment within a
reasonable time from its issue.
Other Class
Foreign Bill of Exchange a bill drawn in one state or country payable in
another state or county
Draft A bill of exchange payable:
a. On demand or at sight ( sight or demand draft)
( if drawn by a bank against its branch or another bank – Bank b. Definite future time or some future
Draft)
determinable time (time draft)
e.g. Cashier check

Trade Acceptance A draft or bill of exchange drawn by a seller on the

purchaser of goods and accepted by latter by
signing it as a drawee.
-it has definite date of maturity

- Banker’s acceptance If the instrument is drawn against a bank instead of

purchaser.
- A mere lending its credit to the buyer.
Letters of Credit

Are Loan Agreements made by a bank (or other person) at the

request a customer that the bank (issuer) will pay or honor draft
drawn by the seller (creditor) on the buyer (debtor) up to stated
amount on compliance with the condition specified in the credit.

Neither Drafts nor Notes

Trade acceptance
Bank Draft
Article 127
VIVIAN AGUILA
Article 127
BILL NOT ASSIGNMENT OF FUNDS
IN HANDS OF DRAWEE
A bill of itself does not operate as an assignment
of the funds in the hands of the drawee available
for the payment thereof, and the drawee is not
liable on the bill unless and until he accepts the
same.
Article 128
JESSA BAGING
Article 128
BILL ADDRESSED TO MORE THAN
ONE DRAWEE
A bill may be addressed to two or more drawees
jointly, whether they are partners or not; but not
to two or more drawees in the alternative or in
succession.
 Article 128
WHO IS A DRAWEE?
A drawee is a person being DRAWER
commanded by the drawer to
pay the payee.

NIL SEC. 1 (E) JOINTLY

DRAWEE A - - - - - - - - - - DRAWEE B
Where the instrument is addressed
to a drawee, he must be name or otherwise
indicated therein with reasonable certainty.
Article 128

PAYABLE TO
PAYABLE TO A AND B
A, B, C, AND D

5 5

HUSBAND AND WIFE PARTNERS IN CORPORATION

Article 128

ACCEPTABLE DRAWEES: UNACCEPTABLE DRAWEES:

TO MR. X OR Y
TO MR. X AND Y (ALTERNATIVE)

TO MR. X OR IN HIS
ABSENCE OR FAILURE
TO PAY, MR. Y
(SUCCESSION)
Article 128 in relation to
Article 145a

WHEN BILL IS ADDRESSED TO TWO OR MORE DRAWEES

WHO ARE NOT PARTNERS

IF ONE HAS AUTHORITY TO

PRESENTMENT MUST BE ACCEPT OR REFUSE FOR ALL,
1 2
MADE TO THEM ALL PRESENTMENT MUST BE
MADE ONLY TO HIM
Article 129
JASMINE BERNARDO
Article 129
INLAND AND FOREIGN BILLS
OF EXCHANGE
An inland bill of exchange is a bill which is , or on
its own face purports to be, both drawn and
payable within the Philippines. Any other bill is a
foreign bill. Unless the contrary appears on the
face of the bill, the holder may treat it as an
inland bill.
FOREIGN V. INLAND BILL
FOREIGN BILL
A bill drawn in the
Philippines and payable in
California, or both drawn
and payable in California, or
drawn in California and
payable in New York is a
foreign bill because it is not
both drawn and payable
within the Philippines.
INLAND BILL
A bill of exchange drawn in
Manila and payable in Iloilo
is an inland or domestic bill
because it is both drawn
and payable within the
Philippines.
FOREIGN V. INLAND BILL

For the purpose of the law on

negotiable instruments, the
several states of the U.S. are
deemed foreign to each other.
(Bank of U.S. v. Daniel, 12 Peters 32; Commercial Bank v.
Barnum, 49 N.Y. 269.)
FOREIGN V. INLAND BILL
While the former must be protested in case of
dishonor to charge the drawer and the
1
indorsers under Sections 118 and 152, the
latter need not be protested; and
It is necessary to determine whether a bill
of exchange is an inland bill or a foreign
bill for purposes of determining the law
that will govern the validity, interpretation, 2
and effect of the bill. (Beutel's Brannan, op.
cit., p. 984; Art. 15, Code of Commerce; Art.
17, Civil Code.)
FOREIGN V. INLAND BILL

A bill which is in fact foreign may be

treated by the holder as an inland bill
unless the contrary appears on its face.

Thus, a bill drawn in New York and payable in the

Philippines is a foreign bill but the holder may treat it
as an inland bill if on the face of the bill it does not
appear that it was drawn in New York.
Article 130 - 131
IVAN BOLANTE
Article 130
WHEN A BILL MAY BE TREATED AS
A PROMISSORY NOTE
Where in a bill the drawer and drawee are the
same person or where the drawee is a fictitious
person or a person not having capacity to
contract, the holder may treat the instrument at
his option either as a bill of exchange or as a
promissory note.
A bill may be treated s a
promissory note under the
following instances:

1 If the drawer and the drawee are the same person.

2 If the drawee is a fictitious person.

3 If drawee has no capacity to contract.

A bill may be treated s a
promissory note under the
following instances:

1 If the drawer and the drawee are the same person.

The holder has an option to consider a bill as a note

because, in relation to the first reason, the drawer
makes himself primarily liable by making himself
also as the drawee.
A bill may be treated s a
promissory note under the
following instances:

2 If the drawee is a fictitious person.

If the drawee is a fictitious person, the holder or

payee may not find somebody to fit in and due to
this, nobody could accept the bill. The only resort is
to go against the drawer.
A bill may be treated s a
promissory note under the
following instances:

3 If drawee has no capacity to contract.

If the drawee is not capable of entering a contract,

then even if he accepted the bill, it is not a valid
acceptance and is considered a fault by the drawer
because he is the one naming the drawee in the bill.
Article 131
REFEREE IN CASE OF NEED
The drawer of a bill and any indorser may insert
thereon the name of the person to whom the holder
may resort in case of need; that is to say, in case the
bill is dishonored by non-acceptance or non-payment.
Such person is called the referee in case of need. It is
the option of the holder to resort to the referee in
case of need or not, as he may see fit.
Referee in Case of Need
The person named by the drawer or indorser as the
one to whom the holder may resort in case of need
that is , in case the bill is dishonored by non-
acceptance or non-payment. It is not obligatory upon
the holder to apply to the referee in case of
dishonor.The referee is not bound to pay the holder
but he may be made liable to the party who named
him.
Referee in Case of Need
Pay to Juan or order 5,000

In case of need ,apply to Pedro

(sgd.) Jose

To Petra
Cases
1. Bank of America Vs. Philippine Racing Club

2. Bank of the Philippine Island Vs. Commissioner of

Internal Revenue