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Mercantile Law

I.
(10%)
R issued a check for P1M which he used to pay S for killing his political enemy.
Reason briefly in (a), (b) and (c).
a. Can the check be considered a negotiable instrument?
Yes, the check can be considered a negotiable instrument. In ascertaining the ch
aracter of the instrument, the primordial and only consideration is its complian
ce with Section 1 of the Negotiable Instruments Law. Since the problem states th
at a check has been issues, we presume that it has all the other terms mandated
under Section 1, and if it was issued payable to order or bearer, then it is a n
egotiable instrument.
b. Does S have a cause of action against R in case of dishonor by the drawee ban
k?
No, S does not have a cause of action against R in case of dishonor by the drawe
e bank. There is still an underlying contractual relationship between S and R, e
videnced by the check, and needs a valid consideration to support it. Under Sect
ion 28 of the Negotiable Instruments Law, such illegality of consideration is a
defense against immediate parties but not against a holder in due course (i.e.,
personal defense). The consideration for the issuance of the check, as between S
and R, is void involving as it does the killing of the political enemy of R.
c. If S negotiated the check to T, who accepted it in good faith and for value,
may R be held secondarily liable by T?
R may be held secondarily liable by T. T enjoys the presumption being a holder i
n due course because every holder is deemed prima facie to be a holder in due co
urse. (Section 59, Negotiable Instruments Law), especially since he took the che
ck in good faith and for value. Section 57 of the Negotiable Instruments Law sta
tes , A holder in due course holds the instrument free from any defect of title o
f prior parties and free from defenses available to prior parties among themselv
es, and may enforce payment of the instrument for the full amount thereof agains
t all parties liable thereon.

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