THE NEGOTIABLE INSTRUMENTS LAW

I. FORM AND INTERPRETATION

Section 1. Form of negotiable instruments.
1. In writing and signed by the maker or drawer;
2. Must contain an unconditional promise or order to pay a sum
certain in money
3. Payable on demand, or at a fied or determinable future time
!. Payable to order or to bearer
". #he drawee must be named or otherwise indicated therein with
reasonable certainty
Sec. 2. What constitutes certainty as to sum. - The s! "#$#%&e is
# s! ce't#in e(en tho)h it is to %e "#i*+
1. with interest
2. by stated installments; or
3. by stated installments, with a pro$ision that, upon default in
payment of any installment or of interest, the whole shall become
due;
!. with echange, whether at a fied rate or at the current rate
". with costs of collection or an attorney%s fee, in case payment shall
not be made at maturity.
Sec. ,. When promise is unconditional. - ncon*ition#& -ithin the
!e#nin) o. this Act tho)h co"&e* -ith+
1. &n indication of a particular fund out of which reimbursement is to
be made or a particular account to be debited with the amount;
2. & statement of the transaction which gi$es rise to the instrument.

Sec. /. Determinable future time; what constitutes. - An
inst'!ent is "#$#%&e #t # *ete'!in#%&e .t'e ti!e -hen'
1. &t a fied period after date or sight;
2. (n or before a fied or determinable future time
3. (n or at a fied period after the occurrence of a specified e$ent
which is certain to happen, though the time of happening be
uncertain.
Sec. 0. Additional provisions not affecting negotiability.
1. &uthori)es the sale of collateral securities in case the instrument
be not paid at maturity;
2. &uthori)es a confession of *udgment
3. +ai$es the benefit of any law intended for obligor,s protection
!. -i$es the holder an election to re.uire something to be done in
lieu of payment of money.

Sec. 1. Omissions; seal; particular money. - The (#&i*it$ #n*
ne)oti#%&e ch#'#cte' o. #n inst'!ent #'e not #..ecte* %$ the .#ct
th#t+
1. it is not dated;
2. does not specify the $alue gi$en
3. does not specify the place where it is drawn or the place where it
is payable;
!. bears a seal;
5. designates a particular kind of current money in which payment is
to be made.

Sec. 2. When payable on demand
1. +hen it is so epressed to be payable on demand, or at sight, or
on presentation;
2. In which no time for payment is epressed

Sec. 3. When payable to order - It !#$ %e *'#-n "#$#%&e to the
o'*e' o.+
1. & payee who is not maker, drawer, or drawee
2. #he drawer or maker
3. #he drawee
!. #wo or more payees *ointly
". (ne or some of se$eral payees
/. #he holder of an office for the time being.

Sec. 4. When payable to bearer

1. 0pressed to be so payable
2. Payable to a person named therein or bearer
3. Payable to the order of a fictitious or non1eisting person, and
such fact was known to the person making it so payable
!. 2ame of the payee does not purport to be the name of any person
". #he only or last indorsement is an indorsement in blank.

Sec. 1,. When date may be inserted. 3
1. +here an instrument epressed to be payable at a fied period
after date is issued undated
2. where the acceptance of an instrument payable at a fied period
after sight is undated

Sec. 12. Construction where instrument is ambiguous. - the
.o&&o-in) '&es o. const'ction #""&$'
1. +here the sum payable is epressed in words and also in figures
and there is a discrepancy between the two, the sum denoted by
the words is the sum payable; but if the words are ambiguous or
uncertain, reference may be had to the figures to fi the amount
2. +here the instrument pro$ides for the payment of interest,
without specifying the date from which interest is to run, the
interest runs from the date of the instrument, and if the
instrument is undated, from the issue thereof
3. +here the instrument is not dated, it will be considered to be
dated as of the time it was issued
!. +here there is a conflict between the written and printed
pro$isions of the instrument, the written pro$isions pre$ail
". +here the instrument is so ambiguous that there is doubt whether
it is a bill or note, the holder may treat it as either at his election
/. +here a signature is so placed upon the instrument that it is not
clear in what capacity the person making the same intended to
sign, he is to be deemed an indorser
4. +here an instrument containing the word "I promise to pay" is
signed by two or more persons, they are deemed to be *ointly and
se$erally liable thereon.

Sec. 13. iability of person signing in trade or assumed name. - No
"e'son is &i#%&e on the inst'!ent -hose si)n#t'e *oes not
#""e#' the'eon5 e6ce"t+
1. & person who signs in an assumed name or trade name
2. #he signature of a party made by duly authori)ed agent
3. #he forger
!. 5nder section 13! 3 in acceptance by a separate instrument
". 5nder section 13" 3 in$ol$ing an unconditional promise
/. #he holder who negotiates an instrument payable to bearer by
mere deli$ery

Re7isites to ne)#ti(e "e'son#& &i#%i&it$ o. #)ent
1. 6e must be duly authori)ed
2. 6e must act within the scope of his authority
3. 6e must indicate in the instrument that he is signing merely as
agent
!. 6e must disclose his principal



Sec. 2,. Forged signature
#hose precluded from setting up the defense of forgery
1. #he indorsers of instruments payable to order
2. #he forgery of the indorsment of party in an instrument payable to
bearer because indorsement is not necessary
3. #he acceptor in a bill of echange
!. #he forger
". #hose under estoppels by their declaration

II. 8ONSIDERATION


Sec. 24. iability of accommodation party
Re7isites to %e #n #cco!!o*#tion "#'t$
1. one who has signed the instrument as maker, drawer, acceptor, or
indorser
2. without recei$ing $alue therefor,
3. and for the purpose of lending his name to some other person

III. NEGOTIATION


Sec. ,,. !inds of indorsement.
1. 7pecial
2. 8lank
3. 9estricti$e
!. :ualified
". ;onditional

Sec. ,1. When indorsement restrictive. - An in*o'se!ent is
'est'icti(e -hich eithe'+
1. Prohibits the further negotiation of the instrument
2. ;onstitutes the indorsee the agent of the indorser
3. <ests the title in the indorsee in trust for or to the use of some
other persons
Sec. ,2. rights of indorsee.
1. to recei$e payment of the instrument
2. to bring any action thereon that the indorser could bring
3. to transfer his rights as such indorsee, where the form of the
indorsement authori)es him to do so.


I9. RIGHTS OF THE HOLDER


Sec. 02. What constitutes a holder in due course. - ho&*e' -ho h#s
t#:en the inst'!ent n*e' the .o&&o-in) con*itions+
1. #hat it is complete and regular upon its face
2. #hat he became the holder of it before it was o$erdue, and without
notice that it has been pre$iously dishonored, if such was the fact
3. #hat he took it in good faith and for $alue
!. #hat at the time it was negotiated to him, he had no notice of any
infirmity in the instrument or defect in the title of the person
negotiating it.

Sec. 00. When title defective. "
In its ac.uisition
1. &c.uisition by fraud
2. 8y means of duress or force and fear
3. =or an illegal consideration
!. 8y other unlawful means
In its negotiation
1. 2egotiation in breach of faith
2. 2egotiation under circumstances as amount to fraud

Sec. 02. #ights of holder in due course. ;
1. 7ue in his name
2. 9ecei$e payment and payment to him in due course discharges the
instrument
3. 6olds the instrument free from any defect of title of prior parties,
and free from defenses a$ailable to prior parties among
themsel$es
!. 0nforce payment of the instrument for the full amount thereof
against all parties liable thereon
Pe'son#& De.enses
1. ;omplete but undeli$ered instrument
2. Incomplete but deli$ered instrument
3. &c.uisition by fraud
!. &c.uisition by fear, force or duress
". &c.uisition for an illegal consideration
/. &c.uisition by unlawful means
4. &bsence of consideration
>. Insertion of a wrong date where date is a material particular
?. 2egotiation in breach of faith
1@. 2egotiation under circumstances amounting to fraud
Re#& De.enses
1. Incomplete and undeli$ered instruments
2. =orgery
3. Minority
!. Material alteration
". ;ogno$its actionem or confession of *udgment instrument
/. =raud in factum or fraud in esse contractus

9. LIABILITIES OF PARTIES

Sec. 1<. iability of ma$er
+arranties of a maker
1. Pay the promissory note according to its tenor
2. &dmits the eistence of the payee
3. &dmits the capacity of the payee to indorse

Sec. 11. iability of drawer
+arranties of the drawer
1. &dmits the eistence of the payee and his capacity to indorse
2. 0ngages that on due presentment the bill will be accepted or paid
3. If dishonoured by non1acceptance or non1payment, he will pay
pro$ided the necessary proceedings were duly taken

Sec. 12. iability of acceptor
+arranties of the acceptor
1. Pay the bill according to the tenor of his acceptance
2. &dmits the eistence of the drawer
3. &dmits the genuineness of the signature of the drawer
!. &dmits the capacity of the drawer
". &dmits that the drawer has authority to draw instrument
/. &dmits eistence of the payee and capacity to indorse

Sec. 1/. iability of irregular indorser.
1. If the instrument is payable to the order of a third person, he is
liable to the payee and to all subse.uent parties
2. If the instrument is payable to the order of the maker or drawer, or
is payable to bearer, he is liable to all parties subse.uent to the
maker or drawer
3. If he signs for the accommodation of the payee, he is liable to all
parties subse.uent to the payee.
9e.uisites to be an irregular indorser
1. 6e is not otherwise a party to the instrument
2. 6e signs the instrument in blank
3. 6e signs before deli$ery of the instrument
Sec. 10. Warranty where negotiation by delivery and so forth. A
+arranties of .ualified indorser and indorser by deli$ery

1. #hat the instrument is genuine and in all respects what it purports
to be
2. #hat he has a good title to it
3. #hat all prior parties had capacity to contract
!. #hat he has no knowledge of any fact which would impair the
$alidity of the instrument or render it $alueless

#he pro$isions of subdi$ision BcC of this section do not apply to a person
negotiating public or corporation securities other than bills and notes.

Sec. 11. iability of general indorser
+arranties of a general indorser
1. #hat the instrument is genuine and in all respects what it purports
to be
2. #hat he has a good title to it
3. #hat all prior parties had capacity to contract
!. #hat it is $alid and subsisting

9I. PRESENTATION FOR PA=MENT


Sec. 22. What constitutes a sufficient presentment

1. 8y the holder, or by some person authori)ed to recei$e payment
on his behalf
2. &t a reasonable hour on a business day
3. &t a proper place as herein defined
!. #o the person primarily liable on the instrument, or if he is absent
or inaccessible, to any person found at the place where the
presentment is made
Sec. 2,. %lace of presentment

1. Place of payment specified in the instrument
2. In default of D1, the address of the person to make payment
3. In default of D1 and 2, the usual place of business or residence of
the person to make payment
!. In any other case if presented to the person to make payment
where$er he can be found, or if presented at his last known place
of business or residence.


Sec. 32. When presentment for payment is e&cused
1. +here, after the eercise of reasonable diligence, presentment
cannot be made
2. +here the drawee is a fictitious person
3. 8y wai$er of presentment, epress or implied
Sec. 3,. When instrument dishonored by non-payment
1. It is duly presented for payment and payment is refused or cannot
be obtained
2. Presentment is ecused and the instrument is o$erdue and unpaid

9II. NOTI8E OF DISHONOR
Sec. 34. 'o whom notice of dishonor must be given
When .#i&'e to )i(e notice *oes not *isch#')e the &i#%i&it$ o.
secon*#'$
1. +ai$er under 1@?
2. 2otice is dispense with under 112 when after reasonable diligence
it cannot be gi$en
3. 2otice need not be gi$en to the drawer under 11!
a. Erawer and drawee are the same person
b. Erawee is fictitious person or a person not ha$ing capacity
to contract
c. Erawer is the person to whom the instrument is presented
for payment
d. Erawer has no right to epect or re.uire that the drawee
or acceptor will honor the instrument
e. Erawer has countermanded payment
!. 2otice need not be gi$en to the indorsers under 11"
a. Erawee is a fictitious person or person not ha$ing capacity
to contract, and the indorser was aware of that fact at the
time he indorsed the instrument
b. #he indorser is the person to whom the instrument is
presented for payment
c. #he instrument was made or accepted for his
accommodation
". +hen notice of dishonour by non1acceptance has been pre$iously
gi$en, a subse.uent notice by non1payment need not be gi$en
under 11/
/. 5nder 114 when omission to gi$e notice does not pre*udice the
rights of a holder in due course

Sec. 4<. (y whom given #n* Sec. 41. )otice given by agent
+ho should gi$e notice of dishonour'
1. 6older
2. & party to the instrument who might be compelled to pay it and
who has a right of reimbursement from the party to whom notice
should be gi$en
3. &gent in behalf of 1 and 2

Sec. 1<,. 'ime when notice should be given if parties reside in
same place
1. If gi$en at the place of business of the person, before the close of
business hours on the day following
2. If gi$en at his residence, before the usual hours of rest on the day
following
3. If sent by mail, it must be deposited in the post office in time to
reach him in usual course on the day following
Sec. 1</. 'ime when notice be given if parties reside in different
places. ;
1. If sent by mail, it must be deposited in the post office in time to go
by mail the day following the day of dishonor, but if there is no
mail that day, by the net mail thereafter
2. If gi$en otherwise than through the post office, then within the
time that notice would ha$e been recei$ed in due course of mail, if
it had been deposited in the post office within the time specified in
the last subdi$ision.

Sec. 1<3. Where notice must be sent

1. 0ither to the post1office nearest to his place of residence or to the
post1office where he is accustomed to recei$e his letters
2. If he li$es in one place and has his place of business in another,
notice may be sent to either place
3. If he is so*ourning in another place, notice may be sent to the
place where he is so so*ourning.

Sec. 11/. When notice need not be given to drawer

1. Erawer and drawee are the same person
2. Erawee is fictitious person or a person not ha$ing capacity to
contract
3. Erawer is the person to whom the instrument is presented for
payment
!. Erawer has no right to epect or re.uire that the drawee or
acceptor will honor the instrument
". Erawer has countermanded payment

Sec. 110. When notice need not be given to indorser

1. Erawee is a fictitious person or person not ha$ing capacity to
contract, and the indorser was aware of that fact at the time he
indorsed the instrument
2. #he indorser is the person to whom the instrument is presented for
payment
3. #he instrument was made or accepted for his accommodation
9III. DIS8HARGE OF NEGOTIABLE INSTRUMENTS

Sec. 114. *nstrument; how discharged

1. Payment in due course by or on behalf of the principal debtor
2. Payment in due course by the party accommodated, where the
instrument is made or accepted for his accommodation
3. Intentional cancellation thereof by the holder
!. &ny other act which will discharge a simple contract for the
payment of money
". +hen the principal debtor becomes the holder of the instrument at
or after maturity in his own right
Sec. 12<. When persons secondarily liable on the instrument are
discharged
1. &ny act which discharges the instrument
2. Intentional cancellation of his signature by the holder
3. Eischarge of a prior party
!. <alid tender or payment made by a prior party
". 9elease of the principal debtor unless the holder%s right of recourse
against the party secondarily liable is epressly reser$ed
/. &ny agreement binding upon the holder to etend the time of
payment or to postpone the holder%s right to enforce the
instrument unless made with the assent of the party secondarily
liable or unless the right of recourse against such party is
epressly reser$ed
Sec. 121. #ight of party secondarily liable who paid the instrument
Payment will not discharge instrument but
1. 6e will be remitted to his former rights as regard all prior parties
2. 6e may strike out his own and all subse.uent indorsements
3. 6e may again negotiate the instrument, ecept
a. If payable to the order of a third person and has been paid
by the drawer
b. If it was made or accepted for accommodation and has
been paid by the party accommodated

Sec. 120. What constitutes a material alteration. - An$ #&te'#tion
-hich ch#n)es+
1. Eate
2. 7um payable, either for principal or interest
3. #ime or place of payment
!. 2umber or the relations of the parties
". Medium or currency in which payment is to be made
/. (r which adds a place of payment where no place of payment is
specified
4. (r any other change or addition which alters the effect of the
instrument in any respect
BILLS OF E>8HANGE

I>. FORM AND INTERPRETATION

T$"es o. Bi&&s o. E6ch#n)e
1. Eraft
2. #rade acceptance
3. 8anker,s acceptance
!. 8ank draft
". Postal money order
/. #reasury warrant
4. #ime bill
>. 8ills in set
?. 8lank bill
1@. ;lean bill
11. Eocumentary bill


Sec. 124. *nland and foreign bills of e&change
+hat are foreign bills
1. 8ill drawn in Phils and payable in another country
2. 8ill drawn in another country and payable in Phils
3. 8ill drawn in one country and payable in another country
!. 8ill both drawn and payable in a country other than the Phils


Sec. 1,<. When bill may be treated as promissory note
1. Erawer and drawee are the same person
2. Erawee is a fictitious person
3. Erawee does not ha$e the capacity to contract
>. A88EPTAN8E

Sec. 1,3. Acceptance of incomplete bill
Maybe made any time'
1. 8efore bill is signed by the drawer
2. +hile bill is still incomplete
3. +hen bill is already o$erdue
!. &fter bill has been dishonoured by non1acceptance or non1payment

Sec. 1,4. !inds of acceptance.
1. -eneral acceptance 1 drawee assents without .ualification to the
order of the drawer
2. :ualified acceptance1 drawee $aries the effect of the bill as drawn


Sec. 1/1. +ualified acceptance
1. ;onditional 1 which makes payment by the acceptor dependent on
the fulfillment of a condition
2. Partial 1 an acceptance to pay part only of the amount for which
the bill is drawn
3. Focal 1 an acceptance to pay only at a particular place
!. :ualified as to time
". #he acceptance of some, one or more of the drawees but not of all


>I. PRESENTMENT FOR A88EPTAN8E

Sec. 1/,. When presentment for acceptance must be made
1. 8ill is payable after sight, or in any other case, where presentment
for acceptance is necessary in order to fi the maturity of the
instrument
2. 8ill epressly stipulates that it shall be presented for acceptance
3. 8ill is drawn payable elsewhere than at the residence or place of
business of the drawee
+hen presentment for acceptance not re.uired
1. 8ills payable on demand
2. 8ills payable at sight
3. 8ills payable on a fied date
!. 8ills payable se$eral days after date
". 8ills upon the occurrence of an e$ent
/. 8ills payable se$eral days after the occurrence of an e$ent


Sec. 1/0. %resentment; how made. ;
6ow made'
1. 8y or on behalf of the holder
2. &t a reasonable hour, on a business day
3. 8efore the bill is o$erdue
!. #o the drawee or some person authori)ed to accept or refuse
acceptance on his behalf
.
Sec. 1/3. Where presentment is e&cused

1. Erawee is dead
2. Erawee has absconded
3. Erawee is fictitious person
!. Erawee is a person not ha$ing capacity to contract by bill
". &fter the eercise of reasonable diligence, presentment can not be
made
/. +here, although presentment has been irregular, acceptance has
been refused on some other ground
Sec. 1/4. When dishonored by nonacceptance
1. +hen acceptance is refused
2. +hen acceptance cannot be obtained by the holder
3. +hen presentment for acceptance is ecused
!. +here the drawer makes a .ualified acceptance
". +here the drawer refuses to write his acceptance on the face of
the bill
/. In any other case where the holder cannot obtain an acceptance in
accordance with the tenor of the bill as drawn
>II. PROTEST

Sec. 102. *n what cases protest necessary
1. =oreign bill is dishonoured by non1acceptance
2. =oreign bill is dishonoured by non1payment
3. Eishonoured bill has been accepted for honor, prior to presentment
for payment to the acceptor for honor
!. 8ill contains a referee in case of need, prior to presentment for
payment to him
". 8ill is protested for better security

>III. A88EPTAN8E FOR HONOR

Sec. 111. When bill may be accepted for honor
9e.uisites
1. #he acceptor must be a stranger and not a party already liable on
the bill, in order to gi$e additional security
2. &cceptor must appear before a notary public and declare his
acceptance for honor and that he will pay the same on due date
3. 8ill must not be o$erdue
!. 8ill must ha$e been priorly protested for dishonour by non1
acceptance
". Must be with consent of the holder

Sec. 110. Agreement of acceptor for honor.
8on*itions %e.o'e #cce"to' "#$s the %i&& on *e "'esent!ent
1. 8ill on due date has been duly presented for payment to the
drawee
2. Erawee refused to pay
3. 8ill is protested for non1payment
!. 2otice of dishonour is gi$en to the acceptor for honor
>I9. PA=MENT FOR HONOR


Sec. 122. %ayment for honor; how made
9e.uisites for payment for honor
1. 8ill has been protested for non1payment
2. &ny person may pay supra protest
3. It must be attested by a notarial act of honor appended to the
protest founded on the declaration by the payor for honor that he
will pay the bill
!. Payer for honor must notify the person for whose honor he will pay
". Person for whose honor the bill will be paid must gi$e his consent

Sec. 120. ,ffect on subse-uent parties where bill is paid for honor.
;
1. &ll parties subse.uent to the party for whose honor payment is
made are discharged
2. #he payer for honor succeeds to and ac.uire rights and duties of
the holder

>9. BILLS IN SET


>9I. PROMISSOR= NOTES AND 8HE8?S

Sec. 13/. %romissory note. defined
Eistinction between promissory note and a bill of echange
1. P2 is unconditional promise, 80 is unconditional order
2. Maker of P2 is primarily liable, drawer of 80 is only secondarily
liable
3. #wo parties only in P2, 3 in 80
!. Presentment for acceptance is not re.uired in all cases in a P2, it
is re.uired in some cases for 80
#ypes of P2
1. 8ank note
2. 8anker,s note
3. ;ertificate of deposit
4. 8ond
Sec. 130. Chec$. defined
Eistinction between check and bill of echange
1. check is drawn against a bank, 80 against a drawee not
necessarily a bank
2. check payable on demand; 80 payable on demand or at a fied
determinable future time.
3. ;heck not re.uired to be presented for acceptance; some 80 are
re.uired to be presented
!. ;heck payable on demand is to be presented within reasonable
time after its issue; 80 payable in demand is to be presented for
payment within a reasonable time after its last negotiation
#ypes of check
1. ;ashier,s check
2. ;rossed check
3. Memorandum check
!. Post dated check
". 8lank check
/. Personal check
4. #ra$eller,s check
>. 7tale check
?. 8ad check