Escolar Documentos
Profissional Documentos
Cultura Documentos
References:
Miravite, Jorge. Commercial Law Reviewer. 2002 ed.
Sundiang and Aquino. Commercial Law Reviewer. 2014
ed.
Lecture Notes for Commercial Law Review 1 under Fiscal
R. S. Aquino-Tambasacan (San Sebastian, PUP College of
Law)
Lecture and Handout of Atty George Ortha II for Jurists
Review Center
Handout by Atty. Danilo G. Ballena (PUP College of Law)
NOTES
Miravite serves as the primary reference for this simple
reviewer as it closely resembles the flow of the syllabus
prescribed by the Supreme Court. It is supplemented by
Sundiang (2014) and further annotated and updated with
lecture notes from Tambasacan, Ortha, and Guzman
This is not meant to be in depth, but rather as a brisk
reviewer that touches substantially the topic under the
syllabus. It is still preferable to read any book for fuller
understanding.
Key feature of this reviewer are the tables on liability in
case of forgery
Prepared By
Lawrence P. Villamar
Negotiable Instrument*
A written contract for the payment of money which by its
form and on its face is intended as a substitute for money
and passes from hand to hand as money, so as to give
the holder in due course the right to hold the instrument
and collect the sum for himself (UPLC, 2005,1949 Bar)
The word prevail, but if the words are ambiguous, reference will be made to
the figures to fix the amount
Starting date is the date of instrument, in the absence of said date, from date
of issue
Such that there is doubt whether it is a bill or note, the holder may treat it as
a note or a bill (1998 Bar)
The payee of the promissory note had the right to hold any one of the two
signers of the promissory note responsibility for the payment of the whole
amount of the note
Requisites of Negotiability
In General (Sec. 1, NIL):
Requisites of Negotiability
PROMISSORY NOTE (1961 Bar)
Must
Must
Must
Must
Requisites of Negotiability
Bill of Exchange (1961 Bar)
Note that an indication of a particular fund from which the acceptor reimburses
himself after paying the holder
And a statement of transaction which gives rise to the instrument.
Certainty of Sum
Note that negotiability is not affected although to be paid with interest, by stated
installments, by stated installments with acceleration clause, with exchange, and
with costs of collection or attorney's fees
STATED should include date, amount to be paid, and number of installment
(Ortha)
Payable on Demad
Where expressed to be payable on demand, at sight, or on presentation
Where no period of payment is stated
Where issued, accepted, or indorsed after maturity
SC: A PN payable on demand is immediately due and demandable and an action
prescribes in ten years.
Payable to Order
Where payee is vaguely designated, the loss will be borned by the party who
cause it the drawer.
Non- negotiable: payable to a specified person and not to his order or to bearer
(governed by some other law e.g. Civil Code or Special Laws)
Bill of Exchange
Cheque
Insertion of Date
Tambasacan: Dates are not material but only for
maturity
Insertion of Date
RULES AS TO DATES
Where the instrument is payable within specified period after date, or after acceptance, in
which case the date of the instrument and the date of acceptance are needed to determine
the date of maturity of the instrument, in these cases, the holder may insert the true date
When the instrument is payable on demand, date is necessary to determine whether the
instrument was presented within a reasonable time from issue in the case of notes or from
last negtiation in case of bills, as these factors will show whether the last holder is a holder
in due course or not;
When the instrument is an interest bearing one, to determine when the interest starts to run
Completion of Blanks
A person in possessor of a check has prima facie
authority to complete by filling up the blanks therein
(Miravite (2002), p. 91)
Signature
Ortha: Not needed to be customary.
One made by an agent with a limited authority to sign, and the principal is
bound only if the agent acts within the limits of the authority
Made by adding per procuration, per proc. or p.p. under agent's
signature
Signature of Agent
Requisites:
Must be authorized
Must disclose his principal
Must sign for and in behalf of the principal
Indorsement by Minor or
Corporation
Mindors and disqualified corporations although
incapacitated to make or draw instruments, can
negotiate instruments, transferring valid titled thereto,
but are not liable as indorsers under the said signatures
Forgery
Counterfeit making or fraudulent alteration of any writing
Forgery
Forgery
Consideration
Presumption of Consideration every negotiable instrument is
deemed prima facie to have been issued for a vauable
consideration; and every person whose signature appears
thereon to have become a party thereto for value (Ortha)
Value any consideration sufficient to support a simple contract.
An antecedent or pre existing debt constitutes value; and is
deemed such whether the instrument is payable on demand or at
a future time (Ortha).
Consideration
Effect of want of consideration a matter of defense as againsty
any person not a holder in due course; and partial failure of
consideration is a defense pro tatnto, whether the failure os am
ascertained and liquidated amount or otherwise (Ortha)
Absence of consideration total lack of any valid consideration
for the contract is only a personal defense (Ortha)
Failure of consideration failure or refusal or one party to do,
perform or comply with the consideration agreed upon is also
only a personal defense (Ortha)
Accommodation Party
Accomodation
Accommodation Party
A person who has signed the instrument as maker,
drawer, acceptor or indorser, without receiving value
therefor, and for the purpose of lending his name to
some other person, is under the law liable on the
instrument to a holder for value notwithstanding that
such holder at the time of taking the instrument knew
him only to be an accomodation party (1952 Bar)
Negotiation
The transfer of a negotiable instrument from one person
to another as to constitute the transferer the holder
thereof
Modes of Negotiation
By Delivery of the Instrument Alone
Kinds of Indorsements
Special
The name of the indorsee is specified (vis a vis General). Ex. Pay to A
Blank
An indorsement which does not specify the name of the indorsee and usually
consists of the indorsers signature, and nothing else found at the back of
the instrument.
Restrictive
Kinds of Indorsements
Conditional
The right of the indorsee under the instrument is made to depend on the
happening of the contingent event stated in the instrument.Said indorsee
however negotiate the instrument succeeding indorsees acquiring right to it
subject to the condition in the origina indorsement.
Qualified
One where the indorser places under his signature the words without
recourse or the like. Does not become liable secondarily under his
indorsement. SC: With recourse meams indorser is a general indorser
(Ortha)
Regular
Irregular
May sue thereunder in his own name, and payment to him in due course
discharges the instrument
If PN is non negotiable, subsequent holders can never be holders in due
course but are mere assignees against whom defenses may be raised by
prior parties.
Fact that PN was executed after the effectivity date of the merger does not
militate against the petitioner.
One who takes the instrument in good faith and for value
At the time the instrument was negotiated to him, he had not notice at any
defect in the title of the person negotiating it
Every holder is deemed prima facie to be a holder in due course
Complete and regular on its face (UPLC)
HOLDER FOR VALUE one who has all the requisites for a
holder in due course except notice of want of
consideration. Prior parties may avail of defense against
said holder.
SHELTER RULE Acquires title from HIDC and not a party on the fraud, acquires rights of HIDC but do
not become an HIDC himself (Ortho)
Liabilities of Parties
Parties Primarily Liable
Maker
Acceptor or the Drawee Who Accepts the Instrument
The Drawer
The General Indorser
The Irregular Indorser
Maker
Enagages to pay according to the tenor of the instrument
Drawer
Admits the existence of the payee and his capacity to
endorse
Acceptor
Engages to pay according to the tenor of his acceptance
Indorser
GENERAL INDORSER
Warrants the genuiness of the instrument, his good title to it, the capacity to
contract prior parties, amd the instrument is valid and subsitsting
Engages that the instrument will be paid by the party primarily liable
Engages that if the instrument is dishonored, and proper proceedings are
taken, he will pay the party entitled to be paid
Indorser
IRREGULAR INDORSER A person, not otherwie a party
to an instrument, places his signature thereon in blank.
If instrument payable to the order of a 3rd person, he isnliablemto the payee and
subsequent parties
If instrument payable to order of maker or drawer, he is liable to all parties
subsequent to the maker or drawer.
If he signs for accomodation of the payee, he is liable to all parties subsequent to the
payee.
Warranties
Ortha: Different from primary obligation, and requires present
and notice of dishonor in order that obbligation for breach of
warranties to arise.
When dispensed:
Where, after the exercise of reasonable diligence, presentment as
required cannot be made
Where th drawee is a fictatious person
By waiver of presentment, express or implied (Sec. 82)
Dishonor by Non-Payment
When instrument dishonored by non-payment:
It is duly presented for payment and payment is refused or
cannot be obtained; or
Presentment is excused and the instrument is overdue and
unpaid (Ortha)
Notice of Dishonor
Bringing, either verbally or in writing, to the knowledge
of the drawer and indorser the fact that a NI, upon
proper proceedings taken, has not been accepted or paid
and the party notified is expected to pay it.
Parties to Be Notified
Parties secondarily liable(or his agent)
Not necessary for qualified indorser or person who negotiated BI
by delivery (Ortha)
Effect of Notice
Upon valid notice of dishonor, immediate right of recourse
against the indorser arises. It is as if the indorser becomes
primarily liable in the sense that the holder need not claim
payment from the person primarily liable (Sundiang, p. 67)
Form of Notice
Either verbally or in writing (Ortha)
Waiver
Notice may be waived either before the time of giving notice, or
after the omission to give due notice. Waiver may be expressed
or implied. (Ortha)
As to who are affected by an express waiver depends on where
the waiver is written:
If it appears in the body or on the face of the instrument, it
bind all parties; but
If it is written above the signature of an indorser, it binds him
only
By a release of the principal debtor unless the holder's right of recourse against the
party secondarily liable is expressly reserved
By any agreement binding upon the holder to extend 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
expressly reserved
Renunciation by Holder
Effects:
A renunciation in favor of a secondary party may be made by the holder
before, at or after maturity of the instrument
Effect: only such secondary party is discharged and all parties
subsequent to him but the instrument itself remains in force
A renunciation in favor of the principal debtor may be effected at or
after maturity
Material Alteration
Concept: Any alteration which changes the date, the
sum payable, the time or place of payment, number or
relation of the parties, or medium or curreny of payment,
or adds a place of payment where none isspecified, or
which alters the effect of the instrument in any respect is
a material alteration (Miravite (2002), p. 95)
A serial number is not an essential requisite for
negotiability.
Acceptance
Definition: The signification by the drawee of his assent
to the order of the drawee. The acceptance must be in
writing and signed by the drawee. It must not express
that the drawee will perform his promise by any other
means than the payment of money.
Acceptance is presumed to be unqualified or absolute
(Sundiang, p. 66)
Manner
Conditional makes payment by the acceptor dependent on
the fulfillment of a condition therein stated.
Partial an acceptance to pay only of the amount for which
the bill is drawn.
Local an acceptance to pay only at a particular place.
Qualified as to time
The acceptance of some, one or more of the drawees but not
of all (Sundiang, p. 65)
Time of Presentment
Where the instrument is payable at a fixed or determinable future
time, presentment must be made on the day it falls due
Where it is payable on demand
Promissory note: within a reasonable time after its issue
Bill of exchange: within a reasonable time after the last
negotiation
Time of Presentment
Time of maturity
Every negotiable nstrument is payable at the time fixed
therein without grace
When the day of maturity falls upon a Sunday or a holiday,
the instruments are to be presented for payment on the next
succeeding business day
When the day of maturity falls upon a Saturday
Time of Presentment
Time of maturity
When the day of maturity falls upon a Saturday
Instrument is payable on demand at the option of the holder, be
presented for payment
Before 12nn on Saturday when that entire day is not a holiday or
The next succeeding business day
HOW COMPUTED
Excluding the day from which the time is to begin to run, and by
including the date of payment
Place of Presentment
Place specified in the instrument
Where no place of payment is specified by the address of the person to
make payment is given in the instrument
If no place specified nor address of person to make payment, usual place of
business or residence of the person to make payment
In any other case if presented to the person to make payment wherever he
can be found or if presented at his last known place of business or
residence
Manner of Presentment
Personal demand for payment at the proper place
Readiness to exhibit the instrument if required and to receive patment and
to surrender the instrument if the debtor is willing to pay
Dishonor by Non-Acceptance
Instances:
When it is duly prsented for acceptance and such an
acceptance is refused or can not be obtained
When presentment for acceptance is excusded and the bill is
not accepted (Sec. 149) (Ortha)
EFFECT: An immediate right of recourse against the drawer and
indorsers accrues to the holder and no presentment for payment
is necessary
Promissory Notes
KINDS OF PROMISSORY NOTES
Certificate of deposit written acknowledgment of a bank of
its receipt of a certain sum with a promise to repay the same
Checks
Definition: A bill of exchange drawn from a bank payable
on demand (Sec. 185)
Stale check one which has not been presented for
payment withina reasonable time after its issue (Ortha)
Death of the drawer of a check, with the knowledge of
bank,revokes the authority of the banker to pay (Ortha)
Need not be presented for acceptance (Ortha)
Kinds
MANAGERS/ CASHIER'S CHECK drawn by a bank on
itself, it is a primary obligation if thr bank. Presumption
is they are supported by sufficient funds (Ortha)
MEMORANDUM CHECK like ordinary check except the
word memorandum or its variant on the face of the
check. Not to be presented for payment, but will be
redeemed bybthe drawer himself
CERTIFIED CHECK A proper officer of thenbank certifies
that the check will be paid when dulym presented for
payment
KINDS
TRAVELERS CHECK the purchasers signature must
appear twice one at the time he buysnit and als at the
time he uses it.