NEGOTIABLE INSTRUMENTS FINAL EXAM ANSWERS

By: Jean Jamailah so wala kasiguraduhan pasensya na kung may sala hndi ako
perfect HAHAHA

I.
a.) Non-negotiable. – The instrument is payable to a specific person and not payable
to order or to bearer. (Section 1 of NIL)

b.) Non-negotiable. – An instrument payable upon a contingency is not negotiable

and the happening of the event does not cure the defect. (Sec. 4 NIL)

II.
No. Jun may not validly compel Javi to pay the same. An incomplete but delivered
instrument is a personal defense. The law provides under Section 14 that in order
for an instrument when completed to be enforced against any person who became a
party thereto prior to its completion, it must be filled up strictly in accordance with
the authority given and within a reasonable. It must also be shown that the purpose
of Javi was to convert said instrument into a negotiable instrument to give rise to
prima facie authority to fill up the blanks.

Thus, if Javi signs on a piece of paper and delivers it for purposes of authentication,
Javi will not be liable even against a HIDC after it is converted into a negotiable
instrument.

III.

a.) No, I will not favor Fe’s contention.

The defense of forgery is a real defense, which can be enforced even against a
HIDC. Thus, Fe does not have a superior rights as a HIDC.

(Forging of a signature renders such signature as inoperative, meaning, it

does not avoid the instrument but only the forged signature. )

b.) Material alteration v. Forgery --- please see section 125 and section 23

IV.

a. ) Yes, Kobe will be liable. This covers the delivery of an incomplete

instrument as provided for under Section 14, which is a personal defense. It
 provides that there was prima facie authority on the part of Pia to fill up any
of the material particulars thereof. Having done so, and when it is first
completed before it is negotiated to a HIDC like Nancy (acquired the check in
good faith and for value), it is valid and effective for all purposes and Nancy
may enforce it within a reasonable time as if it had been filled up strictly in
accordance with the authority given.

b. ) No, not liable. Even though Nancy is a HIDC, this is an incomplete and
undelivered instrument, which is a real defense. Sec. 15 provides that an
incomplete instrument which has not been delivered, it will not, if completed
and negotiated without authority, be a valid contract in the hands of any
holder, as against any person, even Kobe, whose signature was placed
thereon before delivery.

V.

a. ) Please see provisions for special and blank indorsement and memorize

b. ) No. Indorsement is not valid. The general is that the indorsement must be
an indorsement of the entire instrument. There cannot be partial or
piecemeal payment. Such an indorsement would render the instrument non-
negotiable and Mocha would be considered as a mere assignee, for being only
a part indorsee. (Section 32. – exception to the rule: Where the instrument
has been paid in part, it may be indorsed as to the residue)

c. ) Allonge means an indorsement placed on a separate piece of paper attached

to the instrument. (Section 31)

d. ) No, it will not render the bill non-negotiable. --- it is only when the
condition appears on the face of the instrument that it will become non-
negotiable and not when it merely appears in the indorsement itself.

VI.

a.

Under the shelter principle, the HIDC, by negotiating the instrument to a party not a
HIDC, transfers all his rights as such holder to the latter and acquires the right to
enforce the instrument as if he was a HIDC. The principle applies to a “sheltered”
holder who is not a party to any fraud or illegality impairing the validity of the
instrument.
 b.

No, not anymore a HIDC. To be a HIDC, it must be proved that he became the holder
before the instrument was overdue. A negotiable instrument in circulation past its
maturity carries strong indication that it has been dishonored. (NOT SURE SA
SABAT DZAAEE)

VII.

a.

In a promissory, where it is payable on demand, presentment must be made within

a reasonable time after its issue, but in the case of a BOE, presentment for payment
will be sufficient if made within a reasonable time after the last negotiation thereof.
(Sec. 71)

b.

Refusal of Ycel is not valid. Section 92 provides that where notice is given by or on
behalf of the holder, it inures to the benefit of all subsequent holders and all prior
parties who have a right of recourse against the party to whom it is given.

c.

Section 97 provides that notice of dishonor may be given either to the party himself
or to his agent in that behalf. Moreover, the agent must be authorized to receive
notice for the drawer or indorser concerned and not merely an agent for a specified
purpose. Assuming that the secretary was a duly authorized agent, then the notice is
binding.

(Why need nga authorized – it is because under sec. 97, the receipt of notice creates
liability while under sec. 91, the giving of notice benefits the principal that’s why no
need for authorization pero sa sec. 97 dapat may authority gid)

VIII.

a.
Postal money order is not a negotiable instrument because as held in Phil. Education
Co. vs. Soriano, there are many restrictions which make them incompatible with the
concepts of negotiable instruments, thereby making the order conditional, which is
not in accordance with Sec. 1 of the NIL. Further, such is governed by Postal rules
and regulation and it may be negotiated only once.
 b.

Bills that require presentment for acceptance:

1. Bills payable after sight
2. Bills with express stipulation
3. Bill payable elsewhere

(Pwede man in toto under Section 143)

IX.

No, BG not correct.

Notice of dishonor is not required when the drawer has no right to expect or require
that the drawee or acceptor will honor the instrument (Sec. 114 check mo kay more
pa sya instances) if he has no account with the drawee bank or has no funds with the
drawee-bank to meet it.

The drawer of a check issued to another merely as a security, in the case, for jewelry
to be sold on commission, is liable to a HIDC. He cannot simply withdraw his funds
from the drawee-bank to excuse himself from liability after the check has been
negotiated without his knowledge to a HIDC and there is no need to serve him a
notice of dishonor.

X.

No answer yet hahahahah

XI.

Where the holder of a bill refuses to receive payment supra protest, he loses his
right of recourse against any party who would have been discharged by such
payment. (Section 176)

Further, under Section 171, payment supra protest may be made by a person who is
a party to the bill or by a stranger.

XII.

Yes, an acceptor for honor is secondarily liable. Section 165 provides that the
acceptor for honor, by such acceptance engages that he will, on due presentment
pay the bill according to the terms of his acceptance, provided it shall not have been
 paid by the drawee and provided also that it shall have been duly presented for
payment and protested for non-payment and notice of dishonor given him. Thus,
acceptor for honor if the drawee does not.

XIII.

I will favor the contention of Melissa. Since the check was crossed, it should have
forewarned the Bonus Bank that the same was issued for a specific purpose. The
bank should have ascertained the title of Tomas to the check or the nature of the
latter’s possession.

Moreover, Melissa has a cause of action based on quasi-delict since its claims for
damages are in the form of recovery of total amount of the check plus damages and
attorney’s fees.

(dzaeee hindi ako sure diri check ko lang pagid tomorrow if makita ko na correct
answer)

XIV.

No. Section 182 provides that when the acceptor of a bill drawn in sets pays it
without requiring the part bearing his acceptance to be delivered up to him, and
that part at maturity is outstanding in the hands of a HIDC, he is liable to the holder
thereon.

Here, when he accepted the part presented by Ben but pay the part presented by
Joy, without requiring that the part of Ben be delivered up to him, Yelli has made
herself liable to Ben notwithstanding her payment to Joy.

XV.

Section 119. Instrument; how discharged:

1. By 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.

BONUS: Serial number is not a material alteration. Serial number is not material to
the negotiability of the instrument.