Notes On Negotiable Instruments
Notes On Negotiable Instruments
Notes On Negotiable Instruments
Instruments
BSA 4-1
CHAPTER 1
APPLICABILITY OF NEGOTIABILITY INSTRUMENT LAW Despite there is a promise to pay by maker (Luke) to Payee
(Michael), the amount of P5, 000 on demand, the
Negotiable Instrument Law instrument is deemed non-negotiable as it does not meet
the requisites stated in Section 1 that it must contain
Negotiable Instruments Law Section 190 of Act 2031 is the
law that governs any instrument that possesses the unconditional promise to pay.
characteristic of negotiability. A negotiable instrument, either promissory notes or bill of
exchange, regardless whether contract of service, contract
Negotiable Instruments Law Section 190 of Act 2031 was
enacted on February 3, 1911 and took effect ninety (90) of sale, debt agreement or other contracts was entered and
days after the official publication in the Gazette of the the payer was not in the capacity of paying it at present ,
Philippines Islands as stated in Section 198 of Act 2031. can be issued as a medium of exchange or substitute for
money, or instrument of consideration.
The act took effect on June 2 1911.
Presumption of consideration:
Any negotiable instrument made and delivered prior this
law is excluded to the application of provisions of Every negotiable instrument is deemed prima facie to have
negotiable instruments law. been issued for a valuable consideration. The person whose
signature indicated therein is considered to have become a
Any case not provided in the act and instruments other
than those qualified as negotiable instrument or which are party for value
in substantial compliance or possesses the requisites stated Likewise, Section 25 provides what comprises value.
in Sec 1 shall be governed by existing legislations or default,
by the rules of the law on merchant. “Value is any consideration sufficient to support a simple
contract. An antecedent or pre-existing debt constitutes
Negotiable instruments instrument law was enacted to value; and is deemed such whether the instrument is
facilitate the transactions in commercial papers. payable on demand or at a future time”
Sgd. Luke
Example of a check When lien on instrument constitutes holder for value
Note that the cause or consideration is not required to be Section 27 stated that where the holder has lien on the
stated in the instrument and it does not affect the instrument arising from contract or by implication of law,
negotiability. he is deemed a holder for value to the extent of his lien.
If V indorses the note to J-hope then J-hope to Jimin, Jimin is 1. Mayen no defense against Pedro
the holder for value and can enforce the instrument Helen can collect from Mayen P10, 000.
However, he has obligation to give P2000 to
primarily to the maker, Jungkook.
Pedro.
2. Mayen has a personal defense against Pedro such as
FEBRUARY 20, 2019
want consideration
I promise to pay V or bearer P15, 000 on demand. Helen can collect only P8,000 since Helen is a
holder in due course only for the said
Sgd. Jungkook amount.
3. Mayen has a real defense against Pedro
Helen can collect nothing from Mayen.
Effect of want consideration
Negotiable Instruments under Act. 2031
Section 28 stated that absence or failure of consideration is
a matter of defense as against any person not a holder in A. Promissory note (Sec.184)
due course; and partial failure is an ascertained and B. Bill of Exchange (Secs.126-131)
liquidated or otherwise. C. Checks (Secs.185,186,189,193)
D. Bills in Set (Secs.178-183) B. Bill of exchange define
E. Inland and foreign bill of exchange (Sec.129) A bill of exchange is an unconditional order in
F. Bill treated as promissory note (Sec.130) writing addressed by one person to another, signed
G. Option bill or note (Sec.17[e]) by the person giving it, requiring the person to
whom it is addressed to pay on demand or at a fixed
A. Promissory note defined or determinable future time a sum certain in money
A negotiable promissory note is an unconditional to order or to bearer. (Sec.126)
promise in writing made by one party (the notes
issuer or maker) to another party (the notes payee),
signed by the maker, engaging to pay on demand, or Parties in bill of exchange :
at a fixed or determinable future time, a sum certain Drawer- the person who executes the written order
in money to order or to bearer. Where a note is to pay. In the below example, Amy Perez is the
drawn to the maker’s own order, it is not complete drawer.
until indorsed by him. (Sec.184). Payee- the person to whom the bill of exchange is
drawn payable. In the example, Vhong Navarro is
Parties in promissory note: the payee.
Maker- the person, who executes the written Drawee- the person who is given the command by
promise to pay, also called promisor. In the the drawer to pay the payee. In the example ,Jhong
example, Ryan Bang is the maker. Hillaro is the drawee.
Payee- the person in whose favor the promissory
note is made payable, also called promisee. In Example of Promissory note:
the below example, Anne Curtis is the payee.
If Bryan indorses the instrument to Lucas, Lucas to Pay to Bryan or order Php200,000 on demand.
Liam and Liam to Nate, Nate as the holder may present the To: Luke and Patrick
instrument to Luke for payment. If Luke refuses to pay,
Luke as the drawee cannot be compelled to pay Nate even if Sgd. Nina
To: Luke
Nina as the drawer has sufficient funds in the hands of
Luke. Reason, as stated in Sec.127, the "A bill of exchange Note: By having the instrument addressed to two or more
Sgd. Nina
of itself does not operate as an assignment of the funds drawees jointly simply means that presentment for
in the hands of the drawee available for the payment acceptance MUST BE MADE TO THEM ALL, unless one has
thereon and the drawee is not liable on the bill unless authority
To: Luke to accept or refuse acceptance for all, in which
and until he accepts the same." case presentment may be made to him only.
Explanation: In order that a drawee may be liable on In this case, the Sgd.bill
Ninamust be presented for
the draft and then become obligated to the payee it is acceptance BOTH TO LUKE AND PATRICK since neither
necessary that he first accepts the same. In fact, our law the party is authorized by the other.
requires that with regard to drafts or bills of exchange
28 September 2019 Parties in a check
5. Crossed check – bears two parallel lines across its 7. Blank check – a check signed by the drawer but left
face normally on the upper left side diagonally and blank as to the payee or the amount, or both.
signifying either for payee’s account only or for
deposit only. 8. Cancelled check – a check bearing a notation that it
A crossed check is defined as a check crossed has been paid by the bank on which it was drawn. A
with two (2) lines, between which either the name cancelled check is often used as evidence of
of the bank or the words “and company,” in full or payment.
abbreviated. In the former case, the banker on
whom it is drawn must not pay the money for the 9. Memorandum check – a check that a borrower gives
check to any other than the banker named; in the to a lender for the amount of the short-term loan,
latter case, he must not pay it to any other than a with the understanding that it is not to be presented
banker. In one case, it was ruled that the crossing of for payment but will be redeemed by the borrower
one of the subject checks should have put petitioner when the loan falls due.
on guard; it was duty-bound to ascertain the
indorser’s title to the check or the nature of his 10. Traveler’s check – a cashier’s check that must be
possession and crossing of the checks mean: signed by the purchaser at the time of purchase and
countersigned when cashed. An instrument that
a. The check may not be e-cashed but only 1. payable in demand,
deposited in the bank; 2. drawn or payable at or through bank,
b. The check may be negotiated only once to one 3. is designated by the term “traveler’s check” or
who has an account with a bank; and by a substantially similar term, and
c. The act of crossing the check serves as a warning 4. requires, as a condition to payment, a
to the holder that the check has been issued for countersignature by the person whose
definite purpose so that he must inquire if he has specimen signature appears on the instrument.
received the check pursuant to that purpose;
otherwise, he is not a holder in due course.
D. Bills in Set
Except as herein otherwise provided, where any one part of Effect of want of demand on principal debtor.
a bill drawn in a set is discharged by payment or otherwise, Presentment for payment is not necessary in order
the whole bill is discharge. (Sec 183) to charge the person primarily liable on the
The section means on discharging by payment only on one instrument; but if the instrument is, by its terms,
set. It is because that part constituting the bills in set is payable at a special place, and he is able and willing
to pay it there at maturity, such ability and
willingness are equivalent to a tender of payment
upon his part. But except as herein otherwise
provided, presentment for payment is necessary in
order to charge the drawer and indorsers. (Sec 70)
Sgd. Jungkook
CHAPTER 2 Third, it must be payable on demand, or at a fixed, or
determinable future time.
NEGOTIABILITY
Fourth, it must be payable to order or to bearer. The
Negotiable Instruments instrument may be named to a fictitious character and still
be deemed valid.
Negotiable instruments are an alternative for money
which can be used as a substitute for payment in a certain Fifth is for the bill of exchange where it’s addressed
transaction like sales, commercial transactions and other to a drawee. The drawee must be named or indicated with a
financial transactions. In spite of that, creditor cannot be reasonable certainty.
enforced to accept the negotiable instrument as a payment
even if it’s a valid one due to the reason that it’s not a legal Signature of the maker or drawer
tender.
Signature is person’s name or mark written by that
A legal tender is a currency where a debtor can person and used with the intention of authenticating a
oblige a creditor to accept as a payment. document. Furthermore, no person is liable on the
instrument whose signature does not appear thereon,
As such, it’s the discretion of the creditor to accept except as herein otherwise expressly provided.
or decline the negotiable instrument as a mode of payment.
Exceptions:
Negotiability
1. A person signing in a trade name or assumed name
The important factors in an instrument to be will be liable to the extent as if he signed in his own
negotiable are in its face, other things are not relevant. name.
First, the instrument must be in writing and the signature 2. Duly authorized agent signing for the principal. The
of the maker or drawer is indicated therein. Only the principal is bound by the signature of the agent.
person whose signature is seen in the face of the 3. In case of forgery, the forger is still liable even his
instrument is liable. As long as it can be read and has the signature does not appear on the instrument.
other factors, the instrument can be written to a paper or 4. An indorser signing on a separate paper attached to
substitute for paper. the instrument.
Second, it must contain an unconditional promise or 5. The acceptor when the acceptance is written on a
order to pay a sum certain in money. Requirements in the paper other the bill itself.
face of an instrument will make it non-negotiable.
Effect of forged signature Noted: Under Section 23 does not avoid the INSTRUMENT
but only the FORGED SIGNATURE, thus a forged
The signature under forged or made even without indorsement does not operate as the payee's indorsement.
authority of the person, meaning the signature are
W.I.D.E: Unless, "A party against whom it is sought to enforce a right
is precluded from setting up the forgery or want of
o W-Wholly inoperative authority"
The signature is wholly inoperative
o I-Instrument retainer P - Persons Negotiating by delivery
No right to retain the instrument
I - Indorsers
o D- Discharge
No right to give discharge therefore or A - Acceptor
o E-Enforcement payment
No right to enforce payment thereof (P.I.A) Those are the warrantors of the genuineness of the
against any party, thereof can be acquired signature on the instrument
through or under such signature, unless
SIGNATORIES OF NEGOTIABLE INSTRUMENT:
the party against whom it is sought to
enforce such right is precluded from 1. Maker
setting up the forgery or want of 2. Drawer
authority. 3. Indorser
Article 169 of the revised Penal code discuss how forgery is Forged Signature of the Maker
committed
Order Instrument
Under article 169 forged may be committed by the
following: The right of the indorsee is to proceed against the
1. "Appearance of a true genuine document" payee, not the maker (because as to the maker, the
By giving it to a treasury or bank note or any instrument is inoperative)
instrument, payable to bearer or order
mentioned Bearer Instrument
2. "C.A.S.E"
The indorsee who is a holder in due course can
Counterfeiting, Altering, Substituting and Erasing it either proceed against ALL parties.
figures, letters, words or signs contained therein.
Signature is immaterial but forger is criminally Generally, collecting banks are held to be negligent
liable. for failing to observe precautionary measures to
detect the forgery.
Setting up the defense of forgery A collecting bank where a check is deposited and
1. The party against whom it is sought to enforce such which indorses the check upon presentment with
right is precluded from setting up the forgery or want of the drawee bank is such an indorser.
authority by their N.A.S.P: The collecting bank is bound by his warranties as an
indorser and cannot set up the defense of forgery as
N - Negligence against the drawee bank.
In this case, Sakura can proceed against Bernadette, Section 23 also covers about a forged indorsement,
the one who forged the signature of Kenji. for example:
Sakura cannot collect from Athena, Kenji and Kirby - Forged signature of the payee
because the instrument is wholly inoperative. - Indorsee of a note or check
Sakura can collect from Bernadette and Hikari being
the subsequent parties. According to the said provision, subsequent parties
cannot go against parties prior to the forgery and
Notes:
the signature that is forged is “wholly inoperative”.
1. Parties prior to the forgery are not liable. Exception:
2. Only the forger and subsequent parties are liable in -There is an exception to the rules if a party is
an order instrument and it’s signature of the precluded from setting up forgery as defense.
indorser is forged
2. Forged indorsements the negligence of the depositor which, in turn, will
prevent the recovery of an unauthorized payment.
2 Types of cases involving forged If it came to the knowledge of the depositor that her
instruments of checks or his funds is disappearing and if it happens that
1. Forgery was done by a person not related to she fails to take steps, it will make her negligent and
the drawer be estopped to recover from the bank.
Example: Mail Robbery The negligence of the petitioner was the reason of
2. Forgery was done by an agent of the drawer her loss. Under the Section 23 of Negotiable
- It is the duty of the drawer (depositor) to report Instruments Law (NIL), he or she cannot compel the
to the drawee bank if he learns that the check drawee bank to recredit her account with the
drawn by him has been paid under a forged amount of such checks.
instrument.
- The negligence or failure of a drawer to discover B. Forged signature of the Indorser in a bearer
or to report the forgery to the drawee will cause instrument
the drawer to lose his right against the drawee.
Example:
Delivery is essential for the purpose of giving effect
Athena makes a promissory note payable to Kenji or
to the instrument.
order Php 20,000. Assume that while Kirby holds the
Issuance of the instrument instrument, Bernadette took it unlawfully and forged
-First delivery of the instrument, complete in form, the signature of Kirby. Afterwards, she indorsed it to
to the payee who takes it as a holder of the Hikari and Hikari to Sakura, a holder in due course.
instrument
Rule: A drawer’s account for the amount of the said In this case, Sakura can proceed against Bernadette,
check which an indorsement has been forged the one who forged the signature of Kirby and
CANNOT be charge by a drawee bank who has paid Hikari, the subsequent party.
the check. Because the instrument is a bearer instrument,
Exception: Drawer is guilty of negligence Sakura may likewise proceed against Athena and
which made the bank to honor such a check Kenji.
or checks.
In case the check is stolen from the payee, he has no The instrument is a bearer instrument and
similar obligation to the forged instruments. endorsement are not necessary and under Sec. 30,
The failure of the depositor to act as a “prudent the bearer instrument can be negotiated by delivery
businessman” under the circumstances is based on only. The endorsement and forged signature are not
necessary to pass the title; it can be pass through lending his name to some other person. The relation of
delivery. accommodation party and the accommodated party is one
of principal and surety – the accommodation party being
Signature by agent the surety.
The signature of any party may be made by a duly The surety’s liability to the creditor is immediate,
authorized agent, primary, and absolute; he is directly and equally bound
Requisites – signing as agent; with the principal.
An accommodation party is one who has signed the Particular account to be debited
instrument as maker, drawer, acceptor, or indorser, Treasury warrants are non-negotiable instrument
without receiving value thereof, and for the purpose of as it is actually an order of payment out of a particular fund;
therefore, it is not within the scope of negotiable with costs of collection or attorney’s fee in case payment shall
instruments law. not be made upon maturity.”
The instrument is negotiable as it does not mean The mode of payment (which is by instalment) does
that the payment is to be made from the account of July not affect the negotiability of the instrument as the
Corporation. May is the drawer here, so regardless if July principal sum is certain. It is only when maturity date is not
Corporation’s account has enough or insufficient amount, stated which renders it non-negotiable.
June will be paid by May. Only the reimbursement of May’s
payment will come from July Corporation’s account. By stated installments with acceleration clause
Sgd. Rei
I promise to pay Vilma or bearer $10,000 with
exchange at 1.5%.
This is still negotiable because the sum of P10,000 is still
Sgd. Nikka certain although it is to be paid with collection and an
attorney's fee, in case shall not be paid at its maturity date.
Example:
Sgd. Riane
January 4, 2019
Overdue instrument regarded as payable on demand 1. I promise to pay Aira or bearer P10,000, 30 days
after date. Or
Instrument issued, accepted, or indorsed when
overdue 2. I promise to pay Aira or bearer P10,000, 30 days
after sight. Or
Example:
March 23, 2019 3. I promise to pay Aira or bearer P10,000 on or before
February 4, 2019.
I promise to pay Federer or bearer P50,000 on March
31, 2019. Sgd. Audrey
Sgd. Riane
Sgd. Reiniel
- Nos. 1 & 2 are negotiable because the future time is person or to him or to his order and maybe drawn
determinable payable to the order of:
- No. 3 is also negotiable because it is a fixed or A payee who is not maker, drawer, or
determinable future time. drawee;
Drawer or maker
In the above case, it is only the maker, Audrey, that is given Drawee
the privilege to make use of the period stated in the note Two or more payees jointly
"on or before" the period intended to benefit her. One or some several payees; or
Occurrence of Certain Event
The holder of an office for a time being.
It is not necessary that the date on the instrument be Under Section 9, the instrument is payable to bearer
specific, as long as a specified event is payable at a when:
fixed or determinable future time, the instrument It is expressed to be so payable;
shall be rendered NEGOTIABLE. It is payable to a person named therein or
On the other hand, if there is no date on the bearer;
instrument and the specified event cannot be known It is payable to the order of a FICTITIOUS or
to come or contingent, the instrument shall be non-existing person, and such fact was
rendered NON-NEGOTIABLE and the happening of known to the person making it so payable;
the event does not cure the defect or its non- The name of the payee does not purport to be
negotiability. a name of any person; or
According to Art. 1180 of the Civil Code, “In The only or last indorsement is an
conditional obligations, the acquisition of rights, as indorsement in blank.
well as the extinguishment or loss of those already
NOTE: The term “order” or “bearer” is the magic word in a
acquired, shall depend upon the happening of the
negotiable instrument. If there is no payable to order or
event which constitutes the condition”.
bearer in an instrument, then that instrument is not
negotiable. These words serve as an expression that the
instrument maybe transferred.
Must be Payable to Order or to Bearer
Payable to Order
Under Section 8, the instrument is payable to order
There must always be a specified person named in
where it is drawn payable to the order of specified
the instrument which means that the bill or note is
to be paid to the person designated in the
instrument or to any person to whom he has Fictitious Payee
indorsed the instrument and delivered the same.
Requisites:
Payable to bearer
1. Payable to the order of a fictitious or non-
A bearer is the person who is in possession of a bill existing person,
or note which is payable to bearer. 2. Such fact was known to the person making it so
A bearer instrument refers to the bearer of the payable.
documents, or whosoever at the time of
presentment the instrument payable Checks issued to “Prinsipe Abante” or “Si Malakas at
Maganda,” who are well-known characters in Philippine
mythology, are bearer instruments because the named
payees are fictitious and non-existent.
01 October 2019
Pay to bearer Php 100,000 Fictitious Payee
-when it is expressed to be so payable Requisites:
Pay to Federer or bearer Php 100,000
-when it is payable to a person named therein or 3. Payable to the order of a fictitious or non-
existing person,
Pay to Wolverine Php 100,000
4. Such fact was known to the person making it so
-when it is payable to order of a fictitious or non-
payable.
existing person, and such fact was known to the
person making it so payable Checks issued to “Prinsipe Abante” or “Si Malakas at
Pay to cash Maganda,” who are well-known characters in Philippine
mythology, are bearer instruments because the named
-when the name of the payee does not purport to
payees are fictitious and non-existent.
be the name of any person
At the back of the instrument, the payee signed Fictitious Payee Rule
his name and deliver it to another
In a fictitious-payee situation, the drawee bank is
-when the only or last indorsement is an
absolved from liability and the drawer bears the loss. When
indorsement in blank. faced with a check payable to a fictitious payee, it is treated
as a bearer instrument that can be negotiated by delivery.
To: Roddick
Sgd. Nadal
The underlying theory is that one cannot expect a 2. In the case of failure to show that the payees
fictitious payee to negotiate the check by placing his were fictitious in its broader sense, the fictitious-
indorsement thereon. And since the maker knew this payee rule does not apply. Thus, the checks are
limitation, he must have intended for the instrument to be to be deemed payable to order. Consequently,
negotiated by mere delivery. Thus, in case of controversy, the drawee bank bears the loss.
the drawer of the check will bear the loss.
3. A bank that regularly processes checks that are
This rule is justified for otherwise, it will be most neither payable to the customer nor fully
convenient for the maker who desires to escape payment of indorsed by the payee is apparently grossly
the check to always deny the validity of the indorsement. negligent in its operations.
4. In a checking transaction, the drawee bank has
Commercial Bad Faith Rule
the duty to verify the genuineness of the
A showing of commercial bad faith on the part of the signature of the drawer and to pay the check
drawee bank, or any transferee of the check for that matter, strictly in accordance with the drawer's
will work to strip it of this defense. The exception will cause instructions.
it to bear the loss.
Where the instrument is addressed to a drawee, he
Commercial bad faith is present if the transferee of must be named or otherwise indicated therein with
the check acts dishonestly, and is a party to the fraudulent reasonable certainty.
scheme.
It is basic in a bill of exchange that a drawee
For the fictitious-payee rule to be available as a must be a party thereto.
defense, the drawee must show that the makers did not A bill makes a command or order to pay and
intend for the named payees to be part of the transaction such, the person or the drawee to whom such
involving the checks. order is made or addressed must be named.
In case the drawee cannot be named, then at
1. If the bank failed to satisfy a requisite condition least be indicated with reasonable certainty like
of a fictitious-payee situation. “Finance Officer” of a corporation.
-that the maker of the check intended for the Note: since the drawee is only a party to a bill of exchange,
payee to have no interest in the transaction, the this provision necessarily does not apply to promissory
bank is liable for the loss note.
1. A check is a bill of exchange drawn on a bank 5. A drawer must remember his responsibilities every
payable on demand. time he issues a check. He must personally keep
A check is a written order addressed to a bank or track of his available balance in the bank and not
persons carrying on the business of banking, by a rely on the bank to notify him of the necessity to
party having money in their hands, requesting fund certain check he previously issued.
them to pay on presentment, to a person named A check, as distinguished from an ordinary bill of
therein or to bearer or order, a named sum of exchange, is supposed to be drawn against a
money. previous deposit of funds for it is ordinarily
intended for immediate payment.
2. Fixed savings and current deposits of money in 6. A bank performs its full duty where, upon the
banks and similar institutions shall be governed by receipt of a check drawn against an account in which
the provisions concerning simple loan. there are insufficient funds to pay it in full, it
The relationship between the bank and the endeavors to induce the drawer to make good his
depositor is that of a debtor and creditor. account so that the check can be paid, and failing in
this, it protests the check on the following morning
3. Where the bank possesses funds of a depositor, it is and notifies its correspondent bank by the telegraph
bound to honor his checks to the extent of the of the protest.
amount of his deposits.
The failure of a bank to pay the check of a 7. The bank had all the right to dishonor the checks
merchant or a trader, when the deposit is because there were no sufficient funds to speak of in
sufficient, entitles the drawer to substantial the first place.
damages without any proof of actual damages.
If the demand is by check, a drawer must have to
4. Conversely, a bank is not liable for its refusal to pay his credit enough to cover the demand. If his
a check on account of insufficient funds, credit with the bank is less than the amount on
notwithstanding the fact that a deposit may be made the face of the check, the bank may lawfully
later in the day. refuse payment.
Before a bank depositor may maintain a suit to
recover a specific amount from his bank, he must 8. A bank is under no obligation to make part payment
first show that he had on deposit sufficient funds on a check, up to only the amount of the drawer's
to meet his demand. funds, where the check is drawn for an amount
larger than what the drawer has on deposit.
Additional provisions not affecting negotiability Just like if the instrument is compensated by
FAILURE or such dishonesty should be transferred to
By the form and interpretation of section 1 on persons with subordinate duties. Otherwise, these parties
negotiable instrument, an instrument is negotiable if it is will be released.
intended as a substitute for money. But if the instrument
calls for an act other than the payment of money, it is not Burden of evidence
negotiable. However, there are additional provisions not
affecting the negotiability. It is upon the plaintiff who seeks to enforce the
defendant’s liability upon a negotiable instrument as an
(a) Authorizes the sale of collateral securities in case indorser to establish said liability by proving that notice
the instrument be not paid at maturity; was given to the defendant within the time and in the
manner required by the law that the instrument in question
Because the law provides an exception to the general rule had been dishonored.
that a sale of collateral that contains instructions or
promises to take measures other than the payment of funds (d) Gives the holder an election to require something to
cannot be negotiated. be done in lieu of payment of money.
(b) Authorizes a confession of judgment if the Fourth exception to the rule: Even if additional act
instrument be not paid at maturity; or exists, the matter may be negotiable if the right to choose
between paying money or performing additional actions is
In the Philippines, there are certain effects in recognizing in the hands of the owner.
decision in the confession of judgment that are considered
invalid because they violate public policy.
(a) Where the sum payable is expressed in words and also a. is not dated
in figures and there is a discrepancy between the two, the
sum denoted by the words is the sum payable; but if the b. does not specify the value given, or any value had been
words are ambiguous or uncertain, reference may be had to given
the figures to fix the amount c. the place where it has been drawn or the place where it is
(b) Where the instrument provides for the payment of payable is not specified
interest, without specifying the date from which interest is
d. bears a seal
to run, the interest runs from the date of the
instrument, and if the instrument is undated, from the e. designates a particular kind of current money in which
issue thereof payment is to be made
(c) Where the instrument is not dated, it will be considered However, nothing in this chapter shall change or repel any
to be dated as of the time it was issued statute requiring the nature of the consideration to be
stated in the instrument
(d) Where there is a conflict between the written and printed
provisions of the instrument, the written provisions prevail Presumption as to date
(e) if the instrument is unclear that it is hard to tell whether If the instrument or an acceptance or any indorsement
it is a bill or note, the holder of such instrument may treat it thereon, is dated, the date is prima facie to be the true date
as either at his choice. of the making, drawing, acceptance, or indorsement, as the
case may be.
When date may be inserted Hence, an ante-dated or past-dated instrument must be
NEGOTIATED BEFORE its maturity, otherwise, it loses its
An instrument is expressed to be payable: negotiability.
1. at a fixed period after date is issued undated; or Complete or Incomplete and/or deliver or undelivered
Instruments
2. where the acceptance of the instrument to be paid at a
fixed period after sight is not dated Incomplete and delivered instrument – Sec. 14
The true date of issue or acceptance may be inserted by any Incomplete and undelivered instrument – Sec. 15
holder, and the instrument shall be payable. The insertion Complete and undelivered instrument – Sec 16
of an incorrect date does not avoid the instrument in the A. Incomplete and delivered instrument (Blanks;
hands of a following holder in due course.
whenmay be filled)
Ante-dated and Post-dated - The person in possession of the instrument has been
-An instrument is ante-dated or post-dated is still given an authority called prima facie authority to
valid and negotiable until proven that the purpose of the complete the incomplete instrument by filling up the
instrument is for fraudulent or illegal claims then the blanks therein. And signed by the maker of the
instrument can now be invalid. Furthermore, only at the instrument may turn the instrument to a negotiable
date where the payee shall receive the delivered instrument.
instrument is where he acquires the title. - When the instrument is completed it may be
enforced against any person who became a party
a) Ante-dated instrument prior to tits completion. Although, before the
instrument can be passed on from one person to
-is a negotiable instrument that has a date that have another, the person accordance with the authority
already been passed by in time, then the issuance of given and within recoverable time.
instrument is made. - But if such instrument after completion is
b) Post-dated instrument negotiated to a holder in due course, whatever is
within in the instrument shall be valid, effective and
-is a negotiable instrument where the date of can be enforce as if it was strictly in accordance with
issuance comes first then at a later time the date or the authority given by the drawer or maker
effective date of the instrument comes after.
B. Incomplete and undelivered Instruments 1. To a holder in due course
(1) Assume that Mr. M makes and delivers a promissory It includes any alteration which changes:
note to Mr. P, and Mr. P indorses it to Mrs. A, and Mrs. A TO
Mrs. B. Mr. M and Mr. P are said to be immediate parties 1. the date
because they are in direct contractual relation with each 2. the sum payable (principal or interest)
other. The same is true to Mr. P and Mrs. A, and Mrs. A to
Mrs. B. 3. the time or place of payment
(2) Also in the preceding example Mr. M and Mrs. B are 4. the number or the relations of the parties
remote parties, that is, parties who are not in direct
contractual relation to each other. 5. the medium or currency in which paymentis to be made
As such by virtue of Sec.52, a holder in due course is not an 6. or which adds a place of payment where no lace of
immediate party because he has no notice of any infirmity payment is specified, or any other change or addition which
in the instrument or defect in title of the person negotiating alters the effect of the instrument in any respect, is a
it. material alteration. (Sec.125)
Alteration of Instrument
o Acquisition of the instrument by unlawful means • While mere suspicion is not enough, where there is
knowledge of suspicious circumstances, coupled with
o Acquisition of the instrument by for an illegal means of verifying them, taking the instrument may
consideration amount to bad faith
o Negotiation of the instrument in breach of faith
INFIRMITIES
Negotiation of the instrument under
circumstances which amount to fraud • Things that are wrong with the instrument itself
Sec. 56. What constitutes notice of defect. - To • What are these?
constitutes notice of an infirmity in the instrument or
defect in the title of the person negotiating the same, the o Wrong date inserted where the instrument is
person to whom it is negotiated must have had actual expressed to be payable at a fixed period after sight is
knowledge of the infirmity or defect, or knowledge of such undated
facts that his action in taking the instrument amounted to
bad faith. o Filling up a blank instrument not strictly in
accordance with the authority given or not within
To constitute a notice of defect or infirmity, the holder authority given or not within the reasonable time, where
must have actual knowledge either: it was delivered wanting in a material alteration
• Attach to the instrument itself and can be set up • Where the instrument is mechanically complete and is
against the whole world, including a holder in due course not wanting in any material particular, want of delivery is
an equitable defense
• The right sought to be enforced has never existed or
ceased to exist • As against holders not in due course, it can be shown
that no delivery was made, or that the delivery was
• Defense against everybody conditional or for a special purpose
THE INSTRUMENT SUBJECT TO A REAL DEFENSE • Where the instrument is stolen, the defense is also
CAN STILL BE ENFORCED. IT CANNOT BE equitable
ENFORCED WITH REGARD THE PERSON TO WHOM
THE LEGAL DEFENSE IS AVAILABLE. • But where the instrument is payable to order, it is a
real defense—for the person would have to commit forgery
BETWEEN WHOM DEFENSE CAN BE RAISED IN NOTES on the instrument
• In general, the defense of want of consideration FRAUD IN INDUCEMENT IS A PERSONAL OR EQUITABLE
may only be raised between immediate parties DEFENSE
• But this could be raised in the instance that the holder • Relates to the quantity, quality, value or character of
has notice of the want in consideration the consideration of the instrument
BETWEEN WHOM DEFENSE MAY BE RAISED IN BILLS FOR MISTAKE TO INVALIDATE CONSENT
• The want or failure of consideration may be • It should refer to the substance of the thing which is the
interposed in an action brought by the payee against object of the contract, or those conditions which have
the drawer or by the indorsee against the payee principally moved one or both parties to enter into the
indorsing, or by the drawer against the acceptor, but not in contract
an action between the payee and acceptor
FRAUD IN FACTUM OR FRAUD IN ESSE CONTRACTUS IS An alteration which changes the following, constitutes a
A LEGAL DEFENSE material alteration:
ILLUSTRATION: R (drawer) issued bill to P (payee). When instrument is payable to bearer, the liabilities
P, payable to P or order. The drawee is DW. of a person negotiating by delivery are:
P indorsed and deliver the bill to A, A to B, B to C and 1. A person negotiating by delivery has the same
H. liabilities as as qualified indorser, except that his
In the above illustration, the indorsers are P, A, B warranty extends only in favor of his immediate
and C transferee.
-D can enforce payment to any of the indorsee and 2. Liability of agent or broker when he negotiates
need not to follow the order of indorsement. without indorsement.
However, the following order of liability among
indorsers: Warranties of qualified indorser extend to all
-If D recovered from C, C had the right to reimbursed subsequent parties who acquire title through his
to B but cannot go directly to P. indorsement whether they are holders in due course or
-If B paid C, B also had the right to reimbursed to A not.
and not from P.
ILLUSTRATION: M makes a promissory note payable
to P or bearer for P80,000 and P negotiates it by
delivery to A, A to B, B to C and C to D.
WARRANTY OF INDORSER a. If there was a material alteration in the
A. Liability of person negotiating by delivery (Sec.65) instrument, he cannot claim that the instrument
B. Liability of general indorser (Sec. 66) is invalid because of “want of delivery of
C. Liability of irregular indorser (Sec. 64) incomplete instrument.”
b. If the instrument is attained for an illegal
Liability of person negotiating by delivery consideration, he is liable to the holder because
he warrants that he has good title to it.
c. If the drawer, maker, or any indorser prior to o Immediate transferees although they are not
him is a minor, insane, incapacitated or a holder in due course.
corporation performing ultra vires act, he is
liable because he warrants that they have ILLUSTRATION: M makes a promissory note payable
capacity to contract. to P or bearer for P80,000 and P negotiates it by
d. If at the time of the indorsement the maker is delivery to A, A to B, B to C and C to D.
insolvent, he is liable because he had knowledge a. If the person primarily liable is insolvent, a
of it during indorsement. general indorser is liable even if he was not
aware of such facts because he warrants that the
Definition of general indorser instrument is valid and subsisting.
Is one who indorsed the instrument without any Definition of irregular indorser
qualification.
A person who is not really a party to the instrument,
Liabilities of a general indorser but he affixed his signature on the instrument before
1. He warrants that the instrument is genuine and in its delivery.
all respects what it purports to be Usually, he is an accommodation party.
2. He warrants that he has good title to it. Liabilities of an irregular indorser
3. He warrants that all prior parties had capacity to
contract. 1. If the instrument is payable to the order of a third
4. That the instrument is, at the time of his person, he is liable to the payee and to all
indorsement valid and subsisting, subsequent parties.
5. He engages that due on presentment, the bill will be 2. If the instrument is payable to the order of the
accepted or paid or both and that in case of maker or drawer, or is payable to bearer, he is liable
dishonor, he shall pay the bill to the holder or to any to all parties subsequent to the maker or drawer.
subsequent indorsee who may be compelled to pay 3. If he signs for the accommodation of the payee, he is
it. liable to all parties subsequent to the payee.
4. QUALIFIED INDORSEMENT Exception: If such payees are partner; only one payee
may indorse if he has the authority to indorse for
Indorser is a mere assignor of the title to the
others.
instrument
Does not impair the negotiable character of the 7. SUCCESSIVE INDORSEMENT
instrument.
Relieves the indorser of the general to pay if the An instrument negotiated back to a prior party can
instrument is dishonored but not of the liability be reissued and further negotiated by such party,
arising from warranties on the instrument. subject to the provision of the Act.
Words or phrases for qualified indorsement: Prior party is not entitled to enforce payment
1. Without recourse3. Indorsee’s own risk 5. thereof against any intervening party to whom he
With no recourse was personally liable.
2. Sans recourse 4. No recourse
Effect of instrument drawn or indorsed to a person as
5. CONDITIONAL INDORSEMENT CASHIER or other FISCAL OFFICER of a bank or
corporation
The party required to pay the instrument may
disregard the condition and make payment to the It is deemed prima facie to be payable to the bank or
indorsee or his transferee whether the condition has corporation of which he is such officer, andmay be
been fulfilled or not. negotiated by either the indorsement of the bank
Does not render the instrument non-negotiable. or corporation or the indorsement of the officer.
Non-fulfillment of the condition carries with it a
Indorsers are:
caveat to the indorsee or transferee that the
indorser does not intend to be bound on the 1. Bank
instrument. 2. Corporation
3. Officer to whom the instrument is payable
6. JOINT INDORSEMENT
Indorsement where name is misspelled, and so forth
Indorsement payable to two or more persons.
Does not destroy the character of indorsement.
Remedy: Indorse the instrument as it is or add the Place of indorsement; presumption
real name of the indorsee and his signature as well.
Unless proven otherwise, the place where the
Indorsement in representative capacity instrument is dated would be presumed as the place
of indorsement.
A person may indorse an instrument personally or Example:
through agent. The agent has the authority though Suppose a note dated as:
its is not in writing.
The agent may escape from liability if the following “Manila, September 26, 2019”
requirements are met: If there was no place indicated as place of
He is duly authorized indorsement, it is presumed that the indorsement
He adds words to his signature indicating was negotiated in Manila unless proven otherwise.
that he signs as an agent, that is, for or on
behalf of a principal, or in representative Continuation of Negotiable Character
capacity; and
Once an instrument is originally negotiable will
He discloses his principal
always be negotiable even if it is already overdue,
but that holder acquires the instrument will not be
Example:
treated as holder in due course (Sec. 52).
“(SGD.) Jennie Kim
Here are the exceptions of the rule:
As agent of Irene Bae”
When restrictively indorsed
Time of Indorsement; presumption By discharge payment or otherwise
Not all restrictive indorsement prohibits further
If the indorsement bears a date, it is presumed to be negotiation unless otherwise stated.
the true date. If happens that the indorsement bears An instrument not only can be discharge by payment
no date, it is presumed to be negotiated on or before but also with the actions provided by Sec. 119
the maturity date.
In case that a person insist that the indorsement is Striking out indorsement
dated after the maturity, that person needs to
present proofs. An instrument originally payable to bearer may be
It is important to determine if the indorsement is negotiated through mere delivery, but if it is
taken up before maturity because it is one of the indorsed, it could still be a bearer instrument.
requirements to be a holder in due course. A holder may strike out indorsements unnecessary
to his title as stated to Sec 48.
Here are the following persons discharged in stiking
out indorsement:
The indorser whom indorsement is struck
out
All the indorsers subsequent to him
Example:
Pay to Chiara
(Sgd.) Jane
Pay to Mae
(Sgd.) MJ
Pay to Chichi
(Sgd.) Jenlice
Promise to Accept
Completed by delivery or notification
Signifies the drawee will perform his obligation by Unconditional promise in writing = Actual acceptance
payment of money. in to accept a bill before it is drawn favor of
every person receives the bill for value
Maybe done:
Period for Drawee to accept
In writing by drawee in the bill or
Separate instrument 24 hours after presentment in which to decide
whether or not he will accept the bill; if acceptance is given,
Requisites:
it dates as of the day of presentation.
1. In writing, EXCEPT constructive acceptance and
Holder:
foreign bill payable to another state.
2. Signed by the drawee Can’t demand for response as to status of
3. Must express a promise to pay in money acceptance
Forms: No right to treat the bill as accepted
3. By intentional cancellation thereof by the holder. Other causes of extinguishment of obligations, such as
annulment, rescission, fulfillment of a resolutory condition,
The cancellation must be intentional and made by the and prescription, are governed elsewhere in this Code.
holder. There must be an intention to cancel a negotiable
instrument by the holder there of as such intention is an Renunciation by holder.
essential element of discharge on a negotiable instrument
and a negotiable note in a torn condition is presumed a. Applies only to renunciation by the unilateral act
cancelled by the holder thereof. of the holder without consideration and in cases
where the instrument is not delivered up to the
Cancellation; unintentional; burden of proof. person intended to be released
b. Renunciation—act of surrendering a right or
A cancellation made unintentionally or under a claim without recompense but it can be applied
mistake or without the authority of the holder, is with equal propriety to the relinquishing of a
inoperative but where an instrument or any signature
demand upon an agreement supported by a
consideration When instrument reacquired before maturity will
the instrument will be discharged?
The holder may expressly renounce his rights A reacquisition by the principal debt or in his own
against any party to the instrument before, at, or after right but before maturity will not discharge the
its maturity. An absolute and unconditional instrument. It will merely be a negotiation back to the
renunciation of his rights against the principal debtor principal debtor.
made at or after the maturity of the instrument
discharges the instrument. But a renunciation does not When persons secondarily liable on the instrument are
affect the rights of a holder in due course without discharged
notice. A renunciation must be in writing unless the
instrument is delivered up to the person primarily A person secondarily liable on the instrument is
liable thereon. (Section 122) discharged:
2. By the intentional cancellation of his signature by Person C validly tender payment and Person E
the holder unjustifiably refuses to do accept, Person D is discharged.
Illustration: Person A signed a negotiable instrument Tender of payment: act by which one produces and
payable to Person B or order for P100.00. Person B offers to a person holding a claim or demand against him
indorsed the negotiable instrument to Person C, Person C to the amount of money which he considers and admits to be
Person D and Person D indorsed the negotiable instrument due, in satisfaction of such claim or demand without any
to person E. stipulation or condition.
When Person E cancels the signature of his indorser’s
indorser (Person C), his indorser (Person D) and the 5. By a release of the principal debtor unless the
indorser (Person C) of his indorser are discharged from holder’s right of recourse against the party
their obligation but the indorser prior to Person C are not secondarily liable is expressly reserved
discharged.
General rule is that he is not discharged by the holder’s
3. By discharge of a prior party release of the principal debt or even if there lease be made
Illustration: Person A signed a negotiable instrument with know ledge or true relation of the parties and,
payable to Person B or order for P100.00. Person B conversely, there lease of the accommodation maker or
indorsed the negotiable instrument to Person C, Person C to accept or doesn’t discharge the principal debtor through
Person D and Person D indorsed the negotiable instrument the latter occupies the position of a party secondarily liable
to person E. on the instrument.
6. Extension of time
When Person E cancelled the signature of Person C,
the effect is to discharge likewise Person D being a prion If the holder agrees to extend the time of payment, the
party to Person E. indorsers are discharged. However, where the extension of
time is consented to by the party secondarily liable, he is
4. By a valid tender or payment made by a prior party
not discharged. Also, where the holder expressly reserves
Illustration: Person A signed a negotiable instrument his right of recourse against the party secondarily liable,
payable to Person B or order for P100.00. Person B the latter is not discharged.
indorsed the negotiable instrument to Person C, Person C to Requisites of agreement for extension of time
1. It must be a binding contract, supported by b. Presentment is excused and the instrument is
valuable consideration and for a definite period. overdue and unpaid.
2. It must be made with the principal debtor and 2. Where a bill has been protested for non-payment,
not with a third party. any person may intervene and pay it supra protest
for the honor of any person liable thereon or for the
Right of party who discharges instrument honor of the person for whose account it was drawn.
3. The payment for honor supra protests, in order to
Where the instrument is paid by a party secondarily
liable thereon, it is not discharged; but the party so paying operate as such and not as a mere voluntary
it is remitted to his former rights as regard all prior parties, payment, must be attested by a notarial act of honor
which may be appended to the protest or form an
and he may strike out his own and all subsequent
extension to it.
indorsements and against negotiate the instrument, except:
4. The notarial act of honor must be founded on a
1. Where it is payable to the order of a third person declaration made by the payer for honor or by his
and has been paid by the drawer; and agent in that behalf declaring his intention to pay
2. Where it was made or accepted for accommodation the bill for honor and for whose honor he pays.
and has been paid by the party accommodated.
What is payment for honor?
PAYMENT FOR HONOR
Payment for honor is payment made by a person,
Who may make payment for honor? whether a party to the bill or not, after it has been
protested for non-payment, for the benefit of any party
Where a bill has been protested for non-payment, liable thereon, or for the benefit of the person whose
any person may intervene and pay it supra protest for the account it was drawn. It is also called payment supra
honor of any person liable thereon or for the honor of the protest because prior protest for non-payment is required.
person for whose account it was drawn. It is not applicable to promissory notes. Payment for honor
may be availed of when the holder, knowing that the bill
Payment for honor; how made
has already been dishonored for nonpayment, does not
1. When instrument dishonored by non-payment. – want to indorse the bill and there by incur the liabilities of
The instrument is dishonored by non-payment an indorser.
when:
What is the difference between acceptance for honor
a. It is duly presented for payment and payment
and payment of honor?
is refused or cannot be obtained; or
In acceptance for honor, there is an acceptor for What if the payment for honor is not attested by a
honor. In payment for honor, there is a payor for honor. notarial act?
The difference between the two is that while in the former,
the acceptor must be a stranger to the bill, in the latter, the It will operate as a mere voluntary payment and the
payer for honor may be a party liable on the bill. Further, in payer acquires no right to full reimbursement against the
the former, the bill must not be overdue. In the latter, it is party for whose honor he pays. (Art. 1236-1237, NCC). He
overdue. Also, in the former, there may be several acquires the right of reimbursement only up to the extent
acceptors while, in the latter, there can only be one payer. that the party for whose honor he paid is benefited there
Finally, in the former, the protest must be for non- by. Similarly, failure to notify the person for whose honor
acceptance or for better security, while, in the latter, it is for he pays within reasonable time will result in the payment
non-payment. being considered in the same manner.
What are the requisites to perform a valid payment for Preference of parties offering to pay for honor
honor? Where two or more persons offer to pay a bill for the
1. The bill has been dishonored for non-payment honor of different parties, the person whose payment will
2. The bill has been protested for non-payment discharge most parties to the bill is to be given the
3. Payment supra protest is made by any person, even preference.
a party thereto and as to form
Illustration: A draws a bill payable to B, with X as
4. The payment must be attested by notarial act
drawee. B negotiates it to C, C to D, D to E, E to F, holder. X
appended to the protest, or form an extension to it
refuses to honor it and F duly protests non-payment. If Y
5. The notarial act must be based on the declaration by
offers to pay for the honor of C, while Z offers to pay for the
the payer for honor or his agent of his intention to
honor of B, the latter’s (Z) will be preferred as Z’s payment
pay the bill for honor and for whose honor he pays.
will discharge more (C, D, E). Y’s offer will only work to
What is the procedure for payment for honor? discharge D & E.
1. The payer or his agent goes to a notary public and Effect on subsequent parties where bill is paid for
declares his intention to pay the bill and for whose honor
honor he pays.
2. The notary then records the declaration in the protest What are the effects of payment for honor?
or in a separate paper attached to it. 1. All parties subsequent to the party whose
3. The payer then notifies the person for whose honor he honor it is paid are discharged; and
pays within reasonable time.
2. The payer for honor is subrogated for, and have been discharged had the holder accepted payment.
succeeds to, both the rights and duties of the But as to C, the party in whose honor Y offers to pay, is not
holder as regards the party whose honor he discharged because, as to him, even if F accepted, C would
pays and all parties liable to the latter. not be discharged. The party for whom the instrument is
paid for is never discharged from liability by the payment
Illustration: In the example above, suppose Z did not for honor of the payer.
offer and, as a result, Y made payment. What are the
effects? Rights of payer for honor
a. D and E are discharged because they are parties The payer for honor, on paying to the holder the
subsequent to the party for whose honor it is paid (C). amount of the bill and the notarial expenses incidental to
its dishonor, is entitled to receive both the bill itself and the
b. Y acquires the rights of F, holder, as against C, B, A protest.
and X because C is the party for whose honor he pays and
the rest are considered as parties liable to C. What are the rights of the rights of the payer for honor?
5.B Presentment for acceptance is excused and a bill may Where notice is given by or on behalf of the holder,
be treated as dishonored by non-acceptance in either of the it insures to the benefit of all subsequent holders
following case: and all prior parties who have a right of recourse
against the party to whom it is given.
Drawee (dead; abandoned; fictitious person or not
having capacity) 11. Effect where notice is given by party entitles thereto
Presentment cannot be made after the exercise of
reasonable diligence. Where notice is given by or on behalf of a party
Acceptance has been refused on some other ground. entitled to give notice, it inures to the benefit of the
holder and all parties subsequent to the party to
6. Conditions to charge parties secondarily liable whom notice is given.
1. To whom the notice of dishonor may be given 1. If sent by mail, it must be deposited in the post
office in time to go by mail the day following the
1. To the party himself or day of dishonor, or if there be no mail at a
2. To his agent in that behalf. (Sec. 97) convenient hour on last day, by the next mail
3. When any party is dead thereafter.
4. Notice to partners 2. If given otherwise than though the post office,
5. Notice to persons jointly liable then within the time that notice would have been
6. Notice to bankrupt received in due course of mail, if it had been
deposited in the post office within the time
2. Time within which notice must be given specified in the last subdivision. (Sec. 104)
Notice may be given as soon as the instrument is 3. Deposit in post office; what constitutes
dishonored and, unless delay is excused as hereinafter
provided, must be given within the time fixed by this Act. Notice is deemed to have been deposited in the post-
office when deposited in any branch post office or in any
2.A. Where parties reside in same place. letter box under the control of the post-office department.
3.a. Where notice must be sent 6.a When notice need not be given to drawer
Notice of dishonor is not required to be given to the
Where a party has added to his signature, notice of drawer in either of the following cases:
dishonor must be sent to that address; but if he has not Drawer and drawee are the same person;
given such address, then the notice must be sent as follows: When the draw is fictitious person or a
person not having capacity to contract;
1. Either to the post-office where he is accustomed When the drawer is the person to whom the
to receive his letters; or instrument is presented for payment;
2. If he lives in one place and has his place of Where the drawer has no right to expect or
business in another, notice may be sent to either require that the drawee or acceptor will
place; or honor the instrument;
3. If he is sojourning in another place, notice may Where the drawer has countermanded
be sent to the place where he is so sojourning. payment.
4. Waiver of notice of dishonor 6.b When notice need not be given to indorser
Notice of dishonor may be waived either: Notice of dishonor is not required to be given to an
indorser in either of the following cases:
1. Before the time of giving notice has arrived or
2. After the omission to give due notice When the drawee is fictitious person or
a. The waiver may be expressed or person not having capacity to contract,
b. Implied. and then indorser was aware of that fact
at the time he indorsed the instrument;
5. Whom affected by waiver Where the indorser is the person to
Where the waiver is embodied in the instrument whom the instrument is presented for
itself, it is binding upon all parties but, where it is written payment;
above the signature of an indorser, it binds him only. Where the instrument was made or
accepted for his accommodation. (Sec.
6. When notice is dispensed with 115)
A foreign bill appearing on its face to be such is 2. The fact that presentment was made and manner thereof.
dishonored by non-acceptance.
3. The cause or reason for protesting the bill.
4. The
It must be duly protested for non-acceptance. demand made and the answer given, if any, or the face that
Where such bill which has not previously been the drawee and acceptor could not be found.
dishonored by non-payment, it must be duly
protested for non-payment.
4. Protest; by whom made
If it is not so protested, the drawer and indorsers are
discharged.
A notary public.
Where a bill does not appear on its face to be a By any respectable resident of the place where the
foreign bill, protest thereof in case of dishonor is bill is dishonored, in the presence of two or more
unnecessary.
credible witnesses.
Where a dishonored bill has been accepted for
5.Protest; when to be made
Protest before maturity where acceptor
Where the acceptor has been adjudged:
When a bill is protested, such protest must be made on the 1. A bankrupt
day of its dishonor unless delay is excused as a herein 2. An insolvent
provided. When a bill has been duly noted the pretest may Has made an assignment for the benefit of
be subsequently extended as of the date of the noting. creditors before the bill matures, the holder
may cause the bill to be protested for better
Protest is dispensed with by any circumstances
security against the drawer and indorser.
which would dispense with notice of dishonor.
Protest where bill is lost and so forth
Delay in noting is protesting is excused when delay
When a bill is lost or destroyed or is wrongly
is caused by circumstances beyond control of the
detained from the person entitled to hold it,
holder and not imputable to his default, misconduct
protest may be made on a copy or written
or negligence.
particulars thereof.
When the cause of delay ceases to operate, the bill
must be noted or protested with reasonable 9. Waiver of protest
diligence.
A waiver of protest, whether n the case of a foreign bill of
7.Protest; where made exchange or other negotiable instrument, is deemed to be a
waiver of:
A bill must be protested at the place where it is
dishonored, expect that when a bill drawn payable at the A formal protest but
place of business of some person other that the drawee has Also of presentment
been dishonored by non-acceptance, it must be protested Notice of dishonor
for non-payment at the place where it is expressed to be
payable, and no further presentment to, or demand on, the
drawee necessary.