Act No.

2031
February 03, 1911
THE NEGOTIABLE INSTRUMENTS LAW

II. CONSIDERATION

Sec. 24. Presumption of consideration. – Every negotiable instrument is deemed prima facie to
have been issued for a valuable consideration; and every person whose signature appears thereon
to have become a party thereto for value.

Sec. 25. Value, what constitutes. — Value is 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.

Sec. 26. What constitutes holder for value. – Where value has at any time been given for the
instrument, the holder is deemed a holder for value in respect to all parties who become such prior
to that time.

Sec. 27. When lien on instrument constitutes holder for value. — Where the holder has a lien on
the instrument arising either from contract or by implication of law, he is deemed a holder for value
to the extent of his lien.

Sec. 28. Effect of want of consideration. – Absence or failure of consideration is a matter of defense
as against any person not a holder in due course; and partial failure of consideration is a defense
pro tanto, whether the failure is an ascertained and liquidated amount or otherwise.

Sec. 29. Liability of accommodation party. – An accommodation party is one 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. Such a person is liable on the instrument to a
holder for value, notwithstanding such holder, at the time of taking the instrument, knew him to be
only an accommodation party.

III. NEGOTIATION

Sec. 30. What constitutes negotiation. - An instrument is negotiated when it is transferred from
one person to another in such manner as to constitute the transferee the holder thereof. If payable
to bearer, it is negotiated by delivery; if payable to order, it is negotiated by the indorsement of the
holder and completed by delivery.

Sec. 31. Indorsement; how made. - The indorsement must be written on the instrument itself or
upon a paper attached thereto. The signature of the indorser, without additional words, is a
sufficient indorsement.
Sec. 32. Indorsement must be of entire instrument. - The indorsement must be an indorsement of
the entire instrument. An indorsement which purports to transfer to the indorsee a part only of the
amount payable, or which purports to transfer the instrument to two or more indorsees severally,
does not operate as a negotiation of the instrument. But where the instrument has been paid in
part, it may be indorsed as to the residue.

Sec. 33. Kinds of indorsement. - An indorsement may be either special or in blank; and it may also
be either restrictive or qualified or conditional.

Sec. 34. Special indorsement; indorsement in blank. - A special indorsement specifies the person to
whom, or to whose order, the instrument is to be payable, and the indorsement of such indorsee is
necessary to the further negotiation of the instrument. An indorsement in blank specifies no
indorsee, and an instrument so indorsed is payable to bearer, and may be negotiated by delivery.

Sec. 35. Blank indorsement; how changed to special indorsement. - The holder may convert a
blank indorsement into a special indorsement by writing over the signature of the indorser in blank
any contract consistent with the character of the indorsement.

Sec. 36. When indorsement restrictive. - An indorsement is restrictive which either:

Sec. 37. Effect of restrictive indorsement; rights of indorsee. - A restrictive indorsement confers
upon the indorsee the right:
(a) to receive payment of the instrument;
(b) to bring any action thereon that the indorser could bring;
(c) to transfer his rights as such indorsee, where the form of the indorsement authorizes him to
do so.
But all subsequent indorsees acquire only the title of the first indorsee under the restrictive
indorsement.

Sec. 38. Qualified indorsement. - A qualified indorsement constitutes the indorser a mere assignor
of the title to the instrument. It may be made by adding to the indorser's signature the words
"without recourse" or any words of similar import. Such an indorsement does not impair the
negotiable character of the instrument.

Sec. 39. Conditional indorsement. - Where an indorsement is conditional, the party required to pay
the instrument may disregard the condition and make payment to the indorsee or his transferee
whether the condition has been fulfilled or not. But any person to whom an instrument so indorsed
is negotiated will hold the same, or the proceeds thereof, subject to the rights of the person
indorsing conditionally.

Sec. 40. Indorsement of instrument payable to bearer. - Where an instrument, payable to bearer, is
indorsed specially, it may nevertheless be further negotiated by delivery; but the person indorsing
specially is liable as indorser to only such holders as make title through his indorsement.

Sec. 41. Indorsement where payable to two or more persons. - Where an instrument is payable to
the order of two or more payees or indorsees who are not partners, all must indorse unless the one
indorsing has authority to indorse for the others.

Sec. 42. Effect of instrument drawn or indorsed to a person as cashier. - Where an instrument is
drawn or indorsed to a person as "cashier" or other fiscal officer of a bank or corporation, it is
deemed prima facie to be payable to the bank or corporation of which he is such officer, and may
be negotiated by either the indorsement of the bank or corporation or the indorsement of the
officer.

Sec. 43. Indorsement where name is misspelled, and so forth. - Where the name of a payee or
indorsee is wrongly designated or misspelled, he may indorse the instrument as therein described
adding, if he thinks fit, his proper signature.

Sec. 44. Indorsement in representative capacity. - Where any person is under obligation to indorse
in a representative capacity, he may indorse in such terms as to negative personal liability.

Sec. 45. Time of indorsement; presumption. - Except where an indorsement bears date after the
maturity of the instrument, every negotiation is deemed prima facie to have been effected before
the instrument was overdue.

Sec. 46. Place of indorsement; presumption. - Except where the contrary appears, every
indorsement is presumed prima facie to have been made at the place where the instrument is
dated.

Sec. 47. Continuation of negotiable character. - An instrument negotiable in its origin continues to
be negotiable until it has been restrictively indorsed or discharged by payment or otherwise.

Sec. 48. Striking out indorsement. - The holder may at any time strike out any indorsement which is
not necessary to his title. The indorser whose indorsement is struck out, and all indorsers
subsequent to him, are thereby relieved from liability on the instrument.

Sec. 49. Transfer without indorsement; effect of. - Where the holder of an instrument payable to
his order transfers it for value without indorsing it, the transfer vests in the transferee such title as
the transferor had therein, and the transferee acquires in addition, the right to have the
indorsement of the transferor. But for the purpose of determining whether the transferee is a
holder in due course, the negotiation takes effect as of the time when the indorsement is actually
made.

Sec. 50. When prior party may negotiate instrument. - Where an instrument is negotiated back to
a prior party, such party may, subject to the provisions of this Act, reissue and further negotiable
the same. But he is not entitled to enforce payment thereof against any intervening party to whom
he was personally liable.