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Notes Nego - Midterms

This document provides an overview of key concepts in negotiable instruments law in the Philippines, including: - The definition of a negotiable instrument and its main functions of serving as a substitute for money and increasing credit circulation. - Features like negotiability and the accumulation of secondary contracts. - Requirements for an instrument to be considered negotiable under Section 1 of the law. - Types of negotiable instruments like bills of exchange and promissory notes. - Concepts like holders in due course, delivery, consideration, and defenses against holders not in due course. - Details on indorsement, both special and in blank, and how negotiability is continued through ind

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Kevin G. Perez
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45 views4 pages

Notes Nego - Midterms

This document provides an overview of key concepts in negotiable instruments law in the Philippines, including: - The definition of a negotiable instrument and its main functions of serving as a substitute for money and increasing credit circulation. - Features like negotiability and the accumulation of secondary contracts. - Requirements for an instrument to be considered negotiable under Section 1 of the law. - Types of negotiable instruments like bills of exchange and promissory notes. - Concepts like holders in due course, delivery, consideration, and defenses against holders not in due course. - Details on indorsement, both special and in blank, and how negotiability is continued through ind

Uploaded by

Kevin G. Perez
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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N o t e s o n N E G O T I A B L E I N S T R U M E N T S L A W ( Atty.

Glenn Subia) | 1
Alcazar, JMM.

ACT 2031 – Negotiable Instruments Law

Negotiable instrument - written contract for the payment of money which is intended as a substitute
for money and passes from one person to another as money, in such a manner as to give a holder in due
course the right to hold the instrument free from defenses available.

Functions of Negotiable instrument:


Main Functions:
 Serve as substitute for money
 It is a credit instrument which increases credit circulation
Other Functions
 It is a medium of exchange
 Increases purchasing power in circulation
 Serves as proof of transactions

Features of Negotiable Instrument:


 Negotiability
 Accumulation of secondary contracts

Memorize:
Section 1. Form of negotiable instruments
 It must be in writing and signed by the maker or drawer – (maker, in case of note; drawer, in
case of bill)
 Must contain an unconditional promise or order to pay a sum certain in money – (promise, in
case of note; order, in case of bill)
Sum certain – amount that is to be unconditionally paid by the maker / drawer, can be
determined on the face of the instrument
 Must be payable on demand, or at a fixed or determinable future time
Three options of maturity:
a. On demand – see Sec. 7
b. At a fixed future time
c. At a determinable future time – see Sec. 4
 Must be payable to order or to bearer – correlate to Sec. 8 (when payable to order) and Sec. 9
(when payable to bearer)
 Where the instrument is addressed to a drawee, he must be name or otherwise indicated
therein with reasonable certainty. – applies only to bill of exchange

*Section 1 of NIL is the most important provision because the law does not apply if the instrument does
not meet the requirement of negotiability.

Kinds of Negotiable instrument:


 Section 126. Bill of exchange
 Section 184. Promissory notes

Memorize:
Section 7. when payable on demand: An instrument is payable on demand:
a) When it is so expressed to be payable on demand, or at sight, or on presentation (demand, in
case of note; sight, in case of bill)

2nd semester, SY 2013 – 2014


N o t e s o n N E G O T I A B L E I N S T R U M E N T S L A W ( Atty. Glenn Subia) | 2
Alcazar, JMM.

b) In which no time for payment is expressed.


Where the instrument is issued, accepted, or indorsed when overdue, it is as regards the person so
issuing, accepting, or indorsing it, payable on demand.

Sight – instrument is payable as soon as it is seen by the party primarily laible.

Section 11. Date, presumption as to.


Generally, a date is not essential to make an instrument negotiable.
Two dates in a negotiable instrument: Date of maturity and Date of the instrument

Section 13. When date may be inserted. – correlate to Sec. 30 (What constitutes negotiation)

Section 14. Blanks, when may be filled.


Speaks of two instances:
Ω Instrument is wanting any material particular, the person in possession thereof has prima facie
authority to complete it by filling up the blanks therein
Ω A signature on a blank paper delivered by the person making the signature in order that the
paper may be converted into a negotiable instrument operates a prima facie authority to fill it
uo as such for any amount.
*Sec. 14 applies to incomplete and undelivered instrument.
*correlate to Art, 1868, CC.
Article 1868. By the contract of agency a person binds himself to render some service or to do
something in representation or on behalf of another, with the consent or authority of the latter.

Section 15. Incomplete instrument not delivered


Section 16. Delivery; when effectual; when presumed
Delivery  transfer of possession of the negotiable instrument by one person to another with the
intention to transfer title to the instrument.

Section 24. presumption of consideration.


Everybody is presumed to have signed the instrument after receiving the value.

Section 26. what constitutes holder for value.


In the series of transaction, it had been shown that the value had been given / paid for.

Prior parties subsequent parties


“Conclusively presumed” “only deemed prima facie”
Apply Sec. 26 Apply Sec. 24
M P  A  B  C  DE

B paid A (as evidenced / proven); reckoning point: B

Prior parties can no longer testify that they do not received any valuable consideration. Under Sec. 26,
they had been conclusively presumed to have received the consideration.
Subsequent parties can still testify or prove that they do not receive consideration, for they are only
deemed prima facie to have received the consideration.

2nd semester, SY 2013 – 2014


N o t e s o n N E G O T I A B L E I N S T R U M E N T S L A W ( Atty. Glenn Subia) | 3
Alcazar, JMM.

Section 27. When lien on instrument constitutes holder for value.


Lien  charge against or interest in property to secure payment of debt and/or performance of an
obligation
*cor. to Art. 1523, CC
Article 1523. Where, in pursuance of a contract of sale, the seller is authorized or required to send the
goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the
purpose of transmission to the buyer is deemed to be a delivery of the goods to the buyer, except in the
cases provided for in article 1503, first, second and third paragraphs, or unless a contrary intent
appears. Unless otherwise authorized by the buyer, the seller must make such contract with the carrier
on behalf of the buyer as may be reasonable, having regard to the nature of the goods and the other
circumstances of the case. If the seller omit so to do, and the goods are lost or damaged in course of
transit, the buyer may decline to treat the delivery to the carrier as a delivery to himself, or may hold
the seller responsible in damages. Unless otherwise agreed, where goods are sent by the seller to the
buyer under circumstances in which the seller knows or ought to know that it is usual to insure, the
seller must give such notice to the buyer as may enable him to insure them during their transit, and, if
the seller fails to do so, the goods shall be deemed to be at his risk during such transit.

Section 28. Effect of want of consideration. – correlate to Sec. 58 (when subject to original defense)
Defenses against holder not in due course:
a. Absence of consideration
b. Failure to comply with consideration
c. Partial absence / failure

Section 29. Liability of accommodation party


Accommodation party  one who has signed the instrument as maker, drawer, acceptor, or idorser,
without receiving value therefor, and for the purpose of lending his name to some other person.

Memorize:
Section 30. What constitutes negotiation.

Section 34. Special indorsement; indorsement in blank


Pertains to two statements:
A. A special indorsment specifies the person TO WHOM the instrument is to be payable
B. A special indorsment specifies the person TO WHOSE ORDER the instrument is to be payable,
and the indorsement of such indorsee is necessary ti the further negotiation of the instrument

Section 36. When indorsment restrictive. – cor. to Sec. 47 (continuation of negotiable instrument)

Section 38. Qualified indorsement - cor to Sec. 65 (warranty where negotiation by delivery and so
forth)

Section 39. Conditional indorsement – cor. to Art. 1179, CC


Article 1179. Every obligation whose performance does not depend upon a future or uncertain event, or
upon a past event unknown to the parties, is demandable at once.
Every obligation which contains a resolutory condition shall also be demandable, without prejudice to
the effects of the happening of the event.

2nd semester, SY 2013 – 2014


N o t e s o n N E G O T I A B L E I N S T R U M E N T S L A W ( Atty. Glenn Subia) | 4
Alcazar, JMM.

Section 40. indorsement of instrument payable to bearer. – applies whether it is originally payable to
order or has been converted back to payable to order.

Section 41. indorsement where payable to two or more persons. – cor. to Art. 1802
Article 1802. In case it should have been stipulated that none of the managing partners shall act without
the consent of the others, the concurrence of all shall be necessary for the validity of the acts, and the
absence or disability of any one of them cannot be alleged, unless there is imminent danger of grave or
irreparable injury to the partnership.

Section 47. continuation of negotiable character. - cor. to Sec. 36 (1) (when indorsement restrictive)
and Sec. 119 (instrument how discharged)

Section 49. transfer without indorsement, effect. – applies to instrument payable to order.
Reckoning time: actual time of indorsement

Section 50. when prior party may negotiate instrument – cor. to Sec. 121 (right of a party who
discharges instrument)

Memorize
Section 52. What constitutes a holder in due course.

Section 53. when person not deemed holder in due course: - cor. with Sec. 71 (presentment where
instrument is not payable on demand and where payable on demand)
Reasonable time – cor. with Sec. 193 (reasonable time, what constitutes)

Section 59. who is deemed a holder in due course. – does not apply to parties prior to the defective
title

2nd semester, SY 2013 – 2014

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