Jona Notes in Nego - Atty. Subia - Finals

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. 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. 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.

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.

Every obligation which contains a resolutory condition shall also be demandable, without prejudice to the effects of the happening of the event. 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. A holder in due course is a holder who has taken the instrument under the following conditions:chanroblesvirtuallawlibrary (a) That it is complete and regular upon its face; (b) That he became the holder of it before it was overdue, and without notice that it has been previously dishonored, if such was the fact; (c) That he took it in good faith and for value; (d) That at the time it was negotiated to him, he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it.

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 Class discussion, after midterms: Sec. 62 – Liability of the acceptor  correlate to Sec. 127 – bill not an assignment of funds in hands of drawee Sec. 63 – When a person deemed indorser  cor. to Sec. 17 – Construction

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) | 5 Alcazar, JMM.

Memorize: Sec. 65 – Warranty where negotiation by delivery and so forth. *you do not give warranty to the party you had negotiations with, cor. to Sec. 40 – indorsement of an instrument payable to bearer. Sec. 66 – Liability of general indorser  cor. with Sec. 61 – liability of drawer Sec. 66(b) – all prior negotiations are all valid Sec. 70 – effect of want of demand on principal debtor  cor. with Sec 71-73 (due presentment) Memorize: Sec. 72 – What constitutes a sufficient presentment; Sec. 73 – Place of presentment; Sec. 82 – When presentment for payment is excused Sec. 84 – Liability of secondarily liable  cor. with Sec. 89 – to whom notice of dishonor must be given Sec. 87 – Rule where instrument payable at bank  cor. with Sec. 75 – presentment where instrument payable at bank. Memorize Sec. 88 – What constitutes payment in due course  It must be made at or after the maturity  Payment must be to the holder  Must be in good faith  There must be no notice that his title is defective Cor. with Sec. 47 – continuation of negotiable character; Sec. 19 – Signature by agent Sec. 89 – to whom notice of dishonor must be given  cor. with Sec. 83 – when instrument dishonored by nonpayment Sec. 90 – by whom given Person allowed by law to give notice of dishonor:  Holder  Any party to the instrument who might be compelled to pay the holder Cor. with Sec. 19 – signature by agent, Sec. 66 – liability of general indorser, Sec. 68 – order in which the indorsers are liable Cor. with Article 1816. All partners, including industrial ones, shall be liable pro rata with all their property and after all the partnership assets have been exhausted, for the contracts which may be entered into in the name and for the account of the partnership, under its signature and by a person authorized to act for the partnership. However, any partner may enter into a separate obligation to perform a partnership contract. Sec. 91 – notice given by agent  cor. with 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. Sec. 92 – Effect of notice on behalf of the holder  cor. with Sec. 47 – continuation of negotiable character

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) | 6 Alcazar, JMM.

Sec. 94 – When agent may give notice  cor. with Sec. 91 – Notice by agent Two ways of notice by the agent: 1. Act like a principal in giving notice to the drawer 2. Notify the principal himself Sec. 96 – Form of notice  cor. with Sec. 102 – time within which notice must be given Sec. 107 – notice to subsequent party  cor. with Sec. 91 – notice by agent and Sec. 102 - time within which notice must be given Sec. 108 – where notice must be sent  cor. with Sec. 16 – privity of the subsequent holders No need to notify the immediate party Sec. 117 – Effect of omission to give notice of non-acceptance  cor. with Sec. 143 – when presentment for acceptance must be made Sec. 119 – Instrument how discharged Par. (a)  cor. with Sec 88 – what constitute payment in due course (b)  cor. with Sec. 29 – liability of accommodation party (c)  cor. with Sec. 123 – cancellation (e) – refers to absolute liability  cor. with Sec. 192 – persons primarily liable

Sec. 120 – Discharge of secondarily liable Par. (a)  cor. with Sec. 119 – instrument, how discharged (d)  cor. with Sec. 70 – effect of want of demand on principal debtor (f)  cor. with Secs. 65 – 66 – warranty where negotiation by delivery and liability of general indorser

Sec. 121 – Right of party who discharges instrument *pertains to notified indorsers only *instrument remains to be negotiable Sec. 124 – Alteration of instrument – real defense Memorize: Sec. 125 – material alteration; Sec. 127 – bill not an assignment of funds in hands of drawee Sec. 128 – bill addressed to more than one drawee: jointly = solidary, both are liable under the NIL. Sec. 130 – When bill may be treated as promissory note:  The drawer and drawee are the same person  Drawee is a fictitious person  The holder is a person not having capacity to contract Sec. 132 – Acceptance  cor. with Sec. 142 – rights of parties as to qualified acceptance Memorize: Sec. 143 – Presentment for acceptance

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) | 7 Alcazar, JMM.

Sec. 144 – when failure to present releases drawer and indorser  cor. with Sec. 193 – reasonable time Sec. 149 – when dishonored by non acceptance  cor. with Sec. 83 – when instrument dishonored by nonpayment Sec. 150 – Duty of holder where bill not accepted  cor. with Sec. 84 – liability of person secondarily liable

Protest - formal instrument executed by a notary public or other competent person certifying that the facts necessary to the dishonor of the instrument by non-acceptance or non-payment have taken place. Sec. 152 – protest necessary  cor. with Sec. 129 – inland and foreign bills Memorize: Sec. 156 – protest, where made  cor. with Sec. 152 – Sec. 159 – protest dispensed with  cor. with Sec. 112 – notice is dispensed with Sec. 161 – bill accepted for honor Requisites of acceptance for honor:  Bill has been protested for dishonor by non acceptance or protested for better security  The bill is not overdue  Any person not being a party is already liable  There must be the consent of the holder for the acceptance for honor Memorize: Sec. 165 – Agreement for acceptor for honor ; Sec. 184 – promissory note Sec. 185 – check  cor. with Sec. 127 – bill not an assignment of funds Sec. 194 – Time, how computed  cor. with Sec. 86 – time, how computed

Presentation of the NIL – Act 2031 1) 2) 3) 4) 5) 6) 7) 8)

Form and interpretation Consideration Negotiation Rights of the holder Liabilities of the parties Presentment for payment Notice of dishonor Discharge of N.I.

Part II – Bills of exchange a) Form and interpretation b) Acceptance c) Presentment foe acceptance d) Protest e) Acceptance for honor f) Payment for honor g) Bills in set h) Promissory notes and check

2nd semester, SY 2013 – 2014