Reviewer in Nego

NEGO GOTI ABLE I NSTRUMENT  I ti s a wri t t en cont r actf or t he payme nt of mone y whi c h i s i nt ended as a subs t i t ut e f or mone y and pass es f r om one per son t o anot heras money ,i n such a manner as t o gi v e a hol deri n duecour set heri ghtt o hol d t he i ns t r ument f r ee f r om def ence s av ai l abl e t o pr i or part i es . The i ns t r ument mus t comp mpl y wi t h Sec t i on 1 of t he Negot i abl eI nst r ument sLaw t obe c ons i de r e dne g o t i abl e . REQU QUI SI TES OF NEGOTI ABI LI TY ( Sec.1)WUDOA 1.Mus  w  wri tbei n t i ngandsi gnedby t hema makerordr awer ; 2.Must cont ai n an uncondi t i onal pr om mi i se or or der t o pay a sum cer t ai ni nmoney; 3.Mus tbepayabl eon demand,or atafixedordet er mi nabl ef ut ur e t i me; 4.Must be payabl e t o or der or  be ar er ;and 5 . en  Wh t he i ns t r ument i s addressed t o a dr awee,hemu mus t  bename d orot her wi sei ndi cat e d t he r e i nwi t hr e as o nabl ec e r t ai nt y .  Wh  Whatdoesnegot i at i onmean?  The t r ans f er of an i ns t r ume nt f r om one per s on t o anot her i n such a mannerast o co ns t i t ut e t het r a ns f e r e eaho l de rt he r e o f .A hol deri st hepayeeori ndorseeof a bi l l or not e who i s i n

possessi on of i t , or t he beare r t he r e of .

How i s negot i abi l i t y of an i nst r ume m entdet er mi ned?  I n det ermi mi ni ng t he negot i abi l i t y of an i ns t r ument ,c onsi der t he i nst r ument i n i t s ent i r et y and onl ywhatappearson i t sf ace. I t mus t compl y wi t h t he r equi r eme ment sunderSec.1oft he NI L.  Wh  Whennegot i abi l i t yends?  Se c.47 oft heNI L pr ovi dest hat “ an i nst rumentnegot i abl ei ni t s ori gi n cont i nuest obenegot i abl e unt i l : 1. .I I t has bee n r es t r i ct i v e l y i ndo r s e d;o r 2.D .Di sc har ged by payment or ot herwi se. Not e howeve r , t hat r est r i ct i ve i ndor s ement makes t he i nst rumentnonnegot i abl eonl yi f i ti st he fir s tt y pe – i tpr e v e nt s f ur t her nego t i at i on of t he i ns t r ument – and not t he t wo ot her t ypes ( const i t ut es t he i ndo r s e et heag e nto rt r us t e e ) . GOVERN RNI NG LAW  I n addi t i on t o Act No. 2031 ot he r wi se kno wn as t he Ne go t i abl e I ns t r ument s Law, ne go t i abl e i ns t r ume nt s ar e governedbyt hepr ovi si onsoft he CodeofComm mmer cet hatwer enot i mpl i edl yr epeal ed by t he NI L.

 The Ne w Ci vi l Code appl i es s uppl e t o r y .

 Appl i cabi l i t y of t he Negot i abl e I nst r ument sLaw  T hepr ov i si onsoft heNI L can be appl i e d onl y t o ne go t i abl e i ns t r ume nt s .I ft hei ns t r ume nti s not nego t i abl e, t he per t i nent pr ovi si ons oft he Ci vi lCode or per t i nent speci al l aws shoul d appl y .  T heNI L can beappl i ed butonl y  by anal ogy i ft he i ns t r ume nti s no tne g ot i abl ei ft he r ei s no l a w t hatcanbeappl i ed.  De c i si ons of t he cour t si nt he Uni t e d St at es and i n Engl and  based on t he Amer i can Uni f or m Neg ot i abl eI ns t r ument s Law and t heBi l l sofExchangeActof1882 c an beappl i e di nt hej ur i s di c t i o n  be cause t hose f or ei gn l aws serv edasbasesofNI L. FUNCTI ONS 1.I t oper at es as a subst i t ut e of money . 2.I ti s a means ofcr eat i ng and t r ans f e r r i ngc r e di t . 3.I tf ac i l i t at e st hesal eofg oods . 4.I t i nc r e as es t he pur c hasi ng medi um i nci r cul at i on.  TWO I MPORTANT FEATURES OF NEGOTI ABLE I NSTRUMENT i abi l i t y – i 1.Negot t i s t hat at t r i but e or pr oper t y wher eby a  bi l lor not e orc hec k pass f r om

hand t o hand s i mi l ar t o mone y , so as t o gi vet he hol deri n due c our se t he r i ght t o hol d t he i ns t r ument and t o col l ec tt he s um pa y abl ef o rhi ms e l ff r e ef r o m def ences.  A at i on of Secondar y 2 . ccumul Cont r act s–secondarycont r act s ar epi cked up and car r i ed al ong  wi t ht hem ast he yar enegot i at ed f r om oneper son t oanot her ,ori n t he cour se of negot i at i on of a ne g ot i abl ei ns t r ume nt ,as e r i e sof  j udi ci alt i es be t wee nt he par t i es t her et o ari seei t herbyl aw orby pr i vi t y .

KI NDS OF NEGOTI ABLE I NSTRUMENTS l l of Exchange – i 1.Bi ti s an uncondi t i onal or der i n wr i t i ng addr essed by one per son t o anot her , si gned by t he per son g i v i ngi t ,r e qui r i ngt hepe r s o nt o  whom i ti s addr esse dt o pay on de mand or at a fixed or de t er mi nabl ef ut ur et i me a sum ce r t ai ni n money t o or derort o  be ar er . omi ssory Not e – i 2.Pr ti s an uncondi t i onalpr omi sei n wr i t i ng made by one per s on t o anot her , si gnedbyt hemaker ,engagi ngt o payon demand,orata fixe d or det er mi nabl ef ut ur et i me,a sum ce r t ai ni n money t o or derort o  be ar er . Wher eanot ei sdr awnt o t he maker ’ s own or der ,i ti s not compl et eunt i li ndors edbyhi m.

KI NDSOFBI LLOFEXCHANGE 1.Dr   –use d sy nonymous l ywi t h af t  bi l l of e xc hange al t hough i t nor mal l y r e f er s t o a bi l l or exc hange us ed on doc ume nt ar y exchange l i ke l et t er s of cr edi t t r ans ac t i o ns . nl and and Forei gn Bi l l 2.I   –i ti sa  bi l l whi c h i s, or on i t s f ace pur por t st o be,bot h dr awn and payabl e wi t hi n t he Phi l i ppi nes.  Anyot he rbi l li saf or e i gnbi l l .  T me dr af t – dr 3 . i af t t hat i s payabl eatafixeddat e. ght or Demand dr af t – dr 4.Si af t t hati spayabl ewhen t hehol der pr esent si tf orpayment .  T ade Accept ance –bi 5 . r l lt hati s used i n cont r act s ofsal e wher e t he sel l eras dr awerorder st he  buy er( as dr awee)t o pay a sum c e r t ai nt ot hes ames el l e r( pa ye e ) . ’ s Accept ance – a t 6.Banker i me dr af tacr osst hef aceofwhi cht he dr awee has wr i t t en has wr i t t en t hewor dacce pt ed. 7.Check  –abi l lofexchangedr awn onabankpayabl eo ndemand. KI NDSOFPROMI SSORY NOTES 1.Cer orm t i ficat e ofDeposi t –a f ofpr omi ss or y not es whi c hi sa  wr i t t e n ac knowl e dgme nt of a  bank ofi t sr ecei ptofa c er t ai n sum wi t h apr omi set or epayt he same. 2.Bonds–a cer t i ficat eorevi dence ofa debton whi c ht he i ss ui ng

c ompany or go v er nment albody promi se st opayt hebondhol der s aspeci fiedamountofi nt er estf or aspeci fiedl engt h oft i me,and t o r epay t hel oan on t heexpi r at i on date. ur e 3.Debent  – a pr omi ssor y not e or bond bac ke d by t he gener al c r edi t of a c or por at i on and usual l y not se cur ed by a mor t gageorl i en on any speci fic p r o p e r t y .

 When can a bi l lof exchange be t r eat ed as a promi ssory not e by t hehol der ? 1.When t hedr awerand t hedr awee ar et hes ameper son. 2.When t he dr awee i s a fict i t i ous person. 3.Whent hedr aweehasnocapaci t y t oc ont r a c t . 4.When t he i ns t r ume nt i s so ambi guous t hat t her ei s doubt  whe t heri ti sabi l loranot e. Negot i abl e Promi ssory Not e Vs. Negot i abl eBi l lOfExchange Pr omi ss ory Bi l lofExchange Not e Uncondi t i onal Uncondi t i onal pr omi se order I nv ol v es t wo I nv ol v es t hr ee par t i e s par t i e s Maker pri mar i l y Dr awe r l i abl e Onl y

s ec ondar i l yl i abl e one Gener al l y , t wo

pr es ent ment ( or pre se nt ment s:

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accept ance and f orpayment

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 T ade Accept ance –negot 2 . r i abl e , i ti saBi l lo fEx c hang eaddr e s s e d  byt hesel l e roft hegoodst ot he  buy er . Howev er ,Se c.1 mus tbe compl i edwi t h. der – non3.Money Or negot i abl e as i ti sgoverned by post alrul es and r egul at i ons whi c h may be i nconsi st entwi t ht he NI L and i t canonl ybenegot i at edonce.  Wa ehouse Recei pt – non4 . r ne g ot i abl easi tr e pr e s e nt sgo ods , notmoney . cket  5.Pawn Ti –nonnegot i abl eas i tdoesnotr epr es entmone y but t hepawnedar t i cl es.  T easur y war r ant – non6 . r negot i abl e bei ng payabl e out of par t i c ul arf und. l lofLadi ng – non7.Bi negot i abl e as i t r epr esent s go ods, not money .  T ust Recei pt – non8 . r negot i abl e asi ti san evi denceofowner shi p ofgoods,notmoney .

paymentwi t hi na paymentwi t hi na r eas onabl e t i me r eas onabl e t i me af t er

i t s

l ast af t e ri t si s sue .

ne go t i at i on.

 Ar e t he f ol l owi ng commer ci al paper snegoti abl ei nst r ument s? ossCheck  1.Cr –us ual l yne g ot i abl e as i tnor mal l ycompl i eswi t ht he r equi r ement sunderSec .1,NI L,  buti ss ue df ora spe ci alpur pose andcanbenegot i at edonl yonce.

PERSONSI NVOLVED I N NI L 1.Maker   –t hepe r sonwhomake sa promi ss or ynot eand pr omi se st o payt heamountst at edt her ei n. 2.Payee – t he o bl i g e ,t hati s ,t he per son who,by t het er msoft he not e or t he bi l l ,i st or ecei ve pay me nt . awer–t 3.Dr heper son who dr aws t he bi l lofe xchange;he or der s t hedr aweet opayasum ce r t ai n i nmone y .

awee – t 4.Dr he per son t o whom t heordert opayi saddr essedi na  bi l lofexc hange.  A or 5 . ccept   –adr aweewhoacc ept s t he or der t o pay made by t he dr awer .I ti sonl ywhenadr awee  be come s an accept ort hathe i s pr i mar i l yl i abl e . der – t 6.Hol he pe r so n who i si n po ssess i on of a be ar er i ns t r umentoran i ndor se ofan or der i nst r ument who i s i n possessi on t her eof . A hol deri s t he obl i ge e,a per s on who c an enf or ce payment of t he i ns t r ument . er ee i n cas e of need – a 7.Ref per sonwhomaybedes i gnat edi n t he i ns t r ument as t he per son  who may be r es or t ed t o by t he par t i e si nc as eofdi s put e . Negot i abl eI nst r ument s Vs. NonNegot i abl eI nst r ument s Negot i abl e Nonnegot i abl e I nst r ument s I nst r ument s Gov er ned by t he NI L doe s no t NI L

appl y . appl i e s

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i ns t r ument can i ns t r ument can

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REQUI SI TESOFNEGOTI ABI LI TY  A.I n Wr i t i ng and Si gned By The MakerorDr awe a)I n wr i t i ng means i t may be pr i nt e d,i ni nko ri n pe nc i landi t may be wr i t t en i n any mat er i al t hats ubs t i t ut e pape rl i ke c l o t h, l eat herorpar chment . Sec.191 oft heNI Lpr ovi dest hatt hewor d “ wr i t t en” i ncl udes pri nt ed, and “ wr i t i ng ”i nc l ude spr i nt . b)Si gned by t he make r or dr awer meanst hatt hes i gnat ur emaybe i n one’ s handwr i t i ng, pr i nt ed, e ngr av ed, l i t hogr aphed or phot ogr aphedsol ongast heyar e adopt ed as t he si gnat ur e oft he si gner . Whati si mport anti st hat t he make rordr aweruse d what he affixed ashi s own si gnat ur e f ora ut he nt i c at i o n.

t he paye e f r om act–t he dr awee B.Cont ai n

an

Uncondi t i onal

 Pr omi seorOr dert oPaya Sum Cer t ai ni nMoney

hi s own f unds, pay s t he r e a f t e rdr a we e f r om pa ys

Rei mbur sement f orPayment  The dr awee pays Ther ei sonl yone

t he

hi ms el f par t i c ul ar l yf und

f r om

omi se” i a)The “pr n a pr omi ss or y not ei st heunder t aki ngmadeby t hemakert o paya sum ce r t ai n i n mone yt ot he pay ee or t he hol der . The“order”  i n abi l li sa command made by t he dr awe r addr ess edt ot hedr aweror der i ng t hel at t ert opayt hepayeeort he hol derasum ce r t ai ni nmoney .  b)An unqual i fied or derorpr omi se t o pay i s uncondi t i onal wi t hi n t he me ani ng of NI L t hough coupl edwi t h: 1.An i ndi cat i on ofa part i cul ar f und out of whi c h r ei mbur sementi st o be made ora part i cul araccountt o be debi t edwi t ht heamount ;or 2.Ast at ementoft het r ansact i on  whi c h gi v es r i se t o t he i ns t r ument . c)A pr omi se or or der t o pay i s condi t i onal i f : 1) an or der or pr omi set opayoutofapart i cul ar f und; or 2) an i ns t r ument payabl eupon a cont i nge ncy( t he happeni ng oft heev entdoesnot c ur et hede f e c t ) . d)I ndi c at i o no fapar t i c ul arf undf o r payme nt v s. f und f or r e i mbur se ment Fundf or Part i cul arFund

di r ec t l y

t he i ndi c at e d.

part i cul ar f und i ndi c at e d. Part i cul ar f und Par t i cul ar f und i ndi cat ed i s not i ndi cat ed i st he t hedi r ectsour ce di r ect sour ce of of

payme nt

r ei mbur sement

I sa promi ssory not e wher ei nt he maker pr omi ses t o pay “as soon ashi smeansper mi thi mt odoso” negot i abl e?  No . The phr ase“ as s oon as hi s me ans pe r mi t hi m t o do so” r ender st hepr omi secondi t i onal , al t hough undert heCi vi lCode,i t may be cons i der ed as an o bl i g at i o nwi t hape r i o d. C. Payabl ei n Sum Cer t ai n i n Money a)Mo neyneednotbe“ l egalt ender . ”  An i ns t r umenti ss t i l lnegot i abl e al t hough t heamountt o be pai d i s expr essed i n cur r ency t hati s notl egalt enderso l ong as i ti s e xpr essed i n money . UnderRA 8183,t he agr ee ment t o pay i n f or e i g nc ur r e nc yi sv al i d. Ex .P ay abl ei nY e n.  b)I ft he obl i gor l i ke t he make ri s gi v en t he opt i on t o del i v er

some t hi ng i nl i eu ofmone yt he i ns t r ume nti sno tne g ot i abl e . Ex. A no t e whe r e t he maker “ pr o mi s e st o de l i v e rP1, 000 o ra sac kofr i c e”athi sopt i on. c)I ft hei nst rumentgi vest hehol der an el ect i on t or equi r esomet hi ng t o bedonei nl i eu ofpaymentof money ,t he i nst r ument i s st i l l ne go t i abl e . Ex.Wher et hemakerpr omi sest o  pay P1, 000 ora sac ko fr i c e at t heo pt i o no ft heho l de r .  A sum i s ce r t ai n wi t h t he d ) c ont e mpl at i o no fSe c .1( b)o ft he NI Li ft he amountt hati st o be uncondi t i onal l y pai d by t he make r or dr awee can be det er mi ned on t he f ace of t he i nst r ument ev en i fi tr equi r es mat hemat i calcomput at i on. e )The s   um pay abl e i s a sum ce r t ai n wi t hi n t he meani ng of t hi sAc t ,al t houg hi ti st obepai d: 1 . t  Wi hi nt er es t ’ ; 2.Bys t at e di ns t al l me nt ;o r t at ed i nst al l ment ,wi t ha 3.By s pr o v i s i o nt hatupo n de f aul ti n paymentofanyi nst al l mentor of i nt er es t ,t he whol e shal l  becomedue;or  Wi he xc hange,whe t her ata 4 . t fixed r at e or at t he cur r ent r at e ;or  Wi h cos t sofc ol l e ct i on oran 5 . t at t or ne y’ s f ee , i n cas e payments hal lnotbemadeat mat uri t y . at ed I nst al l ment s –t hedat es  f ) St ofeachi nst al l mentmustbefixed

oratl eastdet er mi nabl eand t he amount t o be pai d f or e ac h i nst al l mentmustbest at ed. Ex. The i ns t r ume nt i s no t nego t i abl e i f “ payabl e i n 5 i nst al l ment s i n t he amount of P1, 000 per i nst al l ment ” wi t hout s t at i ng t he dat es of eac h i ns t al l me nt s . D.Payabl e on Demand or at a Fi xed or Det er mi nabl e Fut ur e Ti me

e on Demand – The a)Payabl i ns t r ument shoul d be pai dt he moment i t i s pr e se nt e d f or pay me nt . An i nst r ume nt i s pay abl eondemand: 1.When i ti ssoexpr es se dt obe payabl e on de mand, or at s i g ht ,o ronpr e s e nt at i on;o r 2.I n whi c h not i mef orpayment i se x pr e s s e d; 3.Wher e an i ns t r ument i s i ssued,accept ed,or i ndorsed  whe nov e r due,i ti s,asr egar ds t he pe r son s o i s sui ng, accept i ng, or i ndor si ng i t , pay abl eondemand. e at Det er mi nabl e  b)Payabl Fut ur eTi me –an i ns t r umenti s payabl eatadet er mi nabl ef ut ur e t i me i fi ti s expr es se d t o be payabl e:  A d per i od af t erdat eor 1 . tafixe Ex.Twent y days af t er s i g ht ;( dat e )

2.On or bef or e a fixed or det er mi nabl e f ut ur e t i me Ex .Payabl e s pe c i fie dt he r e i n;( onorbef or eJanuar y1,2016) i od af t er 3.On orata fixed per t he occur r enceofa speci fied ev ent whi c h i s ce r t ai n t o happe n, t hough t he t i me of Ex . happe ni ng be uncer t ai n( Payabl e wi t hi n 5 days f r om de at ho fMr .X) .   er at i on Cl auses – t c )Accel he ne go t i abi l i t yo ft hei ns t r ume nti s no ta ffe c t e de v e ni fi ti st obepai d  bys t at ementi ns t al l me nt s,wi t ha pr ovi si on t hat ,upon def aul ti n paymentofanyi nst al l mentorof i nt er est ,t hewhol eshal lbecome due. o v i s i o ns d)I nsecur i t y Cl auses – pr on t he cont r actwhi ch al l ow t he hol dert o accel er at e payment“ i f hedeemshi msel fi nsec ur e. ” The i ns t r ument i s r ender ed nonne go t i abl e . e)Ext ensi on Cl auses – an i nst r ument i s pay abl e at a de fini t et i mei fby i t st e r msi ti s payabl eatadefini t et i mesubj ect t o ext ensi on att heopt i on oft he hol der , or t o e xt ensi on t o a f ur t he rde fini t et i meatt heopt i o n of t he make r or ac cept or or aut omat i cal l y upon or af t er a speci fiedactorevent . E.Payabl et oOr derorBearer

a.An i ns t r umentt hati spayabl et o aspeci fiedper son orent i t yi snot negot i abl e bec ause t he NI L r eq ui r es t hat t he i ns t r ument mus t be payabl et o or der or t o  be ar er .  b.An i ns t r ument i s pay abl e t o  be ar erwhen: 1.I t i s e xpr essed t o be s o pa y abl e ;o r 2.I ti s pay abl e t o a per s on namedt her ei norbear er ;or 3.I ti spayabl et ot heor derofa fict i t i ous or nonexi st i ng per son, and suc h f ac t was known t ot he per s on maki ng i ts opa yabl e ;or 4.The name oft he pay ee doe s notpur portt obet henameof anyper son ( Ex.“ payt ocase” ) ; or 5.The onl y orl as ti ndor se ment i sani ndor sementi nbl ank. derI nst r ument s  c)Or –i ns t r ument c an ei t her be made payabl et o t he or der ofa speci fied per son ( “ pay t ot he or derofJuan Del a Cr uz” )   ort oa speci fiedper son or hi so r de r( “ payt oJuanDel aCr uz . o ro r de r ” ) d)Sect i on 8 of NI L l i ke wi se i dent i fiest heper sonswhocan be desi gnat edaspayee si n an or der i ns t r ument – t he per sons t o  whoseor de rt hei ns t r umentmay  be made payabl e. The i ns t r umentmaybepayabl et ot he or de ro f : 1.A pay ee who i s not maker , dr awer ,ordrawee;or

2.Thedr awerormaker ;or 3.Thedr awee ;or 4.Twoormor epayee sj oi nt l y;or 5.Oneorsomeofse ve r alpayees ; or

6.Thehol derofan officef ort he t i mebei ng.