report on negotiable instruments law

8/12/2019 Report on Negotiable Instruments Law

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NEGOTIABLE

INSTRUMENTS LAW

ACT NO. 2031

Negotiable (N) vs. Non- Negotiable (NN)

REPORTER: KHERVY B. REYES

2012400251 2-S


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NEGOTIABLEIN

STRUMENTS

LAW

(ACTN

O.2031

)Negotiable vs.Non-Negotiable

Negotiation vs.

Assignment

Bill of Exchange

vs.

Promissory Notes

3/15/2014Prof. Khervy B. Reyes


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Negotiable (N) vs. Non- Negotiable (NN)

NEGOTIABLE (N) NON- NEGOTIABLE (NN)1. Contains ALL the requisites

of Section 1 of the Negotiable

Instruments Law

Does not contain ANY, SOME,

OR ALL of the requisites in

Section 1 of the law.

2. Transferred by negotiation Transferred by assignment

3. Prior parties warrant

payment

Prior parties warrant only the

legality of the title but notpayment

4. A holder in due course

(HDC) can have rights better

than his transferor.

Its transferee acquires no

better right than his transferor.


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Sec. 1 Form of negotiable instruments.

a. It must be in writing and signed by the maker or drawer;

b. Must contain an unconditional promise or order to pay a

sum certain in money;

c. Must be payable on demand or at a fixed or determinablefuture time;

d. Must be payable to order or bearer; and

e. Where the instrument is addressed to a drawee, he must

be named or otherwise indicated therein with reasonable

certainty.


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Negotiation (N) vs. Assignment (A)

MODES OF TRANSFER OF NEGOTIABLE

INSTRUMENT (Sec. 30)

1. By assignment

2. By operation of law

3. By negotiation


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MODES OF TRANSFER1. By assignment A mode of transferring a

negotiable instrument other

than by indorsement if the

instrument is payable to order,or by delivery where payable

to bearer, whereby the

assignee is placed in the

position of the assignor, and

acquires no greater right thanthat of the assignor.


3. By negotiation


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MODES OF TRANSFER1. By assignment

2. By operation of law A transfer of the instrument

without assignment or

negotiation, but by operationof law, namely:

a. By the death of the holder

b. By the bankruptcy of the

holder

c. Upon the death of the joint

payee or indorsee

3. By negotiation


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MODES OF TRANSFER

1. By assignment


3. By negotiation The transfer of a negotiable

instrument from one person to

another in such a manner as

to constitute the transferee theholder of the instrument.


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Negotiation may be made as follows:

1. If the instrument is payable to order,

negotiation may be made by indorsement

completed by delivery.

2. If the instrument is payable to bearer,

negotiation may be made by:

a. Mere delivery, (Section 30) or

b. Indorsement completed by delivery


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NEGOTIATION (N) ASSIGNMENT (A)1. Applies only to negotiable

instruments.

Applies to contracts in general

including negotiable

instruments.

2. In negotiation, transferee

becomes a holder.

In assignment, transferee

becomes a mere assignee.

3. A person who takes aninstrument by negotiation and

becomes a holder in due

course, is subject only to

real defenses.

A person who takes aninstrument by assignment is

subject to both real and

personal defenses obtaining

among the original parties.


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NEGOTIATION (N) ASSIGNMENT (A)

4. In negotiation, a general

indorser warrantsthe

solvency of prior parties.

In assignment, an assignor

does not warrant the

solvency of prior parties,

unless there is a stipulationto the contrary or he knows

of such insolvency.

5. In negotiation,presentment for payment

and notice of dishonoris

requiredto make an indorser

liable.

In assignment, the assignor isl iab le even w ithou t not ice of

d ishonor.


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NEGOTIATION (N) ASSIGNMENT (A)

6. Negotiation is governed by

the Negotiable Instruments

Law (Act No. 2031)

Assignment is governed by

the Civil Code (Art. 1624-

1635) on assignment of

credits.


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Bill of Exchange (BoE) vs. Promissory Note (PN)

Bill of Exchange (BoE) Promissory Note (PN)1. Unconditional order to pay a

sum certain in money

Unconditional promise made

by the maker

2. Parties are drawer, drawee

and payee

Parties are maker and payee

only3. Drawer is secondarily liable Maker is primarily liable

4. If payable to the drawers

order, complete even without

indorsement

If payable to the makers own

order, not complete until

indorsed by maker

5. Must be presented for

acceptance

No need of acceptance


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Bill of Exchange (BoE) vs. Promissory Note (PN)

Bill of Exchange (BoE) Promissory Note (PN)

6. If payable on demand, it

must be presented for

payment within a reasonabletime from its last nego tiat ion .

If payable on demand, it must

be presented for payment

within a reasonable time fromits issue.

report on negotiable instruments law

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