Negotiable Instruments LawsBased on 2015 Bar Exam

Syllabus for Commercial Law

References:

•Miravite, Jorge. Commercial Law Reviewer. 2002 ed.•Sundiang and Aquino. Commercial Law Reviewer. 2014 ed. •Lecture Notes for Commercial Law Review 1 under Fiscal R. S. Aquino-Tambasacan (San Sebastian, PUP College of Law)•Lecture and Handout of Atty George Ortha II for Jurists Review Center•Handout by Atty. Danilo G. Ballena (PUP College of Law)

• Miravite serves as the primary reference for this simple reviewer as it closely resembles the flow of the syllabus prescribed by the Supreme Court. It is supplemented by Sundiang (2014) and further annotated and updated with lecture notes from Tambasacan, Ortha, and Guzman

• This is not meant to be in depth, but rather as a brisk reviewer that touches substantially the topic under the syllabus. It is still preferable to read any book for fuller understanding.

• Key feature of this reviewer are the tables on liability in case of forgery

NOTES

Prepared ByLawrence P. Villamar

Negotiable Instrument*

A written contract for the payment of money which by its form and on its face is intended as a substitute for money and passes from hand to hand as money, so as to give the holder in due course the right to hold the instrument and collect the sum for himself (UPLC, 2005,1949 Bar)

*Peculiar that this is not part of the 2015 syllabus, but this is of primary importance that is why this is included in this reviewer.

Forms and Interpretation

Discrepancy Between the Amount in Figures and that in Words

The word prevail, but if the words are ambiguous, reference will be made to the figures to fix the amount

Instrument Not Dated Considered dated on date of issue

Conflict Between Written and Printed Provisions Written provisions prevail

Interest Provided for but No Starting Date Specified Starting date is the date of instrument, in the absence of said date, from date

of issue

Forms and Interpretation

When instrument is ambigous Such that there is doubt whether it is a bill or note, the holder may treat it as

a note or a bill (1998 Bar)Signature on Instrument Does Not Indicate Capacity in Which Made

Deemed as indorser with secodary liabilityWhen Promissory Note Worder “I Promise to Pay” is Signed By Two Makers

The payee of the promissory note had the right to hold any one of the two signers of the promissory note responsibility for the payment of the whole amount of the note

Requisites of Negotiability

In General (Sec. 1, NIL): Must be in writing and signed by the maker or drawer Must contain an unconditional promise or order to pay a sum certain in

money Must be payable on demand or at a fixed or determinable future time Must be payable to order or to bearer Where the instrument is addressed to a drawee, he must be named or

otherwise indicated therein with reasonable certainty.

Requisites of Negotiability

PROMISSORY NOTE (1961 Bar) Must be in writing and signed by the maker Must contain an unconditional promise to pay a sum certain in money Must be payable on demand or at a fixed or determinable future time Must be payable to order or to bearer

Requisites of Negotiability

Bill of Exchange (1961 Bar) Must be in writing and signed by the drawer Must contain an unconditional promise to pay a sum certain in money Must be payable on demand or at a fixed or determinable future time Must be payable to order or to bearer The drawee must be named or otherwise indicated with reasonable certainty

Quick Notes on Particular Requisites

Unconditional Promise or Order Where the promise or order to pay is made to depend on contingent even, it

is conditional and makes the instrument non negotiable Note that an indication of a particular fund from which the acceptor reimburses

himself after paying the holder And a statement of transaction which gives rise to the instrument.

Certainty of Sum If the amount is fixed

Note that negotiability is not affected although to be paid with interest, by stated installments, by stated installments with acceleration clause, with exchange, and with costs of collection or attorney's fees

STATED – should include date, amount to be paid, and number of installment (Ortha)

Quick Notes on Particular RequisitesIn Money

General rule: If payment is not by money, the instrument is non-negotiable. However, note that additional acts do not affect negotiability.

Need not be legal tender, may be in foreign currency (Ortha) Additional acts:

Authorizing sale of collateral securities on default Authorizes confession of judgment on default Waive benefit of law intended to protect debtor Allows the creditor the option to require something in lieu of money

Payable on Demad Where expressed to be payable on demand, at sight, or on presentation Where no period of payment is stated Where issued, accepted, or indorsed after maturity SC: A PN payable on demand is immediately due and demandable and an action

prescribes in ten years.

Quick Notes on Particular Requisites

Determinable Future Time At a fixed period after date or sight On or before a specified fixed or determinable future time On or at a fixed period after the concurrence of a specified event, certain to

happen, although the exact date is not certain Tambasacan: Solar eclipse is a natural phenomenon certain to happen.

Payable to Order Where drawn payable to the order of a specified person, or to him or his

order

Quick Notes on Particular Requisites

Payable to Bearer When expressed to be so payable When payable to a person named therein or bearer When payable to the order of a fictitious or non-existing person and such

fact was known to the drawer or maker When the name of the payee is not the name of a person When the only and last indorsement is an indorsement in blank NOTE:

Where payee is vaguely designated, the loss will be borned by the party who cause it – the drawer.

Non- negotiable: payable to a specified person and not to his order or to bearer (governed by some other law e.g. Civil Code or Special Laws)

Kinds of Negotiable Instruments

Promissory Note An unconditional promise in writing by one person to another signed by the

maker engaging to pay on demand or at a fixed determinable future time a sum certain in money to order or to beaer

Bill of Exchange An unconditional order in wiriting addressed by one person to another,

signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to order or to bearer

Cheque A bill of exchange drawn on a bank payable on demand

Kinds of Negotiable Instruments

Other forms: Certificate of deposit issued by banks payable to the depositor or his order

or to bearer Trade acceptance Bonds which are in the nature of promissory notes Drafts which are bills of exchange drawn by one bank upon another Letter of Credit*

NOT NEGOTIABLE: Treasury Warrants There is an indication of the fund as the source of payment of the

disbursement.

*Ortha: LC has lots of condition before bank may honor it. Therefore, not negotiable.

Completion and Delivery

Insertion of Date

Tambasacan: “Dates are not material but only for maturity”

Insertion of DateRULES AS TO DATES

Where the instrument, its acceptance, or indorsement is dated, such date is presumed to be the corresponding true date

Antedating or postdating an instrument does not affect validity or negotionability unless done for fraudulent or illegal purpose

Date is important: Where the instrument is payable within specified period after date, or after acceptance, in

which case the date of the instrument and the date of acceptance are needed to determine the date of maturity of the instrument, in these cases, the holder may insert the true date

When the instrument is payable on demand, date is necessary to determine whether the instrument was presented within a reasonable time from issue in the case of notes or from last negtiation in case of bills, as these factors will show whether the last holder is a holder in due course or not;

When the instrument is an interest bearing one, to determine when the interest starts to run

Completion of Blanks

A person in possessor of a check has prima facie authority to complete by filling up the blanks therein (Miravite (2002), p. 91)

Incomplete and Undelivered InstrumentsSec. 15, NILIf completed and delivered without authority, the instrument is not a valid contact against any person who signed before delivery.

Complete but Undelivered InstrumentsBetween immediate parties and a remote party not a holder in dure course, delivery to be effectual must be made by or under the authority of the maker, drawer, acceptor or indorser, as the case may beIf the instrument is in the hands of a holder in due course all prior deliveries are conclusively prwesumed to be validIf the instrument is out of the hands of the person who signed it, a valid and intentional delivery is disputably presumed

Incomplete but Delivered InstrumentsHolder has prima facie authority to complete the instrumentCompletion to be fone within a reasonable time and according to the authority givenHolder in due course of the instrument previously completed in breach of instructions can enforce the same as if regularly completed

Signature

• Ortha: “Not needed to be customary.” Signature per Procuration

One made by an agent with a limited authority to sign, and the principal is bound only if the agent acts within the limits of the authority

Made by adding “per procuration,” “per proc.” or “p.p.” under agent's signature

Signing in Trade Name

The person signing his trade name or assumed name is liable if the name were his own

Signature of Agent

Requisites: Must be authorized Must disclose his principal Must sign for and in behalf of the principal

Without disclosing principal, personal liability (Sec. 20, NIL)

Indorsement by Minor or CorporationMindors and disqualified corporations although incapacitated to make or draw instruments, can negotiate instruments, transferring valid titled thereto, but are not liable as indorsers under the said signatures

Forgery

Counterfeit making or fraudulent alteration of any writingIt may consist of:

Signung of another's name with intent to defraud Alteration of an instrument in the name, amount, description of payee, etc

with intent to defraud.The signature is wholly inoperative, and no right to retain the instrument or to give a discharge therefor, or to enforce payment thereof against any party to it, is acquired through or under such signatue.

Forgery

Forgery

Consideration

• Presumption of Consideration – every negotiable instrument is deemed prima facie to have been issued for a vauable consideration; and every person whose signature appears thereon to have become a party thereto for value (Ortha)

• Value – 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 (Ortha).

Consideration

• Effect of want of consideration – a matter of defense as againsty any person not a holder in due course; and partial failure of consideration is a defense pro tatnto, whether the failure os am ascertained and liquidated amount or otherwise (Ortha)

• Absence of consideration – total lack of any valid consideration for the contract is only a personal defense (Ortha)

• Failure of consideration – failure or refusal or one party to do, perform or comply with the consideration agreed upon is also only a personal defense (Ortha)

Accommodation Party

Accomodation A legal arrangement under which a person called the accommodation party

lends his name and credit to another called the accomodated party, without consideration

A person to whom the instrument thus executed is subsequently negotiated has a right of recourse against the accommodation party inspite of the former's knowledge that no consideration passed between the accommodation and accommodated parties

Accommodation Party

A person 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, is under the law liable on the instrument to a holder for value notwithstanding that such holder at the time of taking the instrument knew him only to be an accomodation party (1952 Bar)Liability: solidary party, unconditional and is not affected by an extension of payment granted by the creditor to the debtor

Negotiation

The transfer of a negotiable instrument from one person to another as to constitute the transferer the holder thereof

Distinguished from Assignment

2009, 2012 Bar ExamAssignability pertains to contracts in general, negotiability pertains to negotiable instrument (Sundiang & Aquino (2014 ed), p. 14)One who takes an instrument by assignment takes the instrument subject to the defenses obtaining among the original parties, whereas a person, who takes the instrument by negotiation, takes it free from personal defenses available among the parties (Ibid.)

Modes of Negotiation

By Delivery of the Instrument Alone Negotiation of NI may be effected by the delivery alone of the instrument to

the transferrer those NI which are originally payable to bearer, o originally payable to order instruments where the last indorsement is an indorsement in blank

By Indorsement Followed By Delivery A NI payable to the order of a pecified person, or to him or his order, may be

negotiated by the payee by indorsement followed by delivery of the instrument to the indorsee. Subsequent negotiations may be made in this manner if the holder who indorses acquired the instrument under special indorsement

Delivery of an instrument means transfer of possession from one person to another.

Kinds of Indorsements

Special The name of the indorsee is specified (vis a vis General). Ex. Pay to A

Blank An indorsement which does not specify the name of the indorsee and usually

consists of the indorser’s signature, and nothing else found at the back of the instrument.

Restrictive Limits the right of the indorsee by restricting further negotiation, or making

the indorsee the collecting agent of the indorser, or makin him a trustee of a person named in the indorsement

Ex. Pay to A only – restricts negotiation Other cases can still be negotiated subject to restriction of original restricve

indorsement (Ortha)

Kinds of IndorsementsConditional

The right of the indorsee under the instrument is made to depend on the happening of the contingent event stated in the instrument.Said indorsee however negotiate the instrument succeeding indorsees acquiring right to it subject to the condition in the origina indorsement.

Qualified One where the indorser places under his signature the words “without

recourse” or the like. Does not become liable secondarily under his indorsement. SC: “With recourse” meams indorser is a general indorser (Ortha)

Regular One placed after the issue of the instrument

Irregular One placed in blank before the issue of the instrument.

Rights of the Holder

In general May sue thereunder in his own name, and payment to him in due course

discharges the instrument If PN is non negotiable, subsequent holders can never be holders in due

course but are mere assignees against whom defenses may be raised by prior parties.

Fact that PN was executed after the effectivity date of the merger does not militate against the petitioner.

Holder in Due CourseRequisites under Sec. 52:

One who takes the instrument in good faith and for value At the time the instrument was negotiated to him, he had not notice at any

defect in the title of the person negotiating it Every holder is deemed prima facie to be a holder in due course Complete and regular on its face (UPLC)

SC: Fact that postdated checks were merely issued as security not a ground for discharged as against the HIDCIf instrument was acquired when overdue, not HIDC for lack of good faith. An instrument becomes overdue the day after its maturity. A holder accepting an instrument on its date of maturity is not an HIDC (Ortho)

Holder Not in Due Course

Without any, some , or all of the requisites under Sec. 52, NILHOLDER FOR VALUE – one who has all the requisites for a holder in due course except notice of want of consideration. Prior parties may avail of defense against said holder.SHELTER RULE – Acquires title from HIDC and not a party on the fraud, acquires rights of HIDC but do not become an HIDC himself (Ortho)

Defenses Against the HIDC

REAL or ABSOLUTE DEFENSES A defense which attaches to the instrument irrespective of the parties and is

predicated on the principle that the right sought to be enforced has never existed or has ceased to exist

Available against all holders, whether in due course or notPERSONAL or EQUITABLE DEFENSES

A defense growing out of an agreement or conduct of a particular person in regard to an instrument which renders it inequitable for him, although owner of it, to enforce it against the defendant.

Not available against a holder in due course.Minority is a real defense, but personal to the minor (Ortho)

Liabilities of Parties

Parties Primarily Liable Maker Acceptor or the Drawee Who Accepts the Instrument

Parties Secondarily Liable The Drawer The General Indorser The Irregular Indorser

Parties with Limited Liability The Qualified Indorser Person Negotiating by Delivery

Maker

Enagages to pay according to the tenor of the instrumentAdmits the existence of the payee and his capacity to indorse

Drawer

Admits the existence of the payee and his capacity to endorseEngages that the instrument will be accepted or paid by the party primarily liableEngages that if the instrument is dishonored and proper proceedings are brought, he will pay to the party entitled to be paid

Acceptor

Engages to pay according to the tenor of his acceptanceAdmits the existence of the drawer, the genuineness of his signatue, and his capacity and authority to draw the instrumentAdmits the existence of the payee and his capacity to indorse

Indorser

GENERAL INDORSER Warrants the genuiness of the instrument, his good title to it, the capacity to

contract prior parties, amd the instrument is valid and subsitsting Engages that the instrument will be paid by the party primarily liable Engages that if the instrument is dishonored, and proper proceedings are

taken, he will pay the party entitled to be paidA collecting bank which endorses a check bearing a forged indorsement and presents it to the drawee bank guarantees prior indorsement, including the forged indorsement.

IndorserIRREGULAR INDORSER – A person, not otherwie a party to an instrument, places his signature thereon in blank.

If instrument payable to the order of a 3rd person, he isnliablemto the payee and subsequent parties

If instrument payable to order of maker or drawer, he is liable to all parties subsequent to the maker or drawer.

If he signs for accomodation of the payee, he is liable to all parties subsequent to the payee.

QUALIFIED INDORSER – One of the parties with limited liability. He warrants that:

Instrument is genuine and in all respects what it purports to be

Has good title to it All prior parties had capacity to contract He has no knowledge of any fact which would impair the validity of instrument or render it valueless.

Person Negotiating By Delivery

• Warranties same as qualified Indorser• Liability only to immediate transferees

Warranties

• Ortha: Different from primary obligation, and requires present and notice of dishonor in order that obbligation for breach of warranties to arise.

Presentment for Payment

• The presentation of an instrument to thn person primarily liable for the purpose of demanding and receiving payment (Ortha)

Necessity of Presentment for Payment• General Rule:

• Presentment for payment is nit necessary to charge persons primarily liable

• Necessary to charge persons secondarily liable; otherwise, they are dicharged (Ortha)

Parties to Whom Presentment for Payment Should Be Made• Presentment for payment is not necessary to charge persons

primarily liable• Presentment for payment is necessary to charge persons

secondarily liable; otherwise, they are discharged.

Dispensation with Presentment for Payment• Exceptions to Need for Presentment for Payment (Ortho):

• Drawer – where her has no right to expect or require that the drawee or acceptor will pay the instrument (Sec. 79)

• Indorser – where the instrument was made of accepted for his accommodation and he has no reason to expect that the instrument will be paid if presented.

• When dispensed:• Where, after the exercise of reasonable diligence, presentment as

required cannot be made• Where th drawee is a fictatious person• By waiver of presentment, express or implied (Sec. 82)

• When the instrument has been dishonored b non-acceptance (sec. 151)

Dishonor by Non-Payment

• When instrument dishonored by non-payment:– It is duly presented for payment and payment is refused or

cannot be obtained; or– Presentment is excused and the instrument is overdue and

unpaid (Ortha)

Notice of Dishonor

• Bringing, either verbally or in writing, to the knowledge of the drawer and indorser the fact that a NI, upon proper proceedings taken, has not been accepted or paid and the party notified is expected to pay it.

Parties to Be Notified

• Parties secondarily liable(or his agent)• Not necessary for qualified indorser or person who negotiated BI

by delivery (Ortha)

Parties Who May Give Notice and Dishonor• Notice of dishonor given by or on behalf of a holder inures to the

benefit of:– All parties prior to the holder who have right of recourse

against the party to whom the notice is given; and– All holders subsequent to the holder giving notice

• Notice of dishonor given by or on beahlf of a party entitled to give notice inures to the benefit of:

– The holder; and– All parties subsequent to the party to whome notice is given

Parties Who May Give Notice and Dishonor• A party giving notice is deemed to have given due notice where:

– The notice of dishonor is duly addressed; and,– Deposited in the post office, even when there is miscarriage

of mail

Effect of Notice

• Upon valid notice of dishonor, immediate right of recourse against the indorser arises. It is as if the indorser becomes primarily liable in the sense that the holder need not claim payment from the person primarily liable (Sundiang, p. 67)

Form of Notice

• Either verbally or in writing (Ortha)

Waiver

• Notice may be waived either before the time of giving notice, or after the omission to give due notice. Waiver may be expressed or implied. (Ortha)

• As to who are affected by an express waiver depends on where the waiver is written:

– If it appears in the body or on the face of the instrument, it bind all parties; but

– If it is written above the signature of an indorser, it binds him only

Dispensation with Notice

• Notice of dishonor is not required to be given to the drawer in any or the ff cases (Ortha):

1.Drawer and drawee are the same

2.Drawee is a fictitious person or not having the capacity to contract

3.Drawer is the person to whom the instrument is presented for payment

4.Drawer has no right to expect or require that the drawee or acceptor will honor the instrument

5.Where the drawer has countermanded payment

Dispensation with Notice

• Notice of dishonor is not required to be given to an indorser in any or the ff cases: (Ortha):

1.Indorser is a fictitious person or does not having the capacity to contract, and indorser was aware of that fact at the time he indorsed the instrument;

2.Indorser is the person to whom the instrument is presented for payment

3.Indorser was made or accepted for his accomodation

Effect of Failure to Give Notice

• Parties liable are discharged (Ortha)

Discharge of Negotiable Instrument

• A release of all parties whether primary or secondary, from the obligations arising thereunder. It renders the instrument without force and effect and, consequently, it can no longer be negotiated (Ortha)

Right of Party Who Discharged Instrument

Discharge of Negotiable Instrument

• By payment in due course by or in behalf of the principal debtor• By payment in due course by the party accommodated, where

the instrument is made or accepted for his accomodation• By intentional cancellation thereof by the holder• By any other act which will discharge a simple contract for the

payment of money• When the principal debtor becomes the holder of the instrument

at or after maturity in his own right (Sec. 119, NIL)

Discharge of Parties Secondarily Liable• Sec. 120 of the NIL provides that a person secondarily liable on

the instrument is discharged (Sundiang, p. 73):– By any act which discharges the instrument

– By the intentional cancellation of his signature by the holder

– By the discharge of a prior party

– By a valid tender or payment made by a prior party

– By a release of the principal debtor unless the holder's right of recourse against the party secondarily liable is expressly reserved

– By any agreement binding upon the holder to extend the time of payment or to postpone the holder's right to enforce the instrument unless made with the assent of the party secondarily liable or unless the right of recourse against such party is expressly reserved

Renunciation by Holder

• Effects:– A renunciation in favor of a secondary party may be made by the holder

before, at or after maturity of the instrument● Effect: only such secondary party is discharged and all parties

subsequent to him but the instrument itself remains in force– A renunciation in favor of the principal debtor may be effected at or

after maturity● Effect: the instrument is discharged and all parties thereto provided

the renunciation is made unconditionally and absolutely• In either case, renunciation does not affect the rights of a holder in due

course without notice

Material Alteration

•Concept: Any alteration which changes the date, the sum payable, the time or place of payment, number or relation of the parties, or medium or curreny of payment, or adds a place of payment where none isspecified, or which alters the effect of the instrument in any respect is a material alteration (Miravite (2002), p. 95)• A serial number is not an essential requisite for negotiability.

Effect of Material Alteration

• Avoids the instrument, except as against the party who made, authorized, or assented to the alteration and subsequent indorsers. HDC can enforcemit according to original tenor. (Sundiang and Aquino)

Acceptance

• Definition: The signification by the drawee of his assent to the order of the drawee. The acceptance must be in writing and signed by the drawee. It must not express that the drawee will perform his promise by any other means than the payment of money.•Acceptance is presumed to be unqualified or absolute (Sundiang, p. 66)

Manner

• Conditional – makes payment by the acceptor dependent on the fulfillment of a condition therein stated.

• Partial – an acceptance to pay only of the amount for which the bill is drawn.

• Local – an acceptance to pay only at a particular place.

• Qualified – as to time

• The acceptance of some, one or more of the drawees but not of all (Sundiang, p. 65)

Time for Acceptance

• Period for drawee to accept – 24 hours after presentment in which to decide whether or not he will accept the bill; if acceptance is given, it dates as of the dat of presentation (Sec. 136, NIL_

Presentment for Acceptance● The production or exhibition of a bill of exchange to the drawee

for his accetance● Acceptance – the signification by the drawee of his assent to

the order of the drawer

Rules Governing Acceptance

• REQUISITES:– The acceptance must be in writing– The written acceptance myst be signed by the drawee– The drawee must assent to the promise to pay a sum certain

in money and not by any other means (Sundiang, p. 63)

Presentment for Acceptance• Mandatory (Sec. 143, NIL):

● Where the bill is payable within a fixed period after sight, or in any other case, where presentment for acceptance is necessary in order to fix the maturity of the instrument

● Where the bill expressly stipulates that is shall be presented for acceptance

● Where the bill drawn is payable elsewhere than at the residence or place of business of the drawee

● NOTE: It is not necessary to present a check for acceptance because it is not one of those required to be presented for acceptance under Sec. 143 (Sundiang, p. 62)

Presentment for Acceptance• HOW MADE (Manner):

– Made by or on behalf of the holder– At a reasonable hour– On a business day– Before the bill is overdue and within reasonable time– To the drawee or some person authorized to acdept

or refuse acceptance on his behalf

Presentment for Acceptance• DAYS PRESENTMENT MAY BE MADE if date of presentment is:

– Sunday or a holiday – mst be made on the next succeeding business day

– Saturday – before 12 nn on Saturday prvided that is not a holiday

Presentment for Payment

● The presentation of an instrument to the person primarily liable for the purpose of demanding and receiving payment

Time of Presentment

• Where the instrument is payable at a fixed or determinable future time, presentment must be made on the day it falls due

• Where it is payable on demand– Promissory note: within a reasonable time after its issue– Bill of exchange: within a reasonable time after the last

negotiation

Time of Presentment

• Time of maturity – Every negotiable nstrument is payable at the time fixed

therein without grace– When the day of maturity falls upon a Sunday or a holiday,

the instruments are to be presented for payment on the next succeeding business day

– When the day of maturity falls upon a Saturday● Instrument is payable at a fixed or determinable future

time (time instrument) – presented for payment is on the next sycceedin business day

Time of Presentment

• Time of maturity – When the day of maturity falls upon a Saturday

● Instrument is payable on demand – at the option of the holder, be presented for payment

– Before 12nn on Saturday when that entire day is not a holiday or– The next succeeding business day

• HOW COMPUTED

– Excluding the day from which the time is to begin to run, and by including the date of payment

– Applies to instruments which are payable at a fixed period after date, after sight, or after the happenin of a specified event

Place of Presentment

• Place specified in the instrument

• Where no place of payment is specified by the address of the person to make payment is given in the instrument

• If no place specified nor address of person to make payment, usual place of business or residence of the person to make payment

• In any other case if presented to the person to make payment wherever he can be found or if presented at his last known place of business or residence

Manner of Presentment

• Personal demand for payment at the proper place

• Readiness to exhibit the instrument if required and to receive patment and to surrender the instrument if the debtor is willing to pay

Effect of Failure to Make Presentment• A check must be presented for payment within a reasonable time

after its issue r the drawer will be discharged from liability thereon to the extent of the loss caused by the delay (but indorsers are discharged w/n they suffered any loss) (Ortha)

Dishonor by Non-Acceptance

• Instances:– When it is duly prsented for acceptance and such an

acceptance is refused or can not be obtained– When presentment for acceptance is excusded and the bill is

not accepted (Sec. 149) (Ortha)

• EFFECT: An immediate right of recourse against the drawer and indorsers accrues to the holder and no presentment for payment is necessary

Promissory Notes

• KINDS OF PROMISSORY NOTES– Certificate of deposit – written acknowledgment of a bank of

its receipt of a certain sum with a promise to repay the same– Bonds – certificate or evidence of a debt on which the issuing

company or governemental body promises to pay the bondholders a specified amunt of interest for a specified length of time, and to repay the loan on the expiration date

– Debenture- a promissory note or bond backed by the general credit of a corporation and usually not secured by a mortgage or lien on any specific property (Sundiang, p. 10)

Checks

•Definition: A bill of exchange drawn from a bank payable on demand (Sec. 185)• Stale check – one which has not been presented for payment withina reasonable time after its issue (Ortha)• Death of the drawer of a check, with the knowledge of bank,revokes the authority of the banker to pay (Ortha)• Need not be presented for acceptance (Ortha)

Kinds

• MANAGER’S/ CASHIER'S CHECK – drawn by a bank on itself, it is a primary obligation if thr bank. Presumption is they are supported by sufficient funds (Ortha)

• MEMORANDUM CHECK – like ordinary check except the word memorandum or its variant on the face of the check. Not to be presented for payment, but will be redeemed bybthe drawer himself

• CERTIFIED CHECK –A proper officer of thenbank certifies that the check will be paid when dulym presented for payment

• CROSSED PAYMENT -2 parallel lines across, for deposit.

KINDS• TRAVELER’S CHECK – the purchaser’s signature must

appear twice – one at the time he buysnit and als at the time he uses it.