Nego6 - lecture notes on negotiable instruments. PDF

Preview

Summary

lecture notes on negotiable instruments....

Description

EFFECT OF ACCELERATI ON CLAUSE AND MATERI ALADVERSE CHANGE CLAUSE ( MAC) Agbayani :Ther ear ecer t ai n not escont ai ni ngaccel er at i on pr ovi si ons.Thesepr ovi si ons( 1)makei t possi bl ef ort hemakert opayt hei ns t r umentatan ear l i erdat eor( 2)makei tpossi bl et hehol dert o r equi r epaymentoft hei ns t r umentatanear l i erdat e. An i l l ust r at i on oft he fir st c l ass i st he socal l ed ‘ payabl e on or bef or ea c er t ai n dat e’not e. I l l ust r at i onsoft hel at t ercl assar et hosei ns t r ument st hat : c ont ai nac c el er at i onc l ausesont hemaker ’ sdef aul ti npaymentofi nst al l ment sorofi nt er est ,or ont hehappeni ngofanext r i nsi cevent ; 2) c ont ai n,i n not es sec ur ed by c ol l at er al ,a pr ovi si on t hatt he makershal lsuppl y addi t i onal c ol l at er ali nc aseofdepr ec i at i oni nt heval ueoft heor i gi naldeposi t ,wi t ht hehol der ’ sr i ghtt o dec l ar et henot eduei mmedi at el yonf ai l ur et omakegoodt hedepr ec i at i on;or 3) c ont ai npr ovi si onsf orac c el er at i onwher ehol derdeemshi msel fi nsec ur e.

1)

Thefir sti scov er edbySect i on2( b) . The r ei saconfli ctofaut hor i t ywi t hr egar dst ot hesecond.Thebet t ervi ew oft het womai nt ai nt hat t hest i pul at i on i n ques t i on doesnotr endert hei ns t r umentcont ai ni ng i tnonnegot i abl ebecause f r om t hes t andpoi ntofexpedi encyasencour agi ngci r c ul at i onandofbusi nesscust om onaccountof t hei rcommon acc ept anc e by t he commer ci alwor l d,suc h cl auses shoul d be i nt er pr et ed as not affec t i ngnegot i abi l i t y . The r ei sal soaconfli ctofaut hor i t ywi t hr egar dst het hi r d.Thebet t ervi ew oft het womai nt ai nt hat t hesecaseshol di ngani nst r umentpayabl eatafixedt i mebutaccel er abl eatt heopt i on oft hepayee orhol derst i l lne got i abl ebecausesuch i nst r ument sar ecer t ai nl ypayabl eon orbe f or eafixed t i me speci fiedt her ei n. Campos:Wher et he opt i on t o accel er at et he mat ur i t y oft he i ns t r umenti s on t he maker,t he negot i abi l i t yoft hei ns t r umenti snotaffect ed,whet hersuch opt i on i sabsol ut eorcondi t i onal .But wher et heaccel er at i on i satt heopt i on oft hehol der ,whe t hersuch accel er at i on pr ovi si on r ender s t hei ns t r umentnonnegot i abl edependsont henat ur eoft hepr ovi si on. I ft heopt i oncanbeexer ci sedbyt hehol deronl yupont hehappeni ngofaspeci fiedeventoractover whi chhehasnocont r ol ,t he nt henegot i abl echar act eroft hei ns t r umenti snotaffect ed. Wher et hehol der ’ sr i ghtt oexer ci set heopt i on i sunc ondi t i onal ,t het i meofpaymenti sr ender ed uncer t ai nandt hei ns t r umentwoul dnotbene got i abl e . However ,wher et heopt i ongi vent ot hehol dert oacce l er at et hemat ur i t yofani nst al l mentnot eupon f ai l ur e oft he maker t o pay any i ns t al l mentwhen due does notaffec tt he negot i abi l i t y oft he i ns t r ument . Acc el er at i onoft hemat ur i t yoft hei nst r umentbyoper at i onofl aw doesnotaffecti t snegot i abi l i t y . er at i on cl ause,i tr ef er st oan obl i gat i on t hati ssus pended Sebast i an:Ev er yt i meweusean accel byat er m.Theobl i gat i on i snoti mmedi at e l yt obeper f or med,butatsomef ut ur et i me .I t sf unc t i on i st o accel er at e/advancet heper f or manc eofobl i gat i on pr i ort ot hes t i pul at ed duedat e.I n many cases,i ti sused when t heobl i gat i on i st o beper f or med i ni ns t al l ment s.I ti sused t o accel er at e i ns t al l ment spayabl ewhent her ei sde f aul ti npaymentofoneoft hei ns t al l ment s. Thet heor y behi nd an acce l er at i on c l ause i st hi s:when a paymentobl i gat i on i s st agger ed on a mont hl y/ i ns t al l mentbasi s,de f aul tofone i ns t al l menti si ndi cat i ve ofi nabi l i t yt o cont i nuewi t h

f ur t herpayment son a t i mel y basi s.I fonei ns t al l menti smi ssed,t he r ei sa pr obabi l i t yt hatt he ot heri ns t al l ment swi l lbemi ssed.I ti sused t odet eradef aul t .Onc et he r ei sdef aul t ,onel osest he benefitoft het er m. However ,de f aul ti snott heonl ysour c eofacc el er at i ngt heobl i gat i on.I ti sal sopossi bl et hatt henot e i s cur r entbutt he acce l er at i on cl ause i st r i gger ed by a col l at er alde f aul t .A not e secur ed by a mor t gage, i t does not l ose negot i abi l i t y because t he col l at er al ar r angement i s a separ at e under t aki ngf r om t heobl i gat i on undert henot e.Thef unct i on oft hemor t gagei st ost r engt hen t he enf or c eabi l i t yoft henot e.Wher et her ei sa br eac h oft hecol l at er alar r angement ,t he r ewi l lbea br each oft henot e.Butnegot i abi l i t yi snotdest r oyedbyaccel er at i on oft hecol l at er al .I n effect ,one wi l lber equi r edt opayt heobl i gat i oni mmedi at e l yandl oset hebe nefitoft het er m. I ti snotunusualt ofindanegot i abl ei nst r umentwi t h an acce l er at i on cl auset hati st r i gger edbya mer ef eel i ngofi nsecur i t yont hepar toft hecr edi t or .Whensome bodyl endsmone y ,hi sc onc er ni st o r ecov erwhathel ent .Recour seagai ns tt hecol l at er ali ssecondar y ,butgi vesahi gherl evelofcomf or t t hatyou can st i l lr ecov eri ncaseofde f aul t .Thel ongert heper i odoft hepayme nt ,t hegr eat eri st he r i s kt akenbyt hecr edi t or . I fatanyt i met her ei samat er i aladver sechangei nt henat ur eoft heunder t aki ng,acr edi t orhas er i alAdver seChangeCl ause( MAC) .Whent hechangei n r i ghtt oacce l er at e.Thi si sknownasMat ci r cums t anc ei s adver se,cr edi t ori s ent i t l ed t o cal li nt he obl i gat i on.I fa negot i abl ei ns t r ument car r i esanacce l er at i oncl ausewher et hegr oundi saMAC,i t sne got i abi l i t yi snoti mpai r edbecause, wi t h orwi t houtt heMAC cl ause,t her ei ss t i l la duedat e oft hei ns t r ument .I tmer e l y gi vest he hol dert omakeapr eempt i vest r i ket ocol l ectt heval ueoft henot ebef or et hi ngsgosour . I nsummary ,anaccel er at i oncl ause,acol l at er alde f aul toran i ns ecur i t yoft hehol derwi l lnotaffec t negot i abi l i t y. Fori ns t anceanot ei spayabl eataf ut ur et i meandt hemakerdi est oday .Thehol dermayfil eac l ai m agai nstt he est at e oft he deceased r egar dl ess oft he due dat e on t he not e .The r ul ei st hatan acce l er at i onbyoper at i onofl aw al sodoesnotaffectnegot i abi l i t y . PAYABLE TO ORDER OR TO BEARER Agbayani :An i ns t r umenti snotne got i abl eunl essmadepayabl et o a per son orhi s“ or der ”ort o “ bear er ”orunl esswor dsofsi mi l arorequi val enti mpor tar eusedsuch as“ assi gns”or“ as si gnees, ” or“ hol der . ”Wher et hei ns t r umenti spayabl eonl yt oaspeci fiedper son,i ti snotpayabl et oor der . Campos:Thei ns t r umenti nor dert obec onsi der ednegot i abl emustcont ai nt hesocal l ed“ wor dsof ne got i abi l i t y”–mustbepayabl et oor derorbear er .Thesewor dsserv easanexpr essi onofconsent t hatt hei ns t r umentmaybet r ans f er r ed.Thi sconsenti si ndi spensabl esi ncet hemakerassumes gr eat err i s ksunderanegot i abl ei ns t r umentt hanunderanonnegot i abl eone.UnderSec.10 however ,t hei ns t r umentneednotf ol l ow t hel anguageoft hel aw,butanyt er m whi chcl ear l y i ndi cat esani nt ent i ont oconf or mt ot hel egalr equi r ement si ssuffici ent...