Negotiable Instruments Law PDF

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THE AWESOME NOTES 1 of 37 COMMERCIAL LAW NEGOTIABLE INSTRUMENTS BILL OF EXCHANGE - contain an order to pay FORMS AND INTERPRETATION - in here, the drawer is commanding a drawee to pay the payer or the holder REQUISITES OF NEGOTIABILITY June 30, 2012 I order x to pay y or holder the sum of 1. it must...

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Negotiable Instruments Law Ronie T Ablan

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THE AWESOME NOTES

!1 of 37 !

COMMERCIAL LAW NEGOTIABLE INSTRUMENTS

FORMS AND INTERPRETATION

BILL OF EXCHANGE - contain an order to pay - in here, the drawer is commanding a drawee to pay the payer or the holder

REQUISITES OF NEGOTIABILITY 1. it must be in writing and signed by the maker 2. must contain an unconditional promise or order to pay a sum certain in money 3. must be payable on demand,or at a fixed determinable future time 4. must be payable to order or bearer; and 5. where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty

NOTE: NEGOTIABILITY OF THE INSTRUMENT IS DETERMINED ONLY BASED ON 1. the whole instrument 2. what appears in the face of the instrument; and 3. provisions of NIL, especially sec. 1



LAW DOES NOT SPECIFY WHAT KIND IF WRITING - hence, it may be handwritten, printed, engraved etc.





W H AT I S I M P O R TA N T F O R SIGNATURE IS the maker affixed as his own signature of authentication



IT MUST CONTAIN AN UNCONDITIONAL PROMISE OR AN ORDER TO PAY

Hence; the ff are not determinable • when the date of each installments are not fixed • as well as the amount to be paid on each installments

NEGOTIABLE PROMISSORY NOTE - contains unconditional promise to pay

NOTE: promise may not be used, so long as words that are equivalent are used.

june 30, 2012

due x or order 1k payable on July 5, 2012



sgd y

NOTE: mere acknowledgement of a debt does not constitute a promise

INTEREST does not affect the certainty of the sum, as there is an unconditional principal amount INSTALLMENT TO BE DETERMINABLE; the ff requisites: 1. the date of each installment must be fixed or at least determinable 2. the amount to be paid for each installment must also be stated or at least determinable



HENCE; DEEMED NOT NEGOTIABLE WHEN the amount supposed to be paid is a sum certain plus another undetermined amount. (profits from the bakery, or the collection of credit)

SAME; as to the signature of the maker. signature may be in writing, printed, etc.



sgd Z

THE FF CONSTITUTE A SUM CERTAIN IN MONEY; although paid 1. with interest; or 2. by stated installments; or 3. by stated installments, with a provision that, upon default in payment of any installment or of interest, the whole shall become due; (with acceleration clause) or 4. with exchange, whether at a fixed rate or at the current rate; or 5. with costs of collection or an attorney's fee, in case payment shall not be made at maturity.



June 30, 2012

I order x to pay y or holder the sum of 1k, on July 15, 2012

HENCE: it is not determined by looking at a separate document IT MUST BE IN WRITING SIGNED BY THE MAKER OR DRAWER



PAYABLE WITH EXCHANGE although the amount stated may be in US currency, actual payment may be made in Phil currency. - in such case, it is necessary to place the exchange rate in order to know the exact amount to be paid in pesos. either stated as: • 40 PHP : 1 USD • current rate of exchange at the time of payment

prepared by: ronie ablan AAA - BASTE / ATB

THE AWESOME NOTES

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COMMERCIAL LAW NEGOTIABLE INSTRUMENTS

THE PROMISE OR ORDER MUST BE UNCONDITIONAL

PAYABLE ON DEMAND OR AT A FIXED OR DETERMINABLE FUTURE TIME

IT IS CONDITIONAL WHEN the promise or order is made to depend on a contingent event, or past unknown event to the parties, the happening of which will either give rise to an obligation or extinguish existing obligation. - whether suspensive or resolutory

PAYABLE ON DETERMINABLE FUTURE TIME - payable on or before Christmas this year.



STIPULATIONS THAT MAKE PROMISE OR ORDER CONDITIONAL 1. indication of fund or account out of which payment shall be made (ie. rental ng apartment) 2. when payment is made to depend upon a contingency

STIPULATIONS THAT DO NOT MAKE THE PROMISE CONDITIONAL 1. indication of particular fund out of which reimbursement is to be made 2. indication of particular account to be debited with the amount 3. a statement of the transaction which gives rise to the instrument



F F A R E D E E M E D PAYA B L E AT A DETERMINABLE FUTURE TIME; when payable

- 25 days after date (date of the instrument), or - 25 days after sight (date from presentment for acceptance)



• On or before a fixed or determinable future time specified therein; or - on or before Dec. 25, 2012 • On or at a fixed period after the occurrence of a specified event which is certain to happen, though the time of happening be uncertain.



EXE FOR #3; it becomes conditional when the statement of transaction ~ restricts the instrument

Pay x or order 10k on or before July 15, 2013 subject to the terms and conditions of Deed of Sale executed by the parties



dapat, reference lang Pay to X or order 10k, on or before July 15 of this year. The bill is being executed by virtue of the contract of sale executed by the parties

- 10 days after death of X



NOTE: the secific event here must be certain to happen.

An instrument payable upon a contingency is not negotiable, and the happening of the event does not cure the defect.

WHEN PAYABLE ON DEMAND • When it is so expressed to be payable on demand, or at sight, or on presentation; or



RATION FOR #1 and #2 as absolute obligation to pay is still existing. and even if the account turned out to be insufficient, payment should still be made. ~ usually,the reimbursement debiting if account transpire after payment has been made.

• At a fixed period after date or sight; or





June 10, 2012

Pay to the order of X 10k on demand (or at sight or upon presentation) sgd Y

TO: Z • In which no time for payment is expressed.

June 10, 2012

Pay X or order 10k sgd Y

TO: Z

WHEN DEEMED PAYABLE ON DEMAND Where an instrument is issued, accepted, or indorsed when overdue, it is, as regards the person so issuing, accepting, or indorsing it, payable on demand.



prepared by: ronie ablan AAA - BASTE / ATB

THE AWESOME NOTES

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COMMERCIAL LAW NEGOTIABLE INSTRUMENTS



PAYABLE TO ORDER OR BEARER INSTRUMENT IS PAYABLE TO BEARER WHEN • When it is expressed to be so payable; or



June 10, 2012

Pay to bearer 10k upon demand



• A payee who is not maker, drawer, or drawee; or

sgd Y

• When it is payable to a person named therein or bearer; or



INSTRUMENT IS PAYABLE TO ORDER WHEN it is drawn payable to the order of a specified person or to him or his order. It may be drawn payable to the order of:



sgd Y

• When the name of the payee does not purport to be the name of any person; or

sgd Y

• When the only or last indorsement is an indorsement in blank.



June 10, 2012

NOTE: for this instrument to be complete, when the maker/drawer is also the payee, he must be the one who first indorse it and sign his name as indorsee

• The drawee; or



June 10, 2012

I promise to pay Z or order 10k upon demand sgd Y sgd: Z (di ko to magets)

• Two or more payees jointly; or

June 10, 2012

Pay to the order of x 10k upon demand. sgd Y TO: blank







June 10, 2012

Pay to Flower or order 10k upon demand



June 10, 2012

Pay to Superman 10k upon demand



I promise to pay x or order 10k upon demand sgd Y

I promise to pay Y or order 10k upon demand sgd Y sgd: Y

sgd Y

• When it is payable to the order of a fictitious or non-existing person, and such fact was known to the person making it so payable; or





June 10, 2012

• The drawer or maker; or June 10, 2012

Pay X or bearer 10k upon demand







June 10, 2012

I promise to pay upon order of Y and Z 10k upon demand sgd X sgd: A

• One or some of several payees; or



June 10, 2012

I promise to pay Y or X 10k upon demand sgd Z

• The holder of an office for the time being.



June 10, 2012

I promise to pay to the order of SSCR Law 10k on July 15, 2012 sgd Y sgd: Y prepared by: ronie ablan AAA - BASTE / ATB

THE AWESOME NOTES

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COMMERCIAL LAW NEGOTIABLE INSTRUMENTS

Where the instrument is payable to order, the payee must be named or otherwise indicated therein with reasonable certainty.

IF THE INSTRUMENT IS ADDRESSED TO A DRAWER; HE MUST BE NAMED OR OTHERWISE INDICATED THEREIN WITH REASONABLE CERTAINTY

RATION: essential for persons who will take a bill of exchange to know the person who will be primarily liable under the instrument.



FF ARE NOT ACCEPTABLE DESIGNATION OF DRAWEE • TO MR X or MR Y - where the instrument is addressed to 2 or more drawees in the alternative

• TO MR X or IN HIS ABSENCE OR FAILURE TO PAY, TO MR. Y - where the instrument is addressed to 2 or more drawees in succession

PWEDE; where the instrument is addressed to 2 or more drawees, jointly - TO MR X and MR Y



MISCELLANEOUS Sec. 5. Additional provisions not affecting negotiability. An instrument which contains an order or promise to do any act in addition to the payment of money is not negotiable.

But the negotiable character of an instrument otherwise negotiable is not affected by a provision which: 1. authorizes the sale of collateral securities in case the instrument be not paid at maturity; or 2. authorizes a confession of judgment if the instrument be not paid at maturity; or 3. waives the benefit of any law intended for the advantage or protection of the obligor; or 4. gives the holder an election to require something to be done in lieu of payment of money. But nothing in this section shall validate any provision or stipulation otherwise illegal.

Sec. 6. Omissions; seal; particular money. The validity and negotiable character of an instrument are not affected by the fact that: 1. it is not dated; or 2. does not specify the value given, or that any value had been given therefor; or 3. does not specify the place where it is drawn or the place where it is payable; or 4. bears a seal; or 5. designates a particular kind of current money in which payment is to be made.

But nothing in this section shall alter or repeal any statute requiring in certain cases the nature of the consideration to be stated in the instrument.

Sec. 10. Terms, when sufficient. The instrument need not follow the language of this Act, but any terms are sufficient which clearly indicate an intention to conform to the requirements hereof.



THE FF INSTRUMENTS ARE NOT NEGOTIABLE TREASURY WARRANT; it is a check drawn on the treasury of the govt, whose payment is subject to a condition (being subject to governmental regulation and usually payable out of a particular fund)

LETTERS OR CREDIT; does not contain an unconditional promise to pay, as payment is dependent upon the presentment of certain documents.

CERTIFICATE OF STOCKS; as merely a written evidence of shareholdings of a person in a corp.

BILL OF LADING; a form of document of title. it represent goods rather than a promise or order to pay money.



prepared by: ronie ablan AAA - BASTE / ATB

THE AWESOME NOTES

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COMMERCIAL LAW NEGOTIABLE INSTRUMENTS

KINDS OF NEGOTIABLE INSTRUMENT



2 BASIC TYPES OF NEGOTIABLE INSTRUMENT PROMISSORY NOTE an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand, or at a fixed or determinable future time, a sum certain in money to order or to bearer. Where a note is drawn to the maker's own order, it is not complete until indorsed by him

BILL OF EXCHANGE an unconditional order in writing 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 a fixed or determinable future time a sum certain in money to order or to bearer.

PROMISSORY NOTE

BILL OF EXCHANGE

2 parties on its face

3 parties on its face

i. MAKER; the one who promises to pay the amount state in the promissory note

i. DRAWER; he is the person who draws and signs the instrument. he orders the drawee to pay

ii. PAYEE; he is the person who is supposed to be paid by the maker

ii. DRAWEE; he is the person who is being ordered to pay. his liability is conditioned upon his acceptance. once accepted, he is called Acceptor

iii. PAYEE; the one to whom payment should be made by the acceptor person who signs it (maker) is the person primarily liable

the person who signs it (drawer) is secondarily liable - the person primarily liable is the drawee-acceptor

there is only ine presentment

there are 2 presentments; 1st is for acceptance & the 2nd is for payment

KINDS OF BILL OF EXCHANGE 1. CHECK; drawn on a bank, payable on demand 2. TIME DRAFT; payable at a fixed date 3. SIGHT OR DEMAND DRAFT; payable when the holder present it for payment 4. TRADE ACCEPTANCE; used in contracts of sake whereby the seller as drawer orders the buyer (as drawee) to pay a sum certain to the same seller (payee) 5. DRAFT; synonymous with bill of exchange (in letter or credit transaction) 6. INLAND BILL; bill which is, or on its face purports to be, both drawn and payable within the Phil. 7. FOREIGN BILL; bill which on its face, does not purports to be both drawn and payable within the Phil. 8. BANKER'S ACCEPTANCE; a time draft across the face of which the drawee which is a bank has written word "accepted" 9. CLEAN BILL OF EXCHANGE; a bill of exchange to which no doc/s is/are attached when presented for payment or acceptance 10. DOCUMENTARY BILL OF EXCHANGE; a bill of exchange to which a doc/s is/are attached when presented for payment or acceptance 11. BILLS IN SET; a bill of exchange drawn on a set, each part of the set being numbered and containing a reference to the other part, the whole of the part constitutes but one bill.

KINDS OF PROMISSORY NOTES 1. CERTIFICATE OF DEPOSIT; a written acknowledgment of a bank of its receipt of a certain sum with promise to repay the same. 2. BONDS; certificate or evidence of a debt in which the issuing company or government body promises to pay the bondholder a specified amount if interest for a specified length of time, and to repay the loan on the expiration date. 3. DEBENTURE; pn or bond backed by the general credit of a corporation and usually not secured by a mortgage or lien on any specific property.

W H E N B I L L M AY B E T R E AT E D A S PROMISSORY NOTE 1. when the drawer and the drawee of the bill are the same person 2. drawee is a fictitious person 3. drawee has no capacity to contract 4. when the instrument is so ambiguous that there is a doubt whether is a bill or a note.



prepared by: ronie ablan AAA - BASTE / ATB

THE AWESOME NOTES

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COMMERCIAL LAW NEGOTIABLE INSTRUMENTS

INSERTION OF DATE

COMPLETION AND DELIVERY

NOT INCLUDED IN THE SYLLABUS Sec. 11. Date, presumption as to. Where the instrument or an acceptance or any indorsement thereon is dated, such date is deemed prima facie to be the true date of the making, drawing, acceptance, or indorsement, as the case may be.



NOTE: but it only results to rebuttable presumption.

Sec. 12. Ante-dated and post-dated. The instrument is not invalid for the reason only that it is ante-dated or post-dated, provided this is not done for an illegal or fraudulent purpose. The person to whom an instrument so dated is delivered acquires the title thereto as of the date of delivery.

NOTES POST DATED; contain a date later than the date of the issuance



ANTE DATED; contain a date earlier than the date of the issuance BANK SHALL NOT HONOR POST DATED CHECKS - pag ante dated, pwede, so long as it it does not exceed 6 mos, or said check is not a state check.

IN RE: SIGNIFICANCE AS TOTHE HOLDER • IF IN DUE COURSE; the date appearing in the instrument is controlling and not the date of issuance • IF NOT IN DUE COURSE; the date of issuance is controlling and not the date appearing on the instrument. ~ personal defect only

WHEN HOLDER MAY INSERT THE TRUE DATE OF ISSUE OR ACCEPTANCE • an instrument expressed to be payable at a fixed period after date is issued undated, or • where the acceptance of an instrument payable at a fixed period after sight is undated,

NOTE: The insertion of a wrong date does not avoid the instrument in the hands of a subsequent holder in due course; but as to him, the date so inserted is to be regarded as the true date.

R AT I O N W H Y I N S E RT I O N O F D AT E ALLOWED - to determine the maturity date of the instrument.



COMPLETION OF BLANKS [WHEN DEEMED PRESUMED TO HAVE AN AUTHORITY TO FILL THE BLANKS] • Where the instrument is wanting in any material particular, the person in possession thereof has a prima facie authority to complete it by filling up the blanks therein.

• And 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 as a prima facie authority to fill it up as such for any amount.

[LIMITATIONS] In order, however, that any such instrument when completed may be enforced against any person who became a party thereto prior to its completion, it must be filled up 1. strictly in accordance with the authority given and 2. within a reasonable time.



~~~~~~~~~~~~~~~~~~~~~~~~~~

[EXE] does not apply to signed blank paper But if any such instrument, after completion, is negotiated to a holder in due course, 1. it is valid and effectual for all purposes in his hands, and 2. he may enforce it as if it had been filled up strictly in accordance with the authority given and within a reasonable time. NOTE: stipulation to be not held liable in case the instrument is stolen against holder in due course - VOID STIPULATION prepared by: ronie ablan AAA - BASTE / ATB

THE AWESOME NOTES

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COMMERCIAL LAW NEGOTIABLE INSTRUMENTS

MATERIAL PARTICULAR those matter constituting as material element of negotiability of an instrument, and any other where if unauthorized, constitute as material alteration, such a...