THE NEGOTIABLE INSTRUMENTS LAW

I. FORM AND INTERPRETATION

Section 1. Form of negotiable instruments. - An
instrument to be negotiable must conform to the
following requirements:
(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
determinable future time;

Sec. 4. Determinable future time; what constitutes. An instrument is payable at a determinable future time,
within the meaning of this Act, which is expressed to be
payable:
(a) At a fixed period after date or sight; or
(b) On or before a fixed or determinable future time
specified therein; or
(c) 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.
An instrument payable upon a contingency is not
negotiable, and the happening of the event does not
cure the defect.

(d) Must be payable to order or to bearer; and

(e) Where the instrument is addressed to a drawee, he
must be named or otherwise indicated therein with
reasonable certainty.
Sec. 2. What constitutes certainty as to sum. - The
sum payable is a sum certain within the meaning of this
Act, although it is to be paid:

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:
(a) authorizes the sale of collateral securities in case the
instrument be not paid at maturity; or

(a) with interest; or

(b) by stated installments; or
(c) by stated installments, with a provision that, upon
default in payment of any installment or of interest, the
whole shall become due; or
(d) with exchange, whether at a fixed rate or at the
current rate; or
(e) with costs of collection or an attorney's fee, in case
payment shall not be made at maturity.
Sec. 3. When promise is unconditional. - An
unqualified order or promise to pay is unconditional
within the meaning of this Act though coupled with:

(b) authorizes a confession of judgment if the instrument

be not paid at maturity; or
(c) waives the benefit of any law intended for the
advantage or protection of the obligor; or
(d) 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:
(a) it is not dated; or

(a) An indication of a particular fund out of which

reimbursement is to be made or a particular account to
be debited with the amount; or

(b) does not specify the value given, or that any value
had been given therefor; or

(b) A statement of the transaction which gives rise to the

instrument.

(c) does not specify the place where it is drawn or the

place where it is payable; or

But an order or promise to pay out of a particular fund is

not unconditional.chan robles virtual law library

(d) bears a seal; or

(e) 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. 7. When payable on demand. - An instrument is

payable on demand:
(a) When it is so expressed to be payable on demand, or
at sight, or on presentation; or
(b) In which no time for payment is expressed.
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.
Sec. 8. When payable to order. - The instrument is
payable to order where 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:
(a) A payee who is not maker, drawer, or drawee; or
(b) The drawer or maker; or
(c) The drawee; or
(d) Two or more payees jointly; or
(e) One or some of several payees; or
(f) The holder of an office for the time being.
Where the instrument is payable to order, the payee
must be named or otherwise indicated therein with
reasonable certainty.
Sec. 9. When payable to bearer. - The instrument is
payable to bearer:
(a) When it is expressed to be so payable; or
(b) When it is payable to a person named therein or
bearer; or
(c) When it is payable to the order of a fictitious or nonexisting person, and such fact was known to the person
making it so payable; or
(d) When the name of the payee does not purport to be
the name of any
person; or
(e) When the only or last indorsement is an indorsement
in blank.
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.
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.

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.
Sec. 13. When date may be inserted. - Where 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, any holder may insert therein the true date of
issue or acceptance, and the instrument shall be payable
accordingly. 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.
Sec. 14. Blanks; when may be filled. - 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.
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 strictly in accordance with the authority given
and within a reasonable time. But if any such instrument,
after completion, is negotiated to a holder in due course,
it is valid and effectual for all purposes in his hands, and
he may enforce it as if it had been filled up strictly in
accordance with the authority given and within a
reasonable time.
Sec. 15. Incomplete instrument not delivered. Where an incomplete instrument has not been delivered,
it will not, if completed and negotiated without authority,
be a valid contract in the hands of any holder, as against
any person whose signature was placed thereon before
delivery.
Sec. 16. Delivery; when effectual; when presumed.
- Every contract on a negotiable instrument is incomplete
and revocable until delivery of the instrument for the
purpose of giving effect thereto. As between immediate
parties and as regards a remote party other than a
holder in due course, the delivery, in order to be
effectual, must be made either by or under the authority
of the party making, drawing, accepting, or indorsing, as
the case may be; and, in such case, the delivery may be
shown to have been conditional, or for a special purpose
only, and not for the purpose of transferring the property
in the instrument. But where the instrument is in the
hands of a holder in due course, a valid delivery thereof
by all parties prior to him so as to make them liable to
him is conclusively presumed. And where the instrument
is no longer in the possession of a party whose signature
appears thereon, a valid and intentional delivery by him
is presumed until the contrary is proved.

Sec. 17. Construction where instrument is

ambiguous. - Where the language of the instrument is
ambiguous or there are omissions therein, the following
rules of construction apply:
(a) Where the sum payable is expressed in words and
also in figures and there is a discrepancy between the
two, the sum denoted by the words is the sum payable;
but if the words are ambiguous or uncertain, reference
may be had to the figures to fix the amount;
(b) Where the instrument provides for the payment of
interest, without specifying the date from which interest
is to run, the interest runs from the date of the
instrument, and if the instrument is undated, from the
issue thereof;
(c) Where the instrument is not dated, it will be
considered to be dated as of the time it was issued;
(d) Where there is a conflict between the written and
printed provisions of the instrument, the written
provisions prevail;

Sec. 21. Signature by procuration; effect of. - A

signature by"procuration" operates as notice that the
agent has but a limited authority to sign, and the
principal is bound only in case the agent in so signing
acted within the actual limits of his authority.
Sec. 22. Effect of indorsement by infant or
corporation.- The indorsement or assignment of the
instrument by a corporation or by an infant passes the
property therein, notwithstanding that from want of
capacity, the corporation or infant may incur no liability
thereon.
Sec. 23. Forged signature; effect of. - When a
signature is forged or made without the authority of the
person whose signature it purports to be, it is wholly
inoperative, and no right to retain the instrument, or to
give a discharge therefor, or to enforce payment thereof
against any party thereto, can be acquired through or
under such signature, unless the party against whom it is
sought to enforce such right is precluded from setting up
the forgery or want of authority.
II. CONSIDERATION

(e) Where the instrument is so ambiguous that there is

doubt whether it is a bill or note, the holder may treat it
as either at his election;
(f) Where a signature is so placed upon the instrument
that it is not clear in what capacity the person making the
same intended to sign, he is to be deemed an indorser;

Sec. 24. Presumption of consideration. - Every

negotiable instrument is deemed prima facie to have
been issued for a valuable consideration; and every
person whose signature appears thereon to have
become a party thereto for value.

(g) Where an instrument containing the word "I promise

to pay" is signed by two or more persons, they are
deemed to be jointly and severally liable thereon.

Sec. 25. Value, what constitutes. Value is 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.

Sec. 18. Liability of person signing in trade or

assumed name. - No person is liable on the instrument
whose signature does not appear thereon, except as
herein otherwise expressly provided. But one who signs
in a trade or assumed name will be liable to the same
extent as if he had signed in his own name.

Sec. 26. What constitutes holder for value. - Where

value has at any time been given for the instrument, the
holder is deemed a holder for value in respect to all
parties who become such prior to that time.

Sec. 19. Signature by agent; authority; how shown. The signature of any party may be made by a duly
authorized agent. No particular form of appointment is
necessary for this purpose; and the authority of the
agent may be established as in other cases of agency.
Sec. 20. Liability of person signing as agent, and so
forth. - Where the instrument contains or a person adds
to his signature words indicating that he signs for or on
behalf of a principal or in a representative capacity, he is
not liable on the instrument if he was duly authorized; but
the mere addition of words describing him as an agent,
or as filling a representative character, without disclosing
his principal, does not exempt him from personal
liability.

Sec. 27. When lien on instrument constitutes holder

for value. Where the holder has a lien on the
instrument arising either from contract or by implication
of law, he is deemed a holder for value to the extent of
his lien.
Sec. 28. Effect of want of consideration. - Absence or
failure of consideration is a matter of defense as against
any person not a holder in due course; and partial failure
of consideration is a defense pro tanto, whether the
failure is an ascertained and liquidated amount or
otherwise.

Sec. 29. Liability of accommodation party. - An

accommodation party is one 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. Such a person
is liable on the instrument to a holder for value,
notwithstanding such holder, at the time of taking the
instrument, knew him to be only an accommodation
party.
III. NEGOTIATION
Sec. 30. What constitutes negotiation. - An instrument
is negotiated when it is transferred from one person to
another in such manner as to constitute the transferee
the holder thereof. If payable to bearer, it is negotiated
by delivery; if payable to order, it is negotiated by the
indorsement of the holder and completed by delivery.
Sec. 31. Indorsement; how made. - The indorsement
must be written on the instrument itself or upon a paper
attached thereto. The signature of the indorser, without
additional words, is a sufficient indorsement.
Sec. 32. Indorsement must be of entire instrument.
- The indorsement must be an indorsement of the entire
instrument. An indorsement which purports to transfer to
the indorsee a part only of the amount payable, or which
purports to transfer the instrument to two or more
indorsees severally, does not operate as a negotiation of
the instrument. But where the instrument has been paid
in part, it may be indorsed as to the residue.
Sec. 33. Kinds of indorsement. - An indorsement may
be either special or in blank; and it may also be either
restrictive or qualified or conditional.
Sec. 34. Special indorsement; indorsement in
blank. - A special indorsement specifies the person to
whom, or to whose order, the instrument is to be
payable, and the indorsement of such indorsee is
necessary to the further negotiation of the instrument. An
indorsement in blank specifies no indorsee, and an
instrument so indorsed is payable to bearer, and may be
negotiated by delivery.
Sec. 35. Blank indorsement; how changed to special
indorsement. - The holder may convert a blank
indorsement into a special indorsement by writing over
the signature of the indorser in blank any contract
consistent with the character of the indorsement.
Sec. 36. When indorsement restrictive. - An
indorsement is restrictive which either:

But the mere absence of words implying power to

negotiate does not make an indorsement restrictive.
Sec. 37. Effect of restrictive indorsement; rights of
indorsee. - A restrictive indorsement confers upon the
indorsee the right:
(a) to receive payment of the instrument;
(b) to bring any action thereon that the indorser could
bring;
(c) to transfer his rights as such indorsee, where the
form of the indorsement authorizes him to do so.
But all subsequent indorsees acquire only the title of the
first indorsee under the restrictive indorsement.
Sec. 38. Qualified indorsement. - A qualified
indorsement constitutes the indorser a mere assignor of
the title to the instrument. It may be made by adding to
the indorser's signature the words "without recourse" or
any words of similar import. Such an indorsement does
not impair the negotiable character of the instrument.
Sec. 39. Conditional indorsement. - Where an
indorsement is conditional, the party required to pay the
instrument may disregard the condition and make
payment to the indorsee or his transferee whether the
condition has been fulfilled or not. But any person to
whom an instrument so indorsed is negotiated will hold
the same, or the proceeds thereof, subject to the rights
of the person indorsing conditionally.
Sec. 40. Indorsement of instrument payable to
bearer. - Where an instrument, payable to bearer, is
indorsed specially, it may nevertheless be further
negotiated by delivery; but the person indorsing specially
is liable as indorser to only such holders as make title
through his indorsement.
Sec. 41. Indorsement where payable to two or more
persons. - Where an instrument is payable to the order
of two or more payees or indorsees who are not
partners, all must indorse unless the one indorsing has
authority to indorse for the others.
Sec. 42. Effect of instrument drawn or indorsed to a
person as cashier. - Where an instrument is drawn or
indorsed to a person as"cashier" or other fiscal officer of
a bank or corporation, it is deemed prima facie to be
payable to the bank or corporation of which he is such
officer, and may be negotiated by either the indorsement
of the bank or corporation or the indorsement of the
officer.

(a) Prohibits the further negotiation of the instrument; or

(b) Constitutes the indorsee the agent of the indorser; or
(c) Vests the title in the indorsee in trust for or to the use
of some other persons.

Sec. 43. Indorsement where name is misspelled, and

so forth. - Where the name of a payee or indorsee is
wrongly designated or misspelled, he may indorse the
instrument as therein described adding, if he thinks fit,
his proper signature.

Sec. 44. Indorsement in representative capacity. Where any person is under obligation to indorse in a
representative capacity, he may indorse in such terms as
to negative personal liability. robles virtual law library

any time strike out any indorsement which is not

necessary to his title. The indorser whose indorsement is
struck out, and all indorsers subsequent to him, are
thereby relieved from liability on the instrument.

Sec. 45. Time of indorsement; presumption. - Except

where an indorsement bears date after the maturity of
the instrument, every negotiation is deemed prima facie
to have been effected before the instrument was
overdue.

Sec. 49. Transfer without indorsement; effect of. Where the holder of an instrument payable to his order
transfers it for value without indorsing it, the transfer
vests in the transferee such title as the transferor had
therein, and the transferee acquires in addition, the right
to have the indorsement of the transferor. But for the
purpose of determining whether the transferee is a
holder in due course, the negotiation takes effect as of
the time when the indorsement is actually made.

Sec. 46. Place of indorsement; presumption. - Except

where the contrary appears, every indorsement is
presumed prima facie to have been made at the place
where the instrument is dated.
Sec. 47. Continuation of negotiable character. - An
instrument negotiable in its origin continues to be
negotiable until it has been restrictively indorsed or
discharged by payment or otherwise.
Sec. 48. Striking out indorsement. - The holder may at

Sec. 50. When prior party may negotiate

instrument. - Where an instrument is negotiated back to
a prior party, such party may, subject to the provisions of
this Act, reissue and further negotiable the same. But he
is not entitled to enforce payment thereof against any
intervening party to whom he was personally liable.