Outline for Negotiable Instruments Law (Bar Exam 2015)

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
- When instrument is ambiguous
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 secondary liability
- When Promissory Note Worded “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 lIn 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 Requisites

 IN MONEY LGENERAL 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 DEMAND
- 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
- lSC: 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 lOn 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
- 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 lTambasacan: “Dates are not material but only for maturity”

Insertion of Date Rules 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 Instruments SEC. 15, NIL

If completed and delivered without authority, the instrument is not a valid contact against any
person who signed before delivery.
Complete but Undelivered Instruments
- Between 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 be
- If the instrument is in the hands of a holder in due course all prior deliveries are conclusively
presumed to be valid
- If the instrument is out of the hands of the person who signed it, a valid and intentional delivery
is disputably presumed

Incomplete but Delivered Instruments

- Holder has prima facie authority to complete the instrument
- Completion to be fone within a reasonable time and according to the authority given
- Holder 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 Corporation
- Mindors 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 writing
- It may consist of:
 Signing 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.

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).

•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
- 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 l2009, 2012 Bar Exam

Assignability 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 Indorsements
- Conditional
 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
original 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”
means 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 Course

Requisites 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 post-dated checks were merely issued as security not a ground for discharged as
against the HIDC
If 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, NIL
- HOLDER 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 not
- PERSONAL 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
- Engages to pay according to the tenor of the instrument
- Admits the existence of the payee and his capacity to indorse

Drawer
- Admits the existence of the payee and his capacity to endorse
- Engages that the instrument will be accepted or paid by the party primarily liable
- Engages 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 acceptance
- Admits the existence of the drawer, the genuineness of his signature, and his capacity and
authority to draw the instrument
- Admits the existence of the payee and his capacity to indorse

Indorser
GENERAL INDORSER
- Warrants the genuineness of the instrument, his good title to it, the capacity to contract prior
parties, and the instrument is valid and subsisting
- 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 paid
- A collecting bank which endorses a check bearing a forged indorsement and presents it to
the drawee bank guarantees prior indorsement, including the forged indorsement.
IRREGULAR INDORSER
- A person, not otherwise 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 accommodation 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 obligation for breach of warranties to arise.

Presentment for Payment

•The presentation of an instrument to the 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 discharged (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 the drawee is a fictitious person
 By waiver of presentment, express or implied (Sec. 82)
When the instrument has been dishonored by non-acceptance (sec. 151)
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 behalf of a party entitled to give notice inures to the benefit
of:
 The holder; and All parties subsequent to the party to whom notice is given
•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 binds 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

•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 accommodation

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)
•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 accommodation
•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 currency 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_

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
The production or exhibition of a bill of exchange to the drawee for his acceptance Acceptance
– the signification by the drawee of his assent to the order of the drawer

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 maturity
Every negotiable instrument 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 payment 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 presented for acceptance and such an acceptance is refused or
cannot be obtained When presentment for acceptance is excused 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 governmental
body promises to pay the bondholders a specified amount 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 within a 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 the
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 by the drawer
himself

•CERTIFIED CHECK –A proper officer of then bank certifies that the check will be paid when
duly presented for payment

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

•TRAVELER’S CHECK – the purchaser’s signature must appear twice – one at the time he
buysnit and als at the time he uses it.