Concept of Future or Determinable Future Time

CONCEPT OF FUTURE OR DETERMINABLE FUTURE TIME
Agbayani: An instrument, to be negotiable, must be payable either (1) on demand or (2) at a fixed
or determinable future time. If it is not either, the instrument is not negotiable.
Campos: The requirement as to certainty of time of payment is for the purpose of informing the
holder of the instrument of the date when he may enforce the payment thereof. Before such time, he
cannot compel the maker of the note or the acceptor of the bill to pay, unless there is a valid
acceleration provision.
Sebastian: To be negotiable, there must be a definite day on which one will be able to collect on an
instrument. A determinable future time is expressed under (a), (b) and (c).
Ideally, a negotiable instrument should be payable on a fixed date but it may be payable at a
determinable future time. The test whether it is payable at a determinable future time is when the
time to pay is ascertainable without the need to negotiate further with the maker as to the date.
SECTION 4
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.
PAYABLE AFTER DATE OR AFTER SIGHT
Agbayani: After sight means after the drawee has seen the instrument upon presentation for
acceptance. If the instrument is a promissory note, the date of maturity is determined by counting
the period from the date of its issuance.
Sebastian: After sight refers to a bill of exchange. Presentment is necessary because it is essential
to check if the signature of the maker/drawer is authentic and the drawee has every right to
ascertain whether or not the order to pay is genuine. From the time the drawee sees the instrument,
he can either accept the instrument or reject it. By accepting it, the order of the maker was
accepted and becomes the party liable on the bill of exchange. The drawee is not a party to the
transaction until the instrument is accepted.
A usance draft is an instrument payable at a fixed period after sight. This is used in banks.
A bank or drawee is not liable to an instrument until it accepts it. A bank may dishonor an
instrument for insufficient funds but it may still honor it, resulting in an overdraft facility.
ON OR BEFORE A SPECIFIC DATE
Sebastian: The phrase “on or before” gives the person liable a chance to pay on any other day
before the due date. Payment date is still certain because it merely stipulates the debtor has the
option to make a pre-payment at any time before the absolute due date.
Rehabilitation Finance Corporation v. CA – At the outset, it should be noted that the makers of
the promissory note quoted above promised to pay the obligation evidenced thereby “on or before
October 31, 1951.” Although the full amount of said obligation was not demandable prior to
October 31, 1951, in view of the provision of the note relative to the payment in ten (10) annual
installments, it is clear, therefore, that the makers or debtors were entitled to make a complete
settlement of the obligation at any time before said date.
FIXED PERIOD AFTER THE OCCURRENCE OF A SPECIFIED EVENT
Sebastian: The phrase “on or after” means it cannot be on or before. The event described herein
is that it will certainly happen but you just don’t know when (i.e. death).
EXTENSION OF DUE DATE
Sebastian: By simply not making a demand for the presentment of the negotiable instrument, the
instrument is no longer negotiable in its full commercial sense because the holder can no longer be
a holder in due course since there is already a default (i.e. the note is already past due).
State Bank of Halstad v. Bilstad – The notes in suit provided for an extension of time for one
year on the condition therein named. The time at which they eventually become due was therefore
fixed and certain. The only uncertainty as to the time or fact of payment was whether they should
be paid at a particular time in one year, or at the date named in the next year.
Section 3060-a4 expressly says that a note that is payable at a determinable future time, or that is
payable on or before a fixed period after the occurrence of a specified event, which is certain to
happen, is negotiable. These provisions clearly provide for flexibility in fixing the time of payment,
provided only that there shall certainly come a time when the note is, by its terms, due. In other
words, they recognize the right of the parties to an instrument to contract for their mutual benefit,
and say in effect that, if the contract is made certainly to be performed at some definite time in the
future, its negotiability is not destroyed. A determinable future time as used in the second, can
mean nothing else than a time that can be certainly determined after the execution of the note. The
contingency will render a note non-negotiable under the last clause of the section clearly means an
even which may or may not happen. A contingency is, in law, an uncertain future event, and, as a
contingency may never happen, a note payable only upon the happening thereof may never come
due.
Security Bank of Sioux City v. Gunderson – The promissory note in suit contains the following
language:
“The makers, indorsers, guarantors of this note, and the sureties hereon severally waive
presentment for payment, protest and notice of dishonor, and consent that the time of its payment
may be extended without notice, all defenses on the
ground of any extension of time of payment being hereby expressly waived.”
In First National Bank of Pomeroy v. Buttery, the Court held that this phrase does not express an
agreement to extend time, but leaves the matter of extension optional with the holder, and not
obligatory upon him, and the note of its face fixes the time when it becomes due. The obvious
purpose of the provision taken as a whole was merely to relieve the holder of the paper from the
burdens made necessary by the rigid requirements of the mercantile law in order to secure the
continued liability of the indorsers and sureties upon the paper. Therefore what was meant by the
stipulation as to the extension of time was simply that in case the holder and the maker should
agree upon an extension, the sureties and indorsers should not be discharged. The holder and
maker of any note may at anytime agree upon an extension; therefore the fact that they have that
right does not affect the negotiability of the paper.
Sebastian: Time extension does not destroy negotiability provided that it is at the option of the
holder/creditor. What destroys negotiability is the option of extension being given to the debtor
because the certainty of the date is made uncertain.

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CONCEPT OF FUTURE OR DETERMINABLE FUTURE TIME

PAYABLE AFTER DATE OR AFTER SIGHT

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