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1) Acceptance - The acceptance of a bill is the signification by the drawee of his assent to
the order of the drawer. 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. It has also been defined as "the act which the drawee manifests his
consent to comply with the request contained in the bill of exchange directed to him and
it contemplates an engagement or promise to pay."

2) Acceptor - The person who agrees to pay a bill of exchange drawn upon him. There
cannot be two separate acceptors of a bill of exchange, e. g. an acceptance by the
drawee, and another for the honor of some party to the bill.

3) Allonge - Upon a paper or it is necessary when there is insufficient space on the
document itself for the endorsements. It is considered part of the commercial paper as
long as the allonge remains affixed thereto.

4) Anomalous Indorsement - An indorsement is restrictive which either: (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. But the mere absence of words implying power to negotiate does not make an
indorsement restrictive.

5) Bearer - The person in possession of a bill or note which is payable to bearer.

6) 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 bearer. (Sec. 126 NIL)

7) Bill of Lading - A contract or receipt for the transport of goods and their delivery to the
person named therein, to his order, or to bearer.

8) Cashiers Check - One drawn by the cashier of a bank, in the name of the bank against
the bank itself payable to a third person. It is a primary obligation of the issuing bank and
accepted in advance upon issuance. (Tan vs. CA, 239 SCRA 310)

9) Check - A bill of exchange drawn on a bank payable on demand. (Sec. 185)

10) Cognotiv Actionem - The written confession made by a defendant admitting the merits
of the action brought against him or her by a plaintiff. The confession is usually based
upon designated conditions, given in court, and impliedly empowers the plaintiff's
attorney to sign judgment and issue execution for its enforcement.

11) Complete and Undelivered Instrument - 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.

12) Cross Check - Usually negotiable as it normally complies with the requirements of Sec
1, NIL but issued for special purpose and can be negotiated only once. One which bears
across its face two parallel lines drawn diagonally, usually on the upper left side.

13) Discharge - To liberate or free; to terminate or extinguish. A discharge is the act or
instrument by which a contract or agreement is ended.

14) Discharge of the 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.

15) Dishonor - To refuse to accept or pay a draft or to pay a promissory note when duly
presented. An instrument is dishonored when a necessary or optional presentment is
made and due acceptance or payment is refused, or cannot be obtained within the
prescribed time, or in case of bank collections, the instrument is seasonably returned by
the midnight deadline; or presentment is excused and the instrument is not duly
accepted or paid. Includes the insurer of a letter of credit refusing to pay or accept a
draft or demand for payment.

16) Dishonor for non-acceptance - When it is duly presented for acceptance and such an
acceptance is refused or cannot be obtained; or when presentment for acceptance is
excused, and the bill is not accepted. (Sec. 149)

17) Dishonor for non-payment - Payment is refused or cannot be obtained after due
presentment for payment; presentment is excused and the instrument is overdue and
unpaid. (Sec. 83)

18) Domestic Bill - Bill which is, or on its face purports to be, both drawn and payable within
the Philippines.

19) Draft - Used synonymously with bill of exchange although it normally refers to a bill of
exchange used in documentary exchange like letters of credit transactions.

20) Drawee - The addressee of the order to pay or the person required to pay the

21) Drawer - The person drawing or making the instrument or the person giving the order.

22) Foreign Bill - One which is or on its face purports to be drawn or payable outside the

23) Forgery - Counterfeit making or fraudulent alteration of any writing, which may consist of
signing of anothers name with intent to defraud; or alteration of an instrument in the
name, amount, name of payee, etc. with intent to defraud. 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 therefore, 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.

24) Fraud-In-Esse-Contractus - It is that which relates to the quality, quantity, value, or
character of the consideration of the instrument. It implies that the signer knew what he
was signing but that he was induced by fraud to sign.

25) Fraud-In-Factum - It exists in those case in which a person, without negligence, has
signed an instrument which was, in fact, a negotiable instrument, but was deceived as to
the character of the instrument and without knowledge of it, as where a note was signed
by oneunder the belief that he was signing as a witness to a deed, or where the
signature was procured by fraudulent use of carbon paper.

26) General Indorsement - Every indorser who indorses without qualification, warrants to
all subsequent holders in due course: (holders in good faith) (a) The matters and
things mentioned in subdivisions (a), (b), and (c) of the next preceding section; and (b)
That the instrument is, at the time of his indorsement, valid and subsisting; And, in
addition, he engages that, on due presentment, it shall be accepted or paid, or both,
as the case may be, according to its tenor, and that if it be dishonored and the
necessary proceedings on dishonor be duly taken, he will pay the amount thereof to
the holder, or to any subsequent indorser who may be compelled to pay it.

27) Holder - The payee or indorsee of a bill or note who is in possession of it, or the bearer

28) 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. 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.

29) Holder in due course - A holder in due course is a holder who has taken the instrument
under the following conditions: (a) That it is complete and regular upon its face; (b) That
he became the holder of it before it was overdue, and without notice that it has been
previously dishonored, if such was the fact; (c) That he took it in good faith and for value;
(d) That at the time it was negotiated to him, he had no notice of any infirmity in the
instrument or defect in the title of the person negotiating it.

30) Holder in Good Faith - The words in good faith under section 52 refer only to the
good faith of the indorsee or transferee and not the seller of the paper. It means
honestly in fact in the transaction concerned. Each situation must be examined
separately to determine good faith. The negative test is that a holder acted with good
faith if bad faith is not present, In an case, the test of good faith (or bad faith) is

31) Holder not in due course - Where an instrument payable on demand is negotiated on
an unreasonable length of time after its issue, the holder is not deemed a holder in due

32) Immediate Parties - Parties that are in direct contractual relation to each other.

33) Incomplete and Undelivered Instrument - 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.

34) Incomplete but Delivered Instrument - 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.

35) Indorsement in Blank - Specifies no indorsee, and an instrument so indorsed is
payable to bearer, and may be negotiated by delivery.

36) Indorsement/Endorsement - The writing of the name of the payee on the instrument
with the intent either to transfer the title to the same, or to strengthen the security of the
holder by assuming a contingent liability for its future payment, or both.

37) Instrument - A formal or legal written document; a document in writing, such as a deed,
lease, bond, contract, or will. A writing that serves as evidence of an individual's right to
collect money, such as a check.

38) Joint Indorsement - 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.

39) Limited Negotiability - Negotiations that uses limited instruments.

40) Maker - One who makes promise and signs the instrument.

41) Mangers Check - A check drawn by the manager of a bank in the name of the bank
itself payable to a third person. It is similar to the cashiers check as to the effect and

42) Material Alteration - Any alteration which changes: (a) The date; (b) The sum payable,
either for principal or interest; (c) The time or place of payment; (d) The number or the
relations of the parties; (e) The medium or currency in which payment is to be made; (f)
Or which adds a place of payment where no place of payment is specified, or any other
change or addition which alters the effect of the instrument in any respect, is a material

43) Negotiable - The quality or attribute of a bill or note whereby it may pass from one
person to another similar to money, so as to give the holder in due course the right to
collect on the instrument the sum payable for himself free from any defect in the title of
any of the prior parties or defenses available to them among themselves.

44) Negotiable Instrument - A written contract for the payment of money which complies
with the requirements of Sec. 1 of the NIL, 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 (HDC) the right to hold the instrument free from defenses available
to prior parties. 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; (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.

45) Negotiable Instrument Law - ACT NO. 2031 AN ACT ENTITLED THE THE
NEGOTIABLE INSTRUMENTS LAW. Sets out the general rules that relate to bills of
exchange, cheques and promissory notes.

46) Negotiation - The transfer of a check, promissory note, bill of exchange or other
negotiable instrument to another for money, goods, services or other benefit. A give-and-
take discussion or conference in an attempt to reach an agreement or settle a dispute.

47) Notice of Dishonor - Bringing either verbally or by writing, to the knowledge of the
drawer or indorser of an instrument, the fact that a specified negotiable instrument, upon
proper proceedings taken, has not been accepted or has not been paid and that the
party notified is expected to pay it.

48) Order - Give an authoritative instruction to do something. A request (something) to be
made, supplied, or served.

49) Original Defenses - In the hands of any holder other than a holder in due course, a
negotiable instrument is subject to the same defenses as if it were non-negotiable. But a
holder who derives his title through a holder in due course, and who is not himself a
party to any fraud or illegality affecting the instrument, has all the rights of such former
holder in respect of all parties prior to the latter.

50) Per 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.

51) Personal Defenses - Those available to prior parties among themselves but which are
not good against a holder in due course.

52) Presentment for Acceptance The production or exhibition of a bill of exchange to the
drawee for his acceptance or payment.

53) Presentment for Payment - Meant the presentation of an instrument to the person
primarily liable for the purpose of demanding and receiving payment.

54) Primarily Liable - The person "primarily" liable on an instrument is the person who, by
the terms of the instrument, is absolutely required to pay the same.

55) Promissory Note - A negotiable promissory note is 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 sm certain in money or to bearer. Where a note is
drawn to the makers own order, it is not complete until indorsed by him. (Sec. 184, NIL)

56) Protest/Notarial Protest - The formal instrument executed usually by a notary public
certifying that the legal steps necessary to fix the liability of the drawee and the indorsers
have been taken.

57) 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.

58) Remote Parties - Parties who are not in direct contractual relation to each other.

59) Sans Recourse - In relation to qualified indorsement - Constitutes the indorser a mere
assignor of the title to the instrument. (Sec. 38). It is made by adding to the indoser's
signature words like "sans recourse, without recourse", "indorser not holder", "at the
indorser's own risk", etc.

60) Secondarily Liable - All other parties that are not primarily liable are secondarily liable.

61) Special Indorsement - 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.

62) Spoliation - Alteration by a stranger in which the effect is the same as where the
alteration is made by a party which a HDC can recover on the original tenor of the
instrument. (Sec. 124)

63) Stale Check - One which has not been presented for payment within a reasonable time
after its issue; becomes valueless; 6 months.

64) Striking Out - The holder may at 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, is thereby relieved from liability on the instrument.

65) Successive Indorsement - An indorsement following another indorsement.

66) Transferee - Law One to whom a conveyance of title or property is made.

67) Transferor - (Law) someone who conveys a title or property to another.

68) Value - Means valuable consideration.