Negotiable Instruments Reviewer for Finals

PRESENTMENT FOR PAYMENT

is the presentation of the instrument to the persons primarily liable for the purpose of
demanding and receiving payment
[Sec 70]
When necessary: to charge persons secondarily liable (drawer/indorsers)
BUT: presentment frst to persons primarily liable
!!"T #! $%T &'($T): drawer/indorsers are )#("*+',) from their secondary
liability- (,en 'ule)
Exceptions: (.) drawer has no right to e/pect or re0uire that the drawee/acceptor will
pay the
instrument(e/- *e has no fund/account with the drawee/acceptor) 1(ec-
2345
(6) instrument was made or accepted for the indorser7s accommodation
(indorser
is the accommodated party and at the same time the principal debtor)
1(ec 8945
(:) after e/ercise of reasonable diligence presentment as re0uired by
this +ct
cannot be made 1(ec 86(a)45
(;) drawee is a fctitious person 1(ec 86(b)45
(<) /press or implied Waiver of presentment 1(ec 86(c)4
(=) Bill is dishonored by non>acceptance 1(ec .<.4
Note: (ec 23? 89 : presentment e/cused
(ec 86? .<. : presentment dispensed with

When $%T necessary: to charge persons primarily liable (ma@er/acceptor)
(.) Aiability is absolute on date for payment5 therefore? the holder can sue the ma@er
as soon as the date for payment has passed without the instrument being paid-
(6) #nstrument payable at a special place and he is able and willing to pay it there5
e0uivalent to a tender and oBer of payment5 eBect: he is not considered in delay (in case
the instrument is unpaid and overdue)? therefore he is not liable for costs and interests
subse0uently accruing-
(:) ven if it is re0uired by terms of the instrument-
[Sec 71]
#nstrument $%T payable on demand: presentment on the day it falls due5
#nstrument payable on demand:
a- (&romissory $ote): presentment within a reasonable time after its issue5
b- (Bills of /change): presentment within reasonable time after the last negotiation of the
instrument-
[Sec 72]
What constitutes sufcient pa!ent (a"" e"e!ents !ust concu#)
.- Cade by the holder/person authoriDed to '"#E payment5
6- +t a reasonable hour within a business day5
:- +t a proper place as herein defned5 +$)
;- To the person primarily liable/if absent or inaccessible? to any person found at the place
where presentmade is made-
[Sec 7$]
What constitutes p#ope# p"ace (in o#%e#)
.- &lace specifed in the instrument? and it is there presented5 or if none
6- +ddress of the person to ma@e payment5 or if none5
:- Usual place of business or residence of the person to ma@e payment5 or if none
;- Wherever he can be found? or at his last @nown address-
[Sec 7&]
Ealid presentment re0uires pe#sona" o# 'ace(to('ace %e!an%) at the proper place?
e/hibiting the instrument to the ma@er/acceptor from whom payment is demanded-
When paid? the instrument must be delivered up to the party paying it-
[Sec *1+
When %e"a o' p#esent!ent e,cuse%-a"so 'o# acceptance 'o# hono#+
When caused by circumstances beyond the control of the holder5 +$)
Without his default? misconduct? or negligence
Note: When reason for delay ceases to operate? presentment must be made within a
reasonable time-

Su!!a# Ru"es as to P#esent!ent 'o# Pa!ent
.- $ot necessary>&CA5 necessary>&(A 1(ec 294
6- $ot necessary>&(A under (ecs 23? 89?86?.<.
[Sec *$]
When inst#u!ent is %ishono#e% . non(pa!ent
a- )uly presented but '!U() of &+FC$T "+$$%T B %BT+#$)
b- (.) G"U() and instrument is (6) %E')U and (:) U$&+#) a"" $ !ust concu#-
Note/ if the presentmade is not made and it is not e/cused? there is no dishonor even
though the instrument is overdue and unpaid-
[Sec *0]
What constitute PAYMENT 1N 23E 4O3RSEH (a"" $ !ust concu#+
.- Cade at maturity? or a'te# maturity to the ho"%e# thereof5
6- #n good faith(of the ma@er/acceptor)5 +$)
:- Without notice that his title is defective
NOT14E OF 21S5ONOR
[Sec *0]
To whom must be givenH
.- To the drawer5 +$)
6- To each indorser

Bect if not given: )ischarges one of liability but he is still liable for breach of warranties
pertaining to the instrument 1(ec =< and ==4
When inst#u!ent is consi%e#e% %ishono#e%
.- #f it is not accepted when presented for acceptance5
6- #f it is not paid when presented for payment5
:- #f presentment is e/cused or waived and the instrument is past due and unpaid-
[Sec 00)01)02]
$otice may be given by:
.- The holder5
6- %n behalf of the holder5
Bect: it inures to the beneft of all subse0uent holders and all prior parties who have a right
of recourse against the party to whom notice is given 1(ec 364
:- +ny party to the instrument who might be compelled to pay the holder? and upon ta@ing it
up? would have a right to reimbursement from the party to whom notice is given-
Bect: #nures to the beneft of the holder and all parties subse0uent to the party to whom
notice is given-
;- By an agent either in his own name or in the name of the party entitled to give notice- 1(ec
3.4
$ote: +,$Tauthority to receive notice $"((+'F
authority to give notice $%T $"((+'F
$otice to &artnersany one of them
$otice to Ioint &artieseach of them
$otice to Ban@ruptparty himself or his trustee ot assignee
T1ME F16E2 FOR 7181N7 NOT14E-a"so 'o# p#esent!ent 'o# pa!ent to accepto# 'o#
hono#(10$)10&+
[Sec 10$) 10&) 107]
((ec .9:) When parties reside in the same place and notice is given at the:
.- business place before the close of the business hour on the day following
6- residence before the usual hours of rest on the day
:- mail deposited in the post oJce in time to reach him in the usual course on the day
following-
((ec .9;) )iBerent place:
.- by mail must be deposited in time to go by mail the day following the day of dishonor
if there be no mail at a convenient hour on that day? by the ne/t mail thereafter
6- otherwise than by mail(e/-personal messenger) recipient shall receive the notice not later
than the time he would receive it had it been mailed-
((ec .92) Time of $otice to (ubse0uent &arties:
same time as that of antecedent parties
What constitute 2ue Notice [Sec 109]
.- The notice of dishonor is )UAF +))'(()5 +$)
6- )&%(#T) #$ T* &%(T %!!#"
post oJce
any branch of post oJce
any letter bo/ under the control of the post oJce
&A+" W*' $%T#" CU(T B ,#E$
.- +ddress added in his signature5
6- #f none? either to post oJce nearest his place or that where he is accustomed to receive his
letters5
:- ither at his residence or business place(if both are not in the same place)5
;- &lace where he is soKourning
$ote: When protest is waived? presentment and notice of dishonor are also deemed waived
When %e"a o' :i;in: notice is e,cuse% 1sa!e as Sec *1]
When Notice to 2#a<e# Not Re=ui#e%
.- )rawer and drawee are the same person5
6- )rawee is a fctitious person5
:- )rawee is a person not having capacity to contract5
;- )rawer is the person to whom the instrument is presented for payment5
<- )rawer has no right to e/pect or re0uire that the drawee or acceptor will honor the
instrument5
=- )rawer has countermanded payment-
When Notice to 1n%o#se# Not Re=ui#e%
.- #ndorser was aware of L6 and L: above5
6- The indorser is the person to whom the instrument was presented5
:- #ndorser is the accommodated party(and the principal debtor)
E>ect <he#e notice o' non(acceptance a"#ea% :i;en
1? #f subse0uently accepted? holder must present the instrument for payment upon maturity5
2? #f not paid? holder must give the subse0uent notice of dishonor-
E>ect o' o!ission to :i;e notice o' non(acceptance . the p#e;ious ho"%e#
+ holder in due course(subse0uent holder) is not preKudiced- *e may still present the
instrument to the drawee for acceptance and notify the drawer and indorsers if acceptance
is refused-
When P#otest Re=ui#e%
.- !oreign bills of e/change
6-
(UCC+'F %! 'UA( +( T% $%T#" %! )#(*%$%'
.- Ai@e presentment for payment? notice of dishonor is not necessary to charge the persons
primarily liable but is necessary to charge persons secondarily liable5
6- When notice of dishonor $%T necessary:
a- $otice is waived5
b- &rotest is waived5
c- $otice is dispensed with5
d- +s to drawer under (ec ..;5
e- +s to indorser under (ec ..<5
f- Where due notice of dishonor by non>acceptance has been given under (ec ..=5 and
g- +s to holder in due course? without notice of dishonor by non>acceptance? subse0uent to the
omission to give notice under (ec ..2-
PROTEST
#s the formal instrument e/ecuted usually by
(.) a notary public? or
(6) by any respectable resident of the place where the bill was dishonored? in the presence
of two or more credible witness
certifying that the legal steps necessary to f/ the liability of the drawee and the
indorsers have been ta@en
Cade on the day of its dishonor? unless delay is e/cused
+t the place where the instrument is dishonored? if not thereat? at the place where it is
e/pressed to be payable
P#otest 'o# .ette# secu#it
&rotest before maturity where acceptor has been adKudged a ban@rupt or insolvent? or has
made an assignment for the beneft of his creditors
When necessa#/
.- #n case of a foreign bill of e/change5
6-
Reasons 'o# #e=ui#in: p#otest in case o' a 'o#ei:n .i"" o' e,chan:e
1? #t ma@es for uniformity in international transactions because most countries re0uire it5
2? #t furnishes authentic and satisfactory evidence of dishonor to the drawer who? from his
residence abroad? would e/perience diJculty in verifying the matter and thus be compelled
to rely on the presentation of the holder-
5o< !a%e/
.- Cust be anne/ed to the bill or must contain a copy thereof5
6- Cust be under the hand and seal of the notary ma@ing it5
:- Cust specify the matters enumerated as follows:
a- Time and place of presentment5
b- The fact that presentment was made and the manner thereof5
c- The cause or reason for protesting the bill5
d- The demand made and the answer given? if any? or the fact that the drawee or acceptor
cannot be found-
When p#otest is %ispense% <ith/ same as that of presentment and notice of dishonor
)UAF $%T)> means written by the notary public on his logboo@ or on the instrument
$ote: formal paper may subse0uently be prepared after it has been duly noted as of the
date of noting-
P#otest an% Notice o' 2ishono# %istin:uishe%
PROTEST NOT14E OF
21S5ONOR
Whe#e
#e=ui#e%
foreign bill any negotiable
instrument
Fo#! Written Eerbal or written
Scope #ncludes
presentment?
notice of
dishonor? and all
the steps
accompanying
dishonor
Aimited to notice of
dishonor only
Ma%e . $otary public or
any respectable
resident where
the instrument
was dishonored in
the presence of
two or more
credible witnesses
By a party or his
agent
Whe#e
!a%e
+t the place of
dishonor
$ot essential
When
!a%e
%n the day of
dishonor
Within the time
prescribed
21S45AR7E
Ne:otia."e 1nst#u!ents a#e %ischa#:e% . [Sec 110]/
a- &ayment in due course by or on behalf of the principal debtor5
b- &ayment in due course by the accommodated party5
c- #ntentional cancellation thereof by the holder5
how cancellation is done:
.- By writing the word M"ancelledN or M&aidN on the face of the instrument
6- #nstrument is torn up? burned? or mutilated
d- +ny act which discharges the instrument under +rt- .6:. of the "ivil "ode:
.- Payment or performance5
6- @oss of the thing due5
:- Remission of the debt or condonation5
;- Merger of the rights of the creditor and debtor or confusion5
<- 4ompensation5
=- Novation5
2- %thers: annulment? rescission? fulfllment of a resolutory condition and prescription
e- The principal debtor reac0uires the instrument in his own right at or after the date of
maturity
Note/ #f reac0uisition is made before maturity? the instrument can be re>negotiated-
Therefore? the reac0uisition of the principal debtor before maturity does not operate to
discharge the instrument-
Metho%s o' %ischa#:e o' secon%a# pa#ties
1? Under (ec ..3 above5
2? 5o"%e# intentiona"" cance"s the si:natu#e of parties secondarily liable on the
instrument as if he has never been a party thereto under (ec-;8
(ec-;8>When holder may stri@e out indorsement not necessary to his title and the indorser
whose indorsement is struc@ out? and all indorsers subse0uent to him? are thereby relieved
from liability on the instrument-
a- + bearer instrument may be negotiated by mere delivery- #n case it is indorsed? it remains a
bearer instrument and may be further negotiated by )A#E'F-
b- +n order instrument may be negotiated only by the indorsement of the payee completed by
delivery- (pecial #ndorsement is necessary for further negotiation- Blan@ #ndorsement (the
last indorsement) makes the order instrument a bearer instrument and may be negotiated
by mere delivery- *ence? the (pecial #ndorsements are not necessary to the holder7s title- *e
may therefore stri@e out the signature of the special indorser- #n eBect? the special indorser
and all indorsers subse0uent to him are relieved of their liabilities to the instrument-
$? By the discharge of a prior party by act o' ho"%e#- not . ope#ation o' "a<+5
&? Ealid tender of payment made by a prior party5
A? By release of the principal debtor . the act o' the ho"%e#- not . ope#ation o' "a<+?
'+(%$: With the release of the principal debtor? subse0uent parties lose their right of
recourse against him-
(UB(OU$T &+'T#( +' 'A+() 3N@ESS: *older reserved his right of recourse against
the said subse0uent parties-
#n eBect? there is an implied reservation by the subse0uent parties of their right of recourse
against the principal debtor-
E>ect o' #eac=uisition . p#io# pa#t
1? The reac0uirer (who paid for the instrument)? for the most part? is remitted to his former
position? and conse0uently? he may stri@e out his own and all subse0uent indorsements as
they are not necessary to his title under (ec ;8-
2? &ayment at or after maturity by a party secondarily liable does not discharges the
instrument but only cancels his own liability and that of parties subse0uent to him-
$? #f the party so paying was formerly a *)"? he may recover from prior parties as such a *)"
even though at that time he had already notice of defenses-
E>ect o' Renunciation
.- Cade before? at? or after maturity
#n favor of secondary party
made by the holder
eBect:discharge of secondary party only? not the instrument which will remain in force
6- Cade at or after maturity
in favor of the principal debtor
eBect:discharge of &) and all parties prior thereto
&rovided: renunciation is absolute and unconditional-
When cance""ation inope#ati;e
1? Cade unintentionally5 or
2? By mista@e or through fraud5 or
$? Without authority
Mate#ia" A"te#ation( refers to any change in the instrument which aBects the liability of
the parties in any way as specifed in (ec .6<? or changes the contract of the parties in any
respect-
Spoi"ation( material alteration made by a stranger
E>ect o' a"te#ation in the inst#u!ent
1? 'egardless if the instrument is innocently or fraudulently altered? the instrument is
discharged/void but the innocent party can sue upon the original debt for which it has been
given5
BUT the instrument is not discharged/void as against (.) the party who has made the
alteration? and
(6) a party who authoriDed or assented to the alteration? and
(:) indorsers who indorsed subse0uent to the alteration-
6- (poilation has same eBect as alteration? it has no eBect upon the instrument is the original
meaning can be ascertained-
:- #f an altered instrument is negotiated to a *)"? he may enforce payment thereof according
to its original tenor regardless if innocently or fraudulently altered-

PAYMENT FOR 5ONOR
&ayment made by a person? whether a party to the .i"" or not? after it has been protested for
non>payment? for the beneft of any party liable thereon or for the beneft of the person for
whose account it was drawn-
M(#$+A% A+$,N
Who !a !aBe pa!ent
1? By a party to the bill5
2? By a stranger5
$? By the drawee after he has refused to accept the bill
&? )rawe of a chec@ which has been dishonored and protested has a right to intervene and pay
it to protest his honor.
Re=uisites o' a 8a"i% Pa!ent 'o# 5ono#
1? The bill has been dishonored by non>payment5
2? #t has been protested for non>payment5
$? &ayment Psupra protest7 is made by any person? even a party thereto5
&? The payment is attested by a notarial act of honor which must be appended to the protest or
form an e/tention of it5
A? The notarial act must be based on the declaration made by the payer for honor or his agent
of his intention to pay the bill for honor and for whose honor he pays-
E>ect i' the a.o;e 'o#!a"ities is not 'o""o<e%
&ayment will operate as a mere voluntary payment5 +$)
The payer has no right of full reimbursement against the party for whose honor he pays-
P#e'e#ence o' pa#ties o>e#in: to pa 'o# hono#
To the person whose payment will discharge the greatest number of parties to the bill-
The rule is diBerent in acceptance for honor-
E>ect <he#e .i"" is pai% 'o# hono#
1? )ischarge of subse0uent parties5 and
2? (ubrogation
Ri:ht o' pae# 'o# hono#
right to receive the bill itself and the protest
E>ect o' ho"%e#Cs #e'usa" to #ecei;e pa!ent 'o# hono#
he cannot recover from the parties who would have been discharged had he accepted the
same-
A44EPTAN4E FOR 5ONOR
+n underta@ing by a stranger to a bill after protest for the beneft of any party liable thereon?
or for the honor of the person for whose account the bill is drawn which acceptance inures to
the beneft of all the parties subse0uent to the person for whose honor it is accepted? and
conditioned to pay the bill when it becomes due if the original drawee does not pay-
&urpose: to preserve the credit of the parties to the instrument or some party to it for whose
honor the acceptance is made-
Re=uisites/
1? The bill must have been protested for dishonor by non>acceptance or for better security5
2? The acceptor for honor must be a person not a party already liable thereon5
$? The bill must not be overdue at the time of the acceptance for honor5 and
&? The acceptance must be with the consent of the holder of the instrument-
A? Cust be in writing5
9? Cust indicate that it is an acceptance for honor5
7? Cust be signed by the acceptor for honor5 and
*? Cust contain an e/press or implied promise to pay money-
0? Cust be delivered (the accepted bill) to the holder-
M+ccepted for the honor of &N
((igned)
G
A:#ee!ent o' Accepto# 'o# 5ono#
engages that he will? on due presentment? pay the bill according to the terms of his
acceptance? provided that the (.) bill was not paid by the drawer? (6) it shall have been duly
presented for payment and (:) protested for non>payment? and (;) notice of dishonor was
given to him-
Bill payable after sight: the date of maturity is calculated from the date of the noting of non>
acceptance and not from the date of the acceptance for honor-
P#otest 'o# non(pa!ent . accepto# 'o# hono#
1? &rotest for dishonor by non>acceptance or for better security
2? &rotest for non>payment by the drawee in order to hold the acceptor for honor liable
$? &rotest for non>payment by the acceptor for honor in order to hold the drawer and indorsers
whose liabilities have not yet become f/ed because of the acceptance for honor-
Acceptance 'o# 5ono# an% O#%ina# Acceptance 2istin:uishe%
+!* %+
+s to protest &revious protest
re0uired
&rotest not
re0uired
+cceptor (tranger )rawee
"onsent of
holder
'e0uired $ot re0uired
Aiability (econdary &rimary
$o- of
acceptors
Cay be several
+!* for diBerent
parties in the bill
$o acceptors in
the alternative or
in succession
When
instruments is
discharged
$ot discharged
even upon
payment by the
+!*
)ischarged upon
payment by the
acceptor
D1@@S 1N SET
&+'T#(: &ayee (&)
)rawer (')
)rawee (W)
B#A((: !irst &art>>>neg-by & to + on (ept 69Qfurther negotiated to )
(econd &art>>>neg- by & to B on (ept 6<>>>further negotiated to
Third &art>>>neg- by & to " on (ept :9Qfurther negotiated to !
$ote:
.- ach part may be negotiated by & although he7s not supposed to do that
6- + is the true owner(the holder whose frst title accrued)
:- #f W pays B in due course? he can refuse to accept and pay the true owner? +-
;- Where the bill is indorsed separately? the holder is liable to that part? every indorser
subse0uent to him is liable on that part that he himself has indorsed-
<- W is re0uired to accept only one part of a bill in set-
=- #f he accepts two or more? and those were negotiated to a *)"? W is liable to every holder
as if the parts were separate bills-
2- #f &? before negotiating to +?B and "? presented the : bills for acceptance to W? then
negotiates the parts to +?B and "(all *)"s)? thenR
W is liable to +?B?" for each amount of the part-
8- #f & presented the : parts to W for acceptance but afterwhich does not negotiate them? W is
liable only the amount on one part to &-
3- W must re0uire the surrender of the bill upon his payment? otherwise? he will be liable to
that part not surrendered and to subse0uent holder thereof-
.9- #f part of the bill is discharged by payment? the whole bill is discharged? as far as ' is
concerned- This is because a bill in a set constitute only one bill-
Ipinaskil ni star delight sa 1:02 AM