CHAPTER VII

NOTICE OF DISHONOR
Section 89 - To whom notice of dishonor must be given. - Except as herein otherwise provided,
when a negotiable instrument has been dishonored by non-acceptance or non-payment, notice of
dishonor must be given to the drawer and to each indorser, and any drawer or indorser to whom
such notice is not given is discharged.
Meaning of notice of dishonor
Notice of dishonor is the 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 hasnt been paid, and that the party notified is expected to pay it.
It is a notice given by the holder or his agent to a party or parties secondarily liable that the
instrument was dishonored by non-acceptance by the drawee of a bill or by non-payment by the acceptor
of a bill or by non-payment by a maker of a note.
A note given by a notary public is called protest.
When instrument considered to be dishonored
A negotiable instrument is considered to be dishonored if it is not accepted when presented for
acceptance; or if it is not paid when presented for payment at maturity.
Necessity and object of giving notice of dishonor
When an instrument is dishonored by non-acceptance or non-payment, notice of such
dishonor must be given to persons secondarily liable, drawer and to each indorser, as the case
may be.
The object of giving notice of dishonor is to inform the parties secondarily liable, drawer or
indorser, that the maker or acceptor, as the case may be, has failed to meet his engagement and to advise
such parties that they will be require to make payment.
Effect of failure to give notice of dishonor
Any drawer or indorser to whom such notice is not given is discharged. However, although the
indorser to whom the notice is not given is discharged, he is still liable for breach of warranties pertaining
to the instrument.

Section 90 - By whom given. - The notice may be given by or on behalf of the holder, or by or on
behalf of any party to the instrument who might be compelled to pay it to the holder, and who,
upon taking it up, would have a right to reimbursement from the party to whom the notice is given.
By whom notice of dishonor is given
The notice of dishonor may be given by the holder; or by someone in behalf of the holder; or by
the party who under certain conditions has a right to reimbursement from the party to whom notice is
given; or by someone on behalf of such party entitled to give notice.
Notice by a mere stranger is ineffectual UNLESS he is acting as agent of the party who is entitled
to give notice of dishonor.

Section 91 - Notice given by agent. - Notice of dishonor may be given by any agent either in his own
name or in the name of any party entitled to give notice, whether that party be his principal or not.
Agent need not be authorized
Notice of dishonor may be given by an agent. The agent giving notice of dishonor need not be
authorized by the principal. The agent can give notice of dishonor in his own name; or in the name of any
party entitled to give notice.

Section 92 - Effect of notice on behalf of holder. - Where notice is given by or on behalf of the
holder, it inures to the benefit of all subsequent holders and all prior parties who have a right of
recourse against the party to whom it is given.
Meaning of benefit
Benefit refers to the right to charge the person secondarily liable who received notice. The party
to whom this benefit inures can charge the party receiving notice of dishonor, even if he didnt give the
notice.
Effect of notice of dishonor given by holder
Notice of dishonor given by or on behalf of the holder inures to the benefit of all holders
subsequent to the holder who has given notice, and all parties prior to the holder but subsequent to the
party whom notice has been given and against whom they have a right of recourse.
A party can charge a prior party who has received notice of dishonor although he himself has not
given said prior party any notice. The reason for this is that a party entitled to a notice of dishonor need to
be notified only once.

Section 93 - Effect where notice is given by party entitled thereto. - Where notice is given by or on
behalf of a party entitled to give notice, it inures to the benefit of the holder and all parties
subsequent to the party to whom notice is given.
The notice given inures the benefit of:
A. The party giving the notice
Example:
M makes a promissory note payable to the order of P. P indorses the note to A, A to B, B to C, C to D,
and D to H, holder. H represents the note for payment to M, but M dishonors it.
* H, the holder, can give notice of dishonor to P, A, B, C and D.
B. The holder
Example:
M makes promissory note payable to the order of P. P indorses the note to A, A to B, B to C, and C to H,
holder. H presents the note to A for payment but M dishonors it.
*H notifies P, A, B and C. The notice given by H to P inures to the benefit of A, B and C. Thus, A, B,
and C can hold P liable even if they themselves did not give notice to P. The notice given by H to A inures
to the benefit of B and C. The notice given by H to B inures to the benefit of C.
C. All parties subsequent to the party to whom notice is given
Example:
M makes a promissory note payable to the order of P. P indorses the note to A, A to B, B to C, and C to
H, holder. H presents the note to M for payment but M dishonors it. H gives notice of dishonor only to C.
C then gives notice to P, A and B.
*The notice given by C to P, A and B inures to the benefit of H, holder. Thus, H can hold liable P, A
and B even if he himself did not give them a notice of dishonor. As regards H, P, A and B are not
discharged.

Section 94 - When agent may give notice. - Where the instrument has been dishonored in the hands
of an agent, he may either himself give notice to the parties liable thereon, or he may give notice to
his principal. If he gives notice to his principal, he must do so within the same time as if he were the
holder, and the principal, upon the receipt of such notice, has himself the same time for giving
notice as if the agent had been an independent holder.
When agent may give notice
a. To the parties liable thereon,
b. To his principal

Duty of principal when the agent gives him notice of dishonor

The principal is required to send notice of dishonor to the drawer and each indorsers. Upon
receipt of such notice, he has the same time for giving notice as if the agent had been an independent
holder.

Section 95 - When notice sufficient. - A written notice need not be signed and an insufficient written
notice may be supplemented and validated by verbal communication. A misdescription of the
instrument does not vitiate the notice unless the party to whom the notice is given is in fact misled
thereby.

Section 96 - Form of notice. - The notice may be in writing or merely oral and may be given in any
terms which sufficiently identify the instrument, and indicate that it has been dishonored by nonacceptance or non-payment. It may in all cases be given by delivering it personally or through the
mails.
Form of notice
a. Oral
b. Written
It must contain the following:
a. Sufficient description of the instrument to identify it.
b. A statement that it has been presented for payment or for acceptance and that it has been
dishonored.
c. If protest is required, a statement that it has been made.
d. A statement that the party giving notice intends to look to the party addressed for the payment.
How notice is served:
a. Personal delivery, or
b. By mail
Notice by phone - It may be given by telephone if it be clearly shown that the party to be notified as the
party as it the receiving end of the line.
Written notice not be signed - If the notice is in writing, the same need not be signed, and if insufficient,
the same may be supplemented and validated by verbal communication.

Section 97 - To whom notice may be given. - Notice of dishonor may be given either to the party
himself or to his agent in that behalf.

The above section pertains to two persons authorized to receive notice of dishonor. First, to the
party himself. Second, to his agent in that behalf.
Do not get confused with section 91 and section 97. The difference is that, in section 91, the
giving of notice benefits the principal and the authorization by the principal is not a must, while in section
97, the receipt of notice creates liability and the notice of dishonor must be authorized.

Section 98 - Notice where party is dead. - When any party is dead, and his death is known to the
party giving notice, the notice must be given to a personal representative, if there be one, and if with
reasonable diligence, he can be found. If there be no personal representative, notice may be sent to
the last residence or last place of business of the deceased.
The personal representative is the one receiving the notice when the party concerned is dead
provided that his death is known to the party giving notice, there is a personal representative and if with
reasonable diligence the said personal representative could be found.

Section 99 - Notice to partners. - Where the parties to be notified are partners, notice to any one
partner is notice to the firm even though there has been a dissolution.
The above section clearly explained that the notice to the partners is notice to the partnership
because each partner is an agent of the partnership. In such cases, the partner becomes fraudulent, he is
liable to his co-partners.

Section 100 - Notice to persons jointly liable. - Notice to joint parties who are not partners must be
given to each of them unless one of them has authority to receive such notice for the others.
As what we have discussed before, joint payees who indorse an instrument are deemed to indorse
jointly and severally. Their liability is solidary and not joint. This principle is actually different from
section 100 because under this section, the notice must be given to the parties who are not partners.

Section 101 - Notice to bankrupt. - Where a party has been adjudged a bankrupt or an insolvent, or
has made an assignment for the benefit of creditors, notice may be given either to the party himself
or to his trustees or assignee.
This section states two situations. First, where the party secondarily liable has been declared a
bankrupt or an insolvent. Second, where he has made an assignment of his properties for the benefits of
creditors. In such cases, notice be given to the party himself or his trustee or assignee.
Section 102. Time within which notice must be given. Notice may be given as soon as the
instrument is dishonored and, unless delay is excused as hereinafter provided, must be given within
the time fixed by Act.

The moment the instrument is dishonored when it is presented for acceptance or the moment the
same is dishonored by non-payment, notice of dishonored must be given within the time provide for in
Sections 103 and 104 of the Negotiable Instrument Law. If no notice is given within the same period to
the drawer or the indorsers, they are discharged from secondary liability.
It should be noted however, that the liability of the drawer under a separate contract may remain
although no notice of dishonor is given to him. The Absence of notice of dishonor affects the drawers
secondary liability but it does not affect the liability of the drawer under a separate source of obligation.
Thus, if the drawer issued the bill of exchange to the payee in payment of the obligation, the bill was
dishonored by the drawee when it was presented for acceptance and no notice of dishonored was given to
the drawer, thee drawer is no longer secondarily liable. However, the drawer is still liable based on the
breach of contract of sales. The drawer, in effect, failed to pay the price and is therefore still liable to pay
such price despite the absence of notice of dishonor.

Section 103 - Where parties reside in same place. Where the person giving and the person to
receive notice reside in the same place, notice must be given within the following times:
a
b
c

If given at the place of business of the person to receive notice, it must be given before the
close of business hours on the day following.
If given at his residence, it must be given before the usual hours on the day following.
If send by mail, it must be deposited in the post office in time to reach him in usual course
on the day following.

When the law refers to persons residing in the same place under Section 103, the law means the
same town or city. Notice under this Section may either be personal or mail.
With respect of paragraph (b.), usual hours of rest has been defined as many of the hours when
the member of the household are attending their ordinary affair.
Regarding on paragraph (c.), the notice is still considered timely given even if in fact the notice
did not reach the person who is supposed to receive notice of dishonor thee day following. It might even
be impossible under present circumstances to expect that the mail will reach that destination the following
day. It is therefore enough that the person who is supposed to give notice exert effort that it will reach the
following day.

Section 104 - Where parties reside to the different places. Where the person giving and the person
to receive notice reside in different places, the notice must be given within the following times:
a. If sent by mail, it must be deposited in the post office in time to go by mail the day following
the day of dishonor, or if there be no mail at a convenient hour on last day, by the next mail
thereafter.
b. If given otherwise than through the post office, then within the time that notice would have
been received in due course of mail, if it had been deposited in the post office within the
time specified in the last subdivision.

If the person giving notice resides in a place different from the place of residence of the person
who is supposed to receive it, the person giving notice also has two options, either to send it by mail or to
deliver the same personally.
If the delivery of notice is by mail, it must be deposited in the post office in time to go by mail the
day following the dishonor as provided for in paragraph (a) Section 104. Hence, if the instrument was
dishonored on February 1, 2016 and notice was supposed to have been sent by mail, the notice should be
deposited with the appropriate address and duly stamped in such a way that it would be part of the mail
that would depart on February 2, 2016.
On the other hand, personal service of the notice under paragraph (b) of Section 104 is sufficient
if the said notice is personally delivered within the same time that the mail normally reach the destination.
Thus, if it usually takes three (3) days to reach the destination, the person given notice personally to a
person who resides in a different place also has three (3) days personally deliver to notice.

Section 105 - When sender deemed to have given due notice. Where notice of dishonor is duly
addressed and deposited in the post office, the sender is deemed to have given due notice,
notwithstanding any miscarriage in the mails.
Notice by mail is deemed to have been properly made where: (1) the notice of dishonor is duly
addressed; and (2) deposited in the post office.
As long as the sender has done everything which the law requires him to do, the notice would still
be considered on time although it does not reach the addressee due to miscarriage in the mails. The notice
must be properly addressed, stamped, and mailed.

Section 106 - Deposit in post office; what constitutes. - Notice is deemed to have been deposited in
the post-office when deposited in any branch post office or in any letter box under the control of the
post-office department.
Section 106 defines the act of depositing in the post office. The notice may be deposited in: a.)
the post-office, b.) any branch post-office, or c.) any letter box under the control of the post-office.
Therefore, a deposit in mail box is equivalent to deposit in the post-office.

Section 107 - Notice to subsequent party; time of. - Where a party receives notice of dishonor, he
has, after the receipt of such notice, the same time for giving notice to antecedent parties that the
holder has after the dishonor.
The instrument is considered dishonored in the hands of a party who receives a notice of dishonor
from the holder on the date he receives such notice and not on the date the instrument is dishonored in the
hands of the holder.

To illustrate, if a promissory note was dishonored on September 1, by the maker, and the holder
notifies an indorser on September 2, such notified indorser is given the same obligation to notify a prior
indorser, if living in the same place not later than September 3.

Section 108 - Where notice must be sent. - Where a party has added an address to his signature,
notice of dishonor must be sent to that address; but if he has not given such address, then the notice
must be sent as follows:
a
b
c

Either to the post-office nearest to his place of residence or to the post-office where he is
accustomed to receive his letters; or
If he lives in one place and has his place of business in another, notice may be sent to either
place; or
If he is sojourning in another place, notice may be sent to the place where he is so
sojourning.
But where the notice is actually received by the party within the time specified in this Act, it
will be sufficient, though not sent in accordance with the requirement of this section.

This section speaks about the place where notice must be sent. If address is given, notice of
dishonor must be sent to that address, otherwise, notice must be sent to the places stated in subsections a,
b, and c.
Illustration:
A, indorser of a note has his place of business in Cubao, and residing in Marikina. At present, he is in
Tagaytay for a vacation. The notice of dishonor may be addressed to any of the three places given, unless
he adds an address in his signature, in which case notice is required to be sent to that address.
Effect of notice sent to the wrong place:
If actually received; though not sent to the proper place, the same is effective.
Notice addressed to a house where he does not reside or do business or receive his letters, even
though he owned the house and his son did business there, is not sufficient in the absence of proof that the
indorser had received that notice.

Sec. 109. Waiver of notice. - Notice of dishonor may be waived either before the time of giving
notice has arrived or after the omission to give due notice, and the waiver may be expressed or
implied.
Waiver is the intentional abandonment of right, or the relinquishment, renunciation of a right
acquired. Waiver of notice of dishonor may be made before the time of giving notice or after omission to
give due notice.

There are two kinds of waiver; express and implied. A waiver is express when it is made orally or
in writing as when notice of dishonor waived appears above the signature of an indorser. It may be
implied from ones act or language. Implied waiver usually takes place after there has been omission to
give notice.
Example:
Where the holder of a note, after dishonor, fails to give notice of dishonor to an indorser, the right is
considered abandoned or impliedly waived. Likewise, if the indorser admits his liability and declares
afterwards that he would pay the note, there is implied waiver of notice of dishonor

Sec. 110. Whom affected by waiver. - Where the waiver is embodied in the instrument itself, it is
binding upon all parties; but, where it is written above the signature of an indorser, it binds him
only.
Persons affected by waiver of notice:
a
b

If embodied in the instrument itself, all parties are bound.

If only above the signature of an indorser, he alone is bound.

Example:
K indorses the note to A, A to B, B to C, C to D, present holder. If a notice of dishonor waived is
written in the body of the instrument, then it is not necessary for D to give notice to A, B, and C to charge
them because the waiver is written in the instrument itself. But if the waiver had been written above the
signature of C, then only C would be bound by the waiver.

Section 111 - Waiver of protest. - A waiver of protest, whether in the case of a foreign bill of
exchange or other negotiable instrument, is deemed to be a waiver not only of a formal
protest but also of presentment and notice of dishonor.
In a waiver of protest, presentment and notice of dishonor are also deemed. This is because
protest is the steps accompanying dishonor that is necessary to charge a party secondarily liable. Protest is
defined as 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. But where notice of
dishonor is waived, presentment for payment is not waived.

Section 112 - When notice is dispensed with. - Notice of dishonor is dispensed with when, after the
exercise of reasonable diligence, it cannot be given to or does not reach the parties sought to be
charged.
Notice of dishonor is dispensed with or excused when it does not reach the parties sought or
required to be charged after the exercise of reasonable diligence. Reasonable diligence depends upon the

circumstances of each case. It implies active search. Notice of dishonor is dispensed with like for
example, when political disturbances interrupt and obstruct the ordinary negotiations of trade, it create a
sufficient excuse for want of presentment or notice, upon the same principle the controls in cases of
military operations or interdictions of commerce. Another also is the occurrence of a malignant,
contagious, infectious disease.

Section 113 - Delay in giving notice; how excused. - Delay in giving notice of dishonor is excused
when the delay is caused by circumstances beyond the control of the holder and not imputable to
his default, misconduct, or negligence. When the cause of delay ceases to operate, notice must be
given with reasonable diligence.
In Section 112 dispenses with the duty to give notice but this section excuses just the delay in
giving it. It is excused when the delay is caused by circumstances beyond the control of the holder.
Circumstances beyond the control of the holder are events which could not be foreseen or which though
foreseen are inevitable. As soon as the cause which operates to prevent the giving of notice of dishonor is
removed, notice must be made with reasonable diligence.

Section 114 - When notice need not be given to drawer. - Notice of dishonor is not required to be
given to the drawer in either of the following cases:
a.
b.
c.
d.

Where the drawer and drawee are the same person;

When the drawee is fictitious person or a person not having capacity to contract;
When the drawer is the person to whom the instrument is presented for payment;
Where the drawer has no right to expect or require that the drawee or acceptor will honor
the instrument;
e. Where the drawer has countermanded payment.
Notice to drawer is not required when the holder has the option to treat bill as promisory note. It
is where the drawer and drawee is the same person and where the drawee is fictitious person. Therefore
the drawer will be regarded as a maker and a primary party.
It is not required if the drawer is the person to whom the instrument is presented for payment. It is
because the drawer has knowledge of the dishonor since he is the one who dishonored the instrument.
Also where the drawer has no right to expect or require that the drawee or acceptor will honor the
instrument, notice is not required.
Notice to drawer not required where the drawer has countermanded payment or cancelled
payment. It is because the drawer knows that the instrument will be dishonored. When the drawer
countermands payment, he orders the drawee not to pay.

Section 115 - When notice need not be given to indorser. - Notice of dishonor is not required to be
given to an indorser in either of the following cases:

a. When the drawee is a fictitious person or person not having capacity to contract, and the indorser
was aware of that fact at the time he indorsed the instrument;
b. Where the indorser is the person to whom the instrument is presented for payment;
c. Where the instrument was made or accepted for his accommodation.
Notice of dishonor is not required since the indorser warrants under section 65 that the parties to
the instrument are genuine and capacitated to contract. The indorser must be aware of the fact that the
drawee is fictitious or not having capacity to contract or else the notice of dishonor must be given to
such indorser to charge him. Also when the indorser is presented to himself, there is no notice of
dishonor required to be given. In terms of accommodation, the accommodated party has no reason to
expect that the instrument will be paid if presented since he is the principal debtor.

Section 116 - Notice of non-payment where acceptance refused. - Where due notice of
dishonor by non-acceptance has been given, notice of a subsequent dishonor by non-payment is
not necessary unless in the meantime the instrument has been accepted.
When the bill is dishonored for non-acceptance of the instrument or the bill is refused for
payment by the primarily liable, the holder may immediately proceed against the secondarily liable which
are the drawer and the indorsers since non-payment of the instrument is expected by the parties. There is
no need to hold the instrument waiting for the maturity by the holder because the fact that the nonacceptance of the primarily liable means there is no payment to be expected. But in case of the bill is
subsequently accepted, the presentment for payment is required.

Section 117 - Effect of omission to give notice of non-acceptance. - An omission to give notice of
dishonor by non-acceptance does not prejudice the rights of a holder in due course
subsequent to the omission.
Failure to give notice of dishonor by non-acceptance of previously holder subsequent to a holder
in due course cannot prejudice his right of the latter and can still present the instrument to the secondarily
liable. The previous holder cannot discharge the liability of the secondarily liable even though he didnt
give notice of dishonor to them.

Section 118 - When protest need not be made; when must be made. - Where any negotiable
instrument has been dishonored, it may be protested for non-acceptance or non-payment, as the
case may be; but protest is not required except in the case of foreign bills of exchange.
Protest is a formal notarized notice of dishonor. Protest must be made and mandatory in case of
non-acceptance or non-payment of foreign bills of exchange because if it is not protested, the secondarily
liable which are the drawer and indorser are discharged. Protest in case of non-acceptance or nonpayment for inland bills, checks or promissory notes are optional.

CHAPTER VII

NOTICE OF DISHONOR
Submitted by:
Bautista, Francis John
Caballero, Maria Kristelyn
Cadenas, Maila
Cedro, Leah Hope
Masancay, Donna Marie
Rosello, Hazel June
Testa, Alexa

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