GENERAL PRINCIPLES

A. THEORY
01. What are the requisites of a negotiable instruments?
Requisites for an instrument to be negotiable:
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 bearer;
e. Where the instrument is addressed to a drawee, he must be named or
otherwise named therein with reasonable certainty.
02. What constitutes a holder in due course? (
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.

Can a bill of exchange or a promissory note qualify as a negotiable

instrument if a.It is not dated; or
b.The date and the month, but not the year of its maturity is given;
or
c.It is payable to cash; or
d.It names two alternative drawees [1997, Bar Examinations].
04. A promissory note reads as follows: I promise to pay Gabriela
Silangan P1,000.00 three years after the unconditional withdrawal of
the U.S. of its military bases in the Philippines. Discuss the
negotiability or non-negotiability of the note above [1966 Bar
Examinations].

05. Can the payee in a promissory note be a holder in due course

within the meaning of the Negotiable Instruments Law? [2000 Bar
Examinations].
06. How do you treat a negotiable instrument that is so ambiguous
that there is a doubt whether it is a bill or a note? [1999, Bar
Examinations].
07. When a signature is so placed upon a negotiable instrument that
it is not clear in what capacity the person making the same intended
to sign, what is his liability? [1946, Bar Examinations].
08. When a negotiable instrument contains the words I promise to
pay and is signed by two or more persons, what is their liability,
joint or solidary? Explain [1946, Bar Examinations].

B. TESTS OF NEGOTIABILITY
09. MP bought a used cellphone from JR. JR preferred cash but MP is
a friend so JR accepted MPs promissory note for P10,000.00. JR
though of converting the note into cash by indorsing it to his brother
KR. The promissory note is a piece of paper with the following handprinted notation: MP WILL PAY JR P10,000.00 IN PAYMENT FOR HIS
CELLPHONE ONE WEEK FROM TODAY. Below this notation is MPs
signature with 8/1/00 next to it, indicating the date of the
promissory note. When JR presented MPs note to KR, the latter said
it was not a negotiable instrument under the law and so could not be
a valid cash substitute. JR took the opposite view, insisting on the
notes negotiability. You are asked to referee . Which of the opposing
views is correct? Explain [2000 Bar Examinations].
10. Perla bought a motor car payable in installments from Automotic
Company for P250,000.00 with a P50,000.00 downpayment. She
executed a promissory note for the balance which reads:

For value received, I promise to pay Automotive Company or order at

its office in Legaspi City, the sum of P200,000.00 with interest at 12%
per annum, payable in equal installments of P20,000.00 for ten (10)
months starting 21 October 2002.
SGD Perla
Manila, 21 September 2002
Automotive Company subsequently indorsed the note to Reliable
Finance Corporation which financed the purchase. Perla defaulted in
the payment of her installments. Is the above promissory note a
negotiable instrument? Explain [1992 Bar Examinations].
11. Romeo had P100,000.00 in his current account at Matatag
Banking Corporation. Romeo learned that his enemy had hired a
contract killer to liquidate him. Fearful of his life, he mailed to his
fiance, Juliet, a check for his P100,000.00 in the bank. The check
was payable to Juliet or order and was accompanied by a letter
stating that he was giving her his money out of his great love for her
and because something would happen to him anytime now. Juliet
presented the check for payment but the bank refused to honor it.
Does Juliet have any right of action against the bank? Because of the
humiliation she suffered from the bank, Juliet broke off her
engagement with Romeo. Does Romeo have a right of action against
the bank? Explain [1986 Bar Examination].
12. Explain whether or not the following instrument is negotiable.
P1,000.00 Manila, October 5, 1970
I acknowledge to have received from Jose Cruz one thousand pesos
(P1,000.00) which I promise to pay on demand or in five months
from date with one percent interest per month payable within the

first five days of every month. If the interest is not paid when due,
then both principal and interest shall become due at the option of
the holder.
SGD: Pedro Garcia
[1970 Bar Examination].
13. For value received, X executed a promissory note in favor of Y
for P10,000.00 agreeing to pay interest thereon but without
specifying the rate thereof. Can Y collect interest on the note? Why?
Explain [1964 Bar Examination].