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Negotiable Instruments Law Reviewer 1
English Bills of Exchange Act Uniform Negotiable Act of theUS
ACT 2031, Negotiable Instruments Law (Took effect on (6121!11"#$NCTI%N& AN' I)%*TANC+It is a substitute for mone but N%T legal ten-er.
But in case the N/I is accepted, read with Art. 1249 CC
L+/AL T+N'+* 
: Payment that, by aw, cann!t be re"usedin the settement !" a e#itimate debt$ %ne which the debt!r can "!rce the credit!r t! accept as payment.
&+CTI%N 2 of *A 63
. &e#a 'ender P!wer. ( An!tes and c!ins issued by the Ban#)! *entra sha be "uy#uaranteed by the +!ernment !" the -epubic !" thePhiippines and sha be e#a tender in the Phiippines "!ra debts, b!th pubic and priate: Pr!ided, h!weer,'hat, uness !therwise "ied by the !netary B!ard, c!inssha be e#a tender in am!unts n!t eceedin# 0P.3"!r den!minati!ns !"
2 centaos an- aboe
, and inam!unts n!t eceedin# 0P2.3 "!r den!minati!ns !"
10centaos or less
hie N/I is a substitute "!r m!ney,meanin# it "uncti!ns i)e m!ney, it is N%'e#a tender and the debt!r cann!t insistthat the credit!r accept s! as t! dischar#ehim "r!m his debt. B5' i" the credit!r accepts the N/I, the6uesti!n is when d!es the N/I pr!ducee""ect !" payment7 In reati!n t! Art. 1249!" the Cii C!de, it is n!t "r!m the tenderbut:  8'he deiery !" pr!miss!ry n!tes payabet! !rder, !r bis !" echan#e !r !thermercantie d!cuments sha pr!duce thee""ect !" payment !ny when they haebeen cashed, !r when thr!u#h the "aut !" the credit!r they hae been impaired.
 
)A)A 4& A$ 4AL+NCIA AN' C%
It is an undisputed "act that resp!ndents had #ien petiti!ner theam!unts !" 0P,.3 in cash !n 24 ay 19, and0P4,.3 in chec) !n 1 ;une 19, in payment !" thepurchase price !" the sub<ect !t. A"ter m!re than ten 013 years"r!m the payment in part by cash and in part by chec), thepresumpti!n is that the chec) had been encashed. As areadystated, he een waied the presentati!n !" !ra eidence.+rantin# that petiti!ner had neer encashed the chec), his "aiuret! d! s! "!r m!re than ten 013 years und!ubtedy resuted in theimpairment !" the chec) thr!u#h his unreas!nabe andunepained deay.hie it is true that the deiery !" a chec) pr!duces the e""ect !" payment !ny when it is cashed, pursuant t! Art. 1249 !" the CiiC!de, the rue is !therwise i" the debt!r is pre<udiced by thecredit!r=s unreas!nabe deay in presentment. 'he acceptance !" achec) impies an underta)in# !" due dii#ence in presentin# it "!rpayment, and i" he "r!m wh!m it is receied sustains !ss by want!" such dii#ence, it wi be hed t! !perate as actua payment !" the debt !r !bi#ati!n "!r which it was #ien. It has, i)ewise, beenhed that i" n! presentment is made at a, the drawer cann!t behed iabe irrespectie !" !ss !r in<ury uness presentment is!therwise ecused. 'his is in harm!ny with Artice 1249 !" theCii C!de under which payment by way !" chec) !r !therne#!tiabe instrument is c!nditi!ned !n its bein# cashed, eceptwhen thr!u#h the "aut !" the credit!r, the instrument is impaired.'he payee !" a chec) w!ud be a credit!r under this pr!isi!n andi" its n!n>payment is caused by his ne#i#ence, payment wi bedeemed e""ected and the !bi#ati!n "!r which the chec) was #ienas c!nditi!na payment wi be dischar#ed.
It is a me-ium of e5cange for most commercialtransactions
 ? y!u can use chec)s t! pay y!ur #r!cery, !rsaaries "!r y!u emp!yees.
It is a me-ium of cre-it transactions
7
meanin# theinstrument itse" can be pr!!" !" indebtedness.
It is a recei8t or 8roof of 8ament. %r it is a recei8t orei-ence from te -rawee of te cancellation of tececk -ue to 8ament
 –
 pr!!" !" the debt!r that hehas paid, eampe, the chec) is #ien bac) t! thedrawer "!r rec!rdin# because it is aready encashed.@ebt!r can use is i" credit!r sues him "!r n!npayment.
It enances securit 7
I" y!u !se y!ur chec), y!ucan ca the drawer ban) and it wi n! !n#er beencashed.
Patterned "r!m Patterned "r!m
It is a s8ecie of 8ersonal 8ro8ert7
'here"!re it canbe !wned, transacted with by itse" i)e any !therpr!perty.
 
)8l s Tongko (1!!9" 7
A was c!nicted "!r esta"a under Art. 10d3. e c!ntends that the penaty !" 2years is a i!ati!n !" *ec 19013 Art III !" the C!nsti. 'he e#isature was n!t th!u#htess in imp!sin# seere penaties "!r i!ati!n !" par. 20d3 !" Artice 1 !" the -eised Pena C!de. 'he hist!ry !" the aw wi sh!w that the seere penaties were intended t! st!p theupsur#e !" swindin# by issuance !" b!uncin# chec)s. It was "et that uness ab!rted, this )ind !" esta"a . . .w!ud er!de the pe!pe=s c!n"idence in the use !" ne#!tiabe instruments as a medium !" c!mmerciatransacti!n and c!nse6uenty resut in the retardati!n !" trade and c!mmerce and the underminin# !" theban)in# system !" the c!untry.
)aceco s CA (1!!!" (As to first issue onl. see 8age :"
*ps.  !btained a !an "r!m *ps D. *ps D as)ed *ps  t! issue an undated chec) with the a#reement that the same wi n!t be encashed but w!ud !ny c!nstitute as eidence !" indebtedness. !weer, due t! n!npayment !" the debt, *ps. D encashed the chec) and sued *ps.  "!r esta"aed: A chec) has the character !" ne#!tiabiity and at the same time it c!nstitutes an eidence !" indebtedness. By mutua a#reement !" the parties, the ne#!tiabe character !" a chec)may be waied and the instrument may be treated simpy as pr!!" !" an !bi#ati!n. 'here cann!t be deceit !n the part !" the !bi#!r because they a#reed with the !bi#ee at the time !" the issuance and p!stdatin# !" the chec)s that the same sha n!t be encashed !r presented t! the ban)s. As per assurance !" the ender, the chec)s are n!thin# but eidence !" the !an!r security there!" in ieu !" and "!r the same purp!se as a pr!miss!ry n!te. By their !wn c!enant, there"!re, the chec)s became mere eidence !" indebtedness. It has been rued thata drawer wh! issues a chec) as security !r eidence !" inestment is n!t iabe "!r esta"a.
Citibank s &abeniano (200"
A has seera acc!unts with di""erent branches !" CitiBan). *he as! has a !an with Citiban) a. hen A was unabe t! pay her !an with Citiban) a, the atter !"">setted her debt withher acc!unts with Citiban) a as we as her d!ar acc!unt with CitiBan)>+enea. Citiban) a c!ntends that AEs decarati!n !" ped#e in her pr!miss!ry n!tes auth!riFed the !""settin#and that CitiBan) a and CitiBan) +enea must be ta)en as !ne unit since b!th be!n#ed t! 8CitiBan)G.
;<
hie A the Phiippine branches !" petiti!ner Citiban) sh!ud be treated as !ne unit with its head !""ice, the c!urt be persuaded t! decare that these Phiippine branches are i)ewise asin#e unit with the +enea branch. 'here"!re, the !"">settin# !r c!mpensati!n !" resp!ndent=s !ans with Citiban)>ania usin# her d!ar acc!unts with Citiban)>+enea cann!t bee""ected. 'he parties cann!t be c!nsidered principa credit!r !" the !ther. As "!r the d!ar acc!unts, resp!ndent was the credit!r and Citiban)>+enea was the debt!r$ and as "!r the!utstandin# !ans, petiti!ner Citiban), particuary Citiban)>ania, was the credit!r and resp!ndent was the debt!r. *ince e#a c!mpensati!n was n!t p!ssibe, petiti!ner Citiban) c!ud!ny use resp!ndent=s d!ar acc!unts with Citiban)>+enea t! i6uidate her !ans i" she had epressy auth!riFed it t! d! s! by c!ntract. -esp!ndent cann!t be deemed t! haeauth!riFed the use !" her d!ar dep!sits with Citiban)>+enea t! i6uidate her !ans with petiti!ner Citiban) when she si#ned the PNs. As has been estabished in the precedin#discussi!n, Citiban), N.A. can !ny re"er t! the !ca branches !" petiti!ner Citiban) t!#ether with its head !""ice. 5ness there is any sh!win# that resp!ndent underst!!d and epressya#reed t! a m!re "ar>reachin# interpretati!n, the re"erence t! Citiban), N.A. cann!t be etended t! a !ther branches !" petiti!ner Citiban) a !er the w!rd. !re!er, the PNs can bec!nsidered a c!ntract !" adhesi!n. 'his bein# the case, the terms !" such c!ntract are t! be c!nstrued stricty a#ainst the party which prepared it.
 
'eelo8ment =ank of *i>al s &ima ?ei (1!!3"
 A ne#!tiabe instrument, !" which a chec) is, is n!t!ny a written eidence !" a c!ntract ri#ht but is as! aspecies !" pr!perty. ;ust as a deed t! a piece !" andmust be deiered in !rder t! c!ney tite t! the#rantee, s! must a ne#!tiabe instrument be deieredt! the payee in !rder t! eidence its eistence as abindin# c!ntract.
 
Negotiable Instruments Law Reviewer
#+AT$*+& %# A N+/%TIA=L+ IN&T*$+NT
2
&ummar< %f wat areNegotiable Instruments accor-ing to @uris8ru-ence<
@ra"t drawn "r!m a etter !" credit
 0'rans"ied s. &uF!n ydr!, 11/22/43
Ne#!tiabe !rder !" withdrawa
 0Pp s. -eyes 11/1/3
'ee#raphic trans"ers
(BPI vs. CIR 0!"!0#$ Altho%gh there is a &or' of ca%tion here beca%se this is'isc%sse' in the context of Sec. "# as &ell as the NIRC (beca%se the iss%e is aretelegra)hic transfers s%b*ect to 'oc%mentar+ stam) tax,-
Hied sain#s dep!sit
ay !r may n!t be ne#!tiabe, dependin# !n w/n it meets *ec. 1. 0IntE chan#eBan) s. CI- 4/4/3
N%T Negotiable Instruments
Bis !" adin#etter !" credits @!c) arrantsareh!use -eceiptsJuedanspawn tic)etsp!stam!ney !rdertreasury warrantsCentra Ban) certi"icate !" indebtedness 0'raders s. CA //93*pecia withdrawa sips 0Hirest!ne s. CA //13Chec) drawn a#ainst a drawn acc!unt 0an! s. spany! 12/1K/3@isbursement !uchers and cash !uchers 0Andaya . PP K/2/K$ Batuan!n  PP& 9/1/K3Hied *ain#s @ep!sit
N+/%TIA=ILIT
?
Cf Sec. /0
'his means that the NI is capabe !" bein# trans"erred "r!m !nepers!n t! an!ther as t! c!nstitute the trans"eree the h!derthere!". *ince it is a substitute "!r m!ney, it must "uncti!n as!i)e m!ney capabe !" trans"er ad in"initum.
ACC$$LATI%N %# &+C%N'A*C%NT*ACT&
 Petiti!ner i)ewise c!ntends that ban)in# ruespr!hibit the drawee ban) "r!m hain# chec)s withm!re than !ne ind!rsement. 'he ban)in# ruebannin# acceptance !" chec)s "!r dep!sit !r cashpayment with m!re than !ne ind!rsement unessceared by s!me ban) !""icias d!es n!t inaidate theinstrument$ neither d!es it inaidate the ne#!tiati!n!r trans"er !" the said chec). In e""ect, this ruedestr!ys the ne#!tiabiity !" bis/chec)s by imitin#their ne#!tiati!n by ind!rsement !" !ny the payee.5nder the NI&, the !ny )ind !" ind!rsement whichst!ps the "urther ne#!tiati!n !" an instrument is arestrictie ind!rsement which pr!hibits the "urtherne#!tiati!n there!".
(Natividad Gempesaw vs. CA)
 
T)+& of N+/%TIA=L+ IN&T*$+NT&
P-%I**%-D N%'* 0c": *ec. 1L43BI&&* %H CAN+ 0c": 12K3CCM* 0specia )ind !" B/$ c": *ec. 1L
N1E SEC  is a favorite BAR 2%estion. 1his is the cr%x in ans&ering Commercial 3a& Exam. If confronte' &ith a )roblem concerning commercial 'oc%ments4 first r%n thro%gh Sec. . If all elements are )resent4 forget other la&s an' a))l+ all )rovisions of NI3.
'he m!ment y!u answer 6uesti!ns in C!mmercia &aw, the cr!ss r!ad is NI&., why7 Because i" the instrumentis a ne#!tiabe instrument, then "!r#et !ther aws. *ince 19L4 unti 2L, there is n! peri!d in time whenthere is n! 6uesti!n as)ed ab!ut NI&. 'his is !ny 2nd t! C!rp! with as t! bar 6uesti!ns. !re !r ess K !" the Bar 6uesti!ns c!me "r!m C!rp!rati!n C!de$ 14 c!mes "r!m NI&. 1 transp!, 12 Insurance$ and therest specia aws. %" the 14, "r!m *ec. 1>2 c!mprise  !" what is bein# as)ed, then *ec. 29, thenh!ders and ri#hts and iabiities !" parties. *!me !" the secti!ns are n!t that "re6uenty as)ed in the Bar. *!the "irst "ew secti!ns is reay that imp!rtant because it c!nstitutes .
 )romissor Note s =ills of +5cange
Person who 1
 st 
 issued 
AM- %-@-
Original  parties/structure
a)er >>>>> Payee 0
P3@rawer, @rawee, Payee@r >>>>>P@r
 Applicailit! 
*ec 1 0a>d3*ec. 1 0a>e3
Sec. 56.
Chec"#de$ined.
 $ A chec7 is abill of exchange 'ra&non a ban7 )a+able on'eman'. Exce)t asherein other&ise )rovi'e'4 the )rovisionsof this Act a))licable toa bill of exchange )a+able on 'eman' a))l+ to a chec7.
%ec. 1&'. Promissor! note# de$ined.
 $ A negotiable )romissor+ note &ithin the meaning of this Act is an %ncon'itional  )romise in &riting ma'e b+ one )erson to another4 signe' b+ the ma7er4 engaging to  )a+ on 'eman'4 or at a fixe' or 'eterminable f%t%re time4 a s%m certain in mone+ to or'er or to bearer. 8here a note is 'ra&n to the ma7er9s o&n or'er4 it is not com)lete %ntil in'orse' b+ him.
%ec. 1. *ill o$ e+change#de$ined.
 $ A bill of exchange is an%ncon'itional or'er in &ritinga''resse' b+ one )erson toanother4 signe' b+ the )ersongiving it4 re:%iring the )erson to&hom it is a''resse' to )a+ on'eman' or at a fixe' o'eterminable f%t%re time a s%mcertain in mone+ to or'er or tobearer.
 
Negotiable Instruments Law Reviewer 3
&ection 1
.
#orm of negotiable instruments
 > Aninstrument t! be ne#!tiabe must c!n"!rm t! the "!!win#re6uirements:
(a" It must be in writing an- signe- b te maker or-rawe
r$ 0b3
ust contain an uncon-itional 8romise or or-er to8a a sum certain in mone
$ 0c3
ust be 8aable on -eman-
,!r at a
fi5e- or -eterminable future time.
0d3
ust be 8aable to or-er or to bearer. an-
0when payabe t! bearer see *ec. 93
0e3 here the instrument is addressed t! a drawee,
e(meaning -rawee"
 must be named !r !therwise indicatedtherein with reas!nabe certainty.
&ec 3
.
?en 8romise (or or-er" is uncon-itional
. > An un6uai"ied !rder!r pr!mise t! pay is unc!nditi!na within the meanin# !" this Act th!u#hc!uped with: 0A3 An indicati!n !" a particuar "und !ut !" which reimbursement is t! bemade !r a particuar acc!unt t! be debited with the am!unt$ !r0b3 A statement !" the transacti!n which #ies rise t! the instrument. 0CH*ec. 24, presumpti!n !" c!nsiderati!n3But an !rder !r pr!mise t! pay !ut !" a particuar "und is n!t unc!nditi!na.
 
*ec. 0A3&ast para#raphIndicati!n !" a particuar "und !ut !" which reimbursement is t! be made.05NC%N@I'I%NA&3Payment !ut !" a particuar "und0C%N@I'I%NA&3Payment is n!t sub<ect t! eistence !" "und'here is uncertainty w/n !ne wi be paid.C!nditi!n is the eistence !" a "und.
&ec  ?en 8aable on -eman-
 > An instrument is payabe !ndemand:
(a"
 hen it is s! epressed t! be payabe !n demand, !r at si#ht, !r !n presentati!n$ !r
(b"
 In which n! time "!r payment is epressed. here an instrument is issued, accepted, !r ind!rsed when !erdue,it is, as re#ards the pers!n s! issuin#, acceptin#, !r ind!rsin# it,payabe !n demand.
(New =ill 'octrine"
 
N!te: en *ec. 0a3 and 0b3 must bepresented within reas!nabe time !therwisethe h!der wi n!t be c!nsidered as a h!derin due c!urse. CH: *ec 19, *ec. 20B3 and *ec. $ As t!what c!nstitutes a reas!nabe en#th !" time,there is n! "ied !r de"inite rue. 'he #uide is <urisprudence 0IntE C!rp!rate Ban) s.+uec!3New Bi@!ctrine presupp!ses that theinstrument was !ri#inay payabe !n a "ied!r determinabe "uture time. *uch time haspassed and yet, despite its bein# !erdue, itwas ind!rsed, accepted !r ne#!tiated. Asre#ards the pers!n s! d!in#, it is c!nsideredas payabe !n demand. But a#ain, !!) atreas!nabe en#th !" time.
&ec : 'eterminable future time. wat constitutes
 > An instrument ispayabe at a determinabe "uture time, within the meanin# !" this Act, which isepressed t! be payabe: 0a3 At a "ied peri!d a"ter date !r si#ht$ !r 0b3 %n !r be"!re a "ied !r determinabe "uture time speci"ied therein$ !r 0c3 %n !r at a "ied peri!d a"ter the !ccurrence !" a speci"ied eent which is certain t! happen, th!u#h the time !" happenin# be uncertain. An instrument payabe up!n a c!ntin#ency is n!t ne#!tiabe, and the happenin# !" the eent d!es n!t cure the de"ect.In *ec1O 2
nd
 sentence. we are ta)in# ab!utPeri!d. A "uture but C-'AIN eent., ath!u#hit may n!t be )n!wn when. &ast par: It is essentia that a ne#!tiabeinstrument be payabe at A&& eents. I" payment is made t! depend !n a c!ntin#ency0simiar t! c!nditi!n3, it is n!n ne#!tiabe. NB: It is necessary that the year !" maturitybe stated, !therwise, the time !" payment !" the instrument, ath!u#h payabe at a certaintime, is N%' determinabe. Case: Pu#et *!und*tate Ban) s. ashin#t!n *tate Pain# C!:-ead why the statement 8 %n demand !r atthe end !" the year, I pr!mise t! pay P !r!rder P1,G is sub<ect t! a c!ntin#ency.
 
&ec 9
.
?en 8aable to or-er
 > 'he instrument is payabe t!!rder where it is drawn payabe t! the !rder !" a speci"iedpers!n !r t! him !r his !rder. It may be drawn payabe t! the!rder !": 0a3 A payee wh! is n!t ma)er, drawer, !r drawee$ !r 0b3 'he drawer !r ma)er$ !r 0c3 'he drawee$ !r 0d3 'w! !r m!re payees <!inty$ !r 0e3 %ne !r s!me !" seera payees$ !r 0"3 'he h!der !" an !""ice "!r the time bein#.here the instrument is payabe t! !rder, the payee must benamed !r !therwise indicated therein with reas!nabe certainty.
!rd 8!rderG is !ne !" the tw! w!rds !" ne#!tiabiity. 'he !ther w!rd is 8bearerG in *ec. 9.
Bor-er&+C 1(="Bor-er&+C 1('"
h! #ies the !rder+ien by the @- "!r the @t! pay P%rder !" the P !r h!der that s!meb!dy ese wi be paidinstead !" himh! receies the!rder/!r wh! isepected t! c!mpy@Pers!n primariy iabe !n the instrument: P/N: a)er B/: Accept!r 0@ when he accepts is caed accept!r3Appicati!nB/!ny B/and P/N
NB: !w ne#!tiated: I" the instrument is payabe t! !rder, it is ne#!tiated by the ind!rsement !" the h!der c!mpeted by deiery. 0CH *ec.3CH *ec. 1: 'he ind!rsement must be written !n the instrument itse" !r up!n a paper attached theret!. In an !rder instrument, a speci"iedpers!n must aways be named therein either be"!re !r a"ter the w!rd 8!rderG. I" there is n! payee, there is n!b!dy wh! c!ud #ie the !rder !rauth!rity t! c!ect, and there w!ud be n!b!dy wh! c!ud ind!rse the instrument.. 'hus an instrument payabe t! 8!rderG where there is n!ban) space "!r the name !" the P is n!t ne#!tiabe. But it is su""icient that P is described with reas!nabe certainty, th!u#h n!t named.
A sum certain in mone is a fi5e- amount of mone tat islegal ten-er
 'he sum payabe t! be certain must de"inite andcertain. 'he am!unt !" m!ney t! be paid must be determinabeby inspecti!n and must be stated painy !n the "ace !" theinstrument. And i)e the den!minati!n in m!ney, must be statedin the b!dy !" the instrument. 'he sum payabe must be inm!ney !ny. A bi !r a n!te i" it is t! be ne#!tiabe cann!t bemade payabe in #!!ds !r serices. *! as! is an instrument n!tne#!tiabe i" it is made payabe in b!nds, c!rp!rate st!c)s, statepaper, script, chec)s and "!rei#n bis.
 
&ection 2
 
?at constitutes certaint as to sum
. > 'he sum payabe is a sum certain within the meanin# !" this Act, ath!u#h it is t! be paid: 0a3 with interest$ !r 0b3 by stated instaments$ !r 0c3 by stated instaments, with a pr!isi!n that, up!n de"aut in payment !" any instament !r !" interest, the wh!e sha bec!me due$ 0acceerati!n cause3 !r 0d3 with echan#e, whether at a "ied rate !r at the current rate$ !r 0e3 with c!sts !" c!ecti!n !r an att!rney=s "ee, in case payment sha n!t be madeat maturity.

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