Negotiable Instruments Law Reviewer 1
English Bills of Exchange Act Uniform Negotiable Act of theUS
ACT 2031, Negotiable Instruments Law (Took effect on (6121!11"#$NCTI%N& AN' I)%*TANC+It is a substitute for mone but N%T legal ten-er.
But in case the N/I is accepted, read with Art. 1249 CC
L+/AL T+N'+*
: Payment that, by aw, cann!t be re"usedin the settement !" a e#itimate debt$ %ne which the debt!r can "!rce the credit!r t! accept as payment.
&+CTI%N 2 of *A 63
. &e#a 'ender P!wer. ( An!tes and c!ins issued by the Ban#)! *entra sha be "uy#uaranteed by the +!ernment !" the -epubic !" thePhiippines and sha be e#a tender in the Phiippines "!ra debts, b!th pubic and priate: Pr!ided, h!weer,'hat, uness !therwise "ied by the !netary B!ard, c!inssha be e#a tender in am!unts n!t eceedin# 0P.3"!r den!minati!ns !"
2 centaos an- aboe
, and inam!unts n!t eceedin# 0P2.3 "!r den!minati!ns !"
10centaos or less
hie 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 reati!n t! Art. 1249!" the Cii C!de, it is n!t "r!m the tenderbut: 8'he deiery !" pr!miss!ry n!tes payabet! !rder, !r bis !" echan#e !r !thermercantie d!cuments sha pr!duce thee""ect !" payment !ny when they haebeen cashed, !r when thr!u#h the "aut !" the credit!r they hae been impaired.
)A)A 4& A$ 4AL+NCIA AN' C%
It is an undisputed "act that resp!ndents had #ien 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 013 years"r!m the payment in part by cash and in part by chec), thepresumpti!n is that the chec) had been encashed. As areadystated, he een waied the presentati!n !" !ra eidence.+rantin# that petiti!ner had neer encashed the chec), his "aiuret! d! s! "!r m!re than ten 013 years und!ubtedy resuted in theimpairment !" the chec) thr!u#h his unreas!nabe andunepained deay.hie it is true that the deiery !" a chec) pr!duces the e""ect !" payment !ny when it is cashed, pursuant t! Art. 1249 !" the CiiC!de, the rue is !therwise i" the debt!r is pre<udiced by thecredit!r=s unreas!nabe deay in presentment. 'he acceptance !" achec) impies an underta)in# !" due dii#ence in presentin# it "!rpayment, and i" he "r!m wh!m it is receied sustains !ss by want!" such dii#ence, it wi be hed t! !perate as actua payment !" the debt !r !bi#ati!n "!r which it was #ien. It has, i)ewise, beenhed that i" n! presentment is made at a, the drawer cann!t behed iabe irrespectie !" !ss !r in<ury uness presentment is!therwise ecused. 'his is in harm!ny with Artice 1249 !" theCii C!de under which payment by way !" chec) !r !therne#!tiabe instrument is c!nditi!ned !n its bein# cashed, eceptwhen thr!u#h the "aut !" the credit!r, the instrument is impaired.'he payee !" a chec) w!ud 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 !bi#ati!n "!r which the chec) was #ienas c!nditi!na payment wi be dischar#ed.
It is a me-ium of e5cange for most commercialtransactions
? y!u can use chec)s t! pay y!ur #r!cery, !rsaaries "!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 8ament. %r it is a recei8t orei-ence from te -rawee of te cancellation of tececk -ue to 8ament
–
pr!!" !" the debt!r that hehas paid, eampe, the chec) is #ien bac) t! thedrawer "!r rec!rdin# because it is aready encashed.@ebt!r can use is i" credit!r sues him "!r n!npayment.
It enances 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 8ro8ert7
'here"!re it canbe !wned, transacted with by itse" i)e any !therpr!perty.
)8l s Tongko (1!!9" 7
A was c!nicted "!r esta"a under Art. 10d3. e c!ntends that the penaty !" 2years is a i!ati!n !" *ec 19013 Art III !" the C!nsti. 'he e#isature was n!t th!u#htess in imp!sin# seere penaties "!r i!ati!n !" par. 20d3 !" Artice 1 !" the -eised Pena C!de. 'he hist!ry !" the aw wi sh!w that the seere penaties were intended t! st!p theupsur#e !" swindin# by issuance !" b!uncin# chec)s. It was "et that uness ab!rted, this )ind !" esta"a . . .w!ud er!de the pe!pe=s c!n"idence in the use !" ne#!tiabe instruments as a medium !" c!mmerciatransacti!n and c!nse6uenty resut in the retardati!n !" trade and c!mmerce and the underminin# !" theban)in# system !" the c!untry.
)aceco 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!ud !ny c!nstitute as eidence !" indebtedness. !weer, due t! n!npayment !" the debt, *ps. D encashed the chec) and sued *ps. "!r esta"aed: A chec) has the character !" ne#!tiabiity and at the same time it c!nstitutes an eidence !" indebtedness. By mutua a#reement !" the parties, the ne#!tiabe character !" a chec)may be waied and the instrument may be treated simpy as pr!!" !" an !bi#ati!n. 'here cann!t be deceit !n the part !" the !bi#!r because they a#reed with the !bi#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 eidence !" 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 eidence !" indebtedness. It has been rued thata drawer wh! issues a chec) as security !r eidence !" inestment is n!t iabe "!r esta"a.
Citibank s &abeniano (200"
A has seera acc!unts with di""erent branches !" CitiBan). *he as! has a !an with Citiban) a. hen A was unabe 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)>+enea. Citiban) a c!ntends that AEs decarati!n !" ped#e in her pr!miss!ry n!tes auth!riFed the !""settin#and that CitiBan) a and CitiBan) +enea must be ta)en as !ne unit since b!th be!n#ed t! 8CitiBan)G.
;<
hie A the Phiippine branches !" petiti!ner Citiban) sh!ud be treated as !ne unit with its head !""ice, the c!urt be persuaded t! decare that these Phiippine branches are i)ewise asin#e unit with the +enea branch. 'here"!re, the !"">settin# !r c!mpensati!n !" resp!ndent=s !ans with Citiban)>ania usin# her d!ar acc!unts with Citiban)>+enea 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)>+enea was the debt!r$ and as "!r the!utstandin# !ans, petiti!ner Citiban), particuary Citiban)>ania, was the credit!r and resp!ndent was the debt!r. *ince e#a c!mpensati!n was n!t p!ssibe, petiti!ner Citiban) c!ud!ny use resp!ndent=s d!ar acc!unts with Citiban)>+enea t! i6uidate her !ans i" she had epressy auth!riFed it t! d! s! by c!ntract. -esp!ndent cann!t be deemed t! haeauth!riFed the use !" her d!ar dep!sits with Citiban)>+enea t! i6uidate her !ans with petiti!ner Citiban) when she si#ned the PNs. As has been estabished in the precedin#discussi!n, Citiban), N.A. can !ny re"er t! the !ca branches !" petiti!ner Citiban) t!#ether with its head !""ice. 5ness there is any sh!win# that resp!ndent underst!!d and epressya#reed t! a m!re "ar>reachin# interpretati!n, the re"erence t! Citiban), N.A. cann!t be etended t! a !ther branches !" petiti!ner Citiban) a !er the w!rd. !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 stricty a#ainst the party which prepared it.
'eelo8ment =ank of *i>al s &ima ?ei (1!!3"
A ne#!tiabe instrument, !" which a chec) is, is n!t!ny a written eidence !" a c!ntract ri#ht but is as! aspecies !" pr!perty. ;ust as a deed t! a piece !" andmust be deiered in !rder t! c!ney tite t! the#rantee, s! must a ne#!tiabe instrument be deieredt! the payee in !rder t! eidence its eistence as abindin# c!ntract.
Negotiable Instruments Law Reviewer
#+AT$*+& %# A N+/%TIA=L+ IN&T*$+NT
2
&ummar< %f wat areNegotiable Instruments accor-ing to @uris8ru-ence<
@ra"t drawn "r!m a etter !" credit
0'rans"ied s. &uF!n ydr!, 11/22/43
Ne#!tiabe !rder !" withdrawa
0Pp s. -eyes 11/1/3
'ee#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,-
Hied sain#s dep!sit
ay !r may n!t be ne#!tiabe, 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!sta m!ney !rdertreasury warrantsCentra Ban) certi"icate !" indebtedness 0'raders s. CA //93*pecia withdrawa sips 0Hirest!ne s. CA //13Chec) drawn a#ainst a drawn acc!unt 0an! s. spany! 12/1K/3@isbursement !uchers and cash !uchers 0Andaya . PP K/2/K$ Batuan!n PP& 9/1/K3Hied *ain#s @ep!sit
N+/%TIA=ILIT
?
Cf Sec. /0
'his means that the NI is capabe !" 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 as!i)e m!ney capabe !" trans"er ad in"initum.
ACC$$LATI%N %# &+C%N'A*C%NT*ACT&
Petiti!ner i)ewise c!ntends that ban)in# ruespr!hibit the drawee ban) "r!m hain# chec)s withm!re than !ne ind!rsement. 'he ban)in# ruebannin# acceptance !" chec)s "!r dep!sit !r cashpayment with m!re than !ne ind!rsement unessceared by s!me ban) !""icias d!es n!t inaidate theinstrument$ neither d!es it inaidate the ne#!tiati!n!r trans"er !" the said chec). In e""ect, this ruedestr!ys the ne#!tiabiity !" bis/chec)s by imitin#their ne#!tiati!n by ind!rsement !" !ny the payee.5nder the NI&, the !ny )ind !" ind!rsement whichst!ps the "urther ne#!tiati!n !" an instrument is arestrictie ind!rsement which pr!hibits the "urtherne#!tiati!n there!".
(Natividad Gempesaw vs. CA)
T)+& of N+/%TIA=L+ IN&T*$+NT&
P-%I**%-D N%'* 0c": *ec. 1L43BI&&* %H CAN+ 0c": 12K3CCM* 0specia )ind !" B/$ c": *ec. 1L
N1E 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#!tiabe instrument, then "!r#et !ther aws. *ince 19L4 unti 2L, there is n! peri!d in time whenthere is n! 6uesti!n as)ed ab!ut NI&. 'his is !ny 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 iabiities !" parties. *!me !" the secti!ns are n!t that "re6uenty as)ed in the Bar. *!the "irst "ew secti!ns is reay that imp!rtant because it c!nstitutes .
)romissor Note s =ills of +5cange
Person who 1
st
issued
AM- %-@-
Original parties/structure
a)er >>>>> Payee 0
P3@rawer, @rawee, Payee@r >>>>>P@r
Applicailit!
*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' or '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#!tiabe must c!n"!rm t! the "!!win#re6uirements:
(a" It must be in writing an- signe- b te maker or-rawe
r$ 0b3
ust contain an uncon-itional 8romise or or-er to8a a sum certain in mone
$ 0c3
ust be 8aable on -eman-
,!r at a
fi5e- or -eterminable future time.
0d3
ust be 8aable to or-er or to bearer. an-
0when payabe 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!nabe certainty.
&ec 3
.
?en 8romise (or or-er" is uncon-itional
. > An un6uai"ied !rder!r pr!mise t! pay is unc!nditi!na within the meanin# !" this Act th!u#hc!uped with: 0A3 An indicati!n !" a particuar "und !ut !" which reimbursement is t! bemade !r a particuar acc!unt t! be debited with the am!unt$ !r0b3 A statement !" the transacti!n which #ies rise t! the instrument. 0CH*ec. 24, presumpti!n !" c!nsiderati!n3But an !rder !r pr!mise t! pay !ut !" a particuar "und is n!t unc!nditi!na.
*ec. 0A3&ast para#raphIndicati!n !" a particuar "und !ut !" which reimbursement is t! be made.05NC%N@I'I%NA&3Payment !ut !" a particuar "und0C%N@I'I%NA&3Payment is n!t sub<ect t! eistence !" "und'here is uncertainty w/n !ne wi be paid.C!nditi!n is the eistence !" a "und.
&ec ?en 8aable on -eman-
> An instrument is payabe !ndemand:
(a"
hen it is s! epressed t! be payabe !n demand, !r at si#ht, !r !n presentati!n$ !r
(b"
In which n! time "!r payment is epressed. 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,payabe !n demand.
(New =ill 'octrine"
N!te: en *ec. 0a3 and 0b3 must bepresented within reas!nabe 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!nabe en#th !" time,there is n! "ied !r de"inite rue. 'he #uide is <urisprudence 0IntE C!rp!rate Ban) s.+uec!3New Bi @!ctrine presupp!ses that theinstrument was !ri#inay payabe !n a "ied!r determinabe "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 payabe !n demand. But a#ain, !!) atreas!nabe en#th !" time.
&ec : 'eterminable future time. wat constitutes
> An instrument ispayabe at a determinabe "uture time, within the meanin# !" this Act, which isepressed t! be payabe: 0a3 At a "ied peri!d a"ter date !r si#ht$ !r 0b3 %n !r be"!re a "ied !r determinabe "uture time speci"ied therein$ !r 0c3 %n !r at a "ied peri!d a"ter the !ccurrence !" a speci"ied eent which is certain t! happen, th!u#h the time !" happenin# be uncertain. An instrument payabe up!n a c!ntin#ency is n!t ne#!tiabe, and the happenin# !" the eent 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 eent., ath!u#hit may n!t be )n!wn when. &ast par: It is essentia that a ne#!tiabeinstrument be payabe at A&& eents. I" payment is made t! depend !n a c!ntin#ency0simiar t! c!nditi!n3, it is n!n ne#!tiabe. NB: It is necessary that the year !" maturitybe stated, !therwise, the time !" payment !" the instrument, ath!u#h payabe at a certaintime, is N%' determinabe. Case: Pu#et *!und*tate Ban) s. ashin#t!n *tate Pain# 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 8aable to or-er
> 'he instrument is payabe t!!rder where it is drawn payabe t! the !rder !" a speci"iedpers!n !r t! him !r his !rder. It may be drawn payabe 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 <!inty$ !r 0e3 %ne !r s!me !" seera payees$ !r 0"3 'he h!der !" an !""ice "!r the time bein#.here the instrument is payabe t! !rder, the payee must benamed !r !therwise indicated therein with reas!nabe certainty.
!rd 8!rderG is !ne !" the tw! w!rds !" ne#!tiabiity. 'he !ther w!rd is 8bearerG in *ec. 9.
Bor-er &+C 1(="Bor-er &+C 1('"
h! #ies the !rder+ien by the @- "!r the @t! pay P%rder !" the P !r h!der that s!meb!dy ese wi be paidinstead !" himh! receies the!rder/!r wh! isepected t! c!mpy@Pers!n primariy iabe !n the instrument: P/N: a)er B/: Accept!r 0@ when he accepts is caed accept!r3Appicati!nB/ !ny B/ and P/N
NB: !w ne#!tiated: I" the instrument is payabe t! !rder, it is ne#!tiated by the ind!rsement !" the h!der c!mpeted by deiery. 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 aways 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!ud #ie the !rder !rauth!rity t! c!ect, and there w!ud be n!b!dy wh! c!ud ind!rse the instrument.. 'hus an instrument payabe t! 8!rderG where there is n!ban) space "!r the name !" the P is n!t ne#!tiabe. But it is su""icient that P is described with reas!nabe certainty, th!u#h n!t named.
A sum certain in mone is a fi5e- amount of mone tat islegal ten-er
'he sum payabe t! be certain must de"inite andcertain. 'he am!unt !" m!ney t! be paid must be determinabeby inspecti!n and must be stated painy !n the "ace !" theinstrument. And i)e the den!minati!n in m!ney, must be statedin the b!dy !" the instrument. 'he sum payabe must be inm!ney !ny. A bi !r a n!te i" it is t! be ne#!tiabe cann!t bemade payabe in #!!ds !r serices. *! as! is an instrument n!tne#!tiabe i" it is made payabe in b!nds, c!rp!rate st!c)s, statepaper, script, chec)s and "!rei#n bis.
&ection 2
?at constitutes certaint as to sum
. > 'he sum payabe is a sum certain within the meanin# !" this Act, ath!u#h it is t! be paid: 0a3 with interest$ !r 0b3 by stated instaments$ !r 0c3 by stated instaments, with a pr!isi!n that, up!n de"aut in payment !" any instament !r !" interest, the wh!e sha bec!me due$ 0acceerati!n cause3 !r 0d3 with echan#e, whether at a "ied 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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