* Accommodation party – one who has signed the
expressly stipulated
instrument as maker, drawer, acceptor, or indorser
without receiving value therefor and for the
purpose of lending his name to some other person.
- liable to holder for value, notwithstanding the fact
that he knew he was an accommodation party.
- A corporation cannot act as an accommodation
party otherwise, act is ultra vires.
HOW TO ENFORCE LIABILITY
Primarily liable
- the maker is liable the moment he makes the
instrument.
- the drawee becomes liable the moment he
accepts the instrument
Secondarily liable
Promissory note
1. Presentment for payment must be made within
the required period to the maker
2. notice of dishonor should be given
Bill of exchange
1. Presentment for acceptance or negotiation
within reasonable time
2. If dishonored, notice of dishonor or if foreign bill,
protest for dishonor by non-acceptance
3. if bill is accepted and dishonored upon
presentment for payment, notice of dishonor
should be given to persons secondarily liable; if
foreign bill, protest of dishonor by non-payment
must be made.
Charge acceptor for honor and referee in case of
need: protest for non-payment by the drawee
* Presentment for payment is necessary to charge
persons secondarily liable except:
1. drawer, where he has no right to expect or
require the drawee or acceptor will pay the
instrument.
2. when dispensed with such as: i. after reasonable
diligence, presentment cannot be made, ii. Drawee
is a fictitious person, iii. Waiver of presentment
3. instrument has been dishonored by non-
acceptance.
Requisites:
1. made by holder or authorized persons
2. made at a reasonable hour on a business da on
the proper date
3. at a proper place
4. to the person primarily liable; or if he is absent or
inaccessible, to any person found at the place
where the presentment is made
5. must be surrendered
*Checks become stale after more than 6 months or
180 days
Presentment for Acceptance
Mandatory if:
1. bill is payable within a fixed period after sight or
if necessary in order to fix the maturity of the
instrument
2.
3. payable elsewhere than at the residence or place
of business of the drawee
* it is not necessary to present a check for
acceptance
Excused/Dispensed with
1. payable elsewhere than the place of business or
residence of drawee, with exercise of reasonable
diligence, failed to present the bill for acceptance.
(delay in presenting in for payment is excused
caused by presentment for acceptance)
2. drawee is dead or absconded or fictitious or no
capacity to contract bill
3. cannot be made with exercise of reasonable
diligence
4. irregular presentment, acceptance has been
refused on some other ground.
Acceptance
Requisites
1. in writing
2. signed by drawee
3. assent to the promise to pay a sum certain in
money and not by any other means
- written acceptance may be in the instrument itself
or in separate instrument
When deemed accepted
1. delivered to the drawee and the latter destroys
the same
2. delivered to the drawee but the drawee refuses
within 24h/such other period as the holder may
allow to return the bill accepted/unaccepted
- unconditional promise in writing to accept a bill
before it is drawn is deemed an actual acceptance
in favor of every person who, upon faith thereof,
receives the bill for value
Kinds
1. Conditional
2. Partial
3. Local
4. Qualified as to time
5. Acceptance of some one or more of the drawees
but not all
- the holder may refuse to take a qualified
acceptance and if he does not obtain an unqualified
acceptance, he may treat the bill as dishonored by
non-acceptance.
-when a qualified acceptance is taken, the drawer
and indorsers are discharged from liability on the
bill unless they have expressly or impliedly
authorized the holder to take the qualified
acceptance or subsequently assent thereto (must,
within reasonable time, express his dissent to the
holder or he will be deemed to have assented
thereto)
-acceptance is presumed to unqualified or absolute
Notice of Dishonor
Who should give:
1. holder 2. Agent or representative 3. Any party
who may be compelled to pay like indorsers 4.
Agent of any party who may be compelled
Effect
- immediate recourse against indorser; holder need
not claim payment from the person primarily liable
Time to give notice
1. Parties reside in same place: before close of
business hours on the day following; before the
usual hours of rest on the day following; deposited
in the post office in time to reach him in usual
course on the day following
2. Parties in different places: deposited in P.O. in
time to go by mail the day following the day of
dishonor. If there be no mail at a convenient hour,
next mail; if not through p.o., 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
When not required, excused or dispensed
1. after exercise of reasonable diligence, it cannot
be given to or does not reach the parties sought to
be charged
drawer: drawer and drawee are the same person,
drawee is a fictitious person or no capacity, drawer
is the person whom the instrument is presented for
payment, drawer has no right to expect or require
that the drawee or acceptor will honor the
instrument, drawer has countermanded the
payment
indorser: drawee is fictitious or no capacity,
indorser is the person to whom the instrument is
presented for payment, mere accommodation
Protest
- a formal declaration, drawn and signed by a
notary, that the foreign bill has been presented for
acceptance or payment, and that the acceptance or
payment is refused
When necessary
1. foreign bill dishonored by non-acceptance
2. f.b. which was not prev presented for acceptance
has been dishonored by non-payment
3. stranger to a bill will accept the instrument for
honor
4. bill will be presented for payment to acceptor for
honor or referee in case of need
5. bill dishonored by the acceptor for honor
* without protest, drawer and indorser are not
liable based on the instrument. May still be liable
based on contract
requisites
1. made by a notary public or any respectable
resident of the place where bill is dishonored
2. made in front of 2 witnesses
3. annexed to the bill or contain a copy thereof
4. under the hand and seal of the notary
5. must specify: time and place of presentment, the
fact that presentment was made and its manner,
cause/reason, demand was made and the answer
given, drawer or acceptor cannot be found
Acceptance for honor
- an undertaking by a stranger to a bill after protest
for the benefit of any party liable or for the honor
of the person whose acct the bill is drawn and
conditioned to pay the bill when it becomes due if
the original drawee does not pay it
requisites
1. bill must be protested for dishonor by non-
acceptance or for better security
2. acceptor for honor must be a stranger
3. bill must not be overdue
4. acceptance for honor must be with the consent
of the holder of the instrument
formal requisites
1. in writing
2. indicate that it is an acceptance for honor
3. signed by acceptor for honor
4. contain promise to pay money
5. accepted bill for honor must be delivered to the
holder
payment for honor
made by a person won a party the bill, after it has
been protested for non-payment.
Requisites
1. dishonored for non-payment
2. protested for non-payment
3. payment supra protest is made by any person,
even by a party thereto
4. attested is attested by a notarial act of honor
which must be appended to the protest or form an
extension of it
5. notarial act must be based on the declaration
made by the payer for honor
*non-compliance with the formalities will result to
voluntary payment and payer will acquire no right
for reimbursement
BILLS IN SET
- composed of several parts, each being numbered
and containing reference to other parts.
- acceptor bound to accept only one part of a bill;
holder whose title first accrues is considered the
true owner
discharge
how? payment in due course by or in behalf of
principal debtor or by the party accommodated, by
intentional cancellation by holder, act that will
discharge a simple contract for payment of money,
principal debtor becomes holder
payment in due course
payment made after maturity in good faith and
without notice that his title is defective
persons secondarily liable may be discharged: act
which discharges instrument, intentional
cancellation by holder, discharge of pbakrior party,
valid tender or payment, release of the principal
debtor, agreement to extend time if payment or
postpone holder’s right
checks
- a bill of exchange drawn on a bank payable on
demand
kinds
1. cashier’s – drawn by a bank upon itself and is
accepted by its issuance
2. certified check: drawn by a depositor upon funds
to his credit in a bank
3. crossed check: must be made by the holder or by
some person authorized to receive payment; check
may not be encashed but only deposited in the
bank; negotiated only once; crossing serves as a
warning to the holder that check was issued for a
definite purpose so that he must inquire if he has
received the check pursuant to that purpose
4. memorandum check: the word memorandum,
memo or mem written across its face, signifying
that maker or drawer engages to pay the bona fide
holder absolutely without any condition concerning
its presentment
5. traveler’s check: instruments purchased from
banks, etc, which can be used as cash upon second
signature by the purchaser
stopping payment
- drawer has the right – issuance of check by itself is
not an assignment of funds by the drawee. If bank
pays after it has been notified to stop payment, it
has paid on its own responsibility and will not
permitted to charge acct
- done If he has valid defense against the holder of
the check