EXPANDED SYLLABUS - NEGO (SILVA)
"Holder" means the payee or indorsee of a bill or note who is
Part 1
Introductory Matters
I. Opening Lecture
A. Development of Negotiable Instruments as
Commercial Papers and as a Payment System
B. Framework for Understanding Negotiable
Instruments
II. General Provisions of Act No. 2031 (1911)
A. Applicable Law
NIL, Section 196. Cases not provided for in Act. - Any case not
provided for in this Act shall be governed by the provisions of
existing legislation or in default thereof, by the rules of the
law merchant.
NCC, Article 18. In matters which are governed by the Code of
Commerce and special laws, their deficiency shall be supplied
by the provisions of this Code.
NCC Article 2270 (2,4). The following laws and regulations are
hereby repealed:
(1) Those parts and provisions of the Civil Code of 1889 which
are in force on the date when this new Civil Code becomes
effective:
(2) The provisions of the Code of Commerce governing sales,
partnership, agency, loan, deposit and guaranty;
(3) The provisions of the Code of Civil Procedure on
prescription as far as inconsistent with this Code; and
(4) All laws, Acts, parts of Acts, rules of court, executive
orders, and administrative regulations which are inconsistent
with this Code. (n)
B. Effectivity
NIL, Sec. 195. Application of Act. - The provisions of this Act
do not apply to negotiable instruments made and delivered
prior to the taking effect hereof.
NIL, Sec. 198. Time when Act takes effect. - This Act shall take
effect ninety days after its publication in the Official Gazette
of the Philippine Islands shall have been completed.
C. Construction of the Statute
NIL, Sec. 191. Definition and meaning of terms. - In this Act,
unless the contract otherwise requires:
"Acceptance" means an acceptance completed by delivery or
notification;
"Action" includes counterclaim and set-off;
"Bank" includes any person or association of persons carrying
on the business of banking, whether incorporated or not;
"Bearer" means the person in possession of a bill or note
which is payable to bearer;
"Bill" means bill of exchange, and "note" means negotiable
promissory note;
"Delivery" means transfer of possession, actual or
constructive, from one person to another;
in possession of it, or the bearer thereof;
"Indorsement" means an indorsement completed by delivery;
"Instrument" means negotiable instrument;
"Issue" means the first delivery of the instrument, complete in
form, to a person who takes it as a holder;
"Person" includes a body of persons, whether incorporated or
not;
"Value" means valuable consideration;
"Written" includes printed, and "writing" includes print.
NIL, Sec. 193. Reasonable time, what constitutes. - In
determining what is a "reasonable time" regard is to be had
to the nature of the instrument, the usage of trade or
business with respect to such instruments, and the facts of the
particular case.
NIL, Sec. 194. Time, how computed; when last day falls on
holiday. - Where the day, or the last day for doing any act
herein required or permitted to be done falls on a Sunday or
on a holiday, the act may be done on the next succeeding
secular or business day.
Part 2
Requisites for Contracts on Negotiable Instruments
III. Negotiable Instruments
A. Form of Negotiable Instruments
NIL, Section 1. Form of negotiable instruments. - An
instrument to be negotiable must conform to the following
requirements:
(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 to bearer; and
(e) Where the instrument is addressed to a drawee, he must
be named or otherwise indicated therein with reasonable
certainty.
Formal Requirements:
 In determining the negotiability of an instrument,
the ff must be considered:
o Whole of the instrument
o Only what appears on the face
 A valid inst is not necessarily negotiable.
 A to D for a promissory notes; A to E for a bill of
exchange
 Must be in writing or reduced in tangible form;
includes tat which is in print or has been typed.
 The negotiability is determined from the writing that
is from the face of the instrument itself.
 General rule wrt signatures is that it si placed at the
lower right hand corner of the instrument. His
signature is prima facie evidence of his intention to
be bound as either maker or drawer.
 Reason for reqt to be payable in money is that
money is the one standard of value in actual
business. The term money properly includes all legal
tender.
  “drawee must be named” applies only to bills and
checks. An order which is not addressed to any
person cannot be a bill. A bill is an order but it would
be sufficient if the drawee is indicated therein with
reasonable certainty though he is not named.  to
enable the payee or holder to know upon whom he
is to call for acceptance or payment.
Nature of non-negotiable instrument:
 merely a simple contract in writing and is evidence
of such intangible rights as may have been created
by the assent of the parties,
 may not be negotiated but may be assigned or
transferred, absent a prohibition
PROMISSORY NOTE:
 unconditional promise in writing made by one
person to another, signed by the maker, engaging to
pay on demand, or at a fixed or determinable future
time, a sum certain in money to order or to bearer.
 Referred to as a note
 2 parties: maker and a payee
BILL OF EXCHANGE:
 Unconditional order in writing addressed by one
person to another, signed by the person giving it,
requiring the person to whom it is addressed to pay
on demand or at a fixed or determinable future time
a sum certain in money to order or to bearer.
 Essentially an order made by one person to another
to pay money to a third person.
 Drawer (person who issues and draws the order bill),
drawee (party upon whom the bill is drawn, ordered
to pay), payee (party in whose favor the bill is
originally drawn or is payable)
 Original and fundamental idea and purpose is that
the drawer has funds in the hands of the drawee of
which the drawer wishes to avail himself. The
drawer is the party primarily interested and
benefited.
 If the drawer has no funds in the hands of the
drawee, presumed that the former must have made
some arrangements. In such a case, the drawee
must look to the drawer for reimbursement and not
to a bona fide holder.
 For the drawee to be liable, there must be some kind
of agreement obligating the drawee to honor the
order of the drawer or an existing dr-cr relationship
between them
NIL, Sec. 10. Terms, when sufficient. - The instrument need
not follow the language of this Act, but any terms are
sufficient which clearly indicate an intention to conform to the
requirements hereof.
 Not required to use the exact words of the law; the
substance of the transaction rather that its form is
the criterion of negotiability.
 Mere defect in language or grammatical error does
not destroy negotiability.
RA 8183, Section 1. All monetary obligations shall be settled
in the Philippine currency which is legal tender in the
Philippines. However, the parties may agree that the
obligation or transaction shall be settled in any other currency
at the time of payment.
1. It must be in writing and signed by the maker or drawer
a. In Writing
NIL, Sec. 191. Definition and meaning of terms. - In this Act,
unless the contract otherwise requires:
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"Written" includes printed, and "writing" includes print.
NIL, Sec. 17. Construction where instrument is ambiguous. -
Where the language of the instrument is ambiguous or there
are omissions therein, the following rules of construction
apply:
xxx
(d) Where there is a conflict between the written and printed
provisions of the instrument, the written provisions prevail;
 Written words are deemed to express the true
intention of the maker or drawer because they are
placed there by himself.
Republic Act No. 8792 (2000): AN ACT PROVIDING FOR THE
RECOGNITION AND USE OF ELECTRONIC COMMERCIAL AND
NON-COMMERCIAL TRANSACTIONS AND DOCUMENTS,
PENALTIES FOR UNLAWFUL USE THEREOF, AND FOR OTHER
PURPOSES
RA 8792, Section 7. Legal Recognition of Electronic
Documents - Electronic documents shall have the legal effect,
validity or enforceability as any other document or legal
writing, and -
(a) Where the law requires a document to be in writing, that
requirement is met by an electronic document if the said
electronic document maintains its integrity and reliability and
can be authenticated so as to be usable for subsequent
reference, in that -
i. The electronic document has remained complete and
unaltered, apart from the addition of any endorsement and
any authorized change, or any change which arises in the
normal course of communication, storage and display; and
ii. The electronic document is reliable in the light of the
purpose for which it was generated and in the light of all
relevant circumstances.
(b) Paragraph (a) applies whether the requirement therein is
in the form of an obligation or whether the law simply
provides consequences for the document not being presented
or retained in its original from.
(c) Where the law requires that a document be presented or
retained in its original form, that requirement is met by an
electronic document if -
i. There exists a reliable assurance as to the integrity of the
document from the time when it was first generated in its
final form; and
ii. That document is capable of being displayed to the person
to whom it is to be presented: Provided, That no provision of
this Act shall apply to vary any and all requirements of
existing laws on formalities required in the execution of
documents for their validity.
For evidentiary purposes, an electronic document shall be the
functional equivalent of a written document under existing
laws.
This Act does not modify any statutory rule relating to
admissibility of electronic data massages or electronic
documents, except the rules relating to authentication and
best evidence.
b. Signed by the maker or drawer
NIL, Sec. 18. Liability of person signing in trade or assumed
name. - No person is liable on the instrument whose signature
does not appear thereon, except as herein otherwise expressly
provided. But one who signs in a trade or assumed name will
be liable to the same extent as if he had signed in his own
name.
 GR: Only persons whose sigs appear on an
instrument are liable thereon.
 Exceptions:
o A person signs in a trade or assumed name
(18.2)
o Principal is liable if a duly authorized agent
signs (19)
o Forger (23)
o Acceptance on a separate paper (134)
o Written promise to accept a bill before it is
drawn (135)
 Signing in a trade or assumed name – necessary that
the party who signed intended to be bound.
NIL, Sec. 29. Liability of accommodation party. - An
accommodation party is one who has signed the instrument
as maker, drawer, acceptor, or indorser, without receiving
value therefore, and for the purpose of lending his name to
some other person. Such a person is liable on the instrument
to a holder for value, notwithstanding such holder, at the time
of taking the instrument, knew him to be only an
accommodation party.
 act in addition to the payment of money is not negotiable.
NIL, Sec. 17. Construction where instrument is ambiguous. -
Where the language of the instrument is ambiguous or there
are omissions therein, the following rules of construction
apply:
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(g) Where an instrument containing the word "I promise to
pay" is signed by two or more persons, they are deemed to
be jointly and severally liable thereon.
2. Must contain an unconditional promise or order to
pay a sum certain in money
NIL, Sec. 2. What constitutes certainty as to sum. - The sum
payable is a sum certain within the meaning of this Act,
although it is to be paid:
(a) with interest; or
(b) by stated installments; or
(c) by stated installments, with a provision that, upon default
in payment of any installment or of interest, the whole shall
become due; or
(d) with exchange, whether at a fixed rate or at the current
rate; or
(e) with costs of collection or an attorney's fee, in case
payment shall not be made at maturity.
NIL, Sec. 3. When promise is unconditional. - An unqualified
order or promise to pay is unconditional within the meaning
of this Act though coupled with:
(a) An indication of a particular fund out of which
reimbursement is to be made or a particular account to be
debited with the amount; or
(b) A statement of the transaction which gives rise to the
instrument.
But an order or promise to pay out of a particular fund is not
unconditional.
NIL, Sec. 17. Construction where instrument is ambiguous. -
Where the language of the instrument is ambiguous or there
are omissions therein, the following rules of construction
apply:
(a) Where the sum payable is expressed in words and also in
figures and there is a discrepancy between the two, the sum
denoted by the words is the sum payable; but if the words
are ambiguous or uncertain, reference may be had to the
figures to fix the amount;
(b) Where the instrument provides for the payment of
interest, without specifying the date from which interest is to
run, the interest runs from the date of the instrument, and if
the instrument is undated, from the issue thereof
NIL, Sec. 5. Additional provisions not affecting negotiability. -
An instrument which contains an order or promise to do any
But the negotiable character of an instrument otherwise
negotiable is not affected by a provision which:
(a) authorizes the sale of collateral securities in case the
instrument be not paid at maturity; or
(b) authorizes a confession of judgment if the instrument be
not paid at maturity; or
(c) waives the benefit of any law intended for the advantage
or protection of the obligor; or
(d) gives the holder an election to require something to be
done in lieu of payment of money.
But nothing in this section shall validate any provision or
stipulation otherwise illegal.
RA 7653: THE NEW CENTRAL BANK ACT
RA 7653, Section 49. Definition of Currency. - The word
"currency" is hereby defined, for purposes of this Act, as
meaning all Philippine notes and coins issued or circulating in
accordance with the provisions of this Act.
RA 7653, Section 52. Legal Tender Power. - All notes and
coins issued by the Bangko Sentral shall be fully guaranteed
by the Government of the Republic of the Philippines and
shall be legal tender in the Philippines for all debts, both
public and private: Provided, however, That, unless otherwise
fixed by the Monetary Board, coins shall be legal tender in
amounts not exceeding Fifty pesos (P50.00) for
denominations of Twenty-five centavos and above, and in
amounts not exceeding Twenty pesos (P20.00) for
denominations of Ten centavos or less.
3. Must be payable on demand, or at a fixed or
determinable future time
NIL, Sec. 4. Determinable future time; what constitutes. - An
instrument is payable at a determinable future time, within
the meaning of this Act, which is expressed to be payable:
(a) At a fixed period after date or sight; or
(b) On or before a fixed or determinable future time specified
therein; or
(c) On or at a fixed period after the occurrence of a specified
event which is certain to happen, though the time of
happening be uncertain.
An instrument payable upon a contingency is not negotiable,
and the happening of the event does not cure the defect.
NIL, Sec. 7. When payable on demand. - An instrument is
payable on
demand:
(a) When it is so expressed to be payable on demand, or at
sight, or on presentation; or
(b) In which no time for payment is expressed.
Where an instrument is issued, accepted, or indorsed when
overdue, it is, as regards the person so issuing, accepting, or
indorsing it, payable on demand.
4. Must be payable to order or to bearer; and
NIL, Sec. 8. When payable to order. - The instrument is
payable to order where it is drawn payable to the order of a
specified person or to him or his order. It may be drawn
payable to the order of:
(a) A payee who is not maker, drawer, or drawee; or
(b) The drawer or maker; or
(c) The drawee; or
(d) Two or more payees jointly; or
(e) One or some of several payees; or
(f) The holder of an office for the time being.
Where the instrument is payable to order, the payee must be
named or otherwise indicated therein with reasonable
certainty.
NIL, Sec. 9. When payable to bearer. - The instrument is
payable to
bearer:
(a) When it is expressed to be so payable; or
(b) When it is payable to a person named therein or bearer;
or
(c) When it is payable to the order of a fictitious or non-
existing person, and such fact was known to the person
making it so payable; or
(d) When the name of the payee does not purport to be the
name of any
person; or
(e) When the only or last indorsement is an indorsement in
blank.
5. Where the instrument is addressed to a drawee, he
must be named or otherwise indicated therein with
reasonable certainty.
B. Matters Not Affecting Negotiability
NIL, Sec. 5. Additional provisions not affecting negotiability. -
An instrument which contains an order or promise to do any
act in addition to the payment of money is not negotiable.
But the negotiable character of an instrument otherwise
negotiable is not affected by a provision which:
(a) authorizes the sale of collateral securities in case the
instrument be not paid at maturity; or
(b) authorizes a confession of judgment if the instrument be
not paid at maturity; or
(c) waives the benefit of any law intended for the advantage
or protection of the obligor; or
(d) gives the holder an election to require something to be
done in lieu of payment of money.
But nothing in this section shall validate any provision or
stipulation otherwise illegal.
NIL, Sec. 6. Omissions; seal; particular money. - The validity
and negotiable character of an instrument are not affected by
the fact that:
(a) it is not dated; or
(b) does not specify the value given, or that any value had
been given therefor; or
(c) does not specify the place where it is drawn or the place
where it is payable; or
(d) bears a seal; or
(e) designates a particular kind of current money in which
payment is to be made.
But nothing in this section shall alter or repeal any statute
requiring in certain cases the nature of the consideration to
be stated in the instrument.
1. Authorizes the sale of collateral securities in case the
instrument be not paid at maturity
2. Authorizes Confession of Judgment
3. Waives the Benefit of Any Law
NCC, 6. Rights may be waived, unless the waiver is contrary to
law, public order, public policy, morals, or good customs, or
prejudicial to a third person with a right recognized by law.
4. Date

NIL, Sec. 6. Omissions; seal; particular money. - The validity
and negotiable character of an instrument are not affected by
the fact that:
(a) it is not dated;
Xxx
NIL, Sec. 13. When date may be inserted. - Where an
instrument expressed to be payable at a fixed period after
date is issued undated, or where the acceptance of an
instrument payable at a fixed period after sight is undated,
any holder may insert therein the true date of issue or
acceptance, and the instrument shall be payable accordingly.
The insertion of a wrong date does not avoid the instrument
in the hands of a subsequent holder in due course; but as to
him, the date so inserted is to be regarded as the true date.
NIL, Sec. 17. Construction where instrument is ambiguous. -
Where the language of the instrument is ambiguous or there
are omissions therein, the following rules of construction
apply:
xxx
(c) Where the instrument is not dated, it will be considered to
be dated as of the time it was issued;
xxx
NIL, Sec. 12. Ante-dated and post-dated. - The instrument is
not invalid for the reason only that it is ante-dated or post-
dated, provided this is not done for an illegal or fraudulent
purpose. The person to whom an instrument so dated is
delivered acquires the title thereto as of the date of delivery.
NIL, Section 11. Date, presumption as to. - Where the
instrument or an acceptance or any indorsement thereon is
dated, such date is deemed prima facie to be the true date of
the making, drawing, acceptance, or indorsement, as the case
may be.
Rules of Court, Rule 131, Section 3(t,u)
Section 3. Disputable presumptions. — The following
presumptions are satisfactory if uncontradicted, but may be
contradicted and overcome by other evidence:
xxx
(t) That an endorsement of negotiable instrument was
made before the instrument was overdue and at the place
where the instrument is dated;
(u) That a writing is truly dated;
xxx
C. Subsistence of Negotiable Character
NIL, Section 47. Continuation of negotiable character. - An
instrument negotiable in its origin continues to be negotiable
until it has been restrictively indorsed or discharged by
payment or otherwise.
D. Interpretation of Negotiable Instrument
NIL, Section 17. Construction where instrument is ambiguous.
- Where the language of the instrument is ambiguous or
there are omissions therein, the following rules of
construction apply:
(a) Where the sum payable is expressed in words and also in
figures and there is a discrepancy between the two, the sum
denoted by the words is the sum payable; but if the words
are ambiguous or uncertain, reference may be had to the
figures to fix the amount;
(b) Where the instrument provides for the payment of
interest, without specifying the date from which interest is to
run, the interest runs from the date of the instrument, and if
the instrument is undated, from the issue thereof;
(c) Where the instrument is not dated, it will be considered to
be dated as of the time it was issued;
(d) Where there is a conflict between the written and printed
provisions of the instrument, the written provisions prevail;
(e) Where the instrument is so ambiguous that there is doubt
whether it is a bill or note, the holder may treat it as either at
his election;
(f) Where a signature is so placed upon the instrument that it
is not clear in what capacity the person making the same
intended to sign, he is to be deemed an indorser;
(g) Where an instrument containing the word "I promise to
pay" is signed by two or more persons, they are deemed to
be jointly and severally liable thereon.
E. General Classes of Negotiable Instruments
NIL, Sec. 191. Definition and meaning of terms. - In this Act,
unless the contract otherwise requires:
"Bill" means bill of exchange, and "note" means negotiable
promissory note;
1. Bill of Exchange
NIL, Section 17. Construction where instrument is ambiguous.
- Where the language of the instrument is ambiguous or
there are omissions therein, the following rules of
construction apply:
xxx
(e) Where the instrument is so ambiguous that there is doubt
whether it is a bill or note, the holder may treat it as either at
his election;
xxx
NIL, Section 126. Bill of exchange, defined. - A bill of
exchange is an unconditional order in writing addressed by
one person to another, signed by the person giving it,
requiring the person to whom it is addressed to pay on
demand or at a fixed or determinable future time a sum
certain in money to order or to bearer.
NIL, Section 128. Bill addressed to more than one drawee. - A
bill may be addressed to two or more drawees jointly,
whether they are partners or not; but not to two or more
drawees in the alternative or in succession.
NIL, Section 131. Referee in case of need. - The drawer of a
bill and any indorser may insert thereon the name of a person
to whom the holder may resort in case of need; that is to say,
in case the bill is dishonored by non-acceptance or non-
payment. Such person is called a referee in case of need. It is
in the option of the holder to resort to the referee in case of
need or not as he may see fit
NIL, Section 185. Check, defined. - A check is a bill of
exchange drawn on a bank payable on demand. Except as
herein otherwise provided, the provisions of this Act
applicable to a bill of exchange payable on demand apply to a
check.
NIL, Section 178. Bills in set constitute one bill. - Where a bill
is drawn in a set, each part of the set being numbered and
containing a reference to the other parts, the whole of the
parts constitutes one bill.
2. Negotiable Promissory Notes (Notes)
NIL, Section 17. Construction where instrument is ambiguous.
- Where the language of the instrument is ambiguous or
there are omissions therein, the following rules of
construction apply:
xxx
(e) Where the instrument is so ambiguous that there is doubt
whether it is a bill or note, the holder may treat it as either at
his election;
xxx
NIL, Section 130. When bill may be treated as promissory
note. - Where in a bill the drawer and drawee are the same
person or where the drawee is a fictitious person or a person
not having capacity to contract, the holder may treat the
instrument at his option either as a bill of exchange or as a
promissory note.
NIL, Section 184. Promissory note, defined. - A negotiable
promissory note within the meaning of this Act is an
unconditional promise in writing made by one person to
another, signed by the maker, engaging to pay on demand, or
at a fixed or determinable future time, a sum certain in
money to order or to bearer. Where a note is drawn to the
maker's own order, it is not complete until indorsed by him.
F. Other Modes of Classifying Negotiable Instruments
1. Inland or Foreign
NIL, Section 129. Inland and foreign bills of exchange. - An
inland bill of exchange is a bill which is, or on its face purports
to be, both drawn and payable within the Philippines. Any
other bill is a foreign bill. Unless the contrary appears on the
face of the bill, the holder may treat it as an inland bill.
2. Order or Bearer
NIL, Section 34. Special indorsement; indorsement in blank. -
A special indorsement specifies the person to whom, or to
whose order, the instrument is to be payable, and the
indorsement of such indorsee is necessary to the further
negotiation of the instrument. An indorsement in blank
specifies no indorsee, and an instrument so indorsed is
payable to bearer, and may be negotiated by delivery.
3. Payable on Demand, or Payable at a Fixed or
Determinable Future Time
NIL, Section 7. When payable on demand. - An instrument is
payable on demand:
(a) When it is so expressed to be payable on demand, or at
sight, or on presentation; or
(b) In which no time for payment is expressed.
Where an instrument is issued, accepted, or indorsed when
overdue, it is, as regards the person so issuing, accepting, or
indorsing it, payable on demand.
NIL, Section 4. Determinable future time; what constitutes. -
An instrument is payable at a determinable future time,
within the meaning of this Act, which is expressed to be
payable:
(a) At a fixed period after date or sight; or
(b) On or before a fixed or determinable future time specified
therein; or
(c) On or at a fixed period after the occurrence of a specified
event which is certain to happen, though the time of
happening be uncertain.
An instrument payable upon a contingency is not negotiable,
and the happening of the event does not cure the defect.
NIL, Section 53. When person not deemed holder in due
course. - Where an instrument payable on demand is
negotiated on an unreasonable length of time after its issue,
the holder is not deemed a holder in due course.
IV. Consent and Capacity of Parties
Civil Code, Article 1305. A contract is a meeting of minds
between two persons whereby one binds himself, with
respect to the other, to give something or to render some
service.
Civil Code, Article 1318. The following contracts are
rescissible:
(1) Those which are entered into by guardians whenever the
wards whom they represent suffer lesion by more than one-
fourth of the value of the things which are the object thereof;
xxx
NIL, Section 192. Persons primarily liable on instrument. - The
person "primarily" liable on an instrument is the person who,
by the terms of the instrument, is absolutely required to pay
the same. All other parties are "secondarily" liable.

A. Consent
1. General Rule
NIL, Section 17. Construction where instrument is ambiguous.
- Where the language of the instrument is ambiguous or
there are omissions therein, the following rules of
construction apply:
xxx
(f) Where a signature is so placed upon the instrument that it
is not clear in what capacity the person making the same
intended to sign, he is to be deemed an indorser; x x x
NIL, Section 18. Liability of person signing in trade or
assumed name. - No person is liable on the instrument whose
signature does not appear thereon, except as herein
otherwise expressly provided. But one who signs in a trade or
assumed name will be liable to the same extent as if he had
signed in his own name.
2. Exceptions
NIL, Section 19. Signature by agent; authority; how shown. -
The signature of any party may be made by a duly authorized
agent. No particular form of appointment is necessary for this
purpose; and the authority of the agent may be established
as in other cases of agency.
NIL, Section 20. Liability of person signing as agent, and so
forth. - Where the instrument contains or a person adds to
his signature words indicating that he signs for or on behalf of
a principal or in a representative capacity, he is not liable on
the instrument if he was duly authorized; but the mere
addition of words describing him as an agent, or as filling a
representative character, without disclosing his principal,
does not exempt him from personal liability.
NIL, Section 21. Signature by procuration; effect of. - A
signature by "procuration" operates as notice that the agent
has but a limited authority to sign, and the principal is bound
only in case the agent in so signing acted within the actual
limits of his authority.
NIL, Section 136. Time allowed drawee to accept. - The
drawee is allowed twenty-four hours after presentment in
which to decide whether or not he will accept the bill; the
acceptance, if given, dates as of the day of presentation.
NIL, Section 137. Liability of drawee returning or destroying
bill. - Where a drawee to whom a bill is delivered for
acceptance destroys the same, or refuses within twenty-four
hours after such delivery or within such other period as the
holder may allow, to return the bill accepted or non-accepted
to the holder, he will be deemed to have accepted the same.
3. Effect of Absence of Consent
a. Lack of Signature
NIL, Section 18. (1st sentence). Liability of person signing in
trade or assumed name. - No person is liable on the
instrument whose signature does not appear thereon, except
as herein otherwise expressly provided. x x x
b. Forgery of Signature
NIL, Section 23. Forged signature; effect of. - When a
signature is forged or made without the authority of the
person whose signature it purports to be, it is wholly
inoperative, and no right to retain the instrument, or to give a
discharge therefor, or to enforce payment thereof against
any party thereto, can be acquired through or under such
signature, unless the party against whom it is sought to
enforce such right is precluded from setting up the forgery or
want of authority.
c. Lack of Authority of Agent
Civil Code, Article 1403. The following contracts are
unenforceable, unless they are ratified:
(1) Those entered into in the name of another person by one
who has been given no authority or legal representation, or
who has acted beyond his powers;
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Civil Code, Article 1317. No one may contract in the name of
another without being authorized by the latter, or unless he
has by law a right to represent him.
A contract entered into in the name of another by one who
has no authority or legal representation, or who has acted
beyond his powers, shall be unenforceable, unless it is
ratified, expressly or impliedly, by the person on whose
behalf it has been executed, before it is revoked by the other
contracting party.
d. Excess of Authority of Agent
NIL, Section 21. Signature by procuration; effect of. - A
signature by "procuration" operates as notice that the agent
has but a limited authority to sign, and the principal is bound
only in case the agent in so signing acted within the actual
limits of his authority.
B. Capacity to Consent (1), In General
Civil Code, Article 1390. The following contracts are voidable
or annullable, even though there may have been no damage
to the contracting parties:
(1) Those where one of the parties is incapable of giving
consent to a contract;
(2) Those where the consent is vitiated by mistake, violence,
intimidation, undue influence or fraud.
These contracts are binding, unless they are annulled by a
proper action in court. They are susceptible of ratification.
Civil Code, Article 1399. When the defect of the contract
consists in the incapacity of one of the parties, the
incapacitated person is not obliged to make any restitution
except insofar as he has been benefited by the thing or price
received by him.
Civil Code, Article 1397 (1st sentence). The action for the
annulment of contracts may be instituted by all who are
thereby obliged principally or subsidiarily. However, persons
who are capable cannot allege the incapacity of those with
whom they contracted; nor can those who exerted
intimidation, violence, or undue influence, or employed
fraud, or caused mistake base their action upon these flaws
of the contract.
Civil Code, Article 1403. The following contracts are
unenforceable, unless they are ratified:
(1) Those entered into in the name of another person by one
who has been given no authority or legal representation, or
who has acted beyond his powers;
(2) Those that do not comply with the Statute of Frauds as set
forth in this number. In the following cases an agreement
hereafter made shall be unenforceable by action, unless the
same, or some note or memorandum, thereof, be in writing,
and subscribed by the party charged, or by his agent;
evidence, therefore, of the agreement cannot be received
without the writing, or a secondary evidence of its contents:
(a) An agreement that by its terms is not to be performed
within a year from the making thereof;
(b) A special promise to answer for the debt, default, or
miscarriage of another;
(c) An agreement made in consideration of marriage, other
than a mutual promise to marry;
(d) An agreement for the sale of goods, chattels or things in
action, at a price not less than five hundred pesos, unless the
buyer accept and receive part of such goods and chattels, or
the evidences, or some of them, of such things in action or
pay at the time some part of the purchase money; but when
a sale is made by auction and entry is made by the auctioneer
in his sales book, at the time of the sale, of the amount and
kind of property sold, terms of sale, price, names of the
purchasers and person on whose account the sale is made, it
is a sufficient memorandum;
(e) An agreement of the leasing for a longer period than one
year, or for the sale of real property or of an interest therein;
(f) A representation as to the credit of a third person.
(3) Those where both parties are incapable of giving consent
to a contract.
Civil Code, Article 1407. In a contract where both parties are
incapable of giving consent, express or implied ratification by
the parent, or guardian, as the case may be, of one of the
contracting parties shall give the contract the same effect as
if only one of them were incapacitated.
If ratification is made by the parents or guardians, as the case
may be, of both contracting parties, the contract shall be
validated from the inception.
NIL, Section 130. When bill may be treated as promissory
note. - Where in a bill the drawer and drawee are the same
person or where the drawee is a fictitious person or a person
not having capacity to contract, the holder may treat the
instrument at his option either as a bill of exchange or as a
promissory note.
C. Capacity to Consent (2): Natural Persons
Civil Code, Article 37. Juridical capacity, which is the fitness
to be the subject of legal relations, is inherent in every
natural person and is lost only through death. Capacity to act,
which is the power to do acts with legal effect, is acquired
and may be lost.
Civil Code, Article 38. Minority, insanity or imbecility, the
state of being a deaf-mute, prodigality and civil interdiction
are mere restrictions on capacity to act, and do not exempt
the incapacitated person from certain obligations, as when
the latter arise from his acts or from property relations, such
as easements.
Civil Code, Article 39. The following circumstances, among
others, modify or limit capacity to act: age, insanity,
imbecility, the state of being a deaf-mute, penalty,
prodigality, family relations, alienage, absence, insolvency
and trusteeship. The consequences of these circumstances
are governed in this Code, other codes, the Rules of Court,
and in special laws. Capacity to act is not limited on account
of religious belief or political opinion.
A married woman, twenty-one years of age or over, is
qualified for all acts of civil life, except in cases specified by
law.
1. Minority
Civil Code, Article 1327. The following cannot give consent to
a contract:
(1) Unemancipated minors; x x x
NIL, Section 22. Effect of indorsement by infant or
corporation.- The indorsement or assignment of the
instrument by a corporation or by an infant passes the
property therein, notwithstanding that from want of capacity,
the corporation or infant may incur no liability thereon.
Family Code, Article 226. The property of the unemancipated
child earned or acquired with his work or industry or by
onerous or gratuitous title shall belong to the child in
ownership and shall be devoted exclusively to the latter's
support and education, unless the title or transfer provides
otherwise.
The right of the parents over the fruits and income of the
child's property shall be limited primarily to the child's
support and secondarily to the collective daily needs of the
family.
Family Code, Article 234. Emancipation takes place by the
attainment of majority. Unless otherwise provided, majority
commences at the age of eighteen years.
2. Insanity, Drunkenness and Hypnotic Spell
Civil Code, Article 1327. The following cannot give consent to
a contract:
xxx
(2) Insane or demented persons, and deaf-mutes who do not
know how to write.
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Civil Code, Article 1328. Contracts entered into during a lucid
interval are valid. Contracts agreed to in a state of
drunkenness or during a hypnotic spell are voidable.
D. Capacity to Consent (3): Juridical Persons
NIL, Section 22. Effect of indorsement by infant or
corporation.- The indorsement or assignment of the
instrument by a corporation or by an infant passes the
property therein, notwithstanding that from want of capacity,
the corporation or infant may incur no liability thereon.
NIL, Article 191. Definition and meaning of terms. - In this
Act, unless the contract otherwise requires: x x x
"Person" includes a body of persons, whether incorporated or
not;
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Civil Code, Article 44.The following are juridical persons:
(1) The State and its political subdivisions;
(2) Other corporations, institutions and entities for public
interest or purpose, created by law; their personality begins
as soon as they have been constituted according to law;
(3) Corporations, partnerships and associations for private
interest or purpose to which the law grants a juridical
personality, separate and distinct from that of each
shareholder, partner or member.
Civil Code, Article 46. Juridical persons may acquire and
possess property of all kinds, as well as incur obligations and
bring civil or criminal actions, in conformity with the laws and
regulations of their organization.
BP 65, Section 36(7,11)
Side note: BP 65 only has to up to Section 10 so we’re
assuming that this was a typo. We’re also guessing that the
appropriate law is BP 68: Corporation Code which provisions
provide as follows:
Section 36. Corporate powers and capacity. – Every
corporation incorporated under this Code has the power and
capacity:
1. To sue and be sued in its corporate name;
2. Of succession by its corporate name for the period of time
stated in the articles of incorporation and the certificate of
incorporation;
3. To adopt and use a corporate seal;
4. To amend its articles of incorporation in accordance with
the provisions of this Code;
5. To adopt by-laws, not contrary to law, morals, or public
policy, and to amend or repeal the same in accordance with
this Code;
6. In case of stock corporations, to issue or sell stocks to
subscribers and to sell stocks to subscribers and to sell
treasury stocks in accordance with the provisions of this
Code; and to admit members to the corporation if it be a non-
stock corporation;
7. To purchase, receive, take or grant, hold, convey, sell,
lease, pledge, mortgage and otherwise deal with such real
and personal property, including securities and bonds of
other corporations, as the transaction of the lawful business
of the corporation may reasonably and necessarily require,
subject to the limitations prescribed by law and the
Constitution;
8. To enter into merger or consolidation with other
corporations as provided in this Code;
9. To make reasonable donations, including those for the
public welfare or for hospital, charitable, cultural, scientific,
civic, or similar purposes: Provided, That no corporation,
domestic or foreign, shall give donations in aid of any political
party or candidate or for purposes of partisan political
activity;
10. To establish pension, retirement, and other plans for the
benefit of its directors, trustees, officers and employees; and
11. To exercise such other powers as may be essential or
necessary to carry out its purpose or purposes as stated in
the articles of incorporation. (13a)
Republic Act No. 8791, Section 29. A commercial bank shall
have, in addition to the general powers incident to
corporations, all such powers as may be necessary to carry on
the business of commercial banking, such as accepting drafts
and issuing letters of credit; discounting and negotiating
promissory notes, drafts, bills of exchange, and other
evidences of debt; accepting or creating demand deposits;
receiving other types of deposits and deposit substitutes;
buying and selling foreign exchange and gold or silver bullion;
acquiring marketable bonds and other debt securities; and
extending credit, subject to such rules as the Monetary Board
may promulgate. These rules may include the determination
of bonds and other debt securities eligible for investment, the
maturities and aggregate amount of such investment
xxx
B. Effect of Want/Illegality of Consideration
1. Absence or Failure of Consideration
NIL, Section 28. Effect of want of consideration. - Absence or
failure of consideration is a matter of defense as against any
person not a holder in due course; and partial failure of
consideration is a defense pro tanto, whether the failure is an
ascertained and liquidated amount or otherwise.
2. Illegal consideration

V. Consideration Civil Code, Article 1409. The following contracts are

inexistent and void from the beginning:
A. In General (1) Those whose cause, object or purpose is contrary to law,
morals, good customs, public order or public policy;
1. Necessity of Consideration (2) Those which are absolutely simulated or fictitious;
NIL, Section 28. Effect of want of consideration. - Absence or failure (3) Those whose cause or object did not exist at the time of
of consideration is a matter of defense as against any person not a the transaction;
holder in due course; and partial failure of consideration is a defense (4) Those whose object is outside the commerce of men;
pro tanto, whether the failure is an ascertained and liquidated
(5) Those which contemplate an impossible service;
amount or otherwise.
(6) Those where the intention of the parties relative to the
 Absence = total lack of any valid consideration 
principal object of the contract cannot be ascertained;
contract must fall
(7) Those expressly prohibited or declared void by law.
 Failure = failure/refusal of one party to do, perform,
These contracts cannot be ratified. Neither can the right to
or comply with the consideration agreed upon.
set up the defense of illegality be waived.
2. What May Constitute Consideration
Civil Code, Art. 2018. If a contract which purports to be for
NIL, Section 25. Value, what constitutes. — Value is any
the delivery of goods, securities or shares of stock is entered
consideration sufficient to support a simple contract. An
into with the intention that the difference between the price
antecedent or pre-existing debt constitutes value; and is
stipulated and the exchange or market price at the time of
deemed such whether the instrument is payable on demand
the pretended delivery shall be paid by the loser to the
or at a future time.
winner, the transaction is null and void. The loser may
recover what he has paid. (n)
Civil Code, Article 2095. Incorporeal rights, evidenced by
negotiable instruments, bills of lading, shares of stock, bonds,
C. Accommodation Parties
warehouse receipts and similar documents may also be
NIL, Section 29. Liability of accommodation party. - An
pledged. The instrument proving the right pledged shall be
accommodation party is one who has signed the instrument
delivered to the creditor, and if negotiable, must be indorsed
as maker, drawer, acceptor, or indorser, without receiving
value therefore, and for the purpose of lending his name to
some other person. Such a person is liable on the instrument
3. Presumptions of Consideration
to a holder for value, notwithstanding such holder, at the
time of taking the instrument, knew him to be only an
NIL, Section 24. Presumption of consideration. - Every
accommodation party.
negotiable instrument is deemed prima facie to have been
issued for a valuable consideration; and every person whose
Part 3
signature appears thereon to have become a party thereto
Issuance of the Negotiable Instrument
for value.
VI. Issuance
Rules of Court, Rule 131. Burden of Proof and Presumptions
xxx
A. Definition
Section 3. Disputable presumptions. — The following
presumptions are satisfactory if uncontradicted, but may be
NIL, Section 191. Definition and meaning of terms. - In this
contradicted and overcome by other evidence:
Act, unless the contract otherwise requires:
xxx
"Issue" means the first delivery of the instrument, complete
(s) That a negotiable instrument was given or indorsed for a
in form, to a person who takes it as a holder;
sufficient consideration;

1. Execution
NIL, Section 1. Form of negotiable instruments. - An
instrument to be negotiable must conform to the following
requirements:
(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 to bearer; and
(e) Where the instrument is addressed to a drawee, he must
be named or otherwise indicated therein with reasonable
certainty.
NIL, Section 10. Terms, when sufficient. - The instrument
need not follow the language of this Act, but any terms are
sufficient which clearly indicate an intention to conform to
the requirements hereof.
NIL, Section 19. Signature by agent; authority; how shown. -
The signature of any party may be made by a duly authorized
agent. No particular form of appointment is necessary for this
purpose; and the authority of the agent may be established
as in other cases of agency.
NIL, Section 20. Liability of person signing as agent, and so
forth. - Where the instrument contains or a person adds to
his signature words indicating that he signs for or on behalf of
a principal or in a representative capacity, he is not liable on
the instrument if he was duly authorized; but the mere
addition of words describing him as an agent, or as filling a
representative character, without disclosing his principal,
does not exempt him from personal liability.
NIL, Section 21. Signature by procuration; effect of. - A
signature by "procuration" operates as notice that the agent
has but a limited authority to sign, and the principal is bound
only in case the agent in so signing acted within the actual
limits of his authority.
2. Delivery
NIL, Section 16. Delivery; when effectual; when presumed. -
Every contract on a negotiable instrument is incomplete and
revocable until delivery of the instrument for the purpose of
giving effect thereto. As between immediate parties and as
regards a remote party other than a holder in due course, the
delivery, in order to be effectual, must be made either by or
under the authority of the party making, drawing, accepting,
or indorsing, as the case may be; and, in such case, the
delivery may be shown to have been conditional, or for a
special purpose only, and not for the purpose of transferring
the property in the instrument. But where the instrument is
in the hands of a holder in due course, a valid delivery thereof
by all parties prior to him so as to make them liable to him is
conclusively presumed. And where the instrument is no
longer in the possession of a party whose signature appears
thereon, a valid and intentional delivery by him is presumed
until the contrary is proved.
NIL, Section 191. Definition and meaning of terms. - In this
Act, unless the contract otherwise requires:
"Acceptance" means an acceptance completed by delivery or
notification;
"Action" includes counterclaim and set-off;
"Bank" includes any person or association of persons carrying
on the business of banking, whether incorporated or not;
"Bearer" means the person in possession of a bill or note
which is payable to bearer;
"Bill" means bill of exchange, and "note" means negotiable
promissory note;
"Delivery" means transfer of possession, actual or
constructive, from one person to another;
"Holder" means the payee or indorsee of a bill or note who is
in possession of it, or the bearer thereof;
"Indorsement" means an indorsement completed by delivery;
"Instrument" means negotiable instrument;
"Issue" means the first delivery of the instrument, complete
in form, to a person who takes it as a holder;
"Person" includes a body of persons, whether incorporated or
not;
"Value" means valuable consideration;
"Written" includes printed, and "writing" includes print.
B. Irregular Issuance
1. Execution of Incomplete Instrument, with Delivery
NIL, Section 14. Blanks; when may be filled. - Where the instrument
is wanting in any material particular, the person in possession
thereof has a prima facie authority to complete it by filling up the
blanks therein. And a signature on a blank paper delivered by the
person making the signature in order that the paper may be
converted into a negotiable instrument operates as a prima facie
authority to fill it up as such for any amount. In order, however, that
any such instrument when completed may be enforced against any
person who became a party thereto prior to its completion, it must
be filled up strictly in accordance with the authority given and within
a reasonable time. But if any such instrument, after completion, is
negotiated to a holder in due course, it is valid and effectual for all
purposes in his hands, and he may enforce it as if it had been filled
up strictly in accordance with the authority given and within a
reasonable time.
 Distinction between 2 classes of instruments:
 o Those in which obvious blanks are left at
time of indorsement, to indicate that the
inst are incomplete until such blanks shall
be filled up  one who signs/indorses is
liable to bonafide holders
o Those apparently complete, has blanks only
because the written matter does not so
fully occupy the entire paper as to preclude
the insertion of addtl words or figures 
liability for the amount which has been
increased by filling up unoccupied spaces
therein
 Holder has prima facie authority to complete an
incomplete instrument by filling up the blanks (date,
due date, payee, amount, or rate of interest)
 Not authority to alter
 Instrument may be enforced only against a person
prior to completion if filled up strictly in accordance
with the authority given and within a reasonable
time
 Person who signed his name has the burden to rebu
the presumption of agency
 “reasonable time” to be reckoned from time of
issuance bec the interest involved is that of issuer,
and NOT from the time of each successive
negotiation.
2. Execution in Blank, with Delivery
NIL, Section 14. Blanks; when may be filled. - Where the
instrument is wanting in any material particular, the person in
possession thereof has a prima facie authority to complete it
by filling up the blanks therein. And a signature on a blank
paper delivered by the person making the signature in order
that the paper may be converted into a negotiable
instrument operates as a prima facie authority to fill it up as
such for any amount. In order, however, that any such
instrument when completed may be enforced against any
person who became a party thereto prior to its completion, it
must be filled up strictly in accordance with the authority
given and within a reasonable time. But if any such
instrument, after completion, is negotiated to a holder in due
course, it is valid and effectual for all purposes in his hands,
and he may enforce it as if it had been filled up strictly in
accordance with the authority given and within a reasonable
time.
3. Execution of incomplete instrument not delivered
NIL, Section 15. Incomplete instrument not delivered. -
Where an incomplete instrument has not been delivered, it
will not, if completed and negotiated without authority, be a
valid contract in the hands of any holder, as against any
person whose signature was placed thereon before delivery.
C. Effect of Issuance
1. Liabilities
NIL, Section 61. Liability of drawer. - The drawer by drawing
the instrument admits the existence of the payee and his
then capacity to indorse; and engages that, on due
presentment, the instrument will be accepted or paid, or
both, according to its tenor, and that if it be dishonored and
the necessary proceedings on dishonor be duly taken, he will
pay the amount thereof to the holder or to any subsequent
indorser who may be compelled to pay it. But the drawer may
insert in the instrument an express stipulation negativing or
limiting his own liability to the holder
NIL, Section 60. Liability of maker. - The maker of a
negotiable instrument, by making it, engages that he will pay
it according to its tenor, and admits the existence of the
payee and his then capacity to indorse.
NIL, Section 29. Liability of accommodation party. - An
accommodation party is one who has signed the instrument
as maker, drawer, acceptor, or indorser, without receiving
value therefor, and for the purpose of lending his name to
some other person. Such a person is liable on the instrument
to a holder for value, notwithstanding such holder, at the
time of taking the instrument, knew him to be only an
accommodation party.
2. Right of Payee
D. Effect of Crossed Checks
Part 4
Transfer of a Negotiable Instrument
VII. Transfer by Negotiation
NIL, Section 30. What constitutes negotiation. - An
instrument is negotiated when it is transferred from one
person to another in such manner as to constitute the
transferee the holder thereof. If payable to bearer, it is
negotiated by delivery; if payable to order, it is negotiated by
the indorsement of the holder and completed by delivery.
A. Negotiation by Delivery
NIL, Section 191, “Delivery”
"Delivery" means transfer of possession, actual or
constructive, from one person to another;
1. What Instruments are Negotiated by Delivery
a. Instrument payable to bearer, as originally written
NIL, Section 30. What constitutes negotiation. - An
instrument is negotiated when it is transferred from one
person to another in such manner as to constitute the
transferee the holder thereof. If payable to bearer, it is
negotiated by delivery; if payable to order, it is negotiated by
the indorsement of the holder and completed by delivery.
NIL, Section 9 (a-d). When payable to bearer. - The
instrument is payable to bearer:
(a) When it is expressed to be so payable; or
(b) When it is payable to a person named therein or bearer;
or
(c) When it is payable to the order of a fictitious or non-
existing person, and such fact was known to the person
making it so payable; or
(d) When the name of the payee does not purport to be the
name of any person; or
xxx
NIL, Section 40. Indorsement of instrument payable to
bearer. - Where an instrument, payable to bearer, is indorsed
specially, it may nevertheless be further negotiated by
delivery; but the person indorsing specially is liable as
indorser to only such holders as make title through his
indorsement
b. Order Instruments Indorsed in Blank
NIL, Section 34. Special indorsement; indorsement in blank. -
A special indorsement specifies the person to whom, or to
whose order, the instrument is to be payable, and the
indorsement of such indorsee is necessary to the further
negotiation of the instrument. An indorsement in blank
specifies no indorsee, and an instrument so indorsed is
payable to bearer, and may be negotiated by delivery.
NIL, Section 9(e). When payable to bearer. - The instrument
is payable to bearer:
xxx
(e) When the only or last indorsement is an indorsement in
blank
2. Warranty of Person Negotiating by Delivery
NIL, Section 65. Warranty where negotiation by delivery and
so forth. — Every person negotiating an instrument by
delivery or by a qualified indorsement warrants:
(a) That the instrument is genuine and in all respects what it
purports to be;
(b) That he has a good title to it;
(c) That all prior parties had capacity to contract;
(d) That he has no knowledge of any fact which would impair
the validity of the instrument or render it valueless.
But when the negotiation is by delivery only, the warranty
extends in favor of no holder other than the immediate
transferee.
The provisions of subdivision (c) of this section do not apply
to a person negotiating public or corporation securities other
than bills and notes.
NIL, Section 40. Indorsement of instrument payable to
bearer. - Where an instrument, payable to bearer, is indorsed
specially, it may nevertheless be further negotiated by
delivery; but the person indorsing specially is liable as
indorser to only such holders as make title through his
indorsement.
B. Negotiation by Indorsement and Delivery
1. Definition
NIL, Section 191, “Indorsement”
"Indorsement" means an indorsement completed by delivery
2. What Instruments Require Indorsement for Negotiation
NIL, Section 30. What constitutes negotiation. - An
instrument is negotiated when it is transferred from one
person to another in such manner as to constitute the
transferee the holder thereof. If payable to bearer, it is
negotiated by delivery; if payable to order, it is negotiated by
the indorsement of the holder and completed by delivery.
NIL, Section 34. Special indorsement; indorsement in blank. -
A special indorsement specifies the person to whom, or to
whose order, the instrument is to be payable, and the
indorsement of such indorsee is necessary to the further
negotiation of the instrument. An indorsement in blank
specifies no indorsee, and an instrument so indorsed is
payable to bearer, and may be negotiated by delivery.
3. How an Instrument is Indorsed
a. General Form
NIL, Section 31. Indorsement; how made. - The indorsement
must be written on the instrument itself or upon a paper
attached thereto. The signature of the indorser, without
additional words, is a sufficient indorsement.
a. Indorsement by Signing in Trade or Assumed Name
NIL, Section 18. Liability of person signing in trade or
assumed name. - No person is liable on the instrument whose
signature does not appear
thereon, except as herein otherwise expressly provided. But
one who signs in a trade or assumed name will be liable to
the same extent as if he had signed in his own name.
b. Indorsement when name of payee or indorsee is wrongly
designated or misspelled
 NIL, Section 43. Indorsement where name is misspelled, and
so forth. - Where the name of a payee or indorsee is wrongly
designated or misspelled, he may indorse the instrument as
therein described adding, if he thinks
fit, his proper signature.
c. Indorsement by Multiple Payees or Indorsees
NIL, Section 41. Indorsement where payable to two or more
persons. - Where an instrument is payable to the order of
two or more payees or indorsees who are not partners, all
must indorse unless the one indorsing has authority to
indorse for the others.
d. Indorsement in representative capacity
NIL, Section 44. Indorsement in representative capacity. -
Where any person is
under obligation to indorse in a representative capacity, he
may
indorse in such terms as to negative personal liability.
e. Indorsement of instrument drawn or indorsed
to a person as cashier
NIL, Section 42. Effect of instrument drawn or indorsed to a
person as cashier. - Where an instrument is drawn or
indorsed to a person as "cashier" or other fiscal officer of a
bank or corporation, it is deemed prima facie to be payable to
the bank or corporation of which he is such officer, and may
be negotiated by either the indorsement of the bank or
corporation or the indorsement of the officer.
f. Striking Out Indorsement
NIL, Section 48. Striking out indorsement. - The holder may at
any time strike out any indorsement which is not necessary to
his title. The indorser whose indorsement is struck out, and
all indorsers subsequent to him, are thereby relieved from
liability on the instrument.
4. Rules on Indorsement
a. Indorsement must be of entire instrument
NIL, Section 32. Indorsement must be of entire instrument. -
The indorsement must be an indorsement of the entire
instrument. An indorsement which purports to transfer to the
indorsee a part only of the amount payable, or which
purports to transfer the instrument to two or more indorsees
severally, does not operate as a negotiation of the
instrument. But where the instrument has been paid in part,
it may be indorsed as to the residue.
b. Effect of Indorsement by Persons without Capacity
NIL, Section 22. Effect of indorsement by infant or
corporation.- The indorsement or assignment of the
instrument by a corporation or by an infant passes the
property therein, notwithstanding that from want of capacity,
the corporation or infant may incur no liability thereon.
RA 10142, SECTION 47. Management. — Unless otherwise
provided herein, the management of the juridical debtor shall
remain with the existing management subject to the
applicable law/s and agreement/s, if any, on the election or
appointment of directors, managers or managing partner.
However, all disbursements, payments or sale, disposal,
assignment, transfer or encumbrance of property, or any
other act affecting title or interest in property, shall be
subject to the approval of the rehabilitation receiver and/or
the court, as provided in the following subchapter.
c. When a person deemed an indorser
(Irregular/Anomalous Indorser)
NIL, Section 63. When a person deemed indorser. - A person
placing his signature upon an instrument otherwise than as
maker, drawer, or acceptor, is deemed to be indorser unless
he clearly indicates by appropriate words his intention to be
bound in some other capacity.
NIL, Section 64. Liability of irregular indorser. - Where a
person, not otherwise a party to an instrument, places
thereon his signature in blank before delivery, he is liable as
indorser, in accordance with the following rules:
(a) If the instrument is payable to the order of a third person,
he is liable to the payee and to all subsequent parties.
(b) If the instrument is payable to the order of the maker or
drawer, or is payable to bearer, he is liable to all parties
subsequent to the maker or drawer.
(c) If he signs for the accommodation of the payee, he is liable
to all parties subsequent to the payee.
d. Presumption of Consideration
Rules of Court, Rule 131, Section 3(s)
Section 3. Disputable presumptions. — The following
presumptions are satisfactory if uncontradicted, but may be
contradicted and overcome by other evidence:
(s) That a negotiable instrument was given or indorsed
for a sufficient consideration;
e. Presumption on Date
NIL, Section 11. Date, presumption as to. - Where the
instrument or an acceptance or any indorsement thereon is
dated, such date is deemed prima facie to be the true date of
the making, drawing, acceptance, or indorsement, as the case
may be.
NIL, Section 45. Time of indorsement; presumption. - Except
where an indorsement bears date after the maturity of the
instrument, every negotiation is deemed prima facie to have
been effected before the instrument was overdue.
Rules of Court, Rule 131, Section 3 (t) Section 3.
Disputable presumptions. — The following presumptions are
satisfactory if uncontradicted, but may be contradicted and
overcome by other evidence:
xxx
(t) That an endorsement of negotiable instrument was
made before the instrument was overdue and at the place
where the instrument is dated;
f. Presumption on Place
NIL, Section 46. Place of indorsement; presumption. - Except
where the contrary appears, every indorsement is presumed
prima facie to have been made at the place where the
instrument is dated.
Rules of Court, Rule 131, Section 3(t)
Section 3. Disputable presumptions. — The following
presumptions are satisfactory if uncontradicted, but may be
contradicted and overcome by other evidence:
Xxx
(t) That an endorsement of negotiable instrument was
made before the instrument was overdue and at the place
where the instrument is dated;
Xxx
g. Referee in case of need
NIL, Section 131. Referee in case of need. - The drawer of a
bill and any indorser may insert thereon the name of a person
to whom the holder may resort in case of need; that is to say,
in case the bill is dishonored by non-acceptance or non-
payment. Such person is called a referee in case of need. It is
in the option of the holder to resort to the referee in case of
need or not as he may see fit.
h. When Indorsement may be demanded
NIL, Section 49. Transfer without indorsement; effect of. -
Where the holder of an instrument payable to his order
transfers it for value without
indorsing it, the transfer vests in the transferee such title as
the transferor had therein, and the transferee acquires in
addition, the right to have the indorsement of the transferor.
But for the purpose of determining whether the transferee is
a holder in due course, the negotiation takes effect as of the
time when the indorsement is actually made
Civil Code, Article 2095. Incorporeal rights, evidenced by
negotiable instruments, bills of lading, shares of stock, bonds,
warehouse receipts and similar documents may also be
pledged. The instrument proving the right pledged shall be
delivered to the creditor, and if negotiable, must be indorsed.
i. Striking out Indorsement
NIL, Section 48. Striking out indorsement. - The holder may
at any time strike out any indorsement which is not necessary
to his title. The indorser whose indorsement is struck out, and
all indorsers subsequent to him, are thereby relieved from
liability on the instrument.
g. Effect of Crossed Checks
5. Classifications of Indorsement/Indorser
NIL, Section 33. Kinds of indorsement. - An indorsement may
be either special or in blank; and it may also be either
restrictive or qualified or conditional.
a. General vs Qualified Indorsement
NIL, Section 66. Liability of general indorser. - Every indorser
who indorses without qualification, warrants to all
subsequent holders in due course:
(a) The matters and things mentioned in subdivisions (a), (b),
and (c) of the next preceding section; and (next preceding
Section: Section 65: (a) That the instrument is genuine and in
all respects what it purports to be; (b) That he has a good title
to it; (c) That all prior parties had capacity to contract)
(b) That the instrument is, at the time of his indorsement,
valid and subsisting;
And, in addition, he engages that, on due presentment, it
shall be accepted or paid, or both, as the case may be,
according to its tenor, and that if it be dishonored and the
necessary proceedings on dishonor be duly taken, he will pay
the amount thereof to the holder, or to any subsequent
indorser who may be compelled to pay it.
 The drawer and general indorsee guarantee payment of
the instrument.
 As regards sec. 65 first three warranties, liability of the
general indorser is similar to that of a qualified indorser
and a person negotiating by delivery.
 As regards the 4th reqt, if it is invalid, gen indorser is liable
but a qualified one is not unless he was aware of the
cause of the invalidity.
 A subsequent party which caused a defect cannot have
any recourse against any of the prior indorsers in good
faith.
 With the warranty that the instrument will be honored, he
is liable in case the same will not be paid because of the
insolvency of any prior party.
 If dishonored by non-payment, indorsers cease to be
merely secondarily liable as they become principal
debtors.
 Warranties are based upon a transfer of title and are
available only to a holder in due course.
 Holders not in due course can enforce the warranties.
 Conditions precedent to make indorser liable:
 o Due presentment for payment/acceptance (c) That all prior parties had capacity to contract;
o If dishonored, the necessary proceedings on dishonor (d) That he has no knowledge of any fact which would impair
 An indorsement is presumed to be unqualified. An the validity of the instrument or render it valueless.
indorser’s liability as warrantor is distinct from his liability But when the negotiation is by delivery only, the warranty
to pay. extends in favor of no holder other than the immediate
 Indorser v. drawer transferee.
Both are secondarily liable to the instrument. The provisions of subdivision (c) of this section do not apply to
Party to the note or bill Only to a bill a person negotiating public or corporation securities other
Does not make any Makes such admission than bills and notes.
admission as to the  Liability is unconditional as not conditioned upon
existence of the payee proper presentment and dishonor and the giving of
and his capacity then to notice of dishonor.
indorse  Contemplates an instrument payable to bearer
Has warranties No warranties, but  Like a qualified indorser, he does not assume to pay
engages to pay after Sec in case of dishonor unless based on any of the four
61 and 66 conditions are implied warranties, he is merely assigning a credit.
complied with  the liability of one who negotiates by mere delivery
 General v irregular indorser extends in favor only of his immediate transferee.
Makes either a blank or Always a blank  The warranty that the inst is genuine… covers all
special indorsement indorsement defects in the inst affecting the validity thereof,
Indorses after its Indorses before its including a forged indorsement  case of the last
delivery to the payee delivery indorser like a collecting bank. Exception:
Liable only to parties Liable to the payee and negligence in the issuance of the check itself 
subsequent to him subsequent parties issuing bank is just as liable.
unless he signs for the
accommodation of the NIL, Section 39. Conditional indorsement. - Where an
payee in which case he is indorsement is conditional, the party required to pay the
liable only to all parties instrument may disregard the condition and make payment to
subsequent to the the indorsee or his transferee whether the condition has been
payee. fulfilled or not. But any person to whom an instrument so
NIL, Section 38. Qualified indorsement. - A qualified indorsed is negotiated will hold the same, or the proceeds
indorsement constitutes the indorser a mere assignor of the thereof, subject to the rights of the person indorsing
title to the instrument. It may be made by adding to the conditionally.
indorser's signature the words "without recourse" or any  It is where the indorser imposes some other
words of similar import. Such an indorsement does not impair conditions to his liability or on the indorsee’s rights
the negotiable character of the instrument. to collect the proceeds of the instrument. It has no
 “recourse” means a resort to a secondarily liable effect on the further negotiation. If the party
person after default of the primary required to pay chooses to pay, the person who
 it shows only an unwillingness to be answerable for received will hold the proceeds subject to the right
the solvency of prior parties, a good precaution of the conditional indorser.
where the inst has a long period of maturity so that  But a condition appearing on the face of the
there is a danger that the principal debtor might instrument renders it non-negotiable.
become insolvent.
 purpose is to transfer title without guaranteeing b. Special Indorsement; Blank Indorsement
payment by the primary party, making the indorser a NIL, Section 32. Indorsement must be of entire instrument. -
mere assignor The indorsement must be an indorsement of the entire
 it limits his liability, secondarily liable for breach of instrument. An indorsement which purports to transfer to the
his warranties as an indorser under Sec 65, unless indorsee a part only of the amount payable, or which purports
the indorsement specifically excludes warranties, to transfer the instrument to two or more indorsees severally,
not liable if otherwise, like the insolvency of the does not operate as a negotiation of the instrument. But
person primarily liable. where the instrument has been paid in part, it may be
indorsed as to the residue.
NIL, Section 65. Warranty where negotiation by delivery and  There cannot be partial delivery so as to avoid
so forth. — Every person negotiating an instrument by multiplicity of suits.
delivery or by a qualified indorsement warrants:  Indorsement to transfer to two or more persons
(a) That the instrument is genuine and in all respects what it severally =/ negotiation, but valid if joint in which
purports to be; case indorsements of all the indorsees are required
(b) That he has a good title to it; for further negotiation.
  If two or more alternative payees, negotiation may
be made by the indorsement of either of the payees.
NIL, Section 35. Blank indorsement; how changed to special
indorsement. - The holder may convert a blank indorsement
into a special indorsement by writing over the signature of the
indorser in blank any contract consistent with the character of
the indorsement.
 The holder may protect himself against the
possibility of loss of title thru subsequent
negotiation, ex by a thief, by converting it. But he
must not change the contract of the blank indorser.
 A bearer instrument always remains a bearer
instrument negotiable by mere delivery whether the
last indorsement is a blank or a special one.
NIL, Section 40. Indorsement of instrument payable to bearer.
- Where an instrument, payable to bearer, is indorsed
specially, it may nevertheless be further negotiated by
delivery; but the person indorsing specially is liable as indorser
to only such holders as make title through his indorsement.
 An instrument payable to bearer is not converted
into an instrument payable to order by being
indorsed specially.
 The special indorser is liable only to those holders
who can trace their title to the instrument by a
series of unbroken indorsements from him. His
liability shall be that of a general indorser under Sec.
66
 Liability if negotiated by delivery alone is governed
by Sec 65.
 Provision does not apply where the paper is
originally made payable to order and indorsed in
blank
c. Restrictive vs Non-Restrictive Indorsement
NIL, Section 36. When indorsement restrictive. - An
indorsement is restrictive which either:
(a) Prohibits the further negotiation of the instrument; or
(b) Constitutes the indorsee the agent of the indorser; or
(c) Vests the title in the indorsee in trust for or to the use of
some other persons.
But the mere absence of words implying power to negotiate
does not make an indorsement restrictive.
 Does not in any way transfer the title to the
collecting bank
 A restrictive indorsement is one so worded that it
either prohibits entirely the further nego or restricts
its further nego to a particular person or for a
particular purpose; or modifies the rights of the
holders or the liabilities of the indorser. Merely gives
the right of an agent.
 With such, the indorser notifies all prospective
holders that the indorsee has only the authority to
deal with the instrument as thereby directed and
that the indorsee has only a restrictive title.
 Destroys the negotiability. It makes the instrument
merely transferrable. A restrictive indorsee is not a
HIDC. All subsequent indorsees acquire only the title
of the first indorsee under the restrictive
indorsement.
 Mere absence of words of negotiability =/ restrictive
indorsement
NIL, Section 37. Effect of restrictive indorsement; rights of
indorsee. - A restrictive indorsement confers upon the
indorsee the right:
(a) to receive payment of the instrument;
(b) to bring any action thereon that the indorser could bring;
(c) to transfer his rights as such indorsee, where the form of
the indorsement authorizes him to do so.
But all subsequent indorsees acquire only the title of the first
indorsee under the restrictive indorsement.
NIL, Section 47. Continuation of negotiable character. - An
instrument negotiable in its origin continues to be negotiable
until it has been restrictively indorsed or discharged by
payment or otherwise.
 GR: an instrument negotiable is origin is always
negotiable until paid though it has been dishonored,
or already overdue. But any holder who acquires it
can no longer be a HIDC.
 Same general rule applies with non-nego papers
d. Regular or Irregular Indorsement
NIL, Section 63. When a person deemed indorser. - A person
placing his signature upon an instrument otherwise than as
maker, drawer, or acceptor, is deemed to be indorser unless
he clearly indicates by appropriate words his intention to be
bound in some other capacity.
 Parol evidence to show the contrary is inadmissible.
NIL, Section 64. Liability of irregular indorser. - Where a
person, not otherwise a party to an instrument, places
thereon his signature in blank before delivery, he is liable as
indorser, in accordance with the following rules:
(a) If the instrument is payable to the order of a third person,
he is liable to the payee and to all subsequent parties.
(b) If the instrument is payable to the order of the maker or
drawer, or is payable to bearer, he is liable to all parties
subsequent to the maker or drawer.
(c) If he signs for the accommodation of the payee, he is liable
to all parties subsequent to the payee.
 Irregular indorsement is one for some purposes
other than to transfer the instrument, or one by a
stranger to the inst or by one not in the actual or
apparent chain of title, esp an indorsement made
prior to the delivery of the instrument to the payee.
Purpose is usually to add the signer’s credit to the
inst.
 Irregular indorser is one who not a party places
therein his signature in blank before delivery. His
name appears where we would naturally expect
another name. He is usually an accommodation
indorser.
  The provision has no application if it was signed after
the delivery.
VIII. Transfer without Negotiation
A. Assignment
1. Assignment without Negotiation, in General
Civil Code, Article 1624. An assignment of creditors and other
incorporeal rights shall be perfected in accordance with the
provisions of Article 1475. (n)
Civil Code, Article 1625. An assignment of a credit, right or
action shall produce no effect as against third person, unless
it appears in a public instrument, or the instrument is
recorded in the Registry of Property in case the assignment
involves real property. (1526)
Civil Code, Article 1626. The debtor who, before having
knowledge of the assignment, pays his creditor shall be
released from the obligation. (1527)
Civil Code, Article 1627. The assignment of a credit includes
all the accessory rights, such as a guaranty, mortgage, pledge
or preference. (1528)
Civil Code, Article 1628. The vendor in good faith shall be
responsible for the existence and legality of the credit at the
time of the sale, unless it should have been sold as doubtful;
but not for the solvency of the debtor, unless it has been so
expressly stipulated or unless the insolvency was prior to the
sale and of common knowledge.
Even in these cases he shall only be liable for the price
received and for the expenses specified in No. 1 of Article
1616.
The vendor in bad faith shall always be answerable for the
payment of all expenses, and for damages. (1529)
Civil Code, Article 1629. In case the assignor in good faith
should have made himself responsible for the solvency of the
debtor, and the contracting parties should not have agreed
upon the duration of the liability, it shall last for one year
only, from the time of the assignment if the period had
already expired.
If the credit should be payable within a term or period which
has not yet expired, the liability shall cease one year after the
maturity. (1530a)
Civil Code, Article 1475. The contract of sale is perfected at
the moment there is a meeting of minds upon the thing which
is the object of the contract and upon the price.
From that moment, the parties may reciprocally demand
performance, subject to the provisions of the law governing
the form of contracts. (1450a)
2. Transfer of Order Instrument without Indorsement
NIL, Section 49. Transfer without indorsement; effect of. -
Where the holder of an instrument payable to his order
transfers it for value without indorsing it, the transfer vests in
the transferee such title as the transferor had therein, and the
transferee acquires in addition, the right to have the
indorsement of the transferor. But for the purpose of
determining whether the transferee is a holder in due course,
the negotiation takes effect as of the time when the
indorsement is actually made.
 If not indorsed, the transferee cannot negotiate the
bill by indorsing it to another.
 Transaction operates as equitable assignment and
the transferee acquires the instrument subject to
defenses and equities (personal defenses) available
among prior parties.
 If the transferor had legal title, transferee acquires
the same and the right to have the indorsement.
 Before the indorsement, the transferee is not a
holder as he is not a payee or indorsee, not a bearer
because the inst is not payable to bearer. He does
not enjoy the presumption of ownership.
 Contemplates “for value” so if gratuitous, the donor-
transferee has no right to compel the other to make
the indorsement.
 Two rights:
o As a transferee in an equitable assignment
o Right to demand indorsement
3. Transfer of Instrument as Security
Civil Code, Article 2095. Incorporeal rights, evidenced by
negotiable instruments, bills of lading, shares of stock, bonds,
warehouse receipts and similar documents may also be
pledged. The instrument proving the right pledged shall be
delivered to the creditor, and if negotiable, must be indorsed.
(n)
 The instrument shall be delivered, if negotiable must
be indorsed.
 Creditor-pledgee is the one who can demand
indorsement.
B. Transfer by Operation of Law
1. Succession
Civil Code, Article 774. Succession is a mode of acquisition by
virtue of which the property, rights and obligations to the
extent of the value of the inheritance, of a person are
transmitted through his death to another or others either by
his will or by operation of law. (n)
Civil Code, Article 776. The inheritance includes all the
property, rights and obligations of a person which are not
extinguished by his death. (659)
Civil Code, Article 777. The rights to the succession are
transmitted from the moment of the death of the decedent.
(657a)
 What if the decedent becomes insolvent? Down.
2. Bankruptcy/Insolvency
RA 10142, Section 113, SECTION 113. Effects of the
Liquidation Order. — Upon the issuance of the Liquidation
Order: (b) legal title to and control of all the assets of the
debtor, except those that may be exempt from execution,
shall be deemed vested in the liquidator or, pending his
election or appointment, with the court;
IX. Legal Effects of Negotiation (1)
A. Completion of a Note Payable to Maker’s Order
NIL, Section 184, 2nd Sentence. Promissory note, defined. - A
negotiable promissory note within the meaning of this Act is
an unconditional promise in writing made by one person to
another, signed by the maker, engaging to pay on demand, or
at a fixed or determinable future time, a sum certain in money
to order or to bearer. Where a note is drawn to the maker's
own order, it is not complete until indorsed by him.
 Not complete until indorsed by him. In the absence
of delivery, the maker is not liable to any holder
where his indorsement is forged.
 The mere fact that a note payable to the maker’s
own order is not indorsed does not prevent recovery
on the debt for which it was given by the maker.
B. Creation of Liabilities
Ogden
Some differences as to liability of transferrers of nego
instruments.
Indorser in full or special indorser. Liability of such transferor
is the complete liability of indorser; proof of at least two
signatures is necessary to recover against such transferor
unless the parties are immediate parties to the instrument.
Indorser in blank. Liability is the complete liability of indorser;
proof of one signature is necessary.
Indorser or rather transferrer by delivery. Liability is binding
only as to immediate parties.
Indorser without recourse. Does not guarantee the fin ability
or solvency of any of the parties; no notice to the original
obligor is required to be given by the holder to such
transferrer.
Transferrer by assignment. Not responsible for the solvency
of the parties; holder thru him takes the instrument subject
to equities; holder must notify the original obligor of the
assignment
Transferrer holding title by operation of law. Should use care
or he will be bound personally when he indorses the
instrument.
Anomalous indorser. Liability of a first indorser (to the payee)
if the inst is payable to the order of a payee who is a third
party; as a second indorser if it is payable to the order of the
maker or drawer, or payable to bearer; liability not to payee,
liable as a second indorser if the signature is for the
accommodation of the payee.
B. 1. General Indorser (Indorser in Full)
NIL, Section 66. Liability of general indorser. - Every indorser
who indorses without qualification, warrants to all
subsequent holders in due course:
(a) The matters and things mentioned in subdivisions (a), (b),
and (c) of the next preceding section; and
(b) That the instrument is, at the time of his indorsement,
valid and subsisting;
And, in addition, he engages that, on due presentment, it
shall be accepted or paid, or both, as the case may be,
according to its tenor, and that if it be dishonored and the
necessary proceedings on dishonor be duly taken, he will pay
the amount thereof to the holder, or to any subsequent
indorser who may be compelled to pay it.
B. 4. Irregular/ Anomalous Indorser
NIL, Section 65 (a-c). Warranty where negotiation by delivery
and so forth. — Every person negotiating an instrument by
delivery or by a qualified indorsement warrants:
(a) That the instrument is genuine and in all respects what it
purports to be;
(b) That he has a good title to it;
(c) That all prior parties had capacity to contract;
xxx
 Does not warrant the payment, the transferee can
claim against the immediate transferor for breaches
of the warranties under the qualified indorser. The
only distinction between a QI and an transferor by
mere delivery is as regards to whom he’ll be liable.
 So cannot demand the full amount in the instrument
but the amount he actually paid plus damages
B. 2. Indorser by Qualified Indorsement (Indorser without
recourse)
NIL, Section 38. Qualified indorsement. - A qualified
indorsement constitutes the indorser a mere assignor of the
title to the instrument. It may be made by adding to the
indorser's signature the words "without recourse" or any
words of similar import. Such an indorsement does not impair
the negotiable character of the instrument.
NIL, Section 65. Warranty where negotiation by delivery and
so forth. — Every person negotiating an instrument by
delivery or by a qualified indorsement warrants:
(a) That the instrument is genuine and in all respects what it
purports to be;
(b) That he has a good title to it;
(c) That all prior parties had capacity to contract;
(d) That he has no knowledge of any fact which would impair
the validity of the instrument or render it valueless.
But when the negotiation is by delivery only, the warranty
extends in favor of no holder other than the immediate
transferee.
The provisions of subdivision (c) of this section do not apply to
a person negotiating public or corporation securities other
than bills and notes.
B. 3. Transferor through Negotiation by Delivery
NIL, Section 65. Warranty where negotiation by delivery and
so forth. — Every person negotiating an instrument by
delivery or by a qualified indorsement warrants:
(a) That the instrument is genuine and in all respects what it
purports to be;
(b) That he has a good title to it;
(c) That all prior parties had capacity to contract;
(d) That he has no knowledge of any fact which would impair
the validity of the instrument or render it valueless.
But when the negotiation is by delivery only, the warranty
extends in favor of no holder other than the immediate
transferee.
The provisions of subdivision (c) of this section do not apply to
a person negotiating public or corporation securities other
than bills and notes.
 NIL, Section 63. When a person deemed indorser. - A person
placing his signature upon an instrument otherwise than as
maker, drawer, or acceptor, is deemed to be indorser unless
he clearly indicates by appropriate words his intention to be
bound in some other capacity.
NIL, Section 64. Liability of irregular indorser. - Where a
person, not otherwise a party to an instrument, places
thereon his signature in blank before delivery, he is liable as
indorser, in accordance with the following rules:
(a) If the instrument is payable to the order of a third person,
he is liable to the payee and to all subsequent parties.
(b) If the instrument is payable to the order of the maker or
drawer, or is payable to bearer, he is liable to all parties
subsequent to the maker or drawer.
(c) If he signs for the accommodation of the payee, he is liable
to all parties subsequent to the payee.
B. 5. Indorser of an instrument negotiable by delivery
NIL, Section 67. Liability of indorser where paper negotiable
by delivery. — Where a person places his indorsement on an
instrument negotiable by delivery, he incurs all the liability of
an indorser.
 There is nothing to prevent the holder from
indorsing if he wants to. Liability will depend upon
whether it was qualified or unqualified.
 If he indorses specially, liable only to holders who
make title through his indorsement.
 If w/o qualification, incurs the liability of a general
indorser
B. 6. Indorser of multiple parts of bill in a set
NIL, Section 180. Liability of holder who indorses two or more
parts of a set to different persons. - Where the holder of a set
indorses two or more parts to different persons he is liable on
every such part, and every indorser subsequent to him is liable
on the part he has himself indorsed, as if such parts were
separate bills.
 Drawee is not liable for more than one part since his
order is to accept or pay only one part.
C. Creation of Rights of Holders
NIL, Section 191. Definition and meaning of terms. - In this
Act, unless the contract otherwise requires:
"Holder" means the payee or indorsee of a bill or note who is
in possession of it, or the bearer thereof;
 Includes not only persons possessing bearer
instruments but also payees and indorsees
possessing order instruments
 Payee – person to whom the person was originally
issued by the maker or drawer
 Indorsee – person to whom the instrument was
negotiated by indorsement and/or delivery
 If fails to qualify as a holder in due course, he is an
ordinary holder or assignee or transferee
C. 1. Rights of Holders, in General
All holders have all the ff rights, regardless if in due course or
not. (Chan v Tan) like the rt to collect but the other party can
have defenses (real or personal)
In the absence of defenses, the holder can collect.
C. 1. a. To sue on the instrument
NIL, Section 51. Right of holder to sue; payment. - The holder
of a negotiable instrument may to sue thereon in his own
name; and payment to him in due course discharges the
instrument.
 A holder even he be a holder only for collection
 To receive payment – payment in due course – made
at or after the maturity to the holder thereof, in
good faith and without notice that his title is
defective
o If paid before, the prior party who
reacquires the same may reissue and
further negotiate it.
 A transferee of unendorsed inst is certainly not a
“holder” under Sec 191, but he may do so if the
transfer vests in the transferee such title as the
transferor had and if the latter has legal title.
C. 1. b. To require acceptance on the face the bill
NIL, Section 133. Holder entitled to acceptance on face of bill.
- The holder of a bill presenting the same for acceptance may
require that the acceptance be written on the bill, and, if such
request is refused, may treat the bill as dishonored.
 Acceptance may be on the bill itself or on a separate
instrument. If on the ltter, ir may be either an
acceptance of an existing bill, or of a future or non-
existing bill.
 Not an essential required that the acceptance be
written, the holder has the right to have it done.
 If drawee refuses, bill can be treated as dishonored
and go against the person secondarily liable after
giving notice of dishonor.
C. 1. c. To insert true date of issuance
NIL, Section 13. When date may be inserted. - Where an
instrument expressed to be payable at a fixed period after
date is issued undated, or where the acceptance of an
instrument payable at a fixed period after sight is undated,
any holder may insert therein the true date of issue or
acceptance, and the instrument shall be payable accordingly.
The insertion of a wrong date does not avoid the instrument
in the hands of a subsequent holder in due course; but as to
him, the date so inserted is to be regarded as the true date.
 Specify date to determine the date of maturity
 Does not apply if payable on demand
 Insertion of a wrong date by one who knows the
true date avoids the instrument as to him or any one
claiming under him but not as to a subsequent
holder in due course
C. 1. d. To complete an incomplete/ blank but delivered
instrument
NIL, Section 14. Blanks; when may be filled. - Where the
instrument is wanting in any material particular, the person in
possession thereof has a prima facie authority to complete it
by filling up the blanks therein. And a signature on a blank
paper delivered by the person making the signature in order
that the paper may be converted into a negotiable instrument
operates as a prima facie authority to fill it up as such for any
amount. In order, however, that any such instrument when
completed may be enforced against any person who became
a party thereto prior to its completion, it must be filled up
strictly in accordance with the authority given and within a
reasonable time. But if any such instrument, after completion,
is negotiated to a holder in due course, it is valid and effectual
for all purposes in his hands, and he may enforce it as if it had
been filled up strictly in accordance with the authority given
and within a reasonable time.
C. 1. e. To treat an ambiguous instrument as either bill or
note
NIL, Section 17. Construction where instrument is ambiguous.
- Where the language of the instrument is ambiguous or there
are omissions therein, the following rules of construction
apply:
xxx
(e) Where the instrument is so ambiguous that there is doubt
whether it is a bill or note, the holder may treat it as either at
his election;
C. 1. f. To negotiate the instrument
NIL, Section 30. What constitutes negotiation. - An instrument
is negotiated when it is transferred from one person to
another in such manner as to constitute the transferee the
holder thereof. If payable to bearer, it is negotiated by
delivery; if payable to order, it is negotiated by the
indorsement of the holder and completed by delivery.
 Negotiation – transfer of a nego inst from one
person to another made in such a manner as to
constitute the transferee the holder thereof
 The payment of a check by the drawee bank is not a
negotiation and does not make the bank a holder,
neither payee nor indorsee.
C. 1. g. To convert a blank instrument into a special
indorsement
NIL, Section 35. Blank indorsement; how changed to special
indorsement. - The holder may convert a blank indorsement
into a special indorsement by writing over the signature of the
indorser in blank any contract consistent with the character of
the indorsement.
C. 1. h. To strike out indorsements not necessary to her/his
title
NIL, Section 48. Striking out indorsement. - The holder may at
any time strike out any indorsement which is not necessary to
his title. The indorser whose indorsement is struck out, and all
indorsers subsequent to him, are thereby relieved from
liability on the instrument.
 Example would be an instrument payable ro bearer
which remains the same in spite of the special
indorsements, and therefore may be negotiated by
mere delivery.
 If payable to order, and the indorsement is special,
the indorsement of the special indorsee is necessary
for further negotiation. If in blank, it becomes
payable to bearer.
 But the indorser may not strike out the payee’s
indorsement, since it is payable to order, it cannot
be validly negotiated without his indorsement.
C. 1. i. To require indorsement by a transferor who did not
indorse
NIL, Section 49. Transfer without indorsement; effect of. -
Where the holder of an instrument payable to his order
transfers it for value without indorsing it, the transfer vests in
the transferee such title as the transferor had therein, and the
transferee acquires in addition, the right to have the
indorsement of the transferor. But for the purpose of
determining whether the transferee is a holder in due course,
the negotiation takes effect as of the time when the
indorsement is actually made.
 If not indorsed, the transferee cannot negotiate the
bill by indorsing it to another.
 Transaction operates as equitable assignment and
the transferee acquires the instrument subject to
defenses and equities available among prior parties.
 If the transferor had legal title, transferee acquires
the same and the right to have the indorsement.
 Before the indorsement, the transferee is not a
holder as he is not a payee or indorsee, not a bearer
because the inst is not payable to bearer. He does
not enjoy the presumption of ownership.
 Contemplates “for value” so if gratuitous, the donor-
transferee has no right to compel the other to make
the indorsement.
C.2. Classes of holders
C. 2. a. Holder Not a Holder in Due Course
NIL, Section 58. 1st Sentence. When subject to original
defense. - In the hands of any holder other than a holder in
due course, a negotiable instrument is subject to the same
defenses as if it were non-negotiable. But a holder who
derives his title through a holder in due course, and who is
not himself a party to any fraud or illegality affecting the
instrument, has all the rights of such former holder in respect
of all parties prior to the latter.
C. 2. b. Holder for Value
NIL, Section 58, 1st Sentence. When subject to original
defense. - In the hands of any holder other than a holder in
due course, a negotiable instrument is subject to the same
defenses as if it were non-negotiable. But a holder who
derives his title through a holder in due course, and who is
not himself a party to any fraud or illegality affecting the
instrument, has all the rights of such former holder in respect
of all parties prior to the latter.
NIL, Section 26. What constitutes holder for value. - Where
value has at any time been given for the instrument, the
holder is deemed a holder for value in respect to all parties
who become such prior to that time.
NIL, Section 27. When lien on instrument constitutes holder
for value. — Where the holder has a lien on the instrument
arising either from contract or by implication of law, he is
deemed a holder for value to the extent of his lien.
NIL, Section 29. Liability of accommodation party. - An
accommodation party is one who has signed the instrument
as maker, drawer, acceptor, or indorser, without receiving
value therefor, and for the purpose of lending his name to
some other person. Such a person is liable on the instrument
to a holder for value, notwithstanding such holder, at the
time of taking the instrument, knew him to be only an
accommodation party.
C. 3. Holder in Due Course
NIL, Section 52. What constitutes a holder in due course. - A
holder in due course is a holder who has taken the
instrument under the following conditions:
(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.
NIL, Section 57. Rights of holder in due course. - A holder in
due course holds the instrument free from any defect of title
of prior parties, and free from defenses available to prior
parties among themselves, and may enforce payment of the
instrument for the full amount thereof against all parties
liable thereon.
NIL, Section 59. Who is deemed holder in due course. - Every
holder is deemed prima facie to be a holder in due course;
but when it is shown that the title of any person who has
negotiated the instrument was defective, the burden is on
the holder to prove that he or some person under whom he
claims acquired the title as holder in due course. But the last-
mentioned rule does not apply in favor of a party who
became bound on the instrument prior to the acquisition of
such defective title.
C. 4. Holder who derives title through a holder in due course
NIL, Section 58, 2nd Sentence. When subject to original
defense. - In the hands of any holder other than a holder in
due course, a negotiable instrument is subject to the same
defenses as if it were non-negotiable. But a holder who
derives his title through a holder in due course, and who is
not himself a party to any fraud or illegality affecting the
instrument, has all the rights of such former holder in respect
of all parties prior to the latter.
X. Legal Effects of Negotiation (2): Holder in Due Course
A. Who is a Holder in Due Course
NIL, Section 52. What constitutes a holder in due course. - A
holder in due course is a holder who has taken the
instrument under the following conditions:
(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.
1. The instrument is complete and regular upon its face
NIL, Section 191. Definition and meaning of terms. - In this
Act, unless the contract otherwise requires:
xxx
"Issue" means the first delivery of the instrument, complete
in form, to a person who takes it as a holder;
NIL, Section 1. Form of negotiable instruments. - An
instrument to be negotiable must conform to the following
requirements:
(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 to bearer; and
(e) Where the instrument is addressed to a drawee, he must
be named or otherwise indicated therein with reasonable
certainty.
NIL, Section 10. Terms, when sufficient. - The instrument
need not follow the language of this Act, but any terms are
sufficient which clearly indicate an intention to conform to
the requirements hereof.
NIL, Section 5. Additional provisions not affecting
negotiability. - An instrument which contains an order or
promise to do any act in addition to the payment of money is
not negotiable. But the negotiable character of an instrument
otherwise negotiable is not affected by a provision which:
(a) authorizes the sale of collateral securities in case the
instrument be not paid at maturity; or
(b) authorizes a confession of judgment if the instrument be
not paid at maturity; or
(c) waives the benefit of any law intended for the advantage
or protection of the obligor; or
(d) gives the holder an election to require something to be
done in lieu of payment of money.
But nothing in this section shall validate any provision or
stipulation otherwise illegal.
NIL, Section 6. Omissions; seal; particular money. - The
validity and negotiable character of an instrument are not
affected by the fact that:
(a) it is not dated; or
(b) does not specify the value given, or that any value had
been given therefor; or
(c) does not specify the place where it is drawn or the place
where it is payable; or
(d) bears a seal; or
 (e) designates a particular kind of current money in which
payment is to be made.
But nothing in this section shall alter or repeal any statute
requiring in certain cases the nature of the consideration to
be stated in the instrument.
2. S/he became the holder of it before it was overdue, and
without notice that it has been previously dishonored, if
such was the fact;
a. Before it was overdue
NIL, Section 85. Time of maturity. - Every negotiable
instrument is payable at the time fixed therein without
grace. When the day of maturity falls upon Sunday or a
holiday, the instruments falling due or becoming payable on
Saturday are to be presented for payment on the next
succeeding business day except that instruments payable on
demand may, at the option of the holder, be presented for
payment before twelve o'clock noon on Saturday when that
entire day is not a holiday.
NIL, Section 86. Time; how computed. - When the
instrument is payable at a fixed period after date, after sight,
or after that happening of a specified event, the time of
payment is determined by excluding the day from which the
time is to begin to run, and by including the date of
payment.
NIL, Section 166. Maturity of bill payable after sight;
accepted for honor. - Where a bill payable after sight is
accepted for honor, its maturity is calculated from the date
of the noting for non-acceptance and not from the date of
the acceptance for honor.
b. Without notice that it has been previously dishonored
NIL, Section 149. When dishonored by nonacceptance. - A
bill is dishonored by non-acceptance:
(a) When it is duly presented for acceptance and such an
acceptance as is prescribed by this Act is refused or can not
be obtained; or
(b) When presentment for acceptance is excused and the bill
is not accepted.
NIL, Section 83. When instrument dishonored by non-
payment. - The instrument is dishonored by non-payment
when:
(a) It is duly presented for payment and payment is refused
or cannot be obtained; or
(b) Presentment is excused and the instrument is overdue
and unpaid.
3. S/he took it in good faith and for value;
a. In good faith
Civil Code, Article 526. He is deemed a possessor in good
faith who is not aware that there exists in his title or mode of
acquisition any flaw which invalidates it.
He is deemed a possessor in bad faith who possesses in any
case contrary to the foregoing.
Mistake upon a doubtful or difficult question of law may be
the basis of good faith.
Civil Code, Article 527. Good faith is always presumed, and
upon him who alleges bad faith on the part of a possessor
rests the burden of proof.
Civil Code, Article 528. Possession acquired in good faith
does not lose this character except in the case and from the
moment facts exist which show that the possessor is not
unaware that he possesses the thing improperly or
wrongfully.
b. For value
NIL, Section 26. What constitutes holder for value. - Where
value has at any time been given for the instrument, the
holder is deemed a holder for value in respect to all parties
who become such prior to that time.
NIL, Section 27. When lien on instrument constitutes holder
for value. — Where the holder has a lien on the instrument
arising either from contract or by implication of law, he is
deemed a holder for value to the extent of his lien.
4. At the time it was negotiated to her/him, s/he had no
notice of any infirmity in the instrument or defect in the title
of the person negotiating it.
a. Defect in Title
NIL, Section 55. When title defective. - The title of a person
who negotiates an instrument is defective within the
meaning of this Act when he obtained the instrument, or any
signature thereto, by fraud, duress, or force and fear, or
other unlawful means, or for an illegal consideration, or when
he negotiates it in breach of faith, or under such
circumstances as amount to a fraud.
b. Notice
NIL, Section 56. What constitutes notice of defect. - To
constitutes notice of an infirmity in the instrument or defect
in the title of the person
negotiating the same, the person to whom it is negotiated
must have had actual knowledge of the infirmity or defect, or
knowledge of such facts that his action in taking the
instrument amounted to bad faith.
NIL, Section 54. Notice before full amount is paid. - Where
the transferee receives notice of any infirmity in the
instrument or defect in the title of the person negotiating the
same before he has paid the full amount agreed to be paid
therefor, he will be deemed a holder in due course only to
the extent of the amount therefore paid by him.
B.Other Rules to Identify a Holder in Due Course
1.S/he must be a holder.
NIL, Section 191, “Holder”. "Holder" means the payee or indorsee of
a bill or note who is in possession of it, or the bearer thereof;
2.A Holder is Presumed to be Holder in Due Course
NIL, Section 59. Who is deemed holder in due course. - Every holder
is deemed prima facie to be a holder in due course; but when it is
shown that the title of any person who has negotiated the
instrument was defective, the burden is on the holder to prove that
he or some person under whom he claims acquired the title as holder
in due course. But the last-mentioned rule does not apply in favor of
a party who became bound on the instrument prior to the acquisition
of such defective title.
3.Whether a Payee can be Holder in Due Course
4.Whether a financing company may be deemed a holder in
due course
5.If s/he holds a demand instrument, it must have been
negotiated within a reasonable length of time after its issue
NIL, Section 53. When person not deemed holder in due course. -
Where an instrument payable on demand is negotiated on an
unreasonable length of time after its issue, the holder is not deemed
a holder in due course.
 One requisite of due course holding is holder
became such “before it is overdue”
 If payable on demand, Sec. 53 applies. The fact that
the instrument has been in circulation for such a
length of time indicates that it has already been
dishonored.
NIL, Section 7. When payable on demand. - An instrument is payable
on demand:
(a) When it is so expressed to be payable on demand, or at sight, or
on presentation; or
(b) In which no time for payment is expressed.
Where an instrument is issued, accepted, or indorsed when overdue,
it is, as regards the person so issuing, accepting, or indorsing it,
payable on demand.
 1st par – inst is payable on demand between the
immediate parties and to subsequent ones
 2nd par – only immediate parties as between them
there is no difference between HDC and nonHDC
 An inst payable in demand is due and payable
immediately after delivery.
6. How a Transferee without Indorsement may become a
Holder in Due Course
NIL, Section 49. Transfer without indorsement; effect of. - Where the
holder of an instrument payable to his order transfers it for value
without indorsing it, the transfer vests in the transferee such title as
the transferor had therein, and the transferee acquires in addition,
the right to have the indorsement of the transferor. But for the
purpose of determining whether the transferee is a holder in due
course, the negotiation takes effect as of the time when the
indorsement is actually made.
 Transaction operates as equitable assignment and
the transferee acquires the instrument subject to
defenses and equities (personal defenses) available
among prior parties.
 If the transferor had legal title, transferee acquires
the same and the right to have the indorsement.
 Before the indorsement, the transferee is not a
holder as he is not a payee or indorsee, not a bearer
because the inst is not payable to bearer. He does
not enjoy the presumption of ownership.
 Time of determining if A is HDC is as of the time of
actual indorsement.
C. Rights of a Holder in Due Course
 May sue on the inst on his own name
 May receive payment and if it is due course, the inst
is discharged
 Holds the inst free from any defect of title of prior
parties
 Holds the inst free from defenses available to prior
parties among themselves
 May enforce payment of the inst for the full amount
thereof against all parties liable
C.1.As to defects of title, personal defenses
NIL, Section 57. Rights of holder in due course. - A holder in due
course holds the instrument free from any defect of title of prior
parties, and free from defenses available to prior parties among
themselves, and may enforce payment of the instrument for the full
amount thereof against all parties liable thereon.
 A nonHDC acquires the inst subject to all defenses,
whether personal or real, because he is treated as a
mere assignee of a non-negotiable paper.
C.2.As to the delivery upon issuance/indorsement of a
complete instrument
NIL, Section 16. Delivery; when effectual; when presumed. - Every
contract on a negotiable instrument is incomplete and revocable
until delivery of the instrument for the purpose of giving effect
thereto. As between immediate parties and as regards a remote
party other than a holder in due course, the delivery, in order to be
effectual, must be made either by or under the authority of the party
making, drawing, accepting, or indorsing, as the case may be; and, in
such case, the delivery may be shown to have been conditional, or
for a special purpose only, and not for the purpose of transferring
the property in the instrument. But where the instrument is in the
hands of a holder in due course, a valid delivery thereof by all parties
prior to him so as to make them liable to him is conclusively
presumed. And where the instrument is no longer in the possession
of a party whose signature appears thereon, a valid and intentional
delivery by him is presumed until the contrary is proved.
 Without the initial delivery, there can be no liability
thereon.
 Delivery is the final act essential to its consummation
as an obligation.
 If a complete instrument is in the hands of a HDC, a
valid delivery thereof by all parties to him is
conclusively presumed.
C.3. As to the completion of an incomplete but delivered
instrument
NIL, Section 14. Blanks; when may be filled. - Where the instrument
is wanting in any material particular, the person in possession
thereof has a prima facie authority to complete it by filling up the
blanks therein. And a signature on a blank paper delivered by the
person making the signature in order that the paper may be
converted into a negotiable instrument operates as a prima facie
authority to fill it up as such for any amount. In order, however, that
any such instrument when completed may be enforced against any
person who became a party thereto prior to its completion, it must
be filled up strictly in accordance with the authority given and within
a reasonable time. But if any such instrument, after completion, is
negotiated to a holder in due course, it is valid and effectual for all
purposes in his hands, and he may enforce it as if it had been filled
up strictly in accordance with the authority given and within a
reasonable time.
  The defense that the instrument had not been filled
up in accordance with the authority given and within
a reasonable time is not available as against a HDC.
C.4.As to the insertion of the date of issuance or acceptance
NIL, Section 13. When date may be inserted. - Where an instrument
expressed to be payable at a fixed period after date is issued
undated, or where the acceptance of an instrument payable at a
fixed period after sight is undated, any holder may insert therein the
true date of issue or acceptance, and the instrument shall be payable
accordingly. The insertion of a wrong date does not avoid the
instrument in the hands of a subsequent holder in due course; but as
to him, the date so inserted is to be regarded as the true date.
 Specify date to determine the date of maturity
 Does not apply if payable on demand
 Insertion of a wrong date by one who knows the
true date avoids the instrument as to him or any one
claiming under him but not as to a subsequent
holder in due course
C.5.As against a General Indorser
NIL, Section 66. Liability of general indorser. - Every indorser who
indorses without qualification, warrants to all subsequent holders in
due course:
(a) The matters and things mentioned in subdivisions (a), (b), and (c)
of the next preceding section; and
(b) That the instrument is, at the time of his indorsement, valid and
subsisting; And, in addition, he engages that, on due presentment, it
shall be accepted or paid, or both, as the case may be, according to
its tenor, and that if it be dishonored and the necessary proceedings
on dishonor be duly taken, he will pay the amount thereof to the
holder, or to any subsequent indorser who may be compelled to pay
it.
NIL, Section 65 (a-c). Warranty where negotiation by delivery and so
forth. — Every person negotiating an instrument by delivery or by a
qualified indorsement warrants:
(a) That the instrument is genuine and in all respects what it
purports to be;
(b) That he has a good title to it;
(c) That all prior parties had capacity to contract; xxx
C.6.As to an instrument materially altered
NIL, Section 124. Alteration of instrument; effect of. - Where a
negotiable instrument is materially altered without the assent of all
parties liable thereon, it is avoided, except as against a party who
has himself made, authorized, or assented to the alteration and
subsequent indorsers.
But when an instrument has been materially altered and is in the
hands of a holder in due course not a party to the alteration, he may
enforce payment thereof according to its original tenor.
 Material alteration is any change in the instrument
which affects or changes the liability of the parties in
any way (Sec 125)
 124  physical alterations (anextension of time
given by the holder to the principal maker without
the consent of a surety co-maker =/ alteration)
 Material alteration by the holder  discharge the
inst and all prior parties who didn’t give their
consent, whether favorable or unfavorable or
whether innocently or fraudulently made.
 Does not discharge the inst against a party who
made the alteration, party who authorized/assented,
and indorsers who indorsed subsequent to the
alteration.
 If it is apparent, party claiming should explain the
alteration or that he has no part therein, or that he
was HDC.
 If an altered inst is negotiated to a HDC, he may
enforce payment thereof accdg to its original tenor
regardless if innocent or fraudulent.
C.7.As to a part of a bill drawn in a set after payment
NIL, Section 182. Payment by acceptor of bills drawn in sets. - When
the acceptor of a bill drawn in a set pays it without requiring the part
bearing his acceptance to be delivered up to him, and the part at
maturity is outstanding in the hands of a holder in due course, he is
liable to the holder thereon.
 Drawee does not warrant every part of the bill in a
set that is indorsed but only the part accepted by
him. Upon paying the bill, acceptor should require
surrender of the part bearing his acceptance.
 If he fails to do so, he would still be liable to a HDC of
such part.
C.8.As to want of consideration
NIL, Section 28. Effect of want of consideration. - Absence or failure
of consideration is a matter of defense as against any person not a
holder in due course; and partial failure of consideration is a defense
pro tanto, whether the failure is an ascertained and liquidated
amount or otherwise.
C.9.As to omission to give notice of non-acceptance
NIL, 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.
 If dishonor by nonpayment, no holder subsequent
can be a HDC bc the maturity of the instrument
appears on the face, holder knows of such dishonor
from the fact that the inst is overdue.
 If omission to give notice of nonacceptance, it cant
prejudice HDC who may still present the inst to the
drawee for acceptance and notify the drawer and
indorsers if acceptance is refused.
C.10.As to renunciation by holder without notice
NIL, Section 122. Renunciation by holder. - The holder may expressly
renounce his rights against any party to the instrument before, at, or
after its maturity. An absolute and unconditional renunciation of his
rights against the principal debtor made at or after the maturity of
the instrument discharges the instrument. But a renunciation does
not affect the rights of a holder in due course without notice. A
renunciation must be in writing unless the instrument is delivered up
to the person primarily liable thereon.
 If renunciation in favor of the principal debtor, it
does not affect the rights of a HDC without notice.
 If the renunciation is made before maturity, it runs
the risk of being negotiated later so as to gain new
life in the hands of a HDC since renunciation is only a
personal defense.
 D.Rights of Multiple Holders in Due Course as to a Bill Drawn
in a Set
NIL, Section 179. Right of holders where different parts are
negotiated. - Where two or more parts of a set are negotiated to
different holders in due course, the holder whose title first accrues is,
as between such holders, the true owner of the bill. But nothing in
this section affects the right of a person who, in due course, accepts
or pays the parts first presented to him.
 Between HDCs, owner of the bill is the holder whose
title first accrues  holder to whom a part is first
negotiated.
 If the drawee in GF accepts or pays the part first
presented to him, he is protected and he can
rightfully refuse to accept or to pay the bill
presented by the HDC who first became the owner.
NIL, Section 181. Acceptance of bill drawn in sets. - The acceptance
may be written on any part and it must be written on one part only.
If the drawee accepts more than one part and such accepted parts
negotiated to different holders in due course, he is liable on every
such part as if it were a separate bill.
 Drawee is required to accept one part only in a set
but should he accept more than one and they are
negotiated to HDCs, he is liable to very holder of the
different parts as if separate bills
 If all parts are in the same holder, drawee is liable
only for one part.
Part 5
Acceptance of a Bill of Exchange
XI. Acceptance
A. Acceptance in General
1. Definition
NIL, Section 132, 1st sentence. Acceptance; how made, by
and so forth. - The acceptance of a bill is the signification by
the drawee of his assent to the order of the drawer. The
acceptance must be in writing and signed by the drawee. It
must not express that the drawee will perform his promise by
any other means than the payment of money.
 Applies only to bills and not to notes
 Unless he accepts, drawee is not bound as a party to
the bill; payee or any holder has no recourse against
him despite presence of sufficient funds
 Object of acceptance: to bind the drawee and make
him an actual party liable
 By accepting, drawee admits everything essential to
its validity
 overdue, to the drawee or some person authorized to accept
2. Freedom of the Drawee to Accept or Not
3. Effect of Acceptance
NIL, Section 127. Bill not an assignment of funds in hands of
drawee. - A bill of itself does not operate as an assignment of
the funds in the hands of the drawee available for the
payment thereof, and the drawee is not liable on the bill
unless and until he accepts the same.
 NIL, Section 141. Qualified acceptance. - An acceptance is
NIL, Section 62. Liability of acceptor. - The acceptor, by
accepting the instrument, engages that he will pay it
according to the tenor of his acceptance and admits:
(a) The existence of the drawer, the genuineness of his
signature, and his capacity and authority to draw the
instrument; and
(b) The existence of the payee and his then capacity to
indorse.
4. When Acceptance Made
NIL, Section 138. Acceptance of incomplete bill. - A bill may
be accepted before it has been signed by the drawer, or while
otherwise incomplete, or when it is overdue, or after it has
been dishonored by a previous refusal to accept, or by non
payment. But when a bill payable after sight is dishonored by
non-acceptance and the drawee subsequently accepts it, the
holder, in the absence of any different agreement, is entitled
to have the bill accepted as of the date of the first
presentment.
B. Who Makes Acceptance
1. Drawee, in General
NIL, Section 132, 1st sentence. Acceptance; how made, by
and so forth. - The acceptance of a bill is the signification by
the drawee of his assent to the order of the drawer. The
acceptance must be in writing and signed by the drawee. It
must not express that the drawee will perform his promise by
any other means than the payment of money.
NIL, Section 127. Bill not an assignment of funds in hands of
drawee. - A bill of itself does not operate as an assignment of
the funds in the hands of the drawee available for the
payment thereof, and the drawee is not liable on the bill
unless and until he accepts the same.
2. Two or More Drawees Jointly
NIL, Section 128. Bill addressed to more than one drawee. - A
bill may be addressed to two or more drawees jointly,
whether they are partners or not; but not to two or more
drawees in the alternative or in succession.
NIL, Section 145. Presentment; how made. - Presentment for
acceptance must be made by or on behalf of the holder at a
reasonable hour, on a business day and before the bill is
or refuse acceptance on his behalf; and
(a) Where a bill is addressed to two or more drawees who are
not partners, presentment must be made to them all unless
one has authority to accept or refuse acceptance for all, in
which case presentment may be made to him only; x x x
qualified which is: x x x
 (e) The acceptance of some, one or more of the drawees but
not of all.
NIL, Section 142. Rights of parties as to qualified acceptance.
- 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. Where 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 a qualified
acceptance, or subsequently assent thereto. When the
drawer or an indorser receives notice of a qualified
acceptance, he must, within a reasonable time, express his
dissent to the holder or he will be deemed to have assented
thereto.
3. Drawee Bank
NIL, Section 191. “Bank.” Definition and meaning of terms. -
In this Act, unless the contract otherwise requires:
"Bank" includes any person or association of persons carrying
on the business of banking, whether incorporated or not;
NIL, Section 187. Certification of check; effect of. - Where a
check is certified by the bank on which it is drawn, the
certification is equivalent to an acceptance.
C. Kinds of Acceptance
NIL, Section 139. Kinds of acceptance. - An acceptance is
either general or qualified. A general acceptance assents
without qualification to the order of the drawer. A qualified
acceptance in express terms varies the effect of the bill as
drawn.
1. General Acceptance
NIL, Section 140. What constitutes a general acceptance. - An
acceptance to pay at a particular place is a general
acceptance unless it expressly states that the bill is to be paid
there only and not elsewhere.
2. Qualified Acceptance
NIL, Section 141. Qualified acceptance. - An acceptance is
qualified which is:
(a) Conditional; that is to say, which makes payment by the
acceptor dependent on the fulfillment of a condition therein
stated;
(b) Partial; that is to say, an acceptance to pay part only of
the amount for which the bill is drawn;
(c) Local; that is to say, an acceptance to pay only at a
particular place;
(d) Qualified as to time;
(e) The acceptance of some, one or more of the drawees but
not of all.
NIL, Section 142. Rights of parties as to qualified acceptance.
- 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. Where 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 a qualified
acceptance, or subsequently assent thereto. When the
drawer or an indorser receives notice of a qualified
acceptance, he must, within a reasonable time, express his
dissent to the holder or he will be deemed to have assented
thereto.
XII. Procedure for Acceptance
A. Presentment for Acceptance
1. When presentment for acceptance required/excused
NIL, Section 143. When presentment for acceptance must be
made. - Presentment for acceptance must be made:
(a) Where the bill is payable after sight, or in any other case,
where presentment for acceptance is necessary in order to fix
the maturity of the instrument; or
(b) Where the bill expressly stipulates that it shall be
presented for acceptance; or
(c) Where the bill is drawn payable elsewhere than at the
residence or place of business of the drawee.
In no other case is presentment for acceptance necessary in
order to render any party to the bill liable.
NIL, Section 148. Where presentment is excused. -
Presentment for acceptance is excused and a bill may be
treated as dishonored by non-acceptance in either of the
following cases:
(a) Where the drawee is dead, or has absconded, or is a
fictitious person or a person not having capacity to contract
by bill.
(b) Where, after the exercise of reasonable diligence,
presentment can not be made.
(c) Where, although presentment has been irregular,
acceptance has been refused on some other ground.
2. Effect of failure to make timely presentment for
acceptance
NIL, Section 144. When failure to present releases drawer
and indorser. - Except as herein otherwise provided, the
holder of a bill which is required by the next preceding
section to be presented for acceptance must either present it
for acceptance or negotiate it within a reasonable time. If he
fails to do so, the drawer and all indorsers are discharged.
NIL, Section 193. Reasonable time, what constitutes. - In
determining what is a "reasonable time" regard is to be had
to the nature of the instrument, the usage of trade or
business with respect to such instruments, and the facts of
the particular case.
Code of Commerce, Article 572. If the holder of a letter of
credit does not make use thereof within the period agreed
upon with the drawer of the same, or, in the absence of a
fixed period, within six months from its date in any point in
the Philippines, and within twelve months outside thereof, it
shall be void in fact and in law.
3. Procedure for Presentment
a. How presentment made
NIL, Section 145. Presentment; how made. - Presentment for
acceptance must be made by or on behalf of the holder at a
reasonable hour, on a business day and before the bill is
overdue, to the drawee or some person authorized to accept
or refuse acceptance on his behalf; and
(a) Where a bill is addressed to two or more drawees who are
not partners, presentment must be made to them all unless
one has authority to accept or refuse acceptance for all, in
which case presentment may be made to him only;
(b) Where the drawee is dead, presentment may be made to
his personal representative;
(c) Where the drawee has been adjudged a bankrupt or an
insolvent or has made an assignment for the benefit of
creditors, presentment may be made to him or to his trustee
or assignee.
b. When presentment made; effect when time is
insufficient
NIL, Section 146. On what days presentment may be made. -
A bill may be presented for acceptance on any day on which
negotiable instruments may be presented for payment under
the provisions of Sections seventy-two and eighty-five of this
Act. When Saturday is not otherwise a holiday, presentment
for acceptance may be made before twelve o'clock noon on
that day.
NIL, Section 147. Presentment where time is insufficient. -
Where the holder of a bill drawn payable elsewhere than at
the place of business or the residence of the drawee has no
time, with the exercise of reasonable diligence, to present the
bill for acceptance before presenting it for payment on the
day that it falls due, the delay caused by presenting the bill
for acceptance before presenting it for payment is excused
and does not discharge the drawers and indorsers.
c. Electronic Presentment for Acceptance
Republic Act No. 8792 (2000), Section 7. Legal Recognition of
Electronic Documents - Electronic documents shall have the
legal effect, validity or enforceability as any other document
or legal writing, and -
(a) Where the law requires a document to be in writing, that
requirement is met by an electronic document if the said
electronic document maintains its integrity and reliability
and can be authenticated so as to be usable for subsequent
reference, in that -
i. The electronic document has remained complete and
unaltered, apart from the addition of any endorsement and
any authorized change, or any change which arises in the
normal course of communication, storage and display; and
ii. The electronic document is reliable in the light of the
purpose for which it was generated and in the light of all
relevant circumstances.
(b) Paragraph (a) applies whether the requirement therein is
in the form of an obligation or whether the law simply
provides consequences for the document not being
presented or retained in its original from.
(c) Where the law requires that a document be presented or
retained in its original form, that requirement is met by an
electronic document if-
i. There exists a reliable assurance as to the integrity of the
document from the time when it was first generated in its
final form; and
ii. That document is capable of being displayed to the
person to whom it is to be presented: Provided, That no
provision of this Act shall apply to vary any and all
requirements of existing laws on formalities required in the
execution of documents for their validity.
For evidentiary purposes, an electronic document shall be the
functional equivalent of a written document under existing
laws.
This Act does not modify any statutory rule relating to
admissibility of electronic data massages or electronic
documents, except the rules relating to authentication and
best evidence.
B. Expression of Acceptance
1. General Rule
a. In writing and signed; promise of payment of
money
NIL, Section 132. Acceptance; how made, by and so forth. -
The acceptance of a bill is the signification by the drawee of
his assent to the order of the drawer. The acceptance must
be in writing and signed by the drawee. It must not express
that the drawee will perform his promise by any other means
than the payment of money.
NIL, Section 18. Liability of person signing in trade or
assumed name. - No person is liable on the instrument whose
signature does not appear thereon, except as herein
otherwise expressly provided. But one who signs in a trade or
assumed name will be liable to the same extent as if he had
signed in his own name.
b. On the face of the Bill
NIL, Section 133. Holder entitled to acceptance on face of bill.
- The holder of a bill presenting the same for acceptance may
require that the acceptance be written on the bill, and, if such
request is refused, may treat the bill as dishonored.
c. Completed by delivery or notification
NIL, Section 191: “Acceptance”, “Delivery”. Definition and
meaning of terms. - In this Act, unless the contract otherwise
requires:
"Acceptance" means an acceptance completed by delivery or
notification;
xxx
"Delivery" means transfer of possession, actual or
constructive, from one person to another;
NIL, Section 16. Delivery; when effectual; when presumed. -
Every contract on a negotiable instrument is incomplete and
revocable until delivery of the instrument for the purpose of
giving effect thereto. As between immediate parties and as
regards a remote party other than a holder in due course, the
delivery, in order to be effectual, must be made either by or
under the authority of the party making, drawing, accepting,
or indorsing, as the case may be; and, in such case, the
delivery may be shown to have been conditional, or for a
special purpose only, and not for the purpose of transferring
the property in the instrument. But where the instrument is
in the hands of a holder in due course, a valid delivery thereof
by all parties prior to him so as to make them liable to him is
conclusively presumed. And where the instrument is no
longer in the possession of a party whose signature appears
thereon, a valid and intentional delivery by him is presumed
until the contrary is proved.
d. Date of Acceptance
NIL, Section 11. Date, presumption as to. - Where the
instrument or an acceptance or any indorsement thereon is
dated, such date is deemed prima facie to be the true date of
the making, drawing, acceptance, or indorsement, as the case
may be.
NIL, Section 13. When date may be inserted. - Where an
instrument expressed to be payable at a fixed period after
date is issued undated, or where the acceptance of an
instrument payable at a fixed period after sight is undated,
any holder may insert therein the true date of issue or
acceptance, and the instrument shall be payable accordingly.
The insertion of a wrong date does not avoid the instrument
in the hands of a subsequent holder in due course; but as to
him, the date so inserted is to be regarded as the true date.
2. Other Modes of Acceptance
a. Certification of a Check
NIL, Section 187. Certification of check; effect of. - Where a
check is certified by the bank on which it is drawn, the
certification is equivalent to an acceptance.
b. Acceptance of a Bill Drawn in a Set
NIL, Section 181. Acceptance of bill drawn in sets. - The
acceptance may be written on any part and it must be written
on one part only. If the drawee accepts more than one part
and such accepted parts negotiated to different holders in
due course, he is liable on every such part as if it were a
separate bill.
c. Acceptance on a separate instrument (Extrinsic
Acceptance)
NIL, Section 134. Acceptance by separate instrument. -
Where an acceptance is written on a paper other than the bill
itself, it does not bind the acceptor except in favor of a
person to whom it is shown and who, on the faith thereof,
receives the bill for value.
d. Promise to Accept (Virtual Acceptance)
NIL, Section 135. Promise to accept; when equivalent to
acceptance. - An unconditional promise in writing to accept a
bill before it is drawn is deemed an actual acceptance in favor
of every person who, upon the faith thereof, receives the bill
for value.
e. Acceptance through Retention or Destruction of Bill
NIL Section 137. Liability of drawee returning or destroying
bill. - Where a drawee to whom a bill is delivered for
acceptance destroys the same, or refuses within twenty-four
hours after such delivery or within such other period as the
holder may allow, to return the bill accepted or non-accepted
to the holder, he will be deemed to have accepted the same.
NIL, Section 136. Time allowed drawee to accept. - The
drawee is allowed twenty-four hours after presentment in
which to decide whether or not he will accept the bill; the
acceptance, if given, dates as of the day of presentation.
3. Date of Acceptance
NIL, Section 11. Date, presumption as to. - Where the
instrument or an acceptance or any indorsement thereon is
dated, such date is deemed prima facie to be the true date of
the making, drawing, acceptance, or indorsement, as the case
may be.

NIL, Section 13. When date may be inserted. - Where an
instrument expressed to be payable at a fixed period after
date is issued undated, or where the acceptance of an
instrument payable at a fixed period after sight is undated,
any holder may insert therein the true date of issue or
acceptance, and the instrument shall be payable accordingly.
The insertion of a wrong date does not avoid the instrument
in the hands of a subsequent holder in due course; but as to
him, the date so inserted is to be regarded as the true date.
NIL, Section 138, 2nd sentence. Acceptance of incomplete bill.
- A bill may be accepted before it has been signed by the
drawer, or while otherwise incomplete, or when it is overdue,
or after it has been dishonored by a previous refusal to
accept, or by non payment. But when a bill payable after sight
is dishonored by non-acceptance and the drawee
subsequently accepts it, the holder, in the absence of any
different agreement, is entitled to have the bill accepted as of
the date of the first presentment.
XIII. Dishonor by Non-Acceptance; Notice; Protest
A. Dishonor by Non-Acceptance
1. When a bill is dishonored by non-acceptance
NIL, Section 149. When dishonored by nonacceptance.
- A bill is dishonored by
non-acceptance:
(a) When it is duly presented for acceptance and such
an acceptance as is prescribed by this Act is refused or
can not be obtained; or
(b) When presentment for acceptance is excused and
the bill is not accepted.
NIL, Section 150. Duty of holder where bill not
accepted. - Where a bill is duly presented for acceptance
and is not accepted within the prescribed time, the
person presenting it must treat the bill as dishonored by
nonacceptance or he loses the right of recourse against
the drawer and indorsers.
2. Effect of Dishonor by Non-Acceptance
NIL, Section 151. Rights of holder where bill not
accepted. - When a bill is dishonored by nonacceptance,
an immediate right of recourse against the drawer and
indorsers accrues to the holder and no presentment for
payment is necessary.
Civil Code, Article 1525(2)
NCC 1525. The seller of goods is deemed to be an
unpaid seller within the meaning of this Title:
(1) When the whole of the price has not been paid or
tendered;
(2) When a bill of exchange or other negotiable
instrument has been received as conditional payment,
and the condition on which it was received has been
broken by reason of the dishonor of the instrument, the
insolvency of the buyer, or otherwise.
Civil Code, Article 1503, last paragraph
xxx
Where the seller of goods draws on the buyer for the
price and transmits the bill of exchange and bill of lading
together to the buyer to secure acceptance or payment
of the bill of exchange, the buyer is bound to return the
bill of lading if he does not honor the bill of exchange,
and if he wrongfully retains the bill of lading he acquires
no added right thereby. If, however, the bill of lading
provides that the goods are deliverable to the buyer or to
the order of the buyer, or is indorsed in blank, or to the
buyer by the consignee named therein, one who
purchases in good faith, for value, the bill of lading, or
goods from the buyer will obtain the ownership in the
goods, although the bill of exchange has not been
honored, provided that such purchaser has received
delivery of the bill of lading indorsed by the consignee
named therein, or of the goods, without notice of the
facts making the transfer wrongful. (n)
B. Notice of Dishonor for Non-Acceptance
1. Necessity of Notice
NIL, 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.
2. When Notice not necessary
a. When Notice cannot be given
NIL, 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.
b. Waiver of Notice
NIL, Section 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.
NIL, Section 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.
c. Waiver of Protest
NIL, 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.
d. As to the drawer of a Bill
NIL, 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) Where the drawer and drawee are the same person;
(b) When the drawee is fictitious person or a person not
having
capacity to contract;
(c) When the drawer is the person to whom the
instrument is presented for payment;
(d) 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.
e. As to Indorsers
NIL, 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.
3. To whom Notice of Dishonor given
a. Secondarily liable parties
NIL, 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.
b. To agent/partners
NIL, 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.
NIL, 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.
c. When party is deceased
NIL, 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.
d. Notice to persons jointly liable
NIL, Section 100. Notice to persons jointly liable. -
Notice to joint persons who are not partners must be
given to each of them unless one of them has authority
to receive such notice for the others.
e. Notice to bankrupt
NIL, 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 trustee
or assignee.
4. By whom given
NIL, 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.
NIL, 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 given notice,
whether that party be his principal or not.
NIL, 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.
5. When Notice should be given a. Standard of
Timeliness
NIL, 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 this Act.
NIL, 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) 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.
(b) If given at his residence, it must be given before the
usual hours of rest on the day following.
(c) If sent by mail, it must be deposited in the post office
in time to reach him in usual course on the day following.
NIL, Section 104. Where parties reside in 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.
b. Compliance with Period for Notice
NIL, 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.
NIL, 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.
NIL, 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.
6. Where it should be given
NIL, 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) 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
(b) If he lives in one place and has his place of business
in another, notice may be sent to either place; or
(c) 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.
7. Form of Notice
NIL, 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.
NIL, 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.
8. Effect of Notice
NIL, 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.
NIL, 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.
NIL, 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.
9. Omission has no effect on subsequent holder in
due course
NIL, 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.
C. Protest for Non-Acceptance
1. Necessity of Protest for Non-Acceptance a.
Dishonor of Foreign Bill
NIL, 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.
NIL, Section 152. In what cases protest necessary. -
Where a foreign bill appearing on its face to be such is
dishonored by nonacceptance, it must be duly protested
for nonacceptance, by nonacceptance is dishonored and (d) The demand made and the answer given, if any, or
where such a bill which has not previously been the fact that the
dishonored by nonpayment, it must be duly protested for drawee or acceptor could not be found.
nonpayment. If it is not so protested, the drawer and
indorsers are discharged. Where a bill does not appear NIL, Section 160. Protest where bill is lost and so forth.
on its face to be a foreign bill, protest thereof in case of - When a bill is lost or destroyed or is wrongly detained
dishonor is unnecessary. from the person entitled to hold it, protest may be made
on a copy or written particulars thereof.
b. When protest dispensed with
3. Format of Protest for Non-Acceptance
NIL, Section 159. When protest dispensed with. -
Protest is dispensed with by any circumstances which
would dispense with notice of dishonor. Delay in noting
or protesting is excused when 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, the bill must
be noted or protested with reasonable diligence.

2. How Protest for Acceptance is Made

a. When and Where is should be made

NIL, Section 155. Protest; when to be made. - When a

bill is protested, such protest must be made on the day
of its dishonor unless delay is excused as herein
provided. When a bill has been duly noted, the protest
may be subsequently extended as of the date of the
noting.

NIL, Section 156. Protest; where made. - A bill must be

protested at the place where it is dishonored, except that
when a bill drawn payable at the place of business or
residence of some person other than the drawee has
been dishonored by nonacceptance, it must be protested
for nonpayment at the place where it is expressed to be
payable, and no
further presentment for payment to, or demand on, the
drawee is necessary.

b. By whom made

NIL, Section 154. Protest, by whom made. - Protest

may be made by:
(a) A notary public; or
(b) By any respectable resident of the place where the
bill is dishonored, in the presence of two or more
credible witnesses.

c. Form of Protest

NIL, Section 153. Protest; how made. – The protest

must be annexed to the bill or must contain a copy
thereof, and must be under the hand and seal of the
notary making it and must specify:
(a) The time and place of presentment;
(b) The fact that presentment was made and the manner
thereof;
(c) The cause or reason for protesting the bill;