NEGOTIABLE INSTRUMENTS LAW

June 1, 2011 NIL: Act 2301 If not negotiable instrument as defined by law, it is not. However, it can be a VALID CONTRACT. HOLDER IN DUE COURSE: any subsequent owner of a negotiable instrument CHECK: specific kind of Bill of Exchange; drawee or drawer PAYEE: to whom the money is to be paid DRAWEE: one who is directed to pay No date: payable on demand June 6, 2011 PROMISSORY NOTE: a promise in writing to pay a sum certain in money.

Unit 222 Cityland 10 CHECK: Bill of exchange drawn on a bank payable on demand. MAKER: executes the promissory note PAYEE: to whom the money is to be paid Account No. Account Name Check No. Date

Pay to the order of: ______________ P____ Pesos _______________________________ BPI Columns, Makati

signature

DRAWER: executes the BOE DRAWEE: ordered to pay PAYEE: to whom the money is to be paid ACCEPTOR: drawee who agrees to the order of the drawer HOLDER: payee of a BOE who is in possession of it or the bearer Negotiation is the mode of transferring an instrument. TRANSFERABILITY. Payable to bearer: delivery Payable to order: indorsement completed by delivery INDORSEMENT: writing of ones own name on the back of the instrument

5000

Makati June 6, 2011

For the value received, I promise to pay to the order of Mr. X the amount of five thousand pesos on or before September 10, 2011 at BDO SM Makati. (Sgd.) Jane Caraig

BILL OF EXCHANGE: an order in writing addressed to someone requiring him to pay a sum certain in money. 5000 Makati June 6, 2011

5 days after sight, pay to the order of Mr. X the sum of five thousand pesos. Value received and charge the same amount to the account of (Sgd.) Jane Caraig To Mr. Y

SECTION 1. FORM OF NEGOTIABLE INSTRUMENT 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. payable to order or to bearer; and

e. when the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty. Negotiable note: a-d Negotiable bill: a-e Written. Otherwise, theres nothing to be passed from hand to hand. Any words equivalent to an order that will show the drawers will that the money should be paid. Equivalent words of PROMISE: agree, will pay, shall pay PROMISE must be UNCONDITIONAL or ABSOLUTE. It is not subject to a condition. CONDITION: an uncertain future event or an unknown past event; MAY OR MAY NOT HAPPEN EVENT: certain to happen, the time of the happening is uncertain SUM PAYABLE MUST BE CERTAIN It should be determinabe and written on the face of the instrument. As well as the denomination. IMPORTANT: principal shall be CERTAIN Must be payable in money only BECAUSE money is the one standard of value in actual business LEGAL TENDER: currency made suitable by law for the purpose of tender of payment of debts. LEGAL TENDER IN THE PHILIPPINES: Philippine peso and half peso Philippine subsidiary coins of 20 centavos Philippine minor coins of nickel and copper Notes and coins issued by the BSP CHECK IS NOT LEGAL TENDER The creditor or oblige cannot be compelled to accept it as valid tender of payment.

Negotiable instrument is just a substitute for money. The delivery of it does not mean payment. The obligation is not yet extinguished until the check has been encashed. It may be accepted if authorized by law or with the consent of the creditor. A check which has been cleared and credited to the account of the creditor shall be equivalent to a delivery to the creditor in cash.

Instruments may be payable in foreign money. SEC 6. RA 529: It asserts that the right of the obligee to require payment in gold or any currency other than the Philippine currency is against public policy, and null and void. An instrument payable in foreign money converted into an instrument payable in Philippine money would be negotiable if it complies with all the requirements of SEC 1. It does not defeat the claim of the creditor. PAYABLE TO ORDER OR TO BEARER: Assigns instead of order :possessor instead of bearer FORMALITIES: important! For the security of mercantile transactions. It distinguishes a negotiabe instrument from the ordinary non-transferrable written contract. DETERMINATION OF NEGOTIABILITY: Requirements of SEC 1 On the instrument itself

SECTION 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 d. with exchange, whether at a fixed rate or at the current rate; or

e. with costs of collection oran attorneys fee in case the payment shall not be made at maturity. When interest is stipulated but not specified, the legal rate applies. 12% for loans or forbearance of money. Where the interest is not stipulated, the legal interest will be paid when the debtor incurs DELAY. ESCALATION CLAUSE: the agreed interest may be increased in the event that the maximum rate of interest in increased by law. DESCALATION: decrease INSTALLMENTS: Fixed or determinable Stated Maturity of installments is essential ACCELERATION CLAUSE: hastens the payment of the whole note EXCHANGE: difference in value of the same amount of money in different countries

Even if the payment is made out of a particular fund, if it is not restricted to that fund, it is still negotiable. AFTER SIGHT: from the date it is presented or from the date of its issuance ACCELERATION NOTES: these make it possible for the maker to pay at an earlier date or for the holder to require payment of the instrument at an earlier date

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 occurrence of a specified event which is certain to happen, though the time of happening be uncertain. An instrument payable upon contingency is not negotiable, and the the happening of the event does not cure the defect.

SECTION 3. WHEN PROMISE IS UNCONDITIONAL An unqualified order or promise to pay in 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. FUND FOR REIMBURSEMENT: the drawee pays the payee from his own account and then pays himself from the particular fund FUND FOR PAYMENT: the drawee pays the payee directly from the particular fund. It is subject to a condition that the funds indicated are sufficient.

SECTION 5. ADDITIONAL PROVISIONS NOT AFFECTING NEGOTIABILITY An instrument which contains an order or promise to do any act in addition to 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.

TEST OF NEGOTIABILITY: WON the promise would give rise to a cause of action for breach of contract if the promise is not done. SALE OF COLLATERAL SECURITIES: Before or on the date of maturity, the promise constitutes payment of money only. After maturity: can be done because it ceases to be a negotiable instrument already. CONFESSIONS OF JUDGMENT: 1. COGNOVIT ACTIONEM: written confession of an action by a defendant authorizing any attorney to confess judgment and issue execution. 2. RELICTA VERIFICATIONE: confession of judgment made after plea is pleaded. *VOID by reason of PUBLIC POLICY 1. prevalence of fraud 2. bargains away the right to a day in court 3. strikes down the right of appeal accorded by the statute WARRANT OF ATTORNEY: an instrument in writing authorizing any attorney to appear in any court in behalf of the person giving it to confess judgment

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 and indorsed, when overdue, it is, as regards to the person so issuing, accepting or indorsing it, payable on demand. Where blank for time for payment is unfilled, it is payable on demand.

SECTION 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 a 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 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. PAYABLE TO ORDER: pay to anybody designated by the person

SECTION 6. OMMISSIONS; SEAL; PARTICULAR MONEY The validity and negotiable character of an instrument is 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 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. CONSIDERATION is presumed!