Function and importance of

negotiable instruments.
*Use as a substitute for money.
*Constitute at present, the media of
exchange for most commercial
transactions.
*Serve as a medium of credit
transaction
Characteristic of features of
negotiable instruments
*Negotiability

a.) Authorizes the sale of collateral

securities in case the instrument be
not paid at maturity
b.) Authorizes a confession of
judgment if the instrument be not paid
at maturity
c.) Waives the benefit of any law
intended for the advantage or
protection of the obligor
d.) Gives the holder an election to
require something to be done in lieu of
payment of money

Two type of instrument

Section 6. Omissions; Seal;

particular money. Not affected by
the fact

a.) Promissory Note

a.) It is not dated

b.) Bills of exchange

b.) Does not specify the value given,

or that any value has been given
therfor

*Accumulation of Secondary Contracts

Sec 2. Certainty as to sum: what

constitutes. The sum payable is a
sum certain.
a.) With interest

c.) Does not specify the place it is

drawn or the place where it is payable

b.) By stated installments

d.) Bears a seal.

c.) By stated installments with a

provision that, upon default in
payment of any installment or of
interest, the whole shall become due

e.) Designates a particular kind of

current money in which payment is to
be made.

d.) With exchange, whether at a fixed

rate or at the current rate
e.) With cost of collection or an
attorneys fee in case payment shall
not be made at maturity.
Section 3. When promise is
unconditional
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
b.) A statement of the transaction
which gives rise to the instrument.
Section 4. Determinable future
time; what constitutes.
a.) at a fixed period after date or sight
b.) On or before a fixed or
determinable future time specified
therin
c.) On or at a fixed period after the
occurrence of specified event which is
certain to happen, though the time of
happening be uncertain.
Section 5. Not affecting
negotiability

Section 7. When payable on

demand.
a.) Where it is expressed to be payable
on demand, or at sight, or on
presentation
b.) In which no time for payment is
epressed
Section 8. When payable to order.
The instrument is payable to
order where it is drawn payable to
order of a specified person.
a.) A payee who is not maker, drawer,
or drawee
b.) The drawer or maker
c.) The drawee
d) Two or more payees
f.) The holder of an office for the time
being
Section 9. When Payable to
bearer.
a.) When it is expressed to be so
payable
b.) When it is payable to a person
name therin or bearer

c.) When it is payable to the order of a

fictitous or non- exsting person, and
such fact was known to the person
making it so payable

No person is liable on the instrument

whose signature does not appear
thereon, except as herin otherwise
expressly provides.

d.) When the name of the payee does

not purport to be the name of any
person

Section 21. Signature by

procuration; effect

e.) When the only or last indorsement

is an indorsement in blank
Section 11. Presumption as to
date.
If the instrument bears a date, such
date is deemed prima facie to be true
date of the making, drawing,
acceptance or indorsement, as the
case may be.
Section 12. Anti-dated and postdated.
The instrument is not invalid for the
reason only that it is for an illegal or
fraudulent purpose.
Anti dated contains a date earlier
than the true date of its issuance.
Post Dated contains a date later than
true date of its issuance,
Section 13. When date may be
inserted.
a.) Where an instrument is payable at
a fixed period after date but is issued
undated
b.) Where an instrument is payable at
a fixed period after sight but the
acceptance is undated.
Section 18. Liability of person
signing in trade or assumed
name.

It gives a warning that the agent has

but a limited authority, so that it is the
duty of the person dealing with him to
inquire into the extent of his authority.
The principal is bound only in case the
agent in so signing acted within the
actual limits of his authority
Sec 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.
Sec 23. Forged Signature effect.
It is wholly inoperative and so no right
can be acquired through the forged
signature.
Sec 52. What constitutes a holder
in due course.
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 had been previously
dishonoured, if such was the fact
c.) The he took it in good faith and for
value
d.) That a 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.