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.

NOTES:

 If instrument calls for an ACT OTHER THAN payment of money – NOT NEGOTIABLE
 A note giving the MAKER the right to ascertain the AMOUNT payable – NON-NEGOTIABLE
 A promise to pay P1000 in “two installments” or “in installments” – NON-NEGOTIABLE
 Acceleration at option of HOLDER – NON-NEGOTIABLE
 Acceleration at option of MAKER – NEGOTIABLE
- (The MAKER can avoid acceleration by paying the installments on their due date)
 The promise/order to pay “w/ exchange” – NEGOTIABLE
- (EXCHANGE – charge for providing funds, may be fixed/current rate; eg. compensating balance)
 Payment in FOREIGN CURRENCY – NEGOTIABLE
 Payment w/ EXCHANGE RATE – NEGOTIABLE
- applicable only to foreign bills
 If payment not made at maturity, then there is ADDED amount due (eg. Cost of collection, attorney’s fee) –
NEGOTIABLE
 Attorney’s fee may be REDUCED by courts if found UNREASONABLE; if attorney’s fee NOT specified, it shall be in
REASONABLE SUM.
 A provision of “to pay ALL costs, charges and expenses incurred by PAYEE in ANY legal proceedings for collection
of debt” – NON-NEGOTIABLE
 Acquisition of instrument AFTER MATURITY
- a transferee acquiring an instrument when it is OVERDUE would NOT BE HDC & would hold instrument
subject to defenses, as if it were NON-NEGOTIABLE.

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

NOTES:

 Promise is NOT UNCONDITIONAL – an order/promise to pay OUT OF particular fund (direct source of payment) –
NON-NEGOTIABLE
 *The test of NEGOTIABILITY is whether the instrument carries the GENERAL PERSONAL CREDIT of
MAKER/DRAWER.
 *A BARE acknowledgment of indebtedness
o (eg. IOU, due A P1000, for value received) ALONE – NON-NEGOTIABLE. But if words like DUE A OR
ORDER, DUE B OR BEARER – NEGOTIABLE although NO express promissory words
 *In BofE, there must be an ORDER TO PAY one party to another, OTHERWISE, it is NON-NEGOTIABLE.
 o ORDER – command/imperative direction
o A MERE request IS NOT an ORDER (eg. I request you to pay, I wish you would pay, I authorize you to pay)

 The MERE use of POLITE words like PLEASE does NOT convert ORDER into REQUEST.
 The NOTE/BILL must be payable ABSOLUTELY.
 It is IMMATERIAL whether the DRAWEE obeys the order to pay or not. The NEGOTIABILITY of a bill DEPENDS
upon the TERMS OF ORDER. The DRAWER has his liability under the law.
 If there is CONDITION or subject to CONTINGENCY – NON-NEGOTIABLE
 If language used is AMBIGUOUS or OBSCURE, courts usually decide IN FAVOR OF NEGOTIABILITY.
 A MERE recital of consideration for instrument is STILL UNCONDITIONAL – NEGOTIABLE (statement merely
identifies the transaction w/c gives rise to instrument)
o (eg. I promise to pay to order of P1000 being the price of the car this day sold and delivered to me; as
per our contract; accordance w/ our contract)
 If promise/order is subject to TERMS AND CONDITIONS – NON-NEGOTIABLE
o (As already stated, the negotiability of instrument is to be determined by what appears on its FACE AND
NOT ELSEWHERE.)

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.

NOTES:

 An instrument payable w/ CONTINGENCY (an uncertain future event, or an event w/c may or may not happen) is
NON-NEGOTIABLE, and the happening of the event DOES NOT cure the defect.
 DEMAND INSTRUMENT – payment at anytime
 TERM INSTRUMENT – payabe only UPON ARRIVAL of time for payment
 AFTER SIGHT – means AFTER the instrument is SEEN by the DRAWEE upon presentment of acceptance
 DETERMINABLE FUTURE TIME – means a time that can be DETERMINED W/ CERTAINTY AFTER execution of
instrument