NEGO

5 Formal requirements for a negotiable inst

1) in writing and signed by the maker or
drawer
2) contains an unconditional promise to
pay or order to pay a sum certain in
money
3) payable to order or bearer
4) payable on demand or at a fixed or
determinable future time
5) if bill of exchange, identify payee with
reasonable specificity

4 general stages of liftem of ni

1. issuance
2. party a passes it on to b or c
indorsement
3. In ca case of bill of exchange, there must
be acceptance
---ASK THE DRAWEE if u accept it or not
4. Discharge or payment of the instrument
“NIL does not a drawee or bank to always
pay the negotiable instrument. Pwede lng
breach of contract. Not applicable to
promissory note.

3 special legal characteristics of a

negotiable isntruments

1. it can be transferred by way of

negotiation to a holder who can
thereafter claim the instrument in his
own name
a. if it is payable to the order of (Erika),
it will be transferrable by
endorsement then deliver
2. presumption of valuable
consideration regarding the note
a. it is presumed that the instrument
was transferred by negotiation with
valuable consideration
3. it vests rights in a holder in due course
in the HAND OF A HOLDER IN DUE
COURSE [has most # of rights in NIL], he
has good title to the instrument even if
he received it from a person who did not
 3have good title. He can have a better
title than his thief and conman
predecessor to sign. Basta good faith ka
mehn
a. in consequence, the holder in due
course can claim notwithstanding
personal defenses invoked by the
payor. ONLY REAL DEFENSES CAN
STOP

General classes of NI

* unconditionable promise to pay 

promissory note aka note

if I am a bank, I promise to pay x para

magkaroon ng pambayad c y

*unconditionable order to pay  bill of

exchange aka bill
(3 parties)
----I hereby order the bank to pay to x (check)

---may pera ako sau, pay x draft

NEGOTIABILITY OF BILLS AND NOTES
1. If it conforms to the 5 formal
requisites ---memorize
2. 4 general stages
3. 3 general characteristics
4. 2 either bill of exchange or
promissory note --memorize
5. Negotiable Instrument!!!!!

Consent, Object, Consideration

Civil code--- founded on general rules of

justice~~~ natural law

Natural law—what is fair and just in a

given situation

I. NIL- founded on customs and practices

of merchants
--not founded in the need for justice
II. Purpose of NIL – NOT JUSTICE!!
facilitate commercial trnasactions thru
commercial papers. Para may confidence
sa paper
--in the hands of the holder in due course
-- not individual jsutic,e but larger
common good

HISTORICAL ORIGINS OF NEGOTIABLE

INSTRUMENTS

Facio ut facias
I do and you do—feudalism
Lord protects slave, slave administers

Do ut des
I give that you give
--barter: exchange of goods

attachment sa bill- ALLONGE

pay to bearr
or sign in blank?

Acceptance can be done before maturity

Payment can only be done after maturity

Pag upon demand—khit kalian u can have

him pay
----demand within a reasonable time

notice of dishonor—I hereby inform u na he

didn't want to accept
---for 2ndary liability

pag foreign cuurency, notice of dishonor

dapat notarized  formal pROTEST
(notarized notice)

you trust the 4 corners of the document - to

facilitate trade
-- 1. Trust the terms
2. every signature is a person u can sue

- insolvent ka di depensa. BUT FORGERY

IS A REAL DEFENSE. Nasa document ooo
GR: You are only bound if u sign
Gr: altered document, discharged or void
E: holder in due course pweds pa rin
collect, but ung orig amount lng

If not holder in due course (not in good

faith)-- u can be stopped from collecting
kahit personal defense

BAR:
1. nEGO INStruemnt ba?
2. Defenses

Part 1, sec2 concerning he general

provisions
Part 2, sec 3 formal requirements and the
non-required

Sec 1-3

Sec. 136. 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.

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. (16a)

Article 2270. The following laws and regulations are hereby repealed:

(2) The provisions of the Code of Commerce governing sales, partnership, agency, loan, deposit and
guaranty;

(4) All laws, Acts, parts of Acts, rules of court, executive orders, and administrative regulations which are
inconsistent with this Code. (n)

Effectivity
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. chanrobles law

Sec. 33. Kinds of indorsement. - An indorsement may be either

special or in blank; and it may also be either restrictive or
qualified or conditional.
33