Negotiable Instruments Complete

ZPG & ASSOCIATES (Zambales.Pablo.
Gonzales)
ACT NO. 2031
Febrar! 03" 1#11
T$E NEGOTIA%&E INST'()ENTS &A*
I. FO') AN+ INTE'P'ETATION

Se,-.on 1. Form of negotiable instruments. -
An .ns-rmen- -o be ne/o-.able ms-
,on0orm -o -1e 0ollo2.n/ re3.remen-s4
(a) I- ms- be .n 2r.-.n/ an5 s./ne5
b! -1e ma6er or 5ra2er7
(b) )s- ,on-a.n an n,on5.-.onal
8rom.se or or5er -o 8a! a sm ,er-a.n
.n mone!7
(,) )s- be 8a!able on 5eman5" or a-
a 9:e5 or 5e-erm.nable 0-re -.me7
(5) )s- be 8a!able -o or5er or -o
bearer7 an5
(e) *1ere -1e .ns-rmen- .s
a55resse5 -o a 5ra2ee" 1e ms- be
name5 or o-1er2.se .n5.,a-e5 -1ere.n
2.-1 reasonable ,er-a.n-!.
What are the requisites for a negotiable
note?
A Promissory note, to be negotiable , must
conform to the following requirements:
1. it must be in writing and signed by the
maker;
2. Must contain an unconditional romise to
ay a sum certain in money
!. must be ayable on demand or at a "#ed
or determinable future time
$. must be ayable to order or bearer
What are the requisites of a negotiable bill?
A bill of e#change, to be negotiable, must
conform to the following requirements:
1. in writing and signed by the drawer
2. contain an unconditional; order to ay a
sum certain in money
!. ayable on demand or at a "#ed or
determinable future time
$. ayable to order or bearer
%. the drawee must be named or otherwise
indicated therein with reasonable certainty
What is meant by in writing and signed
by the maker or drawer?
&he instrument must in writing for if it
were not there would be nothing to be negotiated
or assed from hand to hand. &he medium in
which it is written and where it is written is not
imortant. 't may be in ink, rint or encil. 't may
be in archment, cloth, leather or any other
substitute of aer. (hat is imortant is it is in
writing and such writing is caable of being
transferred or negotiated. )e.g. A note written on
a blackboard is not negotiable*. 'n signing, the
maker thereby binds himself to be liable for the
note )+ec. 1,* 't may be the maker-s full name or
his surname only or signature. 't may be in initials
or numbers. .ut , where the name is not signed,
the holder must ro/e that what is written is
intended as the signature of the erson sought to
be charged. 'n fact, for as long as it be shown
that such was adoted and used by the maker as
his signature, it is su0cient. )1ote: he who makes
it ossible for the commission of fraud, bears the
loss*.
What is meant by an unconditional
promise/order to pay a sum certain in
money?
&he romise to ay must be on the note itself
although it is not necessary to use the word
2romise.3 't is enough that
1. equi/alent words be used such as 2agree3,
2will ay3, 2shall ay3; or that
2. words imlying a romise are contained in
the instrument such as 24ood to3 or
2ayable on demand3 )e.g. 4ood to 5 or
order P16.*
Mere acknowledgement of a debt is not
enough but an acknowledgment followed by the
hrase 2to be aid3 imlies a romise to ay. ) '
acknowledge a debt of P16 to be aid on
demand* 7urther, an instrument which stated 2
8ue 5 or order on demand P163 is negotiable
because 2to be aid3 though not stated, is
required by the sense of the statement. +imilarly,
it is not necessary that the word 2order3 be used.
9qui/alent words or those which show the
drawer- will that the money should be aid are
su0cient. All that must be remembered is that
the .:9 is more than mere asking of a fa/or and
that it is an instrument demanding a right. &hus,
a mere requests to ay or mere authori;ation to
ay is not enough to render it negotiable for it
gi/es a discretion whether or not to ay. &o be
unconditional or absolute, the order or romise to
ay must not be sub<ect to a condition ) a
contingent e/ent*. 'f the e/ent is certain to
haen, it is not contingent nor is it a condition.
=nder Art. 11>? of the 1@@, a condition is a )1*
future and uncertain e/ent; or )2* a ast e/ent
unknown to the arties )+ee also +ec. ! for
further meaning*.
&he amount of money to be aid must be
determinable )at the time of issue* by insection
2
ZPG & ASSOCIATES (Zambales.Pablo.Gonzales)
and must be stated lainly on the face of the
instrument. &he sum is certain e/en is
mathematical comutation is still needed
because the amount to be aid is still
ascertainable from the instrument alone without
reference to any outside source. )see also +ec. 2*.
&he ayment must be for a sum of money . &o be
negotiable, the bill or note must not be ayable in
goods, wares, roerty or ser/ice nor in bonds,
stocks, checks or foreign bills. &he reason for the
requirement is that money is the one standard of
/alue in actual business. 9#cetion to this rule is
+ec. %d. an instrument ayable in money or
goods, ser/ices et. at the otion of the holder.
7urther, while A.A. %2? requires that the
discharge of obligations be in legal tender of the
Philiines the instrument-s negotiability and
/alidity are not aBected by the fact that another
currency is stiulated )+ec. Ce* 'n such case, the
indemnity to be allowed should be e#ressed in
Phil. @urrency on the basis of the current rate of
e#change at the time of ayment. .ut, to be
negotiable, the instrument must state the
denomination in which it is to be ayable.
When is an instrument payable on demand?
'n accordance with +ec. >, a note is ayable on
demand:
. (hen it is so e#ressed to be ayable on
demand or at sight or on resentation;
!. when no time for ayment is e#ressed;
". when an instrument is issued, acceted or
indorsed when o/erdueD as to the arty so
issuing, acceting or indorsing, it is
ayable on demand.
When is an instrument payable at a #$ed or
determinable future time?
't is ayable at a "#ed time when a date is
seci"ed. .ut where the date is gi/en as 28ec. 2,3
it is not "#ed because the time of ayment is not
determinable as the year is not gi/en.
'n accordance with +ec. $, an instrument is
ayable at a determinable future time when it is
e#ressed to be ayableD
1. at a "#ed eriod 2after date or sight; or
2. on or before a "#ed or determinable future
time seci"ed therein; or
!. on or at a "#ed eriod after the occurrence
of a seci"ed e/ent which is certain to
haen though the time of haening be
uncertain.
When is an instrument payable to order? %o
bearer?
'n accordance with +ec. ?b, an instrument is
ayable to bearer when
1. it is e#ressed to be so ayable;
2. it is ayable to a seci"ed erson or
bearer;
!. it is ayable to the order of a "ctitious or
nonDe#isting erson and this fact is known
to the maker or drawer;
$. when the name of the ayee does not
urort to be the name of any erson;
%. when the only or last indorsement is an
indorsement in blank
't is not imortant that the words 2order3 or 2
bearer3 be used. 't is su0cient that words of
similar imort are ut in its lace. )e.g. Pay to
. or assigns or 2assignees3 or 2holder3 or
2ossessor3*. A note ayable to the order or
bearer is ayable to order and such
instrument may be negotiated only by
bearer-s indorsement. )&he bearer is the
ayee.*
When is the indication of the drawee&s
name su'cient?
't is su0cient that the name of the erson
on whom a bill is drawn should aear on the
face of the instrument. :therwise, the
instrument would not be negotiable. .ut,
under +ec. 1$, the drawee-s name may be
omitted and be "lled in under imlied
authority like any other blank. )A9M9M.9A:
+ec. 1$ refers to the incomlete but deli/ered
instruments and that the authority to "ll u
should be in strict accordance with the
authority gi/en*. Also, an accetance by the
drawee may suly the omission of a
designation and renders said instrument
negotiable.
Se,. 2. What constitutes certainty as to
sum. ; T1e sm 8a!able .s a sm ,er-a.n
2.-1.n -1e mean.n/ o0 -1.s A,-" al-1o/1 .-
.s -o be 8a.54
1. 2.-1 .n-eres-7 or
2. b! s-a-e5 .ns-allmen-s7 or
(,) b! s-a-e5 .ns-allmen-s" 2.-1 a
8ro<.s.on -1a-" 8on 5e0al- .n
8a!men- o0 an! .ns-allmen- or o0
.n-eres-" -1e 21ole s1all be,ome 5e7
or
(5) 2.-1 e:,1an/e" 21e-1er a- a 9:e5
ra-e or a- -1e ,rren- ra-e7 or
(e) 2.-1 ,os-s o0 ,olle,-.on or an
a--orne!=s 0ee" .n ,ase 8a!men- s1all
no- be ma5e a- ma-r.-!.
What is the rule regarding the sum payable
being de#nite and certain?

3
+ince a 1' is a de/ice intended to take the
lace of money, it is therefore essential that it
reresents a "#ed amount of money. &he amount
of money must be determinable by insection
and must be stated lainly on the faceE body of
the instrument.
When can it be said that the sum is certain
despite the stipulation of interest?
A stiulation of interest does not render
the sum to be aid as uncertain because gi/en
the interest rate, the amount due can be easily
comuted. Pro/ided the rincial sum is certain,
the amount due becomes a matter of
mathematical comutation ascertainable from
the face of the instrument alone. 7urther, where
interest is stiulated but not seci"ed )as to rate*,
the note is still negotiable and the rate is to be
understood to be the legal rate which is 12F for
loans or forbearance of money.
*1a- .s an es,ala-.on ,lase> A 5e;
es,ala-.on ,lase>
An escalation clause is a stiulation in an
agreement ertaining to a loan or forbearance of
money, goods or credits ro/iding that the rate of
interest agreed uon may be increased in the
e/ent that the alicable ma#imum rate of
interest, is increased by law or by the Monetary
.oard. 8eDescalation clause is stiulation in the
agreement that the rate of interest agreed uon
shall be reduced if the ma#imum rate of interest
is decreased by law or by the Monetary .oard.
&he escalation clause is /alid if there is also a deD
escalation clause in the agreement.
*1a- are -1e re3.remen-s as re/ar5s
8a!men- o0 .ns-allmen-s>
1. &he amount of installment must be
stated G )the sum ayable for each
installment must not be uncertain.
't can be ascertainable.*
2. &he maturity date of each
installment must be "#ed or
determinable.
*1a- .s -1e rle on a,,elera-.on ,lase>
An instrument, which is to be aid in, stated
installment is not rendered nonDnegotiable
desite a ro/ision that uon default of any
installment or of interest, the whole amount shall
become due. +uch is called an acceleration
clause because it hastens the ayment of the
whole note. &he failure to ay any installment
renders the balance of the amount immediately
due and demandable. An acceleration clause
does not make the instrument ayable uon a
contingency )thus, nonDnegotiable* since
ayment is surely to be made and its time of
ayment is surely come. 'n a sense, it is deemed
to be ayable on or before a "#ed or
determinable future time seci"ed therein
)sec.$b*
*1a- .s -1e rle on 8ro<.s.ons 0or
e:,1an/e>
9#change is de"ned to be the diBerence in /alue
of the same amount of money in diBerent
countries. &he e#change may be at the )1*
current rate, or at a )2* "#ed rate indicated
therein. +uch ro/ision does not render the
instrument nonDnegotiable because while the rate
of e#change is not always the same and while it is
technically true that resort must be had to
e#trinsic e/idence to ascertain what it is, yet the
current rate of e#change between 2 laces at a
articular date is a matter of common
commercial knowledge, or at least easily
ascertained by any one so that the arties can
always, without di0culty, ascertain the e#act
amount necessary to discharge the aer. 't must
be remembered that this ro/ision alies only to
instruments drawn in one country and ayable in
another. (here an instrument is drawn in one
country and ayable in the same country, there
can be no e#change, so a ro/ision for ayment
of e#change may be disregarded.
*1! 5oesn?- a s-.8la-.on 0or a--orne!?s
0ees ren5er -1e sm n,er-a.n>
Although such a stiulation will make the sum
ayable after maturity uncertain, it will not aBect
the certainty of the sum ayable at maturity and,
therefore will not aBect the negotiability of the
instrument in which it is stiulated. &he urose
of the stiulation is not to gi/e the lender a larger
comensation for the loan than the law allows,
but to safeguard the lender against future loss or
damage by being comelled to retain counsel to
institute <udicial roceedings to collect his debt.
&he ro/ision refers only to reasonable attorney-s
fees.
*1a- .s -1e e@e,- o0 ne/o-.able a0-er -1e
no-e .s o<er5e>
After the date of maturity, the instrument will no
longer be negotiable in the full commercial sense,
that is, in the sense that any transferee acquiring
it would not be a holder in due course, as he
acquire the instrument after it is o/erdue. +ince
the transferee would not be a holder in due
A
course )H'8@*, he would hold the instrument
sub<ect to the defenses as if it were nonD
negotiable.
Se,. 3. When promise is unconditional. - An
n3al.9e5 or5er or 8rom.se -o 8a! .s
n,on5.-.onal 2.-1.n -1e mean.n/ o0 -1.s A,-
-1o/1 ,o8le5 2.-14
(a) An .n5.,a-.on o0 a 8ar-.,lar 0n5
o- o0 21.,1 re.mbrsemen- .s -o be
ma5e or a 8ar-.,lar a,,on- -o be
5eb.-e5 2.-1 -1e amon-7 or

(b) A s-a-emen- o0 -1e -ransa,-.on
21.,1 /.<es r.se -o -1e .ns-rmen-.
%- an or5er or 8rom.se -o 8a! o- o0 a
8ar-.,lar 0n5 .s no- n,on5.-.onal.
*1a- are -1e 5.@eren,e be-2een 8ar A. an5
-1e las- 8ar. o0 se, 3.>
'n the "rst case, the articular fund indicated is
not the direct source of ayment. 't is only the
source of reimbursement. &he ayment of the
instrument is not made sub<ect to the condition of
a/ailability or su0ciency of funds in the said
account. Here, the drawee "rst ays the ayee
from his own funds, then, afterwards, the drawee
ays himself from the funds indicated. &he order
or romise to ay is uon the general credit of
the drawer or the maker. 'n the second case, the
articular fund indicated is the direct source of
ayment. Here, there is only one act, which is
that the drawee ays directly from the fund
indicated. &he ayment is, thus, sub<ect to the
condition that the funds indicated are su0cient.
.ut the funds indicated may or may not be
su0cient so that the instrument is rendered nonD
negotiable because ayment is conditional.
9g. 1
st
caseD ays to . or order P16 and
reimburses yourself out of the money in your
hands.
2
nd
caseD ays to . or order P16 out of my
art of the estate.
.ut, where the sum ayable is to be aid out of a
articular fund yet ayment is not restricted to
such fund alone, negotiability is not destroyed.
9g. Pay to . or order P16 out of the monthly
rental due from A and secured to be aid by my
.P' account. +imilarly, where the instrument
indicates a articular account to be debited with
the amount, the instrument remains
unconditional and negotiable. &he instrument, in
this case, is to be "rst aid and afterwards, the
articular account will be debited. &he ayment is
not sub<ect to the su0ciency of account to be
debited. 9g. Pay to . or order P16 and charge the
same to my account.
*1a- .s a s-a-emen- o0 -ransa,-.on>
'nstruments are not issued without any
transaction uon which they are based. &he
statement of transaction is the reason gi/ing rise
to the issuance of the instrument and the mere
fact that it. 's stated in the instrument will not
make the romise or order conditional. 9g. Pay to
. or order P16 for ayment of a debt.
.ut where the romise or order is made
sub<ect to the terms and conditions of the
transaction stated, then the instrument is
rendered nonDnegotiable. .esides would be
contrary to the rule that the negotiability of an
instrument )whether there is an unDconditional
order or romise* must be determined only from
the document itself and not elsewhere. 9g. '
romise to ay . or order P16 sub<ect to the
terms contained in the contract between A I @.
1ormally, an instrument-s negotiability is not
aBected by the fact that it is secured by a
mortgage. .ut, where such ro/ision become in
the note will render the amount uncertain or
where such ro/isions become art of the note,
e/en though they are not in the note itself, the
instrument is rendered nonDnegotiable. &hus,
where the note is not only secured by a mortgage
but also made sub<ect to its ro/isions, the note
is nonDnegotiable.

Se,. A. (eterminable future time) what
constitutes. ; An .ns-rmen- .s 8a!able a- a
5e-erm.nable 0-re -.me" 2.-1.n -1e
mean.n/ o0 -1.s A,-" 21.,1 .s e:8resse5 -o
be 8a!able4
A- a 9:e5 8er.o5 a0-er 5a-e or
s./1-7 or
(b) On or be0ore a 9:e5 or
5e-erm.nable 0-re -.me s8e,.9e5
-1ere.n7 or
(,) On or a- a 9:e5 8er.o5 a0-er -1e
o,,rren,e o0 a s8e,.9e5 e<en- 21.,1
.s ,er-a.n -o 1a88en" -1o/1 -1e -.me
o0 1a88en.n/ be n,er-a.n.
An .ns-rmen- 8a!able 8on a
,on-.n/en,! .s none/o-.able" an5 -1e
1a88en.n/ o0 -1e e<en- 5oes no- ,re -1e
5e0e,-.
*1a- 5oes Ba- a 9:e5 8er.o5 a0-erC s./1-D
mean>
E
2After sight3 means after the drawee has seen
the instrument uon resentments doe
accetance. &he instrument becomes ayable
after a "#ed eriod subsequent to date of
resentment to the drawee.
*1a- .s -1e rle on B-1e o,,rren,e o0 a
s8e,.9e5 e<en-sD>
't is essential that the seci"ed e/ent must be
certain to haen although the time of haening
is uncertain. 'f the e/ent seci"ed is not certain
to haen, then it is a condition and the
instrument would be rendered nonDnegotiable, it
is ayable uon a contingency and, according to
the law, the haening of the contingency or
condition does not cure the defect.
*1en an .ns-rmen- s-a-es" B I 8rom.se -o
8a! F or or5er P1000" 10 5a!s a0-er G?s
5ea-1. S/5.z. .s -1.s .ns-rmen- ne/o-.able
an5 21!>
&he instrument is negotiable because ayment is
still certain to be made )unconditionally*, i.e. J-s
death will surely haen.
.ut if in the re/ious e#amle, K romises to ay
16 days before the death of L J, would such
instrument be negotiableM
1o, because the maturity is uncertain )as no one
can tell e#actly when another erson will die*.
7urther, when J is already dead, the instrument
will already be o/er due and will not be
negotiable in its full commercial sense.

Se,. E. *dditional pro+isions not a,ecting
negotiability. ; An .ns-rmen- 21.,1
,on-a.ns an or5er or 8rom.se -o 5o an! a,-
.n a55.-.on -o -1e 8a!men- o0 mone! .s no-
ne/o-.able. %- -1e ne/o-.able ,1ara,-er o0
an .ns-rmen- o-1er2.se ne/o-.able .s no-
a@e,-e5 b! a 8ro<.s.on 21.,14
a-1or.zes -1e sale o0 ,olla-eral
se,r.-.es .n ,ase -1e .ns-rmen-
be no- 8a.5 a- ma-r.-!7 or

(b) a-1or.zes a ,on0ess.on o0
H5/men- .0 -1e .ns-rmen- be no-
8a.5 a- ma-r.-!7 or

(,) 2a.<es -1e bene9- o0 an! la2
.n-en5e5 0or -1e a5<an-a/e or
8ro-e,-.on o0 -1e obl./or7 or

(5) /.<es -1e 1ol5er an ele,-.on -o
re3.re some-1.n/ -o be 5one .n l.e
o0 8a!men- o0 mone!.
%- no-1.n/ .n -1.s se,-.on s1all
<al.5a-e an! 8ro<.s.on or s-.8la-.on
o-1er2.se .lle/al.
*1a- .s -1e /eneral rle as re/ar5s -1e
re3.remen- o0 a55.-.onal a,-s ,on-a.ne5 .n
an .ns-rmen->
&he general rule is that an instrument must not
contain an order or romise to do any act in
addition to ayment of money. :therwise the
instrument would be rendered nonDnegotiable.
.ut the rest of negotiability is whether or not the
romise to do any additional act would gi/e rise
to a cause of action for breach of contract if the
said act is not done, if it does, the instrument is
rendered nonDnegotiable. 9g. ' romise to ay 5
or order P1666 and 1 horse. +uch is nonD
negotiable because it contains an additional act
to be erformed aside from ayment of money.
9g. . ' romise to ay 5 or order P1666 and a
horse. +uch is also nonDnegotiable because the
choice to ay money or deli/er the horse is at the
otion of the debtor. .ut, if the hrase 2 at the
otion of 5 2 is added to the instrument, such is
negotiable because the otion lies with the holder
rendering the sum ayable still certain.
*1a- are -1e e:,e8-.ons -o -1e /eneral
rle>
&he negotiable character of an instrument
otherwise negotiable is not aBected by a
ro/ision whichD
1. Authori;es the sale of collateral securities
in case of failure to ayD the additional act
to be erformed is to be e#ecuted after
the date of maturity. .efore the date of
maturity, no additional act is to be
erformed e#cet the ayment of money.
9g. 2 ' romise to ay 5 or order P166 on
the 8ecember !1,1?%6 ro/ided that if '
fail to do so, 5 may sell the rin ' deli/ered
to secure ayment of the note. +gd. A.
2. Authori;es a confession of <udgment if the
instrument be not aidD the additional act
I
is to be erformed after the date of
maturity when the instrument ceases to
be negotiable in its full commercial sense.
A ower of attorney to confess <udgment
anytime before maturity renders a note
nonDnegotiable. 7urther, in the Philiines,
confessions of <udgment ha/e been
declared /oid as against ublic olicy
because
a. &hey enlarge the "eld for fraud. 2.
Promissor bargains away his day in
court and the eBect of the
instrument is to strike down the
right of aeal accorded by the
statute. .ut while the ro/ision as
to confession of <udgment is not
rendered /alid )because it is illegal*
by /irtue of the last ar. of sec.%,
the instrument is ne/er the less
negotiable.
)c*. (ai/es the bene"t of any law intended for
the ad/antage or rotection of the
obligatorD such as the rights to )1*
resentment for ayment )sec.>6*; )2* notice
of honor )sec.116*; )!* rotest )sec.111*.
&hese being rights, they may be wai/ed
unless the wai/er be contrary to law, ublic
olicy, etc. )art.C of 1@@.*
)d* 4i/es the holder an election to require
something other than moneyD e/en if there is
an additional act, the instrument still remains
negotiable ro/ided that the right to choose is
in the hands of the holder.

Se,. I. -missions) seal) particular money. -
T1e <al.5.-! an5 ne/o-.able ,1ara,-er o0 an
.ns-rmen- are no- a@e,-e5 b! -1e 0a,- -1a-4
.- .s no- 5a-e57 or

(b) 5oes no- s8e,.0! -1e <ale /.<en"
or -1a- an! <ale 1a5 been /.<en
-1ere0or7 or

(,) 5oes no- s8e,.0! -1e 8la,e 21ere
.- .s 5ra2n or -1e 8la,e 21ere .- .s
8a!able7 or

(5) bears a seal7 or

(e) 5es./na-es a 8ar-.,lar 6.n5 o0
,rren- mone! .n 21.,1 8a!men- .s -o
be ma5e.
%- no-1.n/ .n -1.s se,-.on s1all al-er
or re8eal an! s-a--e re3.r.n/ .n ,er-a.n
,ases -1e na-re o0 -1e ,ons.5era-.on -o be
s-a-e5 .n -1e .ns-rmen-.
*1a- .s -1e rle on 8a!men- .n o-1er
,rren,.es (8ar. e)>
9/en if the money in which the instrument
is to be ayable is not legal tender, ro/ided is
current money or foreign money which has a
"#ed /alue in relation to the money of the
country in which the instrument is ayable, the
negotiability of the instrument is not aBected, as
it is still considered ayable in money.

Se,. J. When payable on demand. ; An
.ns-rmen- .s 8a!able on
5eman54
(a) *1en .- .s so e:8resse5 -o be
8a!able on 5eman5" or a- s./1-" or on
8resen-a-.on7 or

(b) In 21.,1 no -.me 0or 8a!men- .s
e:8resse5.
*1ere an .ns-rmen- .s .sse5" a,,e8-e5" or
.n5orse5 21en o<er5e" .- .s" as re/ar5s -1e
8erson so .ss.n/" a,,e8-.n/" or .n5ors.n/ .-"
8a!able on 5eman5.
4i/e e#amle of the abo/e.
9#. 1* of when 2it is e#ressed to be ayable on
demand3
2' romise to ay on demand P 1,666 to 5
or bearer. +gd. A.
DD 'nstead of 2 on demand3 the words 2on sight3
or 2 on resentation3 may be used. &he words 2at
sight3 are not ordinarily used in romissory notes.
2* :f when 2 no time for ayment is e#ressed3
2Pay to 5 or order P1, 666 to J. sgd. K.
DD (here the instrument contains a blank sace
for the date but no date is indicated, it has been
held to be ayable on demand. Howe/er, it may
be roerly considered as an incomlete
instrument and may fall under the ro/isions if
sec.1$ or 1% deending uon how it was
deli/ered )or not*.
J
!. :f the last ar.
a. as regards the erson so
issuing
A note dated Nuly !6, 1?,$ and
ayable 2!6 days after date3 is
issued on August $,1?,$.
b. as regards the erson so
acceting
A bill ayable on August 26,1?,$ is
acceted by the drawee on August
21,1?,$.
c. as regards the indorser
A note ayable 2!6 days after
August 1, 1?,$3 is indorsed on
+etember 2,1?,$.
DD After the date of maturity, the instrument can
no longer be negotiated as to make the artios
who acquire the instrument after the date of
maturity holders in sue course because they
become holders thereof with notice that it is
already o/erdue, as it can be determined from
the face of the instrument itself. 't is ayable in
demand only as between the immediate arties.

Se,. K. When payable to order. ; T1e
.ns-rmen- .s 8a!able -o or5er 21ere .- .s
5ra2n 8a!able -o -1e or5er o0 a s8e,.9e5
8erson or -o 1.m or 1.s or5er. I- ma! be
5ra2n 8a!able -o -1e or5er o04
(a) A 8a!ee 21o .s no- ma6er"
5ra2er" or 5ra2ee7 or
(b) T1e 5ra2er or ma6er7 or
(c) T1e 5ra2ee7 or
(5) T2o or more 8a!ees Ho.n-l!7
or
(e) One or some o0 se<eral
8a!ees7 or
(0) T1e 1ol5er o0 an oL,e 0or
-1e -.me be.n/.
*1ere -1e .ns-rmen- .s 8a!able -o
or5er" -1e 8a!ee ms- be name5 or
o-1er2.se .n5.,a-e5 -1ere.n 2.-1 reasonable
,er-a.n-!.
*1a- 5oes 8a!able -o or5er mean>
'n .:9, it means that the drawee orders
the drawee to ay the ayee indicated or if not
him, to anybody designated by him. +uch
designation is made by indorsement of the
ayee. 'n P1, the maker romises to ay the
ayee indicated or if not him, to anybody
designated by him through )also* indorsement. 't
does not mean that a bill is necessarily ayable
to order because it contains an unconditional
order to ay. A .:9 may either be ayable to
order or to bearer. +imilarly, a P1 may also be
ayable to order or bearer.
*1a- .s -1e rle on nam.n/ -1e 8a!ee>
&he law requires that the ayee must be
named or otherwise indicated with reasonable
certainty. &he ayee of an instrument ayable to
order must be a erson in being, natural or legal,
and ascertained at the time of issue. 'f there is no
ayee indicated, no one could indorse the
instrument. @onsequently, it is useless to
consider it as negotiable.
NOTES4 1* (here the instrument is ayable
to the order of the drawer and it is accetable by
the drawee, the instrument is equi/alent to a
romissory note by the accetor in fa/or if the
drawer.
2* .eing <oint ayees is indicated
by the con<unction 2and3.
9g. 2' romise to ay A and . or
order P166. sgd. 5.3
!* .eing solidary ayees is
indicated by the con<unction 2or3.
9g. 2' romise to ay to the order
of A or . P166. sgd. 5.3
$* 9#amle of ar. f G 2 Pay to the
order of @ashier of =.P. P16.3
Is -1e 0ollo2.n/ .ns-rmen- 8a!able -o
or5er4 BPa! -o -1e or5er o0 )s. &a!a P100.
s/5. Coa,1.D>
Jes, because the instrument is ayable to the
order of a seci"ed erson or to him or his order.
*1en ,an an .ns-rmen- or./.nall! 8a!able
-o or5er be,ome one 8a!able -o bearer>
=nder sec.?,, when the only or last indorsement
is an indorsement in blank.
*1a- .s -1e rle re4 -1e ,on<ers.on o0 or5er
no-e5 -o bearer no-es>
K
&he rule is once a bearer instrument,
always a bearer instrument. &his rule refers to
instruments originally ayable to bearer. .ut an
order instrument may be con/erted to a bearer
instrument by blank endorsement of the ayee or
last endorsee. 't may again be con/erted to an
order instrument, by /irtue of sec. !%, by writing
o/er the signature in blank any contract not
inconsistent with the character of the
endorsement.
Se,. #. When payable to bearer. ; T1e
.ns-rmen- .s 8a!able -o
bearer4
(a) *1en .- .s e:8resse5 -o be so
8a!able7 or

(b) *1en .- .s 8a!able -o a 8erson
name5 -1ere.n or bearer7 or

(,) *1en .- .s 8a!able -o -1e or5er o0
a 9,-.-.os or non;e:.s-.n/ 8erson"
an5 s,1 0a,- 2as 6no2n -o -1e
8erson ma6.n/ .- so 8a!able7 or

(5) *1en -1e name o0 -1e 8a!ee 5oes
no- 8r8or- -o be -1e name o0 an!
8erson7 or

(e) *1en -1e onl! or las- .n5orsemen-
.s an .n5orsemen- .n blan6.
*1a- .s -1e rle re4 9,-.-.os or non;e:.s-.n/
8ersons>
&his ro/ision has 2 requisites: )1* the
ayee named must be "ctitious or nonDe#istent;
and )2* the one making the instrument so
ayable must know him to be "ctitious or nonD
e#isting. &he "rst requisite must be quali"ed. &he
words 2"ctitious erson3 are not limited to
ersons ha/ing no real e#istence. An e#isting
erson may be considered a "ctitious ayee,
deending uon the intention of the one making
or drawing the instrument. 27ictitious erson3
means ne/er intended who has no right to the
instrument because the drawer or maker ne/er
intended for it to be ayable to the said erson.
&he want of interest in the ayee is not the
controlling consideration in determining whether
an instrument is ayable to bearer, as ayable to
a "ctitious erson. Aather, it is the intention the
maker or drawer not to make said erson the
ayee. &hus, it does not matter whether the
name of the ayee used by the drawer or maker
be that of one li/ing or dead or one who ne/er
e#isted. &he name is "ctitious when it is feigned
or retended and a nonDe#istent erson is one
who does not e#ist in the sense that he was not
intended to be ayee by the drawer. &hus, an
instrument made ayable to the order of nonD
e#isting erson or of a erson ha/ing no interest
in the transaction where the makers belie/es that
such erson e#ist and has an interest in the
transaction and intends that he shall recei/e the
same, is not ayable to a "ctitious erson or to
bearer. :nly if such maker, knowing the erson to
be nonDe#isting, ne/er intended it to be aid to
the designated erson, can the instrument be
ayable to a "ctitious erson or to a bearer.
NOTES4 1* =nder the 1'O, a check drawn
ayable to the order of 2cash3 is a check ayable
to bearer., and the bank may ay it to the erson
resenting it for ayment without the drawer-s
endorsement.
2* 'n sec.?e, the instrument
contemlated is one originally ayable to
order. 't becomes ayable to bearer
where: )a* there is only one endorsement
and such is in blank: or )b* there are
se/eral endorsement but the last one is in
blank. .ut, a blank endorsement cannot
make a nonDnegotiable instrument
)because ayable to a seci"ed erson*
negotiable. &he word 2indorsement refers
only to negotiable instruments.
Se,. 10. %erms. when su'cient. ; T1e
.ns-rmen- nee5 no- 0ollo2 -1e lan/a/e o0
-1.s A,-" b- an! -erms are sL,.en- 21.,1
,learl! .n5.,a-e an .n-en-.on -o ,on0orm -o
-1e re3.remen-s 1ereo0.
NOTES4 't is ad/isable to use the words of the
law in order to a/oid uncertainty. Howe/er, under
+ec. 16, it is not necessary to use the e#act words
of the law. &he substance of the transaction
rather than the form is the criterion for the
negotiability.

Se,. 11. (ate. presumption as to. ; *1ere
-1e .ns-rmen- or an a,,e8-an,e or an!
.n5orsemen- -1ereon .s 5a-e5" s,1 5a-e .s
5eeme5 8r.ma 0a,.e -o be -1e -re 5a-e o0
-1e ma6.n/" 5ra2.n/" a,,e8-an,e" or
.n5orsemen-" as -1e ,ase ma! be.
NOTES4 +ec, 11 alies to ! cases: )1* the
instrument contains the date of issue, in which
case it is resumed to be the true date of making
or drawing; )2* in an acceted bill of e#change,
the accetance is dated; in which case it is
resumed to bethe true date of accetance; )!*
an instrument is indorsed and the indorsement is
dated, in which case it is resumed to be the
#
true date of indsorsement. .ut all such
resumtions may be rebutted by cometent
roof to the contrary. &he burden of ro/ing
belongs to the ersons who disutes the /eracity
of the dates indicated.

Se,. 12. *nte-dated and post-dated. - T1e
.ns-rmen- .s no- .n<al.5 0or -1e reason onl!
-1a- .- .s an-e;5a-e5 or 8os-;5a-e5" 8ro<.5e5
-1.s .s no- 5one 0or an .lle/al or 0ra5len-
8r8ose. T1e 8erson -o 21om an .ns-rmen-
so 5a-e5 .s 5el.<ere5 a,3.res -1e -.-le
-1ere-o as o0 -1e 5a-e o0 5el.<er!.
What is the rule on ante-dating and post-
dating?
+ec. 12 contemlates anteDdating or ost G
dating where the arties ha/e mutually agreed to
such dating. An instrument is ostDdated when
the date written thereon is later than the true
date of its issuance or deli/ery. An instrument is
anteD dated when the date written thereon is
earlier than the true date of its issuance or
deli/ery. &he general rule on such instrument is
that an anteDdated or ostDdated instrument is
not rendered in/alid or nonDnegotiable by that
fact alone. 't may be negotiated before or after
the date gi/en as long as it is not negotiated after
its maturity. &he only limitation is that the anteD
dating or ostDdating is not done for illegal and
fraudulent uroses. 7urther, title to the
instrument is not acquired as of the date written
on the instrument but rather as of the actual date
of deli/ery.

Se,. 13. When date may be inserted. ;
*1ere an .ns-rmen- e:8resse5 -o be
8a!able a- a 9:e5 8er.o5 a0-er 5a-e .s
.sse5 n5a-e5" or 21ere -1e a,,e8-an,e o0
an .ns-rmen- 8a!able a- a 9:e5 8er.o5
a0-er s./1- .s n5a-e5" an! 1ol5er ma!
.nser- -1ere.n -1e -re 5a-e o0 .sse or
a,,e8-an,e" an5 -1e .ns-rmen- s1all be
8a!able a,,or5.n/l!. T1e .nser-.on o0 a
2ron/ 5a-e 5oes no- a<o.5 -1e .ns-rmen-
.n -1e 1an5s o0 a sbse3en- 1ol5er .n 5e
,orse7 b- as -o 1.m" -1e 5a-e so .nser-e5
.s -o be re/ar5e5 as -1e -re 5a-e.
Is -1e 5a-e ne,essar! -o an .ns-rmen->
=nder +ec. C, the date is not necessary for
the negotiability of the instrument. Howe/er, the
date may be necessary; )1* where an instrument
is ayable at a "#ed eriod after date but is
issued udated; and )2* where an instrument is
ayable at a "#ed eriod after sight but the
accetance is udated. 'n these 2 cases, any
holder may insert the true date of issue or
accetance.
Ahoda issues an undated instrument to +ioson,
does the fact that is undated aBect is
negotiabilityM
1o. sioson can <ust "ll in the true date of issues in
order to determine the date of maturity. .ut, the
instrument-s negotiability is not aBected in
accordance with sec. C.
'n the same e#amle, suose +ioson uts a false
date on the instrument and negotiates it to Oyn,
an innocent arty. (hat are the eBectsM
&he date +ioson inserted is /oid, but as to Oyn,
she can enforce it against Ahoda as the erformer
is a subsequent holder in due course. Aemember
the rule is that between 2 innocents, the one who
made ossible the commission of the wrong
bears the loss. Also, as to +ioson, the instrument
becomes /oid. &his being in accordance with this
section as well as with sec. 12, that ante or ost
dating )which e/er case* for fraudulent uroses
renders the instrument /oid.

Se,. 1A. /lanks) when may be #lled. ; *1ere
-1e .ns-rmen- .s 2an-.n/ .n an! ma-er.al
8ar-.,lar" -1e 8erson .n 8ossess.on -1ereo0
1as a 8r.ma 0a,.e a-1or.-! -o ,om8le-e .-
b! 9ll.n/ 8 -1e blan6s -1ere.n. An5 a
s./na-re on a blan6 8a8er 5el.<ere5 b! -1e
8erson ma6.n/ -1e s./na-re .n or5er -1a-
-1e 8a8er ma! be ,on<er-e5 .n-o a
ne/o-.able .ns-rmen- o8era-es as a 8r.ma
0a,.e a-1or.-! -o 9ll .- 8 as s,1 0or an!
amon-. In or5er" 1o2e<er" -1a- an! s,1
.ns-rmen- 21en ,om8le-e5 ma! be
en0or,e5 a/a.ns- an! 8erson 21o be,ame a
8ar-! -1ere-o 8r.or -o .-s ,om8le-.on" .-
ms- be 9lle5 8 s-r.,-l! .n a,,or5an,e 2.-1
-1e a-1or.-! /.<en an5 2.-1.n a reasonable
-.me. %- .0 an! s,1 .ns-rmen-" a0-er
,om8le-.on" .s ne/o-.a-e5 -o a 1ol5er .n 5e
,orse" .- .s <al.5 an5 e@e,-al 0or all
8r8oses .n 1.s 1an5s" an5 1e ma! en0or,e
.- as .0 .- 1a5 been 9lle5 8 s-r.,-l! .n
a,,or5an,e 2.-1 -1e a-1or.-! /.<en an5
2.-1.n a reasonable -.me.
*1a- are -1e 2 s-e8s .n e:e,-.on o0 NI>
&he mechanical act of writing the
instrument comletely and in accordance
with sec. 1, of 1'; and
10
&he deli/ery of the instrument with the
intention of gi/ing eBect to it.
To 21a- s-e8 5oes se,. 1A re0er>
+ec. 1$ refers to instrument that are not
comlete on its face but deli/ered by the
makerEdrawer. 't alies to cases where the
instrument is incomlete but deli/ered. &he "rst
ste is, thus, not fully satis"ed.
*1a- are -1e 2 ,ases re0erre5 -o .n se,. 1A>
*1a- are -1e rles on ea,1 ,ase>
1. PA'MA 7A@'9 A=&H:A'&J &: 7'OO =P
.OA1P+D
(here the instrument is wanting in any
material articular, the erson in
ossession thereof has a rima facie
authority to comlete it by "lling u to the
blanks therein.
a. Material articularD may either be a
articular the omission of which will
render the instrument nonD
negotiable
9g. :f )a* G name of ayee, of the drawer
:f )b* G date, rate of interest, lace of
ayment
any articular roer to be inserted in a
negotiable instrument to make it comlete
)gi/en the circumstances of the instrument*
o 4'Q91 2 7A@&+: )1* there is want of
material articular in the instrument;
and )2* there is ossession by a erson
other than the drawer or maker
&H91D the law resumes agency or
authority to "ll u the blanks.
2 PA'MA 7A@'9 A=&H:A'&'9+ &: 7'OO =P &:
A1J AM:=1&D
A signature in a blank aer
deli/ered by a erson making the
signature in order that the roer may be
con/erted into a negotiable instrument
oerates as a rima facie authority to "ll it
u as such for any amount.
1* 4'Q91 2 7A@&+: )1* A signature in a blank
aer, and )2* the aer is deli/ered with
the intention of ha/ing con/erted into a 1'
)mere ossession not being enough*
&H91D the law resumes authority to "ll u
to any amount.
2* .ut, to hold PA':A )before comletion*
arties liable
&o a erson "lling u and to holder not a
H'8@D )1* the blank must be "lled u
strictly in accordance with the authority
gi/en and )2* "lled u within a reasonable
time. )Aeasonable time deends on the
nature of the instrument, the usage of the
trade or business and the facts of a
articular case sec. 1?!.*
so much so that lack of one of the two
would result in a failure to enforce the
instrument against said arties.
&o a holder who is a H'8@D it is necessary
that either was followed for being a H'84,
he takes the note )sec. %2*

o @omlete and regular on its face;
o .efore it was o/erdue and without
notice or dishonor
o 'n good faith and /alue
o (ithout notice of in"rmity in the
instrument or defect in the title of
the owner.
&he maker or drawer cannot
blame an innocent arty for
a mistake which he himself
made ossible )for not
comleting the notice*.
&H=+, failure to "ll u strictly in accordance with
authority gi/en and within a reasonable time isD a
ersonal defense. &his is so because it is
a/ailable as a defense only as against those
holders not H'8@ )including the erson "lling u*.
&he maker or drawer is not liable to them. .ut, as
to H'8@, it is not a /alid defense. &he maker is
still liable desite the error.
('&H A94AA8 &: PAA&'9+ A7&9A 7'OO'14 =P,
they are estoed or recluded from claiming
that the notice was not "lled u strictly in
accordance with the authority gi/en. As to them,
they negotiate the instrument for the /alue "lled
u strictly.
S88ose4 Tob! e:e,-e5 a no-e DI 8rom.se
-o 8a! Er2.n or or5er;;;;;;;. S5/. Tob! -1en
/a<e Er2.n -1e no-e a-1or.z.n/ 1.m -o
8la,e an! amon- no- e:,ee5.n/ PE" 000.
%- Er2.n 8la,e5 P10" 000 an5 ne/o-.a-e5 .-
-o Ian. Can Ian /o a/a.ns- Er2.n> Can Ian /o
a/a.ns- Tob!>
As to 9rwin, being a arty to the comletion and
ha/ing negotiated the note for such /alue, 9rwin,
regardless of whether 'an is a H'8@ or not, can be
held liable for the /alue. As to &oby, if 'an is not
H'8@, &oby cannot be held liable for the
erroneous comletion )&oby*, the holder must be
a H'8@, the note would be /alid and eBectual as if
it had been comleted in strict accordance with
the authority gi/en and within a reasonable time.
(hile it is true that &oby did not authori;e such
amount, by his negligence in making the
fraudulent act ossible, he rather the 'anD an
11
innocent arty, must suBer the consequences of
its acts.
I0 Ian" 8re-en5.n/ -o be a 0an o0 Era8"
se,res 1.s a-o/ra81 on a blan6 8.e,e o0
8a8er an5" -1en" 2r.-es a 8rom.ssor! no-e
o<er .-" ma! Ian en0or,e -1e no-e> I0 Ian
ne/o-.a-e .- Tob!" ma! -1e la--er en0or,e -1e
no-e a/a.ns- Era8>
.oth may not enforce the note. +ec. 1$, while it
allows for the "lling u of a blank aer with a
signature, does not gi/e such authority when the
said aer with no intention of it being con/erted
to a 1'. 't does not matter whether &oby is H'8@
or not. &oby-s remedy would be to go after 'an,
the endorser.

Se,. 1E. 0ncomplete instrument not
deli+ered. ; *1ere an .n,om8le-e
.ns-rmen- 1as no- been 5el.<ere5" .- 2.ll
no-" .0 ,om8le-e5 an5 ne/o-.a-e5 2.-1o-
a-1or.-!" be a <al.5 ,on-ra,- .n -1e 1an5s
o0 an! 1ol5er" as a/a.ns- an! 8erson 21ose
s./na-re 2as 8la,e5 -1ereon be0ore
5el.<er!.
*1a- .s -1e rle on .n,om8le-e an5
n5el.<ere5 .ns-rmen->
Here, both stances in the e#ecution of a 1' are
wanting. &he nonDdeli/ery of an incomlete
instrument renders the note unenforceable as
against the erson whose signature was laced
thereon and is a /alid defense, not only between
the original arties but also against a H'8@. &he
law does not make a distinction when it says that
it is not a 2/alid contract in the hands of any
holder3 which includes a H'8@. 't is, thus, a real
defense as it is a/ailable e/en as against a H'8@.
Howe/er, the in/alidity of the instrument is only
with reference to arties whose signature aears
on the instrument rior to deli/ery. As to arties
whose signatures aear on the instrument after
deli/ery, the instrument may be in/alid.
S88ose Tob!" be0ore 1e ,ol5 ,om8le-e a
no-e" 8la,e5 -1e sa.5 8a8er be-2een -1e
8a/es o0 1.s boo6. Er2.n 21o borro2e5 -1e
boo6 an5 9n5s -1e sa.5 no-e" ,om8le-es .-"
s./ns Tob!?s name an5 ne/o-.a-es .- -o Ian.
Ian ne/o-.a-es .- -o Mon. Can Mon /o a/a.ns-
Ian>
As the note was incomlete and undeli/ered,
&oby has a real defense as against Non. 't does not
matter whether Non is a H'8@ or not. As to &oby,
there was ne/er any /alid contract to make him
liable. .ut, Non can still go against 9rwin and 'an
as they are considered to be arties whose
signature aear after the deli/ery )9rwin-s
signature would aear as an instrument.*
All notes when resented for ayment arew
ersumed to be comlete and deli/ered. &he
urose of sec. 1$, 1% I 1C is to show what
defenses are a/ailable to makersEdrawers uon
the resentment of these instruments. 7or
e#amle, in the hands of a H'8@ when the note is
originallly incomlete and undeli/ered- such
resumtion is only rima facie. Proof of nonD
deli/ery may be resented to rebut the
resumtion. 'n contrast, if the note was
mechanically but undeli/ered, the resumiton is
conclusi/e as to a H'8@. 1o roof may be
resentewd to rebut it.
't has been held that where the custody of
the incomlete instrument has been entrusted to
another who wrongfully comletes and negotiates
the note to a H'8@, deli/ery to the agent is
asu0cient deli/ery to bind the drawer or maker.
&hus, the defense is only a ersonal defense. &he
one who being held liable may only show lack of
deli/ery if and when the holder is not a H'8@
)may either an immediate arty or a holder not a
H'8@*. :nce the holder ro/es that he is a H'8@,
the defense is no longer a/ailable.
*1a- .s mean- b! B.mme5.a-e 8ar-.esD
&he term immediate arties is con"ned to those
who are immediate, in the sense of knowing or
bieng held know the conditions or limitations
laced uon the deli/ery of the instrument. 't
means ri/ity not ro#imity. &he cretirion is
whether or not the arty in question knows of the
conditions or limitationas laced uon deli/ery or
the facts that the instrument was not deli/ered
but stolen. &hus, if a arty knows of such
conditions or limitation, he is an immediate arty
e/en if he is hysically remote )eg. Maker
indorsee who knows*n )1:&9: (hile ro#imity is
not the critirion, it is highly imrobable that the
ne#t arty hysically will not know such
conditions or limitations*.
*1a- ma! -1e ma6er" 5ra2er" .n5orser s1o2
as a/a.ns- -1e .mme5.a-e 8ar-! or a 1ol5er
no- a $I+C>
As against such arties, he may ro/e that: )1* no
deli/ery was made; or )2* if there was a deli/ery,
it was not authori;ed; or if the deli/ery was made
or authori;ed, the deli/ery was conditional or for
a secial urose and not for the urose of
transferring the title to the instrument. 'n
conditional deli/eries, what is conditional is the
deli/ery, not the romise or order to ay. 'f the
12
romise or order to ay is conditional, the
instrument is rendered nonDnegotiable. 9g. A
deli/er the note to . with the condition that the
deli/ery be binding only if @-s signature was
secured. &he deli/ery is not binding on A until @-s
signature aears thereon. )&he romise or order
to ay remains unconditional on the face.* As to
secial uroses, if a deli/ers a bearer instrument
to . for )1* safekeeing or )2* for collection, .
cannot enforce the note against A.
*1a- .s -1e rle on los- or s-olen
.ns-rmen->
As soon as the owner disco/er that he has lost a
1', he should instantly gi/e notice of the lose to
all arties on such aer and inform them not to
ay the amount to any one e#cet to the loser or
is order. &his is esecially imortant in bearer
instrument )but may also aly to order
instrument*. 1o title to a lost bill or note /est in
the "nder and the owner when he has identi"ed
it, may maintain ero an action where the
defendant found an article and refused to return
it to the owner* against the "nder. 'f the "nder
has negotiated it and has recei/ed /alue for it, an
action for money be maintained against him for
such use. A arty liable will net be discharged if
he ays the amount to the holder of the lost
instrument before maturity or if he had notice of
the loss unless the holder is a H'8. )in such case,
the arty liable should reco/er from the "nder*.

Se,. 1I. (eli+ery) when e,ectual) when
presumed. - E<er! ,on-ra,- on a ne/o-.able
.ns-rmen- .s .n,om8le-e an5 re<o,able
n-.l 5el.<er! o0 -1e .ns-rmen- 0or -1e
8r8ose o0 /.<.n/ e@e,- -1ere-o. As
be-2een .mme5.a-e 8ar-.es an5 as re/ar5s
a remo-e 8ar-! o-1er -1an a 1ol5er .n 5e
,orse" -1e 5el.<er!" .n or5er -o be
e@e,-al" ms- be ma5e e.-1er b! or n5er
-1e a-1or.-! o0 -1e 8ar-! ma6.n/" 5ra2.n/"
a,,e8-.n/" or .n5ors.n/" as -1e ,ase ma! be7
an5" .n s,1 ,ase" -1e 5el.<er! ma! be
s1o2n -o 1a<e been ,on5.-.onal" or 0or a
s8e,.al 8r8ose onl!" an5 no- 0or -1e
8r8ose o0 -rans0err.n/ -1e 8ro8er-! .n -1e
.ns-rmen-. %- 21ere -1e .ns-rmen- .s .n
-1e 1an5s o0 a 1ol5er .n 5e ,orse" a <al.5
5el.<er! -1ereo0 b! all 8ar-.es 8r.or -o 1.m
so as -o ma6e -1em l.able -o 1.m .s
,on,ls.<el! 8resme5. An5 21ere -1e
.ns-rmen- .s no lon/er .n -1e 8ossess.on o0
a 8ar-! 21ose s./na-re a88ears -1ereon" a
<al.5 an5 .n-en-.onal 5el.<er! b! 1.m .s
8resme5 n-.l -1e ,on-rar! .s 8ro<e5.

What is the general rule in 1ec. 2?
9/ery contract on a 1' e/en if it is
comletely written is incomlete and re/ocable
until its deli/ery. .efore deli/ery, the maker or
drawer can re/oke, cancel or tear u the
instrument. &he ayee named therein acquires no
right until the instrument is deli/ered to him.
8eli/ery is essential to the /alidity of any 1'. An
undeli/ered instrument is inoerati/e because
deli/ery is a rerequisite of liability. Howe/er, if a
comlete instrument is found in the ossession of
an immediate arty or a remote arty other than
a H'8@, there is a rima facie resumtion of
deli/ery but sub<ect to rebuttal. 'f the holder is a
H'8@ the resumtion becomes conclusi/e and
not sub<ect to rebuttal.
'f the note is found with immediate arty
or a holder not a H'8@, the one being held liable
can show that deli/ery was not made either him
or under his authority. )8eli/ery may be made by
the makerE drawer himself or through an
authori;ed agent. 8eli/ery may also mean
issuance.* .ut, if the note is with a H'8@, the one
being held liable cannot ro/e such because he is
conclusi/ely resumed to ha/e deli/ered it. &hus,
is a maker denies ha/ing deli/ered a comlete
note, the holder must only show that he is a H'8@
and the former can no longer ro/e his
accusation.
Se,. 1J. 3onstruction where instrument is
ambiguous. ; *1ere -1e lan/a/e o0 -1e
.ns-rmen- .s amb./os or -1ere are
om.ss.ons -1ere.n" -1e 0ollo2.n/ rles o0
,ons-r,-.on a88l!4
(a) *1ere -1e sm 8a!able .s
e:8resse5 .n 2or5s an5 also
.n 9/res an5 -1ere .s a
5.s,re8an,! be-2een -1e
-2o" -1e sm 5eno-e5 b!
-1e 2or5s .s -1e sm
8a!able7 b- .0 -1e 2or5s
are amb./os or n,er-a.n"
re0eren,e ma! be 1a5 -o -1e
9/res -o 9: -1e amon-7

(b) *1ere -1e .ns-rmen-
8ro<.5es 0or -1e 8a!men- o0
.n-eres-" 2.-1o- s8e,.0!.n/
-1e 5a-e 0rom 21.,1 .n-eres-
.s -o rn" -1e .n-eres- rns
0rom -1e 5a-e o0 -1e
.ns-rmen-" an5 .0 -1e
.ns-rmen- .s n5a-e5" 0rom
-1e .sse -1ereo07
13

(,) *1ere -1e .ns-rmen- .s no-
5a-e5" .- 2.ll be ,ons.5ere5 -o be
5a-e5 as o0 -1e -.me .- 2as .sse57

(5) *1ere -1ere .s a ,onN.,- be-2een
-1e 2r.--en an5 8r.n-e5 8ro<.s.ons o0
-1e .ns-rmen-" -1e 2r.--en
8ro<.s.ons 8re<a.l7

(e) *1ere -1e .ns-rmen- .s so
amb./os -1a- -1ere .s 5ob-
21e-1er .- .s a b.ll or no-e" -1e 1ol5er
ma! -rea- .- as e.-1er a- 1.s ele,-.on7

(0) *1ere a s./na-re .s so 8la,e5
8on -1e .ns-rmen- -1a- .- .s no-
,lear .n 21a- ,a8a,.-! -1e 8erson
ma6.n/ -1e same .n-en5e5 -o s./n" 1e
.s -o be 5eeme5 an .n5orser7

(/) *1ere an .ns-rmen- ,on-a.n.n/
-1e 2or5 40 promise to pay4 .s s./ne5
b! -2o or more 8ersons" -1e! are
5eeme5 -o be Ho.n-l! an5 se<erall!
l.able -1ereon.
&he rules stated shall not be a/ailed of if the
terms of the instrument in question are clear and
admit of no doubt. 't is only when the instrument
in question is ambiguous, doubtful or obscure or
when there are omissions therein will the rules
aly.
95AMPO9 :7 &H9 A=O9+:
)a* (here a P1 reads 2twel/e esos3 in its
body and P 1,266 )in "gures* at the
margin, the note is good only for P 12. &he
reasons are: )a* the "gures in the margin
do not form art of the instrument and is
only for con/enience: )b* it is easier to
change the "gures or to commit a mistake
than a sum in words. .ut when the words
are ambiguous or uncertain as when the
letter 2J3 in eighty thousand is unclear
)with P,,666 on margin* or when the note
is ayable for 2one esos3 ) with P 166 on
margin* or P!C% is written as 2three si#ty
"/e esos3, the marginal "gures control.
)b* (here the note stiulates that the amount
to be aid is 2with interest at RRRRRRF
fromRRRR3, it is deemed ayable from the
date in the note or if issue at the legal
rate.
)c* (here the note states 2' romise to ay to
the rule of N.M :1OJ P 16. sgd. 5.3 with
2N.M :1OJ3 in handwriting, the note is nonD
negotiable as it is ayable to a seci"ed
erson only. &he handwritten words re/ail
because the written words are deemed to
e#ress the true intention of the maker
because they are written by him while the
rinted words are rinted with no contract
in /iew.
)d* (here a note states 2' romise to ay
9rwin or order P 16. sgd. &oby. 'an3, the
ayee or holder may treat it as either a
note or bill according to his reference.
)e* =sually, the signature of the makerEdrawer
is laced in the lower right hand corner if
the face, the accetor across the face and
the indorser at the back. (here it is not
clear which if the three a erson belongs
as he signs on the margins, he is
resumed to be an indorser.
)f* (here a note states 2' romise to ay @ or
order P16. sgd. AI..3, the makers are
deemed to be solidarily bound.

Se,. 1K. 5iability of person signing in trade
or assumed name. ; No 8erson .s l.able on
-1e .ns-rmen- 21ose s./na-re 5oes no-
a88ear -1ereon" e:,e8- as 1ere.n o-1er2.se
e:8ressl! 8ro<.5e5. %- one 21o s./ns .n a
-ra5e or assme5 name 2.ll be l.able -o -1e
same e:-en- as .0 1e 1a5 s./ne5 .n 1.s o2n
name.
*1a- .s -1e /eneral rle> E:,e8-.ons>
4919AAO A=O9: A erson whose signature does
not aear on the instrument cannot be held
liable thereon
95@9P&':1+:
)1* &he rincial is liable if duly authori;ed
agent signs on his own behalf )+ec. 1?*;
)2* 'n case of forgery is liable e/en if his
signature does not aear on the
instrument )+ec. 2!*;
)!* (here a erson sought to be charged
signs on aer searate from the
instrument itself, as in an allege although
the allege may be considered a art of the
instrument, or where an accetance is
written on another aer other than the
bill )+ec. 1!$ I 1!%*;
)$* (here a erson signs under an assumed
or trade nameD not really an e#cetion,
rather an instance where a erson-s
business name ser/es the same urose
as his signature. &here must be an
intention to be found by signing the trade
name.

Se,. 1#. 1ignature by agent) authority) how
shown. ; T1e s./na-re o0 an! 8ar-! ma! be
ma5e b! a 5l! a-1or.ze5 a/en-. No
8ar-.,lar 0orm o0 a88o.n-men- .s ne,essar!
0or -1.s 8r8ose7 an5 -1e a-1or.-! o0 -1e
1A
a/en- ma! be es-abl.s1e5 as .n o-1er ,ases
o0 a/en,!.
a. &he arty may sign ersonally or
thru an agent. Agency may be oral
or written authority. 't may be
ro/ed by oral or written e/idence,
unless seci"c ro/isions of the
general law require otherwise )eg.
+tatute of 7rauds*.
Se,. 20. 5iability of person signing as
agent. and so forth. ; *1ere -1e .ns-rmen-
,on-a.ns or a 8erson a55s -o 1.s s./na-re
2or5s .n5.,a-.n/ -1a- 1e s./ns 0or or on
be1al0 o0 a 8r.n,.8al or .n a re8resen-a-.<e
,a8a,.-!" 1e .s no- l.able on -1e .ns-rmen-
.0 1e 2as 5l! a-1or.ze57 b- -1e mere
a55.-.on o0 2or5s 5es,r.b.n/ 1.m as an
a/en-" or as 9ll.n/ a re8resen-a-.<e
,1ara,-er" 2.-1o- 5.s,los.n/ 1.s 8r.n,.8al"
5oes no- e:em8- 1.m 0rom 8ersonal l.ab.l.-!.
*1a- are -1e re3.s.-es 0or an a/en- -o
es,a8e l.ab.l.-!>
)1* &he agent must be duly authori;ed.
)2* Must add words to his signature indicating
that he signs as an agent, that is, for or on
behalf of a rincial.
)!* Must disclose his rincial.
95AMPO9+
:f no.2 D 2Nose @ru; by Pedro Qega3
2Pedro Qega as agent of 2Nose @ru;3
:f no.! G 2sdg. Pedro Qega, agent3 G
Qega is liable as he fails to disclose his rincial
)e/en if he acts within his authority*. 2Agent3 is
deemed as merely a descriti/e word, also
2trustee3, 2administrator3 G one is not relie/ed
from liability by adding descriti/e words.
:f no. ! G the disclosure of the rincial
in order to relie/e the agent need not be in
signature )can be in the body*. 9g. 2 ' romise to
ay 5 or order P166 for money loaned to J I @o.
sgd. N, &reasurer.3 &he rincial is ob/ious3.
Se,. 21. 1ignature by procuration) e,ect of.
; A s./na-re b! 4procuration4 o8era-es as
no-.,e -1a- -1e a/en- 1as b- a l.m.-e5
a-1or.-! -o s./n" an5 -1e 8r.n,.8al .s bon5
onl! .n ,ase -1e a/en- .n so s./n.n/ a,-e5
2.-1.n -1e a,-al l.m.-s o0 1.s a-1or.-!.
What is the authority of an agent by
procuration?
&his agent has but a limited authority to sign and
he must act within the limits of his authority.
&he words 2er roc.3 or 2..3 ser/es as a
notice to whole world that the agent has but
a limited authority. 't is the duties of the !rd
erson dealing with such agent ascertain the
limits of the agent-s authority. He must
remember that he is dealing at his own risk.
7:AM: 2Nose @ru; )rincial*, er roc.: Pedro
Qega )agent*3

Se,. 22. 6,ect of indorsement by infant or
corporation.- T1e .n5orsemen- or
ass./nmen- o0 -1e .ns-rmen- b! a
,or8ora-.on or b! an .n0an- 8asses -1e
8ro8er-! -1ere.n" no-2.-1s-an5.n/ -1a- 0rom
2an- o0 ,a8a,.-!" -1e ,or8ora-.on or .n0an-
ma! .n,r no l.ab.l.-! -1ereon.

What is the rule7 a minor or corporation
indorsing?
:rdinarily, a minor cannot gi/e consent to
contracts and a contrast entered into by him
is a/oidable. 'n the case of cororations, they
cannot erform acts beyond the escae of
their authority. +uch acts would be ultra /ires
1e/er the less, if a minor or a cororation
endorsee an instrument, the endorsee
acquires titles to it and can enforce it agains
the maker or accetor or other arties rior
to the minor.
+uose: Oyn reares a note for Pa;, 2 ' romise
to ay Pa; or order P1, 666. sdg. Oynn3 .ut Pa; is
only a minor. Pa; negotiated the instrument to
Oawrence. @an he hold Oynn liable Pa;M
Oawrence can hold Oynn liable because he
acquires title to the instrument by /irtue of sec.
22. &he instrument is /alidly his. .ut Oawrence
cannot hold Pa; liable because Pa; has a /alid
defense G her minority. Minority is real defense in
the sense that the Pa; may use it as against any
holder )e/en a H'8@*. .ut, Oynn cannot make use
of the same defense as it is ersonal to the minor
G Pa;. 7urther, as maker, Oynn warrants the
e#istence of the thing as well as the caacity of
the ayee to enter into the contract. &he maker is
therefore recluded from utting u the defense
that the ayee had no caacity.
1E
+ec. 22 is also alicable to endorsements
by lunatics, imbeciles, and other incaacitated
arties.
Se,. 23. Forged signature) e,ect of. ; *1en
a s./na-re .s 0or/e5 or ma5e 2.-1o- -1e
a-1or.-! o0 -1e 8erson 21ose s./na-re .-
8r8or-s -o be" .- .s 21oll! .no8era-.<e" an5
no r./1- -o re-a.n -1e .ns-rmen-" or -o /.<e
a 5.s,1ar/e -1ere0or" or -o en0or,e 8a!men-
-1ereo0 a/a.ns- an! 8ar-! -1ere-o" ,an be
a,3.re5 -1ro/1 or n5er s,1 s./na-re"
nless -1e 8ar-! a/a.ns- 21om .- .s so/1-
-o en0or,e s,1 r./1- .s 8re,l5e5 0rom
se--.n/ 8 -1e 0or/er! or 2an- o0 a-1or.-!.
*1a- .s 0or/er!>
.y forgery is meant the counterfeit making or
fraudulent alteration of any writing, and may
consist in the signing of another-s name or the
alteration of an instrument in the name, amount,
descrition of the erson and the likes, with
intent to defraud. &he intent to defraud
distinguishes forgery from innocent alterations
and soliation.
*1a- are -1e 0or/er.es no- re0erre5 -o .n
se,. 23>
- fraud in factum G or fraud in esse
contractus. Here, there is fraud in the
sense that ther was really no intention
to issue an instrument. As it amounts
to forgery, it has the eBects of forgery
such that it is a real defense.
eg. . obtains the signature of A
by telling A that it is only for
autograh uroses or that it is
for some document )other than
a 1'* then . con/erts the aer
into a 1'. &he fraud here
amounts to forgery.
&his must be distinguished from fraud in
document because the letter is only a
ersonal defense as there really was an
intention of issuing an instrument. 9g. A
sell to . a diamond rings showing the
merchandise to A. .ut it is only glass. A
makes out a check in .-s fa/or for it. (hile
the consent is /itiated, thus rendering the
contract /oidable, there was still intent to
issue a check. &he defense is only
a/ailable as against the arty who
eretrated.
- 8uress amounting to fraud G ordinarily,
duress is a ersonal defense. &he only
e#cetion is if it amounts to forgery as
when someone forcibly takes one-s hands
and a0#es that the erson-s signature. Here,
there is a real defense as there was no
intention of issuing a negotiable instrument.
- 7raudulent imersonation G in such
cases, the makerEdrawer is said to
ha/e aEdouble intent. 7irst he intends
to make the instrument ayable to the
erson before him or in front of him G
the erson is he is dealing with
regardless of whoe/er he is. &he 2
nd

intent is that he intends that it be
ayable not to the erson in front of
him but to the real erson G the ayee
that this erson says he is. 'n general,
the rule is if the 1
st
intent was resent
the makerEdrawer is liable. +o, what is
imortant is the determination of who
the ayee intended is.
9g. A erson aroaches me and says,
2 ' am Pablo. ' ha/e a check in my fa/or for
P16, 666.3 .ut the erson is really Pedro. 1ow
' issue a check in the name of Pablo. (hat is
my intentionM
1
st
: ' intend to the check to the
erson in front of me G to the erson ' am
dealing with. 't does not matter whether
his name is Pablo or Pedro. ' am making
the transaction because of what he oBers
regardless of his identity.
2
nd
: ' intend to make the check
ayable to the real Pablo G the erson who
Pedro says he is.
)a* &he 1
st
intent go/erns because of the
theory of actual intent and of stoed
or negligence. 'f the check is
encashed, the bank, in aying Pedro
would merely gi/e due course to my
real intent G that it be aid to the
erson ' directly dealt with and to
whom ' intended it to be aid to.
+econdly, because the bank is
innocent as ' am too, and as between
two innocent arties, the one who was
negligent must be bear the loss. ' was
negligent is not ascertaining his
identity. ' am stoed to deny my real
intent because it was within my ower
to ascertain but that ' failed to do so.
1I
)b* &he 1
st
intent cannot rule when the
makerEdrawer issues to a erson an
instrument where the erson before
him urorts only to be an agent of the
intend ayee )gi/en: maker was-nt
negligent*.
*1a- -!8e o0 0or/er! 5oes se,. 23 re0er -o>
+ec. 2!says, 2when a signature is forgedS3 it
alies therefore only to )1* forged signatures
)forger does not urort to be an agent of the
erson whose signature he has forged* or )2*
signatures made without the authority of the
erson whose signature it urorts to be )forger
urorts to be agent but has no authority*. 'f the
roblem is something else other than the
signature, then sec. 2! will not aly. 'f what was
changed was the amount or the name of the
ayee, sec. 12$ on material alternation rather
than sec. 2! should aly.
*1a- are -1e -1ree 0n5amen-al rles as
-o -1e e@e,- o0 a 0or/e5 s./na-re>
that the signature forged or made
without authority is wholly
inoerati/e;
that no right to retain the
instrument, or to gi/e discharge
therefore or enforce ayment
thereof against any arty thereto
can be acquired through or under
such a signature forged or made
without authority.
&hat, ne/ertheless, as against a
arty reclude from setting u to
the forgery or want of authority,
the signature forged or made
without authority is oerati/e, and,
rights to retain the instrument the
instrument, to gi/e discharge
therefore , or to enforce ayment
thereof, can be acquired through or
under the signature forged or made
without the authority.
*1a- .s mean- b! B.- .s 21oll! .no8era-.<e>
&he word it refers to forged signature, not
to the whole instrument. 't means that the forged
signature cannot be used to transfer title e/er
that the instrument to another erson. &he forged
signature cannot oerate to transfer title to
another. .ecause the signature is inoerati/e, the
holder ne/er acquires /alid title to the instrument
so that it is a real defense as against any holder.
95@9P&':1+:
1* but, only the signature forged or made
without authority is stated by the law to
be inoerati/e, neither the instrument nor
the genuine signatures are rendered
inoerati/e. Proof that the one of se/eral
signatures in a note was forged does not
necessarily a/oid the note as to those
whose signatures as are genuine G such as
those who acti/ely rocured the forgery or
had knowledge.
2* further, the instrument can be enforced by
holders to whose title e/er the instrument
the forged signature is not necessary.,
such as, an endorsement of an instrument
which on its faco is ayable to bearer.
(hether an indorsement on a not
necessary for the holder-s title is genuine
or forged is immaterial to his right to
reco/er such instruments can be
negotiated by mere deli/ery so that the
forged signature is irrele/ant to his title.
PA:.O9M: A made a Promissory note 2'
romise to ay . or order P1, 666. sdg A. 2A is
the maker and . is the ayee. . howe/er lost
the instrument. @ found it and simulated the
signature of . and negotiated the instrument
to 8. 8 negotiated it to 9. @an 9 go against A,
., @, 8M 9#lain.
A1+(9A:
7irst, does this roblem in/ol/ed sec.
2!, forgery of a signatureM :b/iously, it does.
+econd, "nd out where the forgery occurred.
'n this case, the forgery occurred at the oint
of @. +o this is the cutDoB oint. All those
below or subsequent to the cutDoB oint. Are
liable to the holder. All those abo/e or rior to
the cutDoB oint are not liable to the holder.
Qisually
A T not liable
. T not liable
DDDDDDDDDDDDDDDDDDDDDD cutDoB oint
@ T liable
8 T liable
9 T holder
)1* as to 8, under sec. 2!, 8 is reclude from
setting u the defense of forgery. &his is
because, under sec. C% I CC, an indorser
warrants that an instrument is genuine
and in all resects what it urorts it to
1J
be. 'n other words, when 8 negotiated the
note to 9, in eBect, he said, the instrument
is genuine and it is /alid. 2 Ha/ing
imliedly said this, he cannot thereafter
say that the instrument is in/alid. He is
stoed by his own warranty.
As to @, being the forger, he is guilty of
a criminal oBense and is liable for all
the consequence of his criminal act.
.ut, more than that, under sec. 1, as
an e#cetion to the general rule, the
forger is liable as he is deemed to ha/e
signed under a trade name or assumed
name. &hus, the forger has the same
warranty as the general indorser.
:therwise, the forger would be
occuying a osition better than of a
general indorser.
)1* As to ., because under sec. 16 2 A erson
where signature does not aear thereon
is not liable on the instrument. 2. did not
sign. +omebody signed for him without his
authority. His signature does not aear
on the instrument and thus, he cannot be
liable thereon. Moreo/er, under sec. 2!,
the forged signature )made by @* is totally
or wholly inoerati/e. &herefore, no title
was /alidly transferred from . to @ to 8 to
9. therefore 9 acquired only the right that
cannot be uheld as against . and any
arty rior to the forgery, it being wholly
inoerati/e, there is no right e/en to
retain the instrument or to enforce
ayment thereof against any arty
thereto.
)2* As to A, insofar as A is concerned, the
signature forged is wholly inoerati/e and
therefore it did not /alidly transfer title to
the instrument to 9. And 9 as against A
has no right to retain the instrument ant to
enforce ayment thereof. )7urther, A
bound himself to ay the order of .. 9
cannot be regarded as such.
+=PP:+9: 'n roblem 1, the note was a bearer
instrument but @, in forging .-s signature,
indicated that it was ayable to him in the back
was ut 2 Pay to 8. sgd.@.3 8 negotiated it to 9,
2Pay to 9. sgd.83 @an 9 now go against A,.,@,8M
)1* +ec. 2! alies only the instrument
ayable to order not to those ayable to
bearer. &he forged signature of . is not
necessary to the title of the holder. &he
holder can e/en cross out all those
indorsement not necessary )sec. $,*. :nce
an instrument is ayable to bearer, it will
always remain a bearer instrument not
withstanding the secial indorsement. 'f
the crosses them out, it will be as if the
note was deli/ered directly in him.
&herefore. 9 can hold A, ., @, 8.
(hile the cutDoB oint rule is used
abo/e in the situation of an
indorser, it is also alicable to
forgeries of a maker-sEdrawer-s
signature such that all arties such
that all arties below the cutDoB
oint )all arties subsequent to the
makerEdrawer* can be held liable
but not the makerEdrawer. 7urther,
under sec. 1,, he whose signature
does not aear thereon is not
liable on the instrument.
*1o are 8re,l5e5 0rom se--.n/ 8 -1e
5e0ense o0 0or/er!>
&hose who warrant or admit the
genuineness of the signature in question:
indorser G whether general or quali"ed,
warrant that the instrument is
genuine and in all resects
what it urorts to be )sec. C%
I CC*
erson negotiating by mere deli/ery G also by
sec. C%.
Accetors G by acceting the bills, he admits
genuineness
&hose who, by their acts, silence or
negligence are stoed from setting u
the defense of forgery.
(hene/er a arty has, by his own
declaration, act or omission, intentionally
and deliberately led another in belie/e
that his or another-s signature in an
instrument is genuine, an to act uon such
belief, he cannot, in any litigation, a rising
out of such declaration, act or omission,
be ermitted to set u the forgery of such
signature. +toed arises from:
)1* a declaration;
)2* an act;
)!* omission or negligence G )such as
unreasonable delay*
*1a- are -1e ,ases o0 0or/er! .n /eneral>
'. 7orgery of romissory notes:
1K
i. forgery of an endorsement
in the note;
2.*forgery of the maker-s
signature
''. forgery of bills of e#change:
a) forgery of an indorsement in the bill;
b) forgery of the drawer-s signature.
a. with accetance by the drawee, or
b. without such accetance but the
bill is aid by the drawee.
&he cutDoB oint rule discussed abo/e is
a su0cient guide to see who can be held
liable on instruments ayable to order
whether the forgery is of the
indorsement or maker-sEdrawer-s
signature. (hat remains to be discussed
is the liability of the drawee in bills
where the indorsement is forged. )below*
As mentioned, when the noteEbill is
ayable to bearer, sec. 2! is not
alicable but a holder who is a H'8@
can reco/er not by /irtue of sec. 1C
)gi/en the instrument is comlete*.
As to the accetor, his accetance
recludes him from setting u the
defense of forgery by /irtue of his
warranties in acceting. Also, in aying
without re/ious accetance, the
drawee cannot collect from the drawer
nor the reciient H'8@. &he accetor is
deemed constructi/ely negligent in
failing to meet its obligation to know its
customer-s )drawer* signature. &he basis
of such liability is not that ayment is
tantamount to accetance but that of his
negligence. )Here it is the drawer-s
signature which is forged*.
*1a- rles se5 /o<ern ,1e,6s>
&he same rule used for the other 1' G the cutDoB
oint rule G with the e#cetion of the
determination of the drawee bank-s liability /isDUD
/is each other.
)ET'O %ANO PS. FNC% (11K SC'A E3J)
@unanan I @o. drew a check for P %6, 666 with
71@. as the drawee in fa/or of Manila Polo @lub.
.y unknown circumstances, +ales was able to
obtain the check, altered the same )making it
ayable to cash and for P %6, 666* and deosited
it with Metro .ank. M. then sent the check to the
@. clearing house with stam on the back: 2
Metro .ank clearedSo0ce all rior endorsement
andE or lack of endorsement guaranteed. 2 the
check cleared the same day and 71@. aid M.
the P %6, 666. (ithin C days, +ales whose
account was credited with the amount, withdrew
the money. .ut before the last withdrawal, M.,
alarmed at the acti/ity of the account, clari"ed
the matter with 71@. which ga/e its aro/al.
=on receit of the check, @unanan noti"ed 71@.
of the alternation. 71@. asked M. to reimburse
the amount but the latter refused. (ho is liableM
+@ declared that under @.@ no. ?, the drawee
bank )71@.* must return the check within 2$ hrs.
from recei/ing it from the @. clearing house to
the collecting bank for any defect such as an
alteration. &he stamed guarantee of M. must be
read with @.@ no.M &hat the liability of the
collecting bank on such stam is limited to the
said 2$ hrs. Here, 71@. returned the check only
after ? days. 7urther, the aro/al gi/en by 71@.
of the last withdrawal shows the drawee-s
negligence and stos them from claiming
otherwise. 71@. '+ O'A.O9.
@.@ 1o. ? has been suerseded by @.@
1o. %,6 )1??>*. =nder %,6 the attention of
the collecting bank must be called within
2$ hrs. from the date of disco/ery of the
fraud, forgery or material alteration. 'f the
case haened at resent, M. would ha/e
to reimburse 71@. for the amount.
&his case, strictly seaking, in/ol/es
material alteration and is not alicable to
+ec. 2! e#cet as tro the liabilities of the
drawee bank and the collecting bank in
cases falling within the scoe of +ec. 2!.
&herefore, if the drawee bank is /igilant as
to inform the collecting bank within 2$
hrs. from disco/ery, the liability for forged
checks will lie with the latter. &he remedy
of the collecting bank is to insure itself
against such losses. 'f the ublic cannot
hold the collecting bank liable, it will no
longer use checks but rather cash.
@ommercial transaction s will bog down.
@onsequently, the economy will stand still
and the banks will suBer. &he drawee bank
is liable only for the signature of the
drawer. 't is only to such arty that the
bank has ri/ity with. &he collecting bank
has ri/ity with the deositor who is the
rincial culrit in the case. &hus, it has
duty of diligence.
II. CONSI+E'ATION

Se,. 2A. 8resumption of consideration. ;
E<er! ne/o-.able .ns-rmen- .s 5eeme5
1#
prima facie -o 1a<e been .sse5 0or a
<alable ,ons.5era-.on7 an5 e<er! 8erson
21ose s./na-re a88ears -1ereon -o 1a<e
be,ome a 8ar-! -1ere-o 0or <ale.
What does this section pro+ide?
=nder this +ection, the mere introduction
or negotiation of a note raises a disutable
resumtion of a su0cient consideration . 't is
unnecessary to a/er or ro/e consideration, for
consideration is imorted and resumed from the
fact that it is a 1'. &he erson )makerEdrawer or
indorser* claiming that a ayee or indorsee did
not gi/e /aluable consideration for an instrument
must ro/e that there really was no /aluable
consideration gi/en.

Se,. 2E. 9alue. what constitutes. Q Pale .s
an! ,ons.5era-.on sL,.en- -o s88or- a
s.m8le ,on-ra,-. An an-e,e5en- or 8re;
e:.s-.n/ 5eb- ,ons-.--es <ale7 an5 .s
5eeme5 s,1 21e-1er -1e .ns-rmen- .s
8a!able on 5eman5 or a- a 0-re -.me.
What is +aluable consideration?
@onsideration means inducement to a
contract that is, the cause, moti/e, rice or
imelling inVuence which induces a contracting
arty to enter into a contract. Qaluable
consideration consists either in some right,
interests, ro"t or bene"t accruing to the arty
who makes the contract, or so, forbearance,
detriment, loss or some resonsibility to act or
labor, or ser/ice gi/en, suBered or undertaken by
the other side. @onsideration founded on )1* lo/e
and aBection, or )2* uon gratitude, is good
consideration, but does not constitute such
/aluable consideration as is su0cient to suort
the obligation of a bill or note, as between
original arties. 'ncluded on this are gifts,
ser/ices without e#ectation of comensation,
moral obligations. &hese are not /aluable
consideration contemlated by the 1'O., although
the same are considered so by the @i/il @ode. A
/aluable consideration need not be adequate. 't is
su0cient if it is a /aluable one.

Se,. 2I. What constitutes holder for +alue. ;
*1ere <ale 1as a- an! -.me been /.<en 0or
-1e .ns-rmen-" -1e 1ol5er .s 5eeme5 a
1ol5er 0or <ale .n res8e,- -o all 8ar-.es 21o
be,ome s,1 8r.or -o -1a- -.me.
What is a holder for +alue?
:ne who gi/es /aluable consideration for
an instrument issued or negotiated to him is a
holder for /alue.
I&&(ST'ATION: A, maker, ., ayee. . indorses
to @, @ to 8, 8 to 9, holder. .etween A I . no
/aluable consideration. .etween . I @ /aluable
consideration is gi/en. .etween 8 I 9 it is not
known whether /alue was gi/en. 9 is a holder
for /alue as to A, . and @ because at @-s time
there was /aluable consideration gi/en and A, .,
and @ were artiers rior to the time when /alue
had been gi/en. As to 8, it is not known.
Se,. 2J. *1en l.en on .ns-rmen-
,ons-.--es 1ol5er 0or <ale. Q *1ere -1e
1ol5er 1as a l.en on -1e .ns-rmen- ar.s.n/
e.-1er 0rom ,on-ra,- or b! .m8l.,a-.on o0
la2" 1e .s 5eeme5 a 1ol5er 0or <ale -o -1e
e:-en- o0 1.s l.en.
S88ose4 Er2.n" o- o0 lo<e an5 a@e,-.on"
.sse5 a 8rom.ssor! no-e .n 0a<or o0 Anne
)ar.e" B I 8rom.se -o 8a! Anne )ar.e or
or5er P1"000.00. s/5. Er2.n.D As a b.r-15a!
/.0-. %- Anne )ar.e o2es Pe-er PI000.00.
%e,ase o0 -1e 8ers.s-en,e o0 Pe-er 0or A)
-o 8a! 1.m" s1e srren5ers -1e .ns-rmen-
-o 1.m. Pe-er .s no2 -1e 1ol5er. Can Pe-er
/o a/a.ns- Er2.n>
4i/en the lack of /aluable consideration
between Anne Marie and 9rwin alying +ec. 2>,
Peter is considered a holder for /alue to the
e#tent of his debt or lienD PC66 and can go
against 9rwin for such amount. As to the P$66
remaining, as Peter is not considered a holder for
/alue to such e#tent, he may not collect it.
Absence of consideration, being a ersonal
defense )+ec. 2,*, can be used as against those
not H'8@. +ince being a holder for /alue is one of
the requisites of a H'8@, Peter can not be
considered as H'8@ and thus, the defense of lack
of consideration is a/ailable to 9rwin as against
Peter. H:(9Q9A, if su0cient consideration
e#isted between Anne Marie and 9rwin, Peter
may collect the entire sum sub<ect to the
obligation to return the e#cess to AM. .ut, also, if
the defense of 9rwin is a real defense, Peter may
not reco/er from the instrument desite his lien.

Se,. 2K. 6,ect of want of consideration. -
Absen,e or 0a.lre o0 ,ons.5era-.on .s a
ma--er o0 5e0ense as a/a.ns- an! 8erson no-
a 1ol5er .n 5e ,orse7 an5 8ar-.al 0a.lre o0
,ons.5era-.on .s a 5e0ense 8ro -an-o"
21e-1er -1e 0a.lre .s an as,er-a.ne5 an5
l.3.5a-e5 amon- or o-1er2.se.
20
What is absence of consideration? Failure of
consideration? (istinguish the two.

Absence of consideration is a total lack of
any /alid consideration such as when the
consideration for commercial aer is clearly
fraudulent. 7ailure of consideration is the neglect
or failure of one of the arties to gi/e, to do or to
erform the consideration agreed uon. (ant or
absence of consideration embraces transactions
where no consideration was intended to ass
while failure of consideration was contemlated
but that it failed to ass.
Ills-ra-e 8ar-.al 0a.lre o0 ,ons.5era-.on.
+uose that in a note for P1,666.66 the
e#tent of want of consideration is only PC66.66
&hat is, .., ayee, ga/e A, maker /aluable
consideration to the e#tent of P$66.66. A can
interose want of consideration ro tanto, or
roortionateD only to the e#tent of PC66.66. @,
holder, if he is not a H'8@, can only collect from A
P$66.66. .ut, if he were a H'8@, he can collect
the entire amount.
What kind of defense is absence or failure
of consideration?
7ailure or absence of consideration ,
whether total or artial, can be interosed as a
defense only against ersons not H'8@ but not
against H'8@. &hese defenses are, therefore, only
ersonal or equitable defenses.
Se,. 2#. 5iability of accommodation party. ;
An a,,ommo5a-.on 8ar-! .s one 21o 1as
s./ne5 -1e .ns-rmen- as ma6er" 5ra2er"
a,,e8-or" or .n5orser" 2.-1o- re,e.<.n/
<ale -1ere0or" an5 0or -1e 8r8ose o0
len5.n/ 1.s name -o some o-1er 8erson.
S,1 a 8erson .s l.able on -1e .ns-rmen- -o
a 1ol5er 0or <ale" no-2.-1s-an5.n/ s,1
1ol5er" a- -1e -.me o0 -a6.n/ -1e .ns-rmen-"
6ne2 1.m -o be onl! an a,,ommo5a-.on
8ar-!.
What is an accommodation party?
An accommodation arty is one who has
signed the instrument as maker, drawer, accetor
or indorser without recei/ing /alue therefore, and
for the urose of lending his name to some
other erson. &he requisites therefore are : )1* he
must be a arty to the instrument, signing as
maker, drawer, accetor or indorser; )2* he must
not recei/e /alue therefore; and )!* he must sign
for the urose of lending his name or credit.
&hus, it is not a /alid defense that the
accommodation arty did not recei/e any
/aluable consideration when he e#ecuted the
instrument as the law requires such absence. )'n
contrast, under the @i/il Oaw, the absence of
consideration renders the contract defecti/e.* &he
lacing on the note of the words 2 /alue
recei/ed3 does not negate the character of the
note as an accommodation aer. &he hrase
without recei/ing /alue therefore 2 means without
recei/ing /alue by /irtue of the instrument and
not as it aarently is suosed to mean, without
recei/ing ayment for lending his name.

I&&(ST'ATION4
1. ACCO)O+ATION )AOE'; A wanted to
borrow money from .. .ut . would not
lend the money to A because of the
former-s bad reutation. A would only lend
. the money if the latter were able to
secure the signature of @. . asks @ to
e#ecute a P1 in his).* fa/or. @ makes a
P1, 2' romise to ay . or order P1,666.66
sgd. @.3 . then indorses the note to A and
. gets the P1,666.66 from A.
'n this eg., . is the accommodated
arty. @ is the accommodated arty
)maker*. He become a arty to the
instrument as maker but only for
the urose of lending his name or
credit to . so that . can raise the
money he needs. @ who as a maker
is ordinarily rimarily liable, is only
secondarily liable, is rimarily
liable. &his is because ultimately,
the accommodated arty is the one
required to ay. .ut if due date
comes and . cannot ay, @ can be
held liable to ay desite A-s
knowledge that @ is only an
accommodated arty. &hen, @ after
ayment can ha/e recourse as
against the one rimarily liable, the
accommodated arty D. )'n my
oinion, when due date comes is @
that A should go against. After
ayment, only then can . held
liable. +o, the maker is still
rimarily liable G at least, at "rst*.
A cororation cannot be held liable
as an accommodation arty. &his is
because a cororation cannot issue
instruments without a
consideration. And under sec. 22,
while title may ass as to the
instrument, the cororation may
not be held liable due to its want of
caacity )to issue 2consideration D
less3 1'*. 'n such cash, it is the
21
o0cers who issued the instrument
who must be held liable in their
indi/idual caacities. +uch an act is
considered ultra /ires. )+ee cases*
2* ACCO)O+ATION IN+O'SE' G in the eg.
Abo/e instead of asking @ to e#ecute a P1, .
makes a note fa/or of A. . asks @ to indorse the
note without recei/ing /alue therefore. Here, @ is
considered an accommodation indorser. +uch
endorsement is for the urose of better securing
the ayment of the note.
3) ACCO))O+ATION +'A*E' G in the eg.
Abo/e, instead of e#ecuting a P1, @ e#ecutes a
.:9 with . as the ayee e/en though no /aluable
consideration is recei/ed by @.. then indorses the
bill to A, who gi/es the roceeds to ..
A) ACCO))O+ATION ACCEPTO' G in the eg.
Abo/e, instead of ask @ to accet the bill drawn
by him ).* in this own fa/or. &hen, . indorses the
bill )that was acceted by @* to who gi/es the
money.
*1a- .s -1e le/al 8os.-.on o0 -1e
a,,ommo5a-.on 8ar-!>
&he accommodation arty is generally
regarded as a surety for the arty
accommodated. 't is not the accommodation
arty that is ultimately liable for the instrument
issued. 't is the accommodated arty. (hen the
accommodation arty makes ayment to the
holder, they ha/e the right to see the
accommodated arty for reimbursement since
the relation between them is in eBect that of
rincial and sureties. &he accommodated arty
cannot reco/er from the accommodation arty
because, as between them, absence of
consideration is a /alid defense. &he
understanding between them is either: )1* the
accommodated arty ays the instrument directly
to the holder; or )2* the accommodated arty
reimburses the amount aid by the
accommodation arty to the holder.
A holder desite his knowledge
that the arty he holds liable is <ust
an accommodation arty can still
reco/er from such arty as if there
was no contract of accommodation.
&he knowledge of the holder does
not eBect his being an otherwise
H'8@. &hus, to hold the
accommodation arty liable, the
holder, e#cet for the knowledge of
want consideration, must
meet all the requisites under sec.
%2, that is, the holder for /alue
must ha/e acquired the instrument
comlete and regular on its face,
before it is o/erdue and without
notice of re/ious dishonor. (here
he does not meet all these, thus
not a H'8@, sec. 2, not a sec. 2?
alies. &he accommodation arty
may interose the defense of its
being an accommodation arty to a
holder not H'8@.
A solidary accommodation arty )1*
may demand from the rincial
debtor reimbursement of the
amount he aid; and )2* may
demand contribution from his coG
accommodation makers without
"rst directing his action against the
rincial debtor ro/ided that )a*
he made the ayment by /irtue of
a <udicial demand; or )b* the
rincial debtor is insol/ent.

III. NEGOTIATION

Se,. 30. What constitutes negotiation. ; An
.ns-rmen- .s ne/o-.a-e5 21en .- .s
-rans0erre5 0rom one 8erson -o ano-1er .n
s,1 manner as -o ,ons-.--e -1e -rans0eree
-1e 1ol5er -1ereo0. I0 8a!able -o bearer" .- .s
ne/o-.a-e5 b! 5el.<er!7 .0 8a!able -o or5er"
.- .s ne/o-.a-e5 b! -1e .n5orsemen- o0 -1e
1ol5er an5 ,om8le-e5 b! 5el.<er!.
+EFINITION OF TE')S4
1. &ransferD to con/ey roerty from
one erson to another;
2. HolderD the ayee or indorsee of a
bill or note who is in ossession of
it or the bearer thereof )+ec. 1?1*.
What are the " types of transfer?
1. by assignment;
2. by oeration of law
!. by negotiation which may either be by
indorsement comleted by deli/ery or by
mere deli/ery.
What is assignment?
4enerally, it is a method of transferring a
nonDnegotiable instrument whereby the assignee
is merely laced in the osition of the assignor
and acquires the instrument sub<ect to all
defenses that might ha/e been set u against the
original ayee. &he eBect of the assignment is
that the Warty holding the right dros out of the
contract and another takes his lace. 9ach
assignee takes his chances as to the e#act
22
osition in which any arty making an
assignment of it stands. (here the holder of a bill
ayable to order transfers it without the
indorsement, it oerates as an equitable
assignment but the assignee has the right to
comel the assignor to indorse the instrument
)+ec. $?*.
When does transfer of operation of law
occur?
&he full title to a bill or note may ass
without either assignment, indorsement or
deli/ery but by oeration of law by:
1. the death of the holder, where title /ests
in his ersonal reresentati/e
)+uccession*;
2. the bankrutcy of the holder, where title
/ests in the assignee or trustee
)insol/ency*, or
!. uon the death of a <oint ayee or
indorsee in which case the general rule is
that the title /ests at once in the sur/i/ing
ayee or indorsee.
What is negotiation?
't is the transfer of an instrument form one
erson to another so as to constitute the other
the holder thereof. &here is no negotiation if the
transfer does not make the transferee the holder
of the instrument. (here the instrument is
ayable to order, it is negotiated by the
indorsement of the holder comleted by deli/ery,
and where it is ayable to bearer, by mere
deli/ery. .ut where the instrument is ayable to
bearer and it was indorsed and deli/ered, the
transferor shall be liable as an indorser. 7urther,
for the holder to hold liable such indorser, the
former must be able to trace his title through an
unbroken chain of indorsement )+ec. $6*
Se,. 31. 0ndorsement) how made. - T1e
.n5orsemen- ms- be 2r.--en on -1e
.ns-rmen- .-sel0 or 8on a 8a8er a--a,1e5
-1ere-o. T1e s./na-re o0 -1e .n5orser"
2.-1o- a55.-.onal 2or5s" .s a sL,.en-
.n5orsemen-.
*1a- .s -1e na-re o0 .n5orsemen-s>
'ndorsement is the writing of the name of
the indorser on the instrument with the intent
either in transfer the title to the same, or to
strengthen the security to the holder by assuming
a contingent liability for its future ayment, or
both. An indorserment is not only a mode of
transfer. 't in/ol/es also a new contract and an
obligation on the art of the indorser G an imiled
guaranty that the instrument will be duly aid
according to the terms thereof. &hat, further, if
the instrument is not aid by the one rimarily
liable, the indorser, after due notice of dishonor,
will ay. &here is an added obligation uon the
instrument reside from what aears uon the
face of the instrument.
Where is the indorsement written?
&he indorsement may be written )1* on
the instrument itself; or )2* uon a aer
attached thereto. (here it is written on the
instrument itself, it is usually written on the back.
.ut, the law looks to the intention of the arties
rather to the form as to indorsement. &he lace is
not essential. (here the instrument is written on
a aer attached to the instrument, such aer is
called an 2alone.3 &he aer must be attached to
the instrument so as to become art of it. A
temorary attachment cannot be considered an
allonge. 7urther, the use of an allonge is not
limited to when there is an imossibility of
indorsing on the instrument due to lack of sace.
&he indorserment is not in/alidated by the fact
that is written on another aer e/en if there is
still sace for indorsement on the instrument
itself )Agbayani-s oinion*.
1:&9: an indorsement has to be
only in writing. 't may thus be
rinted such as tyewritten or
stamed.
Se,. 32. 0ndorsement must be of entire
instrument. - T1e .n5orsemen- ms- be an
.n5orsemen- o0 -1e en-.re .ns-rmen-. An
.n5orsemen- 21.,1 8r8or-s -o -rans0er -o
-1e .n5orsee a 8ar- onl! o0 -1e amon-
8a!able" or 21.,1 8r8or-s -o -rans0er -1e
.ns-rmen- -o -2o or more .n5orsees
se<erall!" 5oes no- o8era-e as a ne/o-.a-.on
o0 -1e .ns-rmen-. %- 21ere -1e
.ns-rmen- 1as been 8a.5 .n 8ar-" .- ma! be
.n5orse5 as -o -1e res.5e.
*1a- .s -1e rle on .n5orsemen-s o0 -1e
amon->
&he general rule is that the indorserment must be
of the entire amount. An indorsement must of the
art of the instrument does not one rate as a
negotiation thereof but may constitute a /alid
assignment binding between the arties ) thus,
the holder is suscetible to defenses a/ailable
23
against the assigner*. An instrument is said to be
indorsed artially when eg. &he note is for P1,666
but the indorsement states, 2Pay to 5 P$663. .ut
where the instrument has been aid in art, it
may be indorsed as to the residue )eg. in the eg.
abo/e, suose the maker aid PC666 already.
&he indorsement for P$66 would then be /alid as
the negotiation*. 7urther, an indorsement which
urorts to transfer the instrument to 2 or more
indorsees se/erally does not oerate as a
negotiation. )eg. in the abo/e eg., suose the
indorsement read, 2Pay to 5 P$66 and J PC66 is
not a /alid negotiation but 2Pay to 5 and J
P1,6663 is*.

Se,. 33. :inds of indorsement. ; An
.n5orsemen- ma! be e.-1er s8e,.al or .n
blan67 an5 .- ma! also be e.-1er res-r.,-.<e
or 3al.9e5 or ,on5.-.onal.

What are the kinds of indorsement?
't may either be: )1* secial, or )2* in blank )both
sec. !$*, or )!* restricti/e, or )$*non G restricti/e
)sec. !C*, or )%* quali"ed, or )C* unquali"ed or
general )sec. !,,CC*, or )>* conditional, or ),*
unconditional, or )?* <oint )sec. $1*,
)16*successi/e )sec. %6,C,*, or )11* irregular )sec.
C$*, or )12* facultati/e )sec. 111*.
Se,. 3A. 1pecial indorsement) indorsement
in blank. ; A s8e,.al .n5orsemen- s8e,.9es
-1e 8erson -o 21om" or -o 21ose or5er" -1e
.ns-rmen- .s -o be 8a!able" an5 -1e
.n5orsemen- o0 s,1 .n5orsee .s ne,essar!
-o -1e 0r-1er ne/o-.a-.on o0 -1e
.ns-rmen-. An .n5orsemen- .n blan6
s8e,.9es no .n5orsee" an5 an .ns-rmen- so
.n5orse5 .s 8a!able -o bearer" an5 ma! be
ne/o-.a-e5 b! 5el.<er!.
What are the ! kinds of indorsement
speci#ed in sec.";?
+P9@'AO '18:A+9M91&D one that )1* seci"es the
erson to whom the inodrsement is ayable )eg.
2Pay to A3* or )2* seci"es to whose order it is
ayable, )eg. 2Pay to A or order3*. 'n both cases,
the indorsement is followed by the signature of
the indorser. &he omission of the words of
negotiability such as 2 or order3 and 2 to the
order of 2 do not aBect the negotiability of the
instrument which is negotiable on its face )sec.
!C* since it is only an indorsement.
.OA1P '18:A+9M91&D :19 (H'@H +P9@'7'9+ 1:
'18:A+99. +uch an indorsement generally
consists only of the signature of the indorser.
<ow are instruments so indorsed.
negotiated further?
(here the instrument is originally ayable to
order and it is negotiated by the ayee by secial
indorsement, it can be negotiated by the indorsee
by indorsement comleted by deli/ery. (here the
instrument is originally ayable to order and it is
negotiated by the ayee by blank indorsee, it can
be further negotiated by the holder by mere
deli/ery. (here the instrument is originally
ayable to bearer, it can be further negotiated by
mere originally deli/ery, e/en if the original
bearer negotiated it by secial indorsement.
)once a bearer instrument, always ayable to
bearer*.

Se,. 3E. /lank indorsement) how changed
to special indorsement. ; T1e 1ol5er ma!
,on<er- a blan6 .n5orsemen- .n-o a s8e,.al
.n5orsemen- b! 2r.-.n/ o<er -1e s./na-re
o0 -1e .n5orser .n blan6 an! ,on-ra,-
,ons.s-en- 2.-1 -1e ,1ara,-er o0 -1e
.n5orsemen-.
&he diBerence between secial and blank
indorsement is only signi"cant. (hen the
instrument is originally ayable to order because
a bearer instrument, e/en if secially indorsed, is
no diBerent from one indorsed in blank. &hey are
still negotiated by mere deli/ery.
'OO=+&AA&':1: A makes a note with . as ayee. .
negotiates it to @, signing only his signature. @,
holder, may lace abo/e such signature 2Pay to
@3 to con/ert the blank indorsement into a
secial one.
O'M'&A&':1+: &he holder must not write any
contract not consistent with the indorsement,
that is, the contract so written must not change
the contrat of the blank indorsement. @onsistency
shall be <udge with the intention of the arties.
9g. of inconsistent G )1* 2Pay to 5 and J3 when it
was intended to be ayable to only one erson.
)2* 2 8emand and noticed wai/ed3. )!* 2 '
guaranty ayment3. )$* 2 without recourse.3
2A

Se,. 3I. When indorsement restricti+e. ; An
.n5orsemen- .s res-r.,-.<e 21.,1 e.-1er4
(a) Pro1.b.-s -1e 0r-1er ne/o-.a-.on
o0 -1e .ns-rmen-7 or

(b) Cons-.--es -1e .n5orsee -1e
a/en- o0 -1e .n5orser7 or

(,) Pes-s -1e -.-le .n -1e .n5orsee .n
-rs- 0or or -o -1e se o0 some o-1er
8ersons.
%- -1e mere absen,e o0 2or5s .m8l!.n/
8o2er -o ne/o-.a-e 5oes no- ma6e an
.n5orsemen- res-r.,-.<e.
*1a- .s a res-r.,-.<e .n5orsemen->
A restricti/e endorsement is one so worded that it
either restrict or rohibits entirely the futher
negotiation of an instrument, an indorser noti"es
all rosecti/e holders that the indorsee has only
the authority to deal with the instrument as
thereby directed and that the indorsee has only a
restricti/e title thereto. .y such indorsement, an
indorser can safeguard his interest whene/er he
should "nd it necessary to entrust negotiable
aer to another. A restricti/e indorsement
destroys the negotiability of the instrument and
bars further negotiation to a H'8@. All subsequent
indorsees acquire only the title of the "rst
indorsee under the restricti/e indorsement.
9g. of )a* rohibition G
2Pay to @ only3 or 2 Pay to @ and no
other3.
:f )b* 2 agency tye3 of restricti/e
indorsement
2Pay to @ collection3. or 2Pay to @
for deosit3.
- Here, @ does not acquire title o/er
the instrument. He is merely an
agent of the indorser. &hus, he is
sub<ect to all the defenses a/ailable
as against the indorser.
:f )c* in trust for another G
2 Pay to 5 in trust for @.3 or 2 Pay
ti 5 for the use of @3.
- Here, there is transfer of legal title to
the instrument to the indorsee as
trustee. And gi/e notice that the
aer cannot be negotiated by him
for his own debt or for his own
beni"t. 7urther, it is he oinion of
2learned writers3 that the indorsee is
not sub<ect to the defenses a/ailable
as against the indorser.
&he restricti/e indorsement which are
hold to negati/e the resumtion of consideration
are such as to indicate that they are not intended
to ass title but merely to enable the indorsee to
collect for the indorser.
Mere absence of the words imlying
ower to negotiate does not make an
indorsement restricti/e. &hus, 2Pay to 53 is the
same as 2Pay to 5 order3 where the instrument is
ayable to order. &he omission of the word
2order3 does not render the indorsement
restricti/e. .ut while the omission of the words of
negotiability in the indorsement does not aBect
the negotiability of the instrument, ssuch
omission in the body thereof will render the
instrument nonDnegotiable. Aestricti/e
indorsements ser/e to limit only the negotiability
of an instrument originally negotiable.
Se,. 3J. 6,ect of restricti+e indorsement)
rights of indorsee. ; A res-r.,-.<e
.n5orsemen- ,on0ers 8on -1e .n5orsee -1e
r./1-4
(a) -o re,e.<e 8a!men- o0 -1e
.ns-rmen-7

(b) -o br.n/ an! a,-.on -1ereon -1a-
-1e .n5orser ,ol5 br.n/7

(,) -o -rans0er 1.s r./1-s as s,1
.n5orsee" 21ere -1e 0orm o0 -1e
.n5orsemen- a-1or.zes 1.m -o 5o so.
%- all sbse3en- .n5orsees a,3.re onl!
-1e -.-le o0 -1e 9rs- .n5orsee n5er -1e
res-r.,-.<e .n5orsemen-.
'OO=+&AA&':1: 'n the indorsement, 2Pay to A for
collection. sgd. P3. a is merely an agent of P and
because of this, A may )1*recei/e ayment of the
instrument; )2* bring any action thereon that the
indorsee could bring )sub<ect to the same
defenses a/ailable against the indorser*; and )!*
if authori;ed, may transfer his right to another by
negotiating the instrument. .ut such subsequent
indorsee acquires only the title of the agent, A,
whose right is merely to colloect.
&he right to recei/e ayment and the
right to bring any action that the indorser could
bring are a/ailable under any form of restricti/e
indorsement. &he 2 rights are the basic rights of
indorsees in instruments with restricti/e
indorsement.
1ot all forms of restricti/e indorsement
destroy negotiability of an instrument. :nly those
which fall within sec. !C )a* do so. (hile all three
2E
forms of restricti/ce indorsement imose some
degree of limitation and it is the indorsement
itself that discloses the e#tent of the limitation.
&his is the reason for )c*. &he indorsee may, if
authori;ed, negotiate further the instrument but
all subsequent indorsees acquire only the title of
the original indorsee G an agent.

Se,. 3K. =uali#ed indorsement. ; A 3al.9e5
.n5orsemen- ,ons-.--es -1e .n5orser a
mere ass./nor o0 -1e -.-le -o -1e .ns-rmen-.
I- ma! be ma5e b! a55.n/ -o -1e .n5orser=s
s./na-re -1e 2or5s R2.-1o- re,orseR or
an! 2or5s o0 s.m.lar .m8or-. S,1 an
.n5orsemen- 5oes no- .m8a.r -1e ne/o-.able
,1ara,-er o0 -1e .ns-rmen-.
*1a- .s 3al.9e5 .n5orsemen->
't is one made by adding to the indorser-s
signature the words 2 without recourse3,
2indorser not holden3, 2 at indorsee-s one risk3,
ao any words of similar imort. 't constitutes the
indorser a mere assignor of the title to the
instrument. 2(ithout recourse3 means without
resort to a erson who is secondarily liable after
the default of the erson who is rimarily liable.
&he urose of such indorsement is to trasfer title
without guaranteeing ayment. 'n eBect the
indorser states that 2all arties to the aer and
genuine, that the indoreser is the lawful holder of
that aer and has title to it, and that he knows
of no reason why the indorsee cannot reco/er,
but that he does not guarantee the "nancial
resonsibility of the arties on the aer.
*1en ,an -1e 3al.9e5 .n5orser be 1el5
se,on5ar.l! l.able>
'n general, an indorser is secondarily liable. A
quali"ed indorser is still secondarily liable but his
liability is limited. He is not entirely free from
secondarily liability. He is secondarily liable on
breaches of his warranties as an indorser under
sec. C%. He can be held liable if the instrument is
dishonored due to: 1 forgery 2 lack of good title
on the arty of the indorser: ! lack of caacity to
indorse on the art of rior or arties $ the fact
that, at the time of indorsement, he knew that
the instrument was /alueless or not /alid. &he
only thing he does not warrant is the sol/ency of
the erson rimarilyliable if the failure to reco/er
was due to the fact of the insol/ency at the time
os indorsement, he is liable for breach of is
warranty that he did not know of any fact that the
instrument was /alueless.
A quali"ed indorsement does not imair
the negotiable character of the instrument.

Se,. 3#. 3onditional indorsement. - *1ere
an .n5orsemen- .s ,on5.-.onal" -1e 8ar-!
re3.re5 -o 8a! -1e .ns-rmen- ma!
5.sre/ar5 -1e ,on5.-.on an5 ma6e 8a!men-
-o -1e .n5orsee or 1.s -rans0eree 21e-1er
-1e ,on5.-.on 1as been 0l9lle5 or no-. %-
an! 8erson -o 21om an .ns-rmen- so
.n5orse5 .s ne/o-.a-e5 2.ll 1ol5 -1e same"
or -1e 8ro,ee5s -1ereo0" sbHe,- -o -1e
r./1-s o0 -1e 8erson .n5ors.n/ ,on5.-.onall!.
*1a- .s an absol-e .n5orsemen-> A
,on5.-.onal .n5orsemen->
An absolute indorsement is one by which the
indorser binds himself to ay, uon no other
condition than the failure of rior arties to do so,
and uon due notice to him such failure. :n the
other hand, a conditional indorsement is one by
which the indorser anne#es some other condition
to his liability, that is, where there is some
condition in the indorsement. &he indorsement is
sub<ect to the haening of a contogent e/ent
)an e/ent that may or may not haen* or a ast
e/ent unknown to the arties. Oike restricti/e
indorsements, it must be remembered that the
ressure of conditions in the indorsements does
not render the instrument nonDnegotiable. :nly if
the condition is on the face or on the original
contract of the instrument is the instrument
rendered nonDnegotiable as the romise or order
to ay is conditional.
'OO=+&AA&':1: A e#ecutes a note in fa/or of . for
P166. . indorses the note to @ stating into the
indorsement, 2Pay to @, if he asses the bar
e#ams. +gd. .. 2it is a conditional indorsement as
the e/ent is not certain to haen )and it is in the
indorsement*. .ut, under sec. !?, the maker can
disregard the condition and ay @ the roceeds
desite the nonDoccurrence of the e/ent. &he
maker may also honor the condition set and
refuse to ay. 'f the note was aid, @ holds the
roceeds thereof in trust while the condition is
not ful"lled. @ does not acquire ownershi o/er
the sum. 't is uon ful"llment of the condition
that such ownershi o/er the roceeds is
absolutely acquired by the conditional indorsee.

Se,. A0. 0ndorsement of instrument payable
to bearer. ; *1ere an .ns-rmen-" 8a!able
-o bearer" .s .n5orse5 s8e,.all!" .- ma!
ne<er-1eless be 0r-1er ne/o-.a-e5 b!
2I
5el.<er!7 b- -1e 8erson .n5ors.n/ s8e,.all!
.s l.able as .n5orser -o onl! s,1 1ol5ers as
ma6e -.-le -1ro/1 1.s .n5orsemen-.
&his section alies to instruments which
are originally ayable to bearer. 't does not aly
to order instruments con/erted to bearer
instruments because the only or last indorsement
is in blank.
*1a- .s -1e rle on .n5orsemen-s o0 bearer
.ns-rmen->
.y /irtue of this sec., an instrument ayable to
bearer is not con/erted into an instrument
ayable to order by being indorsed secially and
therefore, the indorsee mey further negotiate the
instrument by mere deli/ery. &his means that an
instrument which is originally ayable to bearer is
always ayable to bearer. .ut, such indorser,
because of his indorsement, can be held liable
secondarily by those holders who can trace their
title to the instrument by the series of unbroken
indorsements form such secial indorser. His
liability is that of a general indorser as ro/ided
in sec. CC.
'OO=+&AA&':1: A e#ecutes a note ayable to
bearer for P166 in fa/or of .. . deli/ered it to @. @
secially indorsed it to 8. 8 secially indorsed it
to 9, holder. @an 9 go against A,.,@,8,M
9 cannot go against ., because there is
mere deli/ery and there is no unbroken chain of
indorsements. &he rule is that the holder must
trace his title to the secial indorser to make him
liable through an unbroken chain of indorsement.
9 cannot go against . because. As a
erson who negotiates by mere deli/ery )to @*,
warranty under sec. C% e#tends only to the
immediate transferee. &hus, . is only liable to @,
not to 8 I 9.
9 can go against @ I 8 because 9 can
trace his title to @ )I 8* through an unbroken
chain of indorsements.
1:&9: this section deals with secial
indorsements, not blank indorsement. +o, that if,
in the eg. abo/e, @ blankly indorsed it to 8, 9
cannot go against @ as it would be imossible for
him to trace his title to @. )my oinion*
)contrary to Abad-s*
Se,. A1. 0ndorsement where payable to two
or more persons. ; *1ere an .ns-rmen- .s
8a!able -o -1e or5er o0 -2o or more 8a!ees
or .n5orsees 21o are no- 8ar-ners" all ms-
.n5orse nless -1e one .n5ors.n/ 1as
a-1or.-! -o .n5orse 0or -1e o-1ers.
&his section alies only to instrument
ayable to two or more ayees <ointly )eg. 2Pay to
the order of A and .3*. it does not aly to
instrument ayable to two or more ayees
se/erally. )eg. 2Pay to the order of A and .3*. the
latter may be negotiated by the indorsement of
one ayee.
*1a- .s -1e rle .n Ho.n- 8a!ees>
(here the instrument is ayable to two or more
ayees )<ointly*, all ayees must each indorse in
order to negotiate the instrument. 'f only one
indorses, he asses only his art of the
instrument. .ut such an indorsement would not
oerate as a /alid negotiation because it would
not be an indorsement of the entire amount
which is contrary to sec. !2. 9#cetion is made
for such rule: )1* where the ayee or indorser has
authority to indorse for he others; and )2* where
the ayees or indorsees are artners.

Se,. A2. 6,ect of instrument drawn or
indorsed to a person as
cashier. ; *1ere an .ns-rmen- .s 5ra2n or
.n5orse5 -o a 8erson as 4cashier4 or o-1er
9s,al oL,er o0 a ban6 or ,or8ora-.on" .- .s
5eeme5 8r.ma 0a,.e -o be 8a!able -o -1e
ban6 or ,or8ora-.on o0 21.,1 1e .s s,1
oL,er" an5 ma! be ne/o-.a-e5 b! e.-1er -1e
.n5orsemen- o0 -1e ban6 or ,or8ora-.on or
-1e .n5orsemen- o0 -1e oL,er.
*1a- .s -1e 8resm8-.on ra.se5 .n se,. A2>
&he resumtion is that the instrument ayable
to the cashier or other "scal o0cer of a bank or
cororation is resumed ayable to the bank or
cororation to which such erson is a cashier or
"scal o0cer. 't is resumed not ayable to the
said o0cer. &he instrument may be indorsed by
any duly authori;ed )by the laws of the said bank
or cororation* o0cer of the entity other than the
said cashier or "scal o0cer. .ut the resumtion
established is disutable by su0cient roof to the
contrary )eg. that the instrument really belongs
and is ayable ersonally to the cashier as the
real creditor of the maker or drawer*.
&his rule is equally 2alicable3 to
instruments drawn ayable to the treasurer of
municial or ublic cororations )eg. a town*. .ut,
since town does not fall within the scoe of
2cororation3 in sec. $2, the treasurer may not
indorse the said instrument.
2J

Se,. A3. 0ndorsement where name is
misspelled. and so forth. ; *1ere -1e name
o0 a 8a!ee or .n5orsee .s 2ron/l!
5es./na-e5 or m.ss8elle5" 1e ma! .n5orse
-1e .ns-rmen- as -1ere.n 5es,r.be5 a55.n/"
.0 1e -1.n6s 9-" 1.s 8ro8er s./na-re.
'OO=+&AA&':1: An instrument drawn ayable to
Al"e Almedo when the name of the ayee is
really Al"e Almeda may be indorsedS
)1* by using the misselled name G 2Pay to
5. sgd. Al"e Almedo3.
)2* :r by writing the misselled name
with the roer name D 2Pay to 5. sgd.
Al"e Almedo sdg. Al"e Almeda3.

Se,. AA. 0ndorsement in representati+e
capacity. ; *1ere an! 8erson .s n5er
obl./a-.on -o .n5orse .n a re8resen-a-.<e
,a8a,.-!" 1e ma! .n5orse .n s,1 -erms as -o
ne/a-.<e 8ersonal l.ab.l.-!.
$o2 ms- an a/en- .n5orse>
He must indorse in the same manner as an agent
of the maker, drawer or accetor should in order
to escae ersonal liability as required in sec. 26.
&hus, )1* he must add words describing himself
as an agent; and )2* at the same time disclose
his rincial )he may also sign only the name of
the rincial*; and )!* he must be duly
authori;ed. :therwise, he is ersonally liable.

Se,. AE. %ime of indorsement) presumption.
; E:,e8- 21ere an .n5orsemen- bears 5a-e
a0-er -1e ma-r.-! o0 -1e .ns-rmen-" e<er!
ne/o-.a-.on .s 5eeme5 8r.ma 0a,.e -o 1a<e
been e@e,-e5 be0ore -1e .ns-rmen- 2as
o<er5e.
*1a- 5oes -1.s mean an5 21! .s .-
.m8or-an->
(hen the ayee indorsees the instrument without
dating his indorsement, the resumtion is that
he indorsed it on or before the note-s maturity
date. .ut, this resumtion is rebuttable or
disutable by the su0cient roof to the contrary
and the burden of roof is on the erson who
claims it was negotiated after its date maturity. 'f
the indorsement idXs dated, then the
resumtion in this sec. (ill not arise but that
resumtion in sec. 11 that the date written is
resumed the true date of indorsement. &his
section is imortant because in order to
constitute one a holder in due course, he must
ha/e taken the instrument before it was o/erdue.
(ith this resumtion, the erson who claims
that the holder is not a H'8@, has the burden of
ro/ing so.

Se,. AI. 8lace of indorsement) presumption.
; E:,e8- 21ere -1e ,on-rar! a88ears" e<er!
.n5orsemen- .s 8resme5 8r.ma 0a,.e -o
1a<e been ma5e a- -1e 8la,e 21ere -1e
.ns-rmen- .s 5a-e5.
*1a- .s -1e .m8or-an,e o0 -1.s se,.>
&he lace of indorsement is sometimes material
because an indorsement is go/erned by the laws
of the state where it is indorsed, although the
instrument is drawn or made in a diBerent state.
'OO=+&AA&':1: A bill is dated thus: 2Manila, Phil.,
Nan. >, 1??63.
't is subsequently indorsed without writing the
lace of indorsement. &he resumtion is that it
was indorsed in Manila. .ut such resumtion is
rebuttable.

Se,. AJ. 3ontinuation of negotiable
character. - An .ns-rmen- ne/o-.able .n .-s
or./.n ,on-.nes -o be ne/o-.able n-.l .- 1as
been res-r.,-.<el! .n5orse5 or 5.s,1ar/e5 b!
8a!men- or o-1er2.se.
*1a- .s -1e /eneral rle on -1e ne/o-.able
,1ara,-er o0 NI>
&he rule is that once an instrument is negotiable
at its origin, it continues to be negotiable until 1 it
is resecti/ely indorsed )in such a way that is
rohibits further negotiation of the instrument
under sec. !C WaY*; or 2 is discharged by ayment
or otherwise. 2 :therwise3 refers to the diBerent
ways to discharge an instrument enumerated in
sec. 11?.
+oes -1e ne/o-.able ,1ara,-er ,ease a0-er
ma-r.-!>
1o. the mercantile character )1* of the instrument
as negotiable instrument and )2* of the contracts
of the se/eral arties to it, continues after it
maturity and until it is aid e#cet )!* that an
indorsee or transferee after maturity takes the
instrument sub<ect to defenses between the rior
arties, because after maturity such subsequent
arties take the instrument after becomes
2K
o/erdue, and thus, under sec. %2)b*, they are not
H'8@. &ransfer to such transferees would be
equi/alent to a mere assignment and sub<ect to
defenses. &he osition of the holder is that he is a
holder with notice because he takes a bill, which,
on its face, ought to ha/e been aid. He is bound
to make two inquiries: )1* has the bill been
dischargedM And )2* if not, why notM (as there a
defect in the title of the erson who held it at
maturityM .ut, e/en if he is not a H'8@, he
reco/er from the note sub<ect only to defenses as
if it were nonDnegotiable.

Se,. AK. 1triking out indorsement. ; T1e
1ol5er ma! a- an! -.me s-r.6e o- an!
.n5orsemen- 21.,1 .s none,essar! -o 1.s
-.-le. T1e .n5orser 21ose .n5orsemen- .s
s-r,6 o-" an5 all .n5orsers sbse3en- -o
1.m" are -1ereb! rel.e<e5 0rom l.ab.l.-! on
-1e .ns-rmen-.
*1en ma! -1e 1ol5er s-r.6e o-
.n5orsemen->
A holder may strike out any indorsement which is
not necessary to his title. .ut where an
instrument is transferred by a secial
indorsement, the holder has no right to strike out
he name of the indorsee and lace his name in its
lace nor to con/ert such secial inodrsement to
a blank one. An instrument ayable to bearer on
its face may be negotiated by mere deli/ery
without indorsement. 'n case it is indorsed, the
holder, by /irtue of sec. $,, may strike out all
inter/ening indorsemnent or any of them because
none of them are essential to his title. .ut an
instrument originally ayable to order may be
negotiated only by the indorsement of the ayee
comleted by deli/ery. (hen the indorsement is
secial the indorsement of the secial indorsee is
necessary for further negotiation of the
instrument and may not be struck out. (hen the
indorsement is in blank the instrument becomes
ayable to bearer and may be negotiated by
mere deli/ery. Any secial indorsement
subsequent to such blank indorsement may be
struck out as they are not they are not necessary
to the holders-s title )he may claim that the
ayee blankly indorsed to him* but the ayee-s
indorsement itself may not be struck out as the
indorsement is necessary to his title.
*1a- .s -1e e@e,- o0 s-r.6.n/ o-
.n5orsemen->
)1* the indorser whose indorsement is struck
out is relie/ed form liability )secondary* on
the instrument; and
)2* all subsequent indorsers are also relie/ed
from their liability on the instrument.
1:&9: conditional indorsements may not
be struck out e/en if they are not
necessary to the title.

+ec. $?. Transfer without indorsement; efect of.
D (here the holder of an instrument ayable to
his order transfers it for /alue without indorsing
it, the transfer /ests in the transferee such title as
the transferor had therein, and the transferee
acquires in addition, the right to ha/e the
indorsement of the transferor. .ut for the urose
of determining whether the transferee is a holder
in due course, the negotiation takes eBect as of
the time when the indorsement is actually made.
&his sec. alies only to instrument ayable to
order. &his contemlates a case where there is
deli/ery and ayment of /alue but no
indorsement. &here is lacking one element for the
negotiation of the instrument G the indorsement
by the ayees or indorser. &hus, it oerates as an
equitable assignment.
*1a- are -1e r./1-s o0 -1e -rans0eree 0or
<ale>
)1* the transferee acquires only the rights of
the transferor, such that if a defense is
a/ailable against the transferee.
)2* &he transferee has also the right to
require the transferor to indorse the
instrument.
'OO=+&AA&':1: A e#ecutes a note in fa/or of . but
there is no /aluable consideration. . deli/ers the
note to @ for /alue and under circumstances that
would ha/e made @ a H'8@ )such that @ does not
know of the absence of consideration* where it
not for the lack of .-s indorsement. @an @ reco/er
from AM
1o, because @ acquires only .-s rights and
. cannot collect from A who can set u the
absence of consideration. &he transferee is not a
holder because while he is in ossession of the
instrument, he is not he indorsee. He is merely an
assignee.
*1a- ,an .- be 5e-erm.ne5 21e-1er s,1
-rans0eree .s a $I+C>
&he time for determining whether the transferee
is a H'8@ is as of the time of actual indorsement
not a time of the deli/ery. &he reason is that
negotiation is comleted at the time of
indorsement, not at the time of deli/ery.
2#
'OO=+&AA&':1: 'n the eg. abo/e, suose the note
was deli/ered on 8ec. 1, 1??6 but was indorse
only by . on 8ec. 1%, 1??6. but on 8ec. 16, 1??6,
@ found out of the absence of consideration.
&hus, on 8ec. 1%, the time of indorsement, @
cannot be considered a H'8@ as he had
knowledge of a defect on the title at the time of
negotiation.

+ec. %6. When prior party may negotiate
instrument. D (here an instrument is negotiated
back to a rior arty, such arty may, sub<ect to
the ro/isions of this Act, reissue and further
negotiable the same. .ut he is not entitled to
enforce ayment thereof against any inter/ening
arty to whom he was ersonally liable.
'OO=+&AA&':1: A e#ecuted a note ayable to the
order of .. 't is indorsed as follows: A .
@ 8 9 ..
- =nder this sec., . may continue to
negotiate the note or may reco/er
from it as a holder )he kees it instead
of negotiating it*. (here he negotiates
it )rior to maturity*, after aying the
subsequent holder ) suosing he is
held secondarily liable*, he may not
claim ayment from any of the
inter/ening arties G @, 8, 9 as it would
result in circuity of suits. Also, if .
decides to kee the note and try to
reco/er from it, be may not enforce
ayment against @, 8, 9 for the same
reason.

IP. 'IG$TS OF T$E $O&+E'

Se,. E1. >ight of holder to sue) payment. ;
T1e 1ol5er o0 a ne/o-.able .ns-rmen- ma!
-o se -1ereon .n 1.s o2n name7 an5
8a!men- -o 1.m .n 5e ,orse 5.s,1ar/es
-1e .ns-rmen-.
*1o .s a 1ol5er>
&he holder is the erson who is hysically in
ossession of the instrument. 'f you are not in
ossession of an instrument, you cannot be a
holder, much less, a holder in due course. 9/en if
you are owners of an instrument but you are not
hysically in ossession of it, the erson rimarily
liable on the instrument has all the right to refuse
ayment because uon ayment of the
instrument of the instrument by the erson
rimarily liable thereon, he has all the right to
retrie/e the instrument. :nce retrie/ed, he can
ha/e that instrument as a more /oucher of
ayment. 't is ossible that you may ha/e lost the
instrument. &he ownershi o/er it by the coy of
the lost of instrument )M*. :nly then will the
erson rimarily liable on the instrument be
comelled to ay the instrument.
*1a- are -1e ,lasses o0 1ol5ers>
)1* Holders in general )sec. %1*;
)2* Holders for /alue )sec. 2C*; and
)!* Holders in due course )sec. %2,%>*
*1a- are -1e r./1-s o0 a 1ol5er .n /eneral>
)1* He may sue on the instrument in his own
name; and
)2* He may recei/e ayment and if the
ayment in due course, the instrument is
discharged.
*1o 1as -1e r./1- -o se on -1e .ns-rmen->
&he holder of a negotiable instrument may sue in
his own name, e/en if he a holder only for
collection or as a ledge of an instrument. 't is
belie/ed that e/en a transferee of an indorsed
instrument )sec. $?* may sue in his own name if
the transferee could ha/e done so. &his is
because a transferee of an instrument for /alue
but without endorsement, under sec. $? is /ested
with such title such title as the transferor had if
the transferor had legal title, this must ass by
the transfer although sub<ect to defenses.
*1a- .s B8a!men- .n 5e ,orseD>
Payment in due course is ayment made )1* at or
after the maturity of the instrument, )2* to the
holder thereof, )!* in good faith and without
notice that his title is defecti/e.

Se,. E2. What constitutes a holder in due
course. ; A 1ol5er .n 5e ,orse .s a 1ol5er
21o 1as -a6en -1e .ns-rmen- n5er -1e
0ollo2.n/ ,on5.-.ons4
(a) T1a- .- .s ,om8le-e an5 re/lar
8on .-s 0a,e7

(b) T1a- 1e be,ame -1e 1ol5er
o0 .- be0ore .- 2as o<er5e" an5
2.-1o- no-.,e -1a- .- 1as been
8re<.osl! 5.s1onore5" .0 s,1
2as -1e 0a,-7

(,) T1a- 1e -oo6 .- .n /oo5 0a.-1
an5 0or <ale7

(5) T1a- a- -1e -.me .- 2as
30
ne/o-.a-e5 -o 1.m" 1e 1a5 no
no-.,e o0 an! .n9rm.-! .n -1e
.ns-rmen- or 5e0e,- .n -1e -.-le
o0 -1e 8erson ne/o-.a-.n/ .-.
*1a- .s a 1ol5er .n 5e ,orse>
A H'8@ is a holder who took the instrument under
the conditions enumerated in sec. %2. All the four
conditions must concur a H'8@. 'f any one of
them is absent., the holder cannot be considered
a H'8@. =nder sec. %?, generally, e/ery holder is
resumed rima facie to be a holder in due
course. &hus, a holder need out ro/ed at a /ery
outset that he is a H'8@. Any one who claims
otherwise must ro/e that the holder in question
acquired the instrument with one or more
conditions lacking.
*1en .s an .ns-rmen- B,om8le-e an5
re/lar 8on .-s 0a,eD>
@omlete means that the holder acquired the
instrument without any material articular lacking
thereon, that all material articulars are resent
on the face of instrument at the time the holder
acquired it. An instrument is deemed not
comlete only when there is an omission of any
material articular or articular roer to be
inserted in a negotiable instrument without the
same will not be comlete. )1ot all forms of
omissions will make the instrument incomlete. 't
must be necessary to the instrument*.
9g. &he instrument is issued undated and
stated, 2 ' romi; to ay 5 or order
P166. sgd. J3. 's it comleteM Jes because
the date is not necessary.
.ut if the note stated, 2 ' romise to ay 5
or order P166 !6 days after date now
.ecomes a material articular, as maturity
cannot be determined without it.
An incomlete instrument should ut the holder
in inquiry as to why it is incomlete. 'f he fails to
do so, be takes the instrument sub<ect to all
defenses as he is not a H'8@.
Aegular means that the holder acquired it without
any alteration or changes or erasures aarent
on the face of the instrument. )&he most common
tye of irregularity is an alteration. 't must be
aarent on the face; otherwise, the matter is
go/erned solely by sec. 12$ which renders the
instrument /oid*. 'f it aears that there was a
change in the amount or in the name of the
ayee, etc., then the instrument is deemed not
regular on its face and the holder now has the
duty of inquiring. :therwise, if no inquiry is
made , the holder acquires the instrument not in
good faith and deemed to ha/e notice of a defect
or in"rmity in the instrument.
'OO=+&AA&':1 :7 1:& 2@:MPO9&9 A18
A94=OAA3:
1* a note ayable on a gi/en date
without naming the year;
2* an acceted bill with no drawee
named;
!* a note ayable to 2 ayees but
indorsed only by 1;
$* a rinted note altered in rinting;
%* a note ayable 2on or before after
date3.
*1en .s -1e .ns-rmen- o<er5e>
An instrument is o/erdue after the date of
maturity. &he date of maturity is the time "#ed
therein. 't may be a "#ed or determinable future
time. 'f the instrument is ayable on demand, the
date of maturity is determined by the date of
resentment. 'f it is a romissory note, it is
suosed to be resented within a reasonable
time after its issue. .ut if it is a bill, it is should be
resented within reasonable time after its last
negotiation. 9g. +uose an instrument is issued
today, Nuly 1>. 'n Aug., it was negotiated. 'n :ct.,
again, until 8ec. (hen was it suosed to be
resentedM
'f it was a P1, it must ha/e been resented
within a reasonable time after its issue, Nuly. .ut if
it was a .:9, it must be resented within a
reasonable time after its last negotiation, 8ec.
&he oint of reckoning will diBer. Aeasonable time
is a relati/e term defending on a circumstance.
'f the instrument is ayable on the occurrence of
a seci"ed oening of the e/ent. (hen the
instrument contains an acceleration clause and
one installment is not aid. Pnowledge of the
holder of this fact at the time of acquisition is
notice that the instrument is o/erdue. +imilarly,
if, by the terms of an instrument, the rincial is
due uon default of ayment of interest, the
holder cannot be considered a H'8@ where the
interest is o/erdue. 'f the holder acquired the
instrument on the date of maturity, it is not
o/erdue as the debtor has the whole day to ay.
)'f resented to a ba, anytime before close of
banking hrs. if resented to a business o0ce,
anytime before close of business hrs. And if
resented at the house of the erson rimarily
liable, anytime before the end of the Q'OMA +how
or before rest hours.* A 1' in circulation ast its
maturity date carries strong indication that it has
been dishonored.
An instrument may be dishonored either by nonD
accetance )sec. 1$?* or by nonDayment )sec.
,%*. 8ishonored by nonDaccetance, refers only to
a bill of e#change. (hile dishonor by nonD
ayment can only take lace at the time of
maturity, dishonor by nonDaccetance of a bill
31
may occur e/en before the date of its maturity.
&he holder must, at the time of negotiation, ha/e
no knowledge that it had been dishonored rior to
his acquisition. &hus, an o/erdue or dishonored
instrument may still be negotiated to the same
e#tent as before maturity )sec. $>* but, in case of
the former, the holder cannot be a H'8@, while in
the case of the latter, the holder without notice
can be a H'8@.
+=PP:+9: A P1 reads: 2 ' romise to ay 5 or
order P166 on Nuly 1>, 1??1. &oday is the due
date. 5 resents the note at 16am. 't was
dishonored by nonDayment. At 12nn 5
negotiated it to P.P is now the holder of the note.
's P a H'8@M
'& 89P918+ on whether at the time of
negotiation P knew of the fact that it was
dishonored. +ince it was negotiated on the
due date, it was still on Nuly 1,, P can no
longer be H'8@ as it is o/erdue and he is
charge with knowledge of dishonor. &he
fact that the note was already dishonored
is not enough to deny P of his caacity of
being a H'8@ if he had no knowledge of
such dishonor.
*1a- 5oes a,3.re5 .n /oo5 0a.-1 mean>
4ood faith refers to the indorsee or transferee
and not to the indorser or transferee of the aer.
9/en if the indorsee is in bad faith, the indorsee
may still be a H'8@. =nder sec. %C, bad faith
means that he must ha/e knowledge of facts
which render it, dishonest for him to take a
articular iece of 1'. &o show bad faith, it is not
necessary to show knowledge of the e#act truth
but actual knowledge of some truth that would
re/ent action by th commercially honest men.
+urmise, susicion or fear is not enough. &he
element of good faith must be read together with
the element of notice or knowledge of an in"rmity
on the instrument or defect on the title of a rior
arty. 'f the holder knew of such defect or
in"rmity, he cannot be held to be in good faith.
&he term 2 holder in good faith3 means a holder
without knowledge or notice of equities
)defenses* of any sort which could be set u
against a rior holder of the instrument.
*1a- 5oes B0or <aleD mean>
As discussed in sec. 2%, the holder must take the
instrument for /aluable consideration. Any
consideration su0cient to suort a simle
contract is /alue. .ut lo/e and aBection do not
constitute /alue. (here the holder takes the
instrument without gi/ing /aluable consideration,
he cannot be considered a holder for /alue,
moreso a H'8@. 't is not necessary that the
consideration be adequate )art. 1!%%, 1@@*. .ut if
the amount asked for the instrument is
insigni"cant as comared to the face /alue, it
should be su0cient notice that there is something
wrong and failure to inquiry is equi/alent to bad
faith.
*1a- .s mean- b! B2.-1o- no-.,e o0
.n9rm.-! .n .ns-rmen- or 5e0e,- .n -1e -.-le>
&he 1'O, in de"ning things that may be wrong
with an wrong with an instrument uses ! terms.
)1* 8efects of title, )2* defenses, and )!*
in"rmities. 8efects of title co/er all those
situations gi/ing rise to equitable defenses.
8efecti/e title of a erson o/er an instrument
may result from circumstances relating to the
erson-s acquisition of the instrument or as to
how he negotiated it. 8efect of title is further
elucidated in sec. !%. 'n the cases cited in said
section, the erson acquiring the instrument is
said to ha/e a defecti/e title o/er it. .ut, in order
for the holder to be not a H'8@, he must ha/e
knowledge of the defect atr the time of
negotiation. &he term 2defenses3 includes 1.
mistake, 2. absence or failure of consideration
)sec. 2,*; ! minority and other forms of
incaacity )sec. 22*; $. lack of authority of an
agent )sec. 1?*. 'n"rmities on the other hand,
include things that are wrong with the instrument
itself, they are illnesses which attach to the
instrument, such as:
)1* wrong date as inserted )sec. 1!*;
)2* "lling u of a blank instrument not strictly
in accordance with the authority gi/en or
not within a reasonable time )sec. 1$*;
)!* "lling u and negotiating without authority
an incomlete and undeli/ered instrument
)sec. 1%*;
)$* lack of /alid and intentional deli/ery of a
mechanically comlete instrument )sec.
1C*;
)%* agent signing er rocuration beyond the
scoe of his authority )sec. 21*;
)C* for forgery )sec. 2!*;
)>* material alternation )sec. 12$ I 12%*.
As in the case of defects in title, the mere fact
that such defenses and in"rmities e#ist does not
re/ent the holder from being a H'8. Aather, it is
the fact that, at the time of negotiation, he had
actual knowledge of such defects, defenses or
in"rmities. &his fourth condition must be read
together with the condition that the holder take in
good faith. 'n eBect, the fourth condition
elucidates the meaning of good faith. Anyone
who acquires the instrument with notice of such
defects and in"rmities would not qualify as a
taker in good faith. &o constitute notice, under
sec. %C, the holder must ha/e had actual
knowledge of the in"rmity or defect or must ha/e
acted in bad faith. &he absence of knowledge and
32
lack of bad faith is essential basis that renders a
holder a H'8@.
As re/iously stated, notice of defect can
also be resumed when )1* one takes an o/erdue
instrument, and )2* one acquires an instrument
for grossly inadequate consideration.
Aemember that the concet of H'8@ is only
alicable to negotiable instrument. :nce the
instrument is nonDnegotiable, the assignee of the
instrument cannot be considered a H'8@.
Se,. E3. When person not deemed holder in
due course. - *1ere an .ns-rmen- 8a!able
on 5eman5 .s ne/o-.a-e5 on an
nreasonable len/-1 o0 -.me a0-er .-s .sse"
-1e 1ol5er .s no- 5eeme5 a 1ol5er .n 5e
,orse.
:ne of the requisites of a H'8@ is that he
aquires the instrument before it is o/erdue. .ut,
ob/iously, where the instrument is ayable on
demand, the holder cannot determine whether
the instrument is o/erdue or not as there is no
maturity date. &he law here states that the holder
must ha/e acquired it a reasonable time after its
issue. As to what constitutes reasonable time,
regard must be had to the nature of the
instrument, the usage of trade of business with
resect to such instruments and the facts of a
articular case )sec. 1?!*.
(ith the regard the .:9, the law states
that it should be resented within a reasonable
time from last negotiation. &his should be read in
the light of sec. %! so that the last negotiation
should be itself within a reasonable time from its
issue. &his is esecially true for checks where
after a certain eriod the check becomes stale if
not resented for ayment within a reasonable
eriod of time from issue.

Se,. EA. ?otice before full amount is paid. ;
*1ere -1e -rans0eree re,e.<es no-.,e o0 an!
.n9rm.-! .n -1e .ns-rmen- or 5e0e,- .n -1e
-.-le o0 -1e 8erson ne/o-.a-.n/ -1e same
be0ore 1e 1as 8a.5 -1e 0ll amon- a/ree5
-o be 8a.5 -1ere0or" 1e 2.ll be 5eeme5 a
1ol5er .n 5e ,orse onl! -o -1e e:-en- o0
-1e amon- -1ere0ore 8a.5 b! 1.m.
'OO=+&AA&':1: A draws a bill in fa/or of . for P1,
666 with 5 as drawee. . indorsee it to @, who fails
to gi/e /alue therefore. @ indorses it to 8 uon
the terms of ayment of PC66 now and the
balance of P$66, 8 disco/ers the absence of
consideration. =nder the circumstances, 8 can be
considered a H'8@ for the /alue aid by him
before he had notice of the defect D PC66.

Se,. EE. When title defecti+e. - T1e -.-le o0 a
8erson 21o ne/o-.a-es an .ns-rmen- .s
5e0e,-.<e 2.-1.n -1e mean.n/ o0 -1.s A,-
21en 1e ob-a.ne5 -1e .ns-rmen-" or an!
s./na-re -1ere-o" b! 0ra5" 5ress" or 0or,e
an5 0ear" or o-1er nla20l means" or 0or an
.lle/al ,ons.5era-.on" or 21en 1e ne/o-.a-es
.- .n brea,1 o0 0a.-1" or n5er s,1
,.r,ms-an,es as amon- -o a 0ra5.
*1en .s -.-le o0 a 8erson 5e0e,-.<e>
&he title to a erson in an instrument becomes
defecti/e either:
)1* in the acquisition of the instrument G
)a* by fraud;
D refers to fraud in inducement D
he acquires the instrument by
falsely
inducing its issuance or
negotiation.
)b* by duress, or force and fear;
D refers to the use of /iolence and
intimidation to cause the issuance or
negotiation.
)c* by other unlawful means;
D such as theft.
)d* for an illegal consideration.
D the instrument is issued or
negotiated as a consideration for an illegal
act
or omission.
)2* in the negotiation of the instrument G
)a* with breach of faith;
D refers to negotiation of the
instrument in contra/ention of the terms
of
the agreement, or negotiation
after it has been aid )discharged*, or
negotiation before the
consideration for the instrument is gi/en.
)b* under circumstances as amount
to a fraud.
D refers to negotiation after
being told that ayment would be resisted,
or transferor had no legal
right to transfer.

Se,. EI. What constitutes notice of defect. ;
To ,ons-.--es no-.,e o0 an .n9rm.-! .n -1e
.ns-rmen- or 5e0e,- .n -1e -.-le o0 -1e
8erson ne/o-.a-.n/ -1e same" -1e 8erson -o
21om .- .s ne/o-.a-e5 ms- 1a<e 1a5 a,-al
6no2le5/e o0 -1e .n9rm.-! or 5e0e,-" or
6no2le5/e o0 s,1 0a,-s -1a- 1.s a,-.on .n
-a6.n/ -1e .ns-rmen- amon-e5 -o ba5
0a.-1.
*1en 5oes -1e 1ol5er 1a<e no-.,e o0
5e0e,- or .n9rm.-!>
33
&o constitute notice or defect or in"rmity,
the transferee must ha/e actual knowledge,
either: )1* of the defect or in"rmity, or )2* of
such facts that his action in taking the
instrument amounts to bad faith. Pnowledge
of some truth )at least* that the instrument is
tainted in some way is necessary, not mere
susicion or surmise. .ad faith consist in
guilty knowledge, or willful ignorance,
showing a /icious or e/il mind. (hile mere
susicion is not enough, where there is
knowledge of susicious circumstances,
couled with means of /erifying them, taking
of the instrument may amount of bad faith )if,
willfully, no inquiry is made*. .ut negligence,
e/en gross negligence, is not bad faith.

Se,. EJ. >ights of holder in due course. ; A
1ol5er .n 5e ,orse 1ol5s -1e .ns-rmen-
0ree 0rom an! 5e0e,- o0 -.-le o0 8r.or 8ar-.es"
an5 0ree 0rom 5e0enses a<a.lable -o 8r.or
8ar-.es amon/ -1emsel<es" an5 ma! en0or,e
8a!men- o0 -1e .ns-rmen- 0or -1e 0ll
amon- -1ereo0 a/a.ns- all 8ar-.es l.able
-1ereon.
*1a- are -1e r./1-s o0 a $I+C>
)1* he may sue on the instrument in his
own )sec. %1*;
)2* he may recei/e ayment and if
ayment is in due course, the
instrument is discharged )sec.%1*;
)!* he holds the instrument free from any
defect of title of rior arties;
)$* he holds the instrument free from
defenses a/ailable to rior arties
among themsel/es; and
)%* he may enforce ayment of the
instrument for the full amount thereof
against all arties liable thereon.
*1a- are -1e 2 6.n5s o0 5e0enses -1a-
m./1- be a<a.lable -o 8ar-.es 1el5 l.able
on -1e .ns-rmen->
Aeal or legal defenses are those that attach to
the instrument itself and can be set the whole
world. 't is a/ailable against the holders
including H'8@. &hey are called real defenses
because they attach to the res )the
instrument itself* regardless the merits or
demerits of the holder. 'n real defenses, the
right sought to be enforced has ne/er e#isted
or ceased to e#ist. 't is a defense against
e/erybody but it is not a defense a/ailable for
e/erybody. &he instrument cannot be
enforced only against the erson to whom the
real defense is a/ailable. &hus, the mere
e#istence of a real defense not imly that the
instrument is /alueless and can ne/er be
enforced. 't <ust means that the instrument is
only unenforceable against the arty entitled
to set u the defense )eg. the one rimarily
liable* but can be enforced against those
whom such defense is not a/ailable )eg. those
secondarily liable*. 'n many instances, the real
defense alies only to the erson who made
the instrument )but there are e#cetions*. As
a general rule, a real defense is a defense
which the erson against whom one is
endea/oring to reco/er may set u and that
erson to usually the erson rimarily liable
uon the instrument. 7urther, a defense
a/ailable to the makers will not be a/ailable to
the indorser )nor will a defense a/ailable to
the indorser be a/ailable to the maker*. W in
case of <oint maker defense a/ailable to one
<oint maker is not, in general a/ailable to the
other e#cet if the defense goes to the meat
of the case defeating holder-s right to reco/er.
7or, eg,, if R defense is minority, it is a/ailable
to bothY.
Personal or equitable defenses are those
which grow out of the ersonal or equitable
defenses.
Agreement or conduct of a articular erson
regard to the instrument which renders it
inequitable for him, though holding legal title,
to enforce it against the erson being held
liable, but which are not a/ailable against
H'8@. &hey are called ersonal defenses
because they are only a/ailable against that
erson )ayee or indorsee* or a subsequent
holder who stands in ri/ity with him
To 21a- 6.n5 o0 5e0enses 5oes a $I+C
1ol5 -1e .ns-rmen- 0ree 0rom>
A H'8@ holds the instrument free from any
defect of title of rior arties and free from
defenses a/ailable to rior arties among
themsel/es. &he defenses referred to in sec.
%> from which the H'8@ is free from, are not
equitable defenses only, not legal defenses.
+oes -1e $I+C 1ol5 -1e .ns-rmen- 0ree
0rom .n9rm.-.es o0 -1e .ns-rmen->
1o, the holder of the instrument, if a H'8@,
holds the instrument free from defect of title
3A
rior arties and from defenses a/ailable to
rior arties among themsel/es )sec. %>* but
the law does not say that he acquires it free
from the in"rmities of the instrument. An
in"rmity is an illness, a defect which attaches
to the instrument itself G whene/er it goes.
&hey are attached to the instrument. &hey are
real defenses which can be ut u e/en
against H'8@. 'n"rmities are things that are
wrong with the instrument. &he latter are only
ersonal defenses. )Abad-s oinion*
)8'+A94AA8 &H'+ Z=9+&':1*
W1:&9: .ut if in"rmities are real defenses,
what good is it that the holder, under the sec.
%2to be H'8@, must ha/e no notice of an
in"rmity in the instrumentM 9/en if he had no
notice of it, the H'8@ is re/ented from
collecting from erson liable because of a real
defense G the in"rmity.Y
*1a- are e:am8les o0 8ersonal
5e0enses>
)1* absence of failure of consideration,
artial or total;
- )read sec. 2,* G want of consideration
may be raised only as between
immediate arties. )de"nition of
immediate in sec. 1C*
)2* want of deli/ery of comlete
instrument; )read sec. 1C*
)!* inserting of wrong date in an
instrument where it is ayable at a
"#ed eriod after date and it is issued
undated, or where it is ayable at a
"#ed eriod after sight and the
accetance is undated; )read sec. 1!*
)$* "lling u blank contrary to authority
gi/en or not within reasonable time,
where the instrument is deli/ered;
)read sec. 1$*
)%* fraud in inducement; )read sec. %%*
- in fraud in inducement, one knew that
he was signing a negotiable aer, and
thus, signed with knowledge that the
instrument would robably ass into
hands of an innocent urchaser but
was decei/ed into signing for a larger
amount than he intended, or on
diBerent terms. &he signer is led by
decetion to e#ecute what knows is a
negotiable instrument. &his is diBerent
from fraud in factum where here is no
intention to issue a 1'.
)C* acquisition of instrument by force,
duress or fear )sec. %%*
- 8uress consist of deri/ing one of his
will and understanding and by threat
or
=nlawful means.
)>* acquisition of the instrument by
unlawful means; )sec.%%*
),* acquisition of the instrument for an
illegal consideration; )sec. %%*
)?* negotiation in breach of faith )sec. %%*
)16*negotiation under circumstances that
amount to fraud; )sec. %%*
)11*mistake;
- in order that mistake may /itiate
consent, it must refer to the substance
of the
things which is the ob<ect of the
contract or those conditions which
ha/e rincially mo/ed one or both
arties to enter into the contract.
)12* into#ication;
D into#ication so as to deri/e the erson
sought to be charged of the e#ercise of
is understanding and reason.
)1!* ultra /ires acts of cororation where
the cororation has the ower to issue
negotiable aer but the issuance was
not authori;ed for the articular
urose for which it was issued.
)1$* want of authority of agent where he
has aarent authority; )read art. 1,C?,
1@@*
)1%* insanity where there is no notice of
insanity on the art of the one
contracting with the insane erson;
)1C* illegality of contract where form or
consideration is illegal;
- eg. usury notes; 4ambling notes.
)1>* setDoB between immediate arties;
- this is a defense only when the holder
has a debt against the erson held
liable.
)1,* discharge between original arties;
D 2original arties3

3E

Se,. EK. When sub@ect to original
defense. - In -1e 1an5s o0 an! 1ol5er
o-1er -1an a 1ol5er .n 5e ,orse" a
ne/o-.able .ns-rmen- .s sbHe,- -o -1e
same 5e0enses as .0 .- 2ere non;
ne/o-.able. %- a 1ol5er 21o 5er.<es 1.s
-.-le -1ro/1 a 1ol5er .n 5e ,orse" an5
21o .s no- 1.msel0 a 8ar-! -o an! 0ra5
or .lle/al.-! a@e,-.n/ -1e .ns-rmen-" 1as
all -1e r./1-s o0 s,1 0ormer 1ol5er .n
res8e,- o0 all 8ar-.es 8r.or -o -1e la--er.

Se,. E#. Who is deemed holder in due
course. ; E<er! 1ol5er .s 5eeme5 8r.ma
0a,.e -o be a 1ol5er .n 5e ,orse7 b-
21en .- .s s1o2n -1a- -1e -.-le o0 an!
8erson 21o 1as ne/o-.a-e5 -1e
.ns-rmen- 2as 5e0e,-.<e" -1e br5en .s
on -1e 1ol5er -o 8ro<e -1a- 1e or some
8erson n5er 21om 1e ,la.ms a,3.re5
-1e -.-le as 1ol5er .n 5e ,orse. %- -1e
las-;men-.one5 rle 5oes no- a88l! .n
0a<or o0 a 8ar-! 21o be,ame bon5 on
-1e .ns-rmen- 8r.or -o -1e a,3.s.-.on o0
s,1 5e0e,-.<e -.-le.

P. &IA%I&ITIES OF PA'TIES

Se,. I0. 5iability of maker. ; T1e ma6er o0 a
ne/o-.able .ns-rmen-" b! ma6.n/ .-"
en/a/es -1a- 1e 2.ll 8a! .- a,,or5.n/ -o .-s
-enor" an5 a5m.-s -1e e:.s-en,e o0 -1e
8a!ee an5 1.s -1en ,a8a,.-! -o .n5orse.

Se,. I1. 5iability of drawer. ; T1e 5ra2er b!
5ra2.n/ -1e .ns-rmen- a5m.-s -1e
e:.s-en,e o0 -1e 8a!ee an5 1.s -1en
,a8a,.-! -o .n5orse7 an5 en/a/es -1a-" on
5e 8resen-men-" -1e .ns-rmen- 2.ll be
a,,e8-e5 or 8a.5" or bo-1" a,,or5.n/ -o .-s
-enor" an5 -1a- .0 .- be 5.s1onore5 an5 -1e
ne,essar! 8ro,ee5.n/s on 5.s1onor be 5l!
-a6en" 1e 2.ll 8a! -1e amon- -1ereo0 -o -1e
1ol5er or -o an! sbse3en- .n5orser 21o
ma! be ,om8elle5 -o 8a! .-. %- -1e 5ra2er
ma! .nser- .n -1e .ns-rmen- an e:8ress
s-.8la-.on ne/a-.<.n/ or l.m.-.n/ 1.s o2n
l.ab.l.-! -o -1e 1ol5er.

Se,. I2. 5iability of acceptor. ; T1e a,,e8-or"
b! a,,e8-.n/ -1e .ns-rmen-" en/a/es -1a-
1e 2.ll 8a! .- a,,or5.n/ -o -1e -enor o0 1.s
a,,e8-an,e an5 a5m.-s4
(a) T1e e:.s-en,e o0 -1e 5ra2er" -1e
/en.neness o0 1.s s./na-re" an5 1.s
,a8a,.-! an5 a-1or.-! -o 5ra2 -1e
.ns-rmen-7 an5

(b) T1e e:.s-en,e o0 -1e 8a!ee an5
1.s -1en ,a8a,.-! -o .n5orse.
Se,. I3. When a person deemed indorser. ;
A 8erson 8la,.n/ 1.s s./na-re 8on an
.ns-rmen- o-1er2.se -1an as ma6er"
5ra2er" or a,,e8-or" .s 5eeme5 -o be
.n5orser nless 1e ,learl! .n5.,a-es b!
a88ro8r.a-e 2or5s 1.s .n-en-.on -o be bon5
.n some o-1er ,a8a,.-!.
When is a person deemed an indorser?
(hen there is no indication in what
caacity a erson signs uon the instrument, he
is deemed an indorser.
95@9P&':1: :ne making a note ayable to his
own order does not assume liability as indorser
desite his indorsement.
5 laced his signature uon an instrument
without indicating in what caacity he was
signing. Oater, 5 souight to show, by arole
e/idence, his intention to be bound merely as an
agent. @an 5 be allowed to do thisM
5 cannot be allowed to show by arole e/idence
that he did not intend to be bound as an indorser.
&he law requires that he indicate by aroriate
words his intention to be bound in some other
cacity on the instrument itself. 'n the absence of
this indication, 5 is deemed an indorser.
&he following are e#amles of words indicating
that the erson who signs on the instrument
does not intend to be bound as an indorser.
2 ' hereby guarantee ayment of this
instrument.3
2 as surety3, 2 as guarantor3,
2 for identi"cation only3
.ut when the note itself reads., 2 (e, the signers,
indorser, sureties, and all of us in solido, romise
to ay, etc.3, the signers on the back of the
instrument before deli/ery were held to be bound
in solido, not as indorsers. &his is a case where
the intent to be bound in some other caacity
may be found on the face of the instrument.
Se,. IA. 5iability of irregular indorser. ;
3I
*1ere a 8erson" no- o-1er2.se a 8ar-! -o an
.ns-rmen-" 8la,es -1ereon 1.s s./na-re .n
blan6 be0ore 5el.<er!" 1e .s l.able as
.n5orser" .n a,,or5an,e 2.-1 -1e 0ollo2.n/
rles4
(a) I0 -1e .ns-rmen- .s 8a!able -o -1e
or5er o0 a -1.r5 8erson" 1e .s l.able -o
-1e 8a!ee an5 -o all sbse3en-
8ar-.es.

(b) I0 -1e .ns-rmen- .s 8a!able -o -1e
or5er o0 -1e ma6er or 5ra2er" or .s
8a!able -o bearer" 1e .s l.able -o all
8ar-.es sbse3en- -o -1e ma6er or
5ra2er.

(,) I0 1e s./ns 0or -1e a,,ommo5a-.on
o0 -1e 8a!ee" 1e .s l.able -o all 8ar-.es
sbse3en- -o -1e 8a!ee.
Se,. IE. Warranty where negotiation by
deli+ery and so forth. Q E<er! 8erson
ne/o-.a-.n/ an .ns-rmen- b! 5el.<er! or b!
a 3al.9e5 .n5orsemen- 2arran-s4
(a) T1a- -1e .ns-rmen- .s /en.ne
an5 .n all res8e,-s 21a- .- 8r8or-s -o
be7

(b) T1a- 1e 1as a /oo5 -.-le -o .-7

(,) T1a- all 8r.or 8ar-.es 1a5 ,a8a,.-!
-o ,on-ra,-7

(5) T1a- 1e 1as no 6no2le5/e o0 an!
0a,- 21.,1 2ol5 .m8a.r -1e <al.5.-!
o0 -1e .ns-rmen- or ren5er .-
<aleless.
%- 21en -1e ne/o-.a-.on .s b! 5el.<er!
onl!" -1e 2arran-! e:-en5s .n 0a<or o0 no
1ol5er o-1er -1an -1e .mme5.a-e -rans0eree.

T1e 8ro<.s.ons o0 sb5.<.s.on (,) o0 -1.s
se,-.on 5o no- a88l! -o a 8erson ne/o-.a-.n/
8bl., or ,or8ora-.on se,r.-.es o-1er -1an
b.lls an5 no-es.

Se,. II. 5iability of general indorser. ; E<er!
.n5orser 21o .n5orses 2.-1o- 3al.9,a-.on"
2arran-s -o all sbse3en- 1ol5ers .n 5e
,orse4
a. T1e ma--ers an5 -1.n/s
men-.one5 .n
sb5.<.s.ons (a)" (b)" an5
(,) o0 -1e ne:- 8re,e5.n/
se,-.on7 an5

(b) T1a- -1e .ns-rmen- .s" a- -1e
-.me o0 1.s .n5orsemen-" <al.5 an5
sbs.s-.n/7
An5" .n a55.-.on" 1e en/a/es -1a-" on 5e
8resen-men-" .- s1all be a,,e8-e5 or 8a.5"
or bo-1" as -1e ,ase ma! be" a,,or5.n/ -o .-s
-enor" an5 -1a- .0 .- be 5.s1onore5 an5 -1e
ne,essar! 8ro,ee5.n/s on 5.s1onor be 5l!
-a6en" 1e 2.ll 8a! -1e amon- -1ereo0 -o -1e
1ol5er" or -o an! sbse3en- .n5orser 21o
ma! be ,om8elle5 -o 8a! .-.

Se,. IJ. 5iability of indorser where paper
negotiable by deli+ery. Q *1ere a 8erson
8la,es 1.s .n5orsemen- on an .ns-rmen-
ne/o-.able b! 5el.<er!" 1e .n,rs all -1e
l.ab.l.-! o0 an .n5orser.

Se,. IK. -rder in which indorsers are liable.
; As res8e,- one ano-1er" .n5orsers are
l.able prima facie .n -1e or5er .n 21.,1 -1e!
.n5orse7 b- e<.5en,e .s a5m.ss.ble -o s1o2
-1a-" as be-2een or amon/ -1emsel<es"
-1e! 1a<e a/ree5 o-1er2.se. Mo.n- 8a!ees
or Ho.n- .n5orsees 21o .n5orse are 5eeme5
-o .n5orse Ho.n-l! an5 se<erall!.

Se,. I#. 5iability of an agent or broker. ;
*1ere a bro6er or o-1er a/en- ne/o-.a-es
an .ns-rmen- 2.-1o- .n5orsemen-" 1e
.n,rs all -1e l.ab.l.-.es 8res,r.be5 b!
Se,-.on S.:-!;9<e o0 -1.s A,-" nless 1e
5.s,loses -1e name o0 1.s 8r.n,.8al an5 -1e
0a,- -1a- 1e .s a,-.n/ onl! as a/en-.
'OO=+&AA&':1: 5 is an agent of J. 5 deli/ers to K a
note ayable to bearer in his caacity as J- agent.
(hen 5 made a deli/ery, howe/er, he did not tell
K that he was merely acting as an agent. 5 incurs
all the liabilities rescribed in +ec. C%. He can not
be released of these liabilities uon ro/ing that
he was merely acting as an agent.

PI. P'ESENTATION FO' PAG)ENT

Se,. J0. 6,ect of want of demand on
principal debtor. ; Presen-men- 0or 8a!men-
.s none,essar! .n or5er -o ,1ar/e -1e
8erson 8r.mar.l! l.able on -1e .ns-rmen-7
b- .0 -1e .ns-rmen- .s" b! .-s -erms"
8a!able a- a s8e,.al 8la,e" an5 1e .s able
an5 2.ll.n/ -o 8a! .- -1ere a- ma-r.-!" s,1
ab.l.-! an5 2.ll.n/ness are e3.<alen- -o a
-en5er o0 8a!men- 8on 1.s 8ar-. %- e:,e8-
as 1ere.n o-1er2.se 8ro<.5e5" 8resen-men-
0or 8a!men- .s ne,essar! .n or5er -o ,1ar/e
-1e 5ra2er an5 .n5orsers.

Se,. J1. 8resentment where instrument is
not payable on demand and where payable
3J
on demand. - *1ere -1e .ns-rmen- .s no-
8a!able on 5eman5" 8resen-men- ms- be
ma5e on -1e 5a! .- 0alls 5e. *1ere .- .s
8a!able on 5eman5" 8resen-men- ms- be
ma5e 2.-1.n a reasonable -.me a0-er .-s
.sse" e:,e8- -1a- .n -1e ,ase o0 a b.ll o0
e:,1an/e" 8resen-men- 0or 8a!men- 2.ll be
sL,.en- .0 ma5e 2.-1.n a reasonable -.me
a0-er -1e las- ne/o-.a-.on -1ereo0.

Se,. J2. What constitutes a su'cient
presentment. ; Presen-men- 0or 8a!men-" -o
be sL,.en-" ms- be ma5e4
(b) %! -1e 1ol5er" or b! some
8erson a-1or.ze5 -o re,e.<e
8a!men- on 1.s be1al07
(b) A- a reasonable 1or on a
bs.ness 5a!7
(,) A- a 8ro8er 8la,e as 1ere.n
5e9ne57
(5) To -1e 8erson 8r.mar.l! l.able
on -1e .ns-rmen-" or .0 1e .s
absen- or .na,,ess.ble" -o an!
8erson 0on5 a- -1e 8la,e 21ere
-1e 8resen-men- .s ma5e.
What is the importance of 1ec. A!?
+ec. >2 establishes the four requisites for a
su0cient resentment for ayment. 'f the
resentment does not comly with ay of the four,
it is not su0cient. @onsequently, it would be as if,
the resentment was made and, thus, the
ersons secondarily liable are discharged.
Who makes presentment?
Presentment for ayment must be made )1* by
the holder of the instrument , or )2* by some
erson authori;ed to recei/e ayment on his
behalf.
When and where must presentment be
made?
't must be made 2 at a reasonable hour on a
business day.3 (hat is reasonable hour on a
business day deends uon the general custom
at the lace of the articular transaction. 'n the
Philiines, for e#amle, commercial banks are
oen ?am to $ m. Presentment for ayment can
not be made on a +unday or holiday )+ec. ,%,
1?$*. &he resentment must be made at the
roer lace as de"ned in +ec. >!.
%o whom must presentment be made?
't must be made to the erson rimarily liable. 'f
a note, it must be made to the maker. 'f a bill, it
must be made to the accetor. 't is not made to
the erson secondarily liable. .ut, if the erson
rimarily liable is absent or inaccessible,
resentment can be made to any erson found at
such lace e/en without secial authority gi/en
him.
Se,. J3. 8lace of presentment. -
Presen-men- 0or 8a!men- .s ma5e a- -1e
8ro8er 8la,e4
(a) *1ere a 8la,e o0
8a!men- .s s8e,.9e5 .n -1e .ns-rmen-
an5 .- .s -1ere 8resen-e57
(b) *1ere no 8la,e o0
8a!men- .s s8e,.9e5 b- -1e a55ress o0
-1e 8erson -o ma6e 8a!men- .s /.<en .n
-1e .ns-rmen- an5 .- .s -1ere 8resen-e57
(,) *1ere no 8la,e o0
8a!men- .s s8e,.9e5 an5 no a55ress .s
/.<en an5 -1e .ns-rmen- .s 8resen-e5 a-
-1e sal 8la,e o0 bs.ness or res.5en,e
o0 -1e 8erson -o ma6e 8a!men-7
(5) In an! o-1er ,ase
.0 8resen-e5 -o -1e 8erson -o ma6e
8a!men- 21ere<er 1e ,an be 0on5" or .0
8resen-e5 a- 1.s las- 6no2n 8la,e o0
bs.ness or res.5en,e.
What is the rule on proper place of
presentment?
&he roer lace of resentment is the lace
seci"ed in the order of enumeration from
subsection )a* to subsection )d*. &his means that
if subsection )a* can be alied )eg. A lace of
ayment is actually seci"ed*, resentment in
any other lace under subsection )b* to )d* will be
imroer and will not meet the requirement of
+ec. >2 )c*. +imilarly, subsec )c* is only alicable
if subsec. )a* and )b* cannot be alied. Oastly,
subsec. )d* is alicable only if resentment
cannot be made at any other lace.
'OO=+&AA&':1:
:f )a* : 2 ' romise to ay to 5 or order
P166 at P1., Manila. +gd. J.3
:f )b*: 2 'n the same note, 2P1., Manila is
omitted but it was signed as 2sgd. J, $6$
Aegina .ldg., Manila;3
:f )c *: &he note neither seci"es a lace
of ayment nor does it indicate the
address of the erson to ay. .ut the
maker-s residence or business o0ce is
known by the holder. 9ither lace will do.
:f )d*: 'f no lace is seci"ed, no address
is gi/en, and both the address and
business o0ce is not known, resentment
is made when seen )anywhere*.
Se,. JA. 0nstrument must be e$hibited. ;
T1e .ns-rmen- ms- be e:1.b.-e5 -o -1e
8erson 0rom 21om 8a!men- .s 5eman5e5"
an5 21en .- .s 8a.5" ms- be 5el.<ere5 8 -o
-1e 8ar-! 8a!.n/ .-.
3K
Why is e$hibition of the instrument
necessary?
Presentment includes not only demand
for ayment but also the e#hibition of the
instrument. Qalid resentment requires ersonal,
or face to face demand at the roer lace,
e#hibiting the instrument to the erson from
whom ayment is demanded. 'f the instrument is
not e#hibited, the resentment would be
ineBectual, as the debtor is entitled to see the
instrument and demand its surrender uon
ayment. &hus, the urose of e#hibition is to
enable the debtor: )1* to determine the
genuineness of the instrument and the right of
the holder to recei/e the ayment; and t )2* to
enable him to reclaimE ossession uon ayment.
3an presentment be made through
telephone?
1o, because the instrument must be hysically
roduced and this is not ossible through hone.
&his is because the erson rimarily liable has
the right to insect and retrie/e or take
ossession of the instrument uon ayment.
:nce, it is retrie/ed, the instrument becomes
merely a /oucher of ayment and re/ents the
instrument from being negotiated to innocent !
rd
arties who are unaware of the fact of discharge
and may hold the erson rimarily liable for
ayment again.

When is e$hibition e$cused?
)1* (hen the debtor does not demand to see
the instrument but refuses ayment on some
other grounds; and
)2* (hen the instrument is lost or destroyed.
Se,. JE. 8resentment where instrument
payable at bank. ; *1ere -1e .ns-rmen- .s
8a!able a- a ban6" 8resen-men- 0or
8a!men- ms- be ma5e 5r.n/ ban6.n/
1ors" nless -1e 8erson -o ma6e 8a!men-
1as no 0n5s -1ere -o mee- .- a- an! -.me
5r.n/ -1e 5a!" .n 21.,1 ,ase 8resen-men-
a- an! 1or be0ore -1e ban6 .s ,lose5 on
-1a- 5a! .s sL,.en-.
What is the rule where the instrument is
payable at a bank?
(here an instrument is ayable at a bank,
it is equi/alent to an order to the bank to make
ayment for the account of the rincial debtor
)+ec. ,>*. 'f the instrument is ayable at a bank
and the erson to make ayment has fund in the
bank to meet it on the date of maturity,
resentment must be made during banking
hours. Presentment made outside banking hours
is not su0cient inasmuch as banks do not make
ayments outside of banking hours. 'n the
Philiines. &he banking hours are from ? am to $
am )but Agbayani claims it is only u to 2:!6m*
from Monday to 7riday. &here are no banking
hours on +aturdays and Holidays. @onsequently
resentment must be made between ? am to $
m on ordinary days. :therwise, resentment
would not be su0cient and ersons secondarily
liable on the bill are discharged. .ut it must be
remembered that the erson to make ayment
has until the close of banking hours in which to
ay it, and if before the close of such hours, he
deosits funds there enough to ay it, a demand
earlier in the day is remature. Howe/er, if the
erson to make ayment has no funds in the
bank to meet the ayment at any time during the
day, resentment at any hour before the bank is
closed is su0cient to hold ersons secondarily
liableD the reason being that at any rate, the bill
cannot be aid e/en is resented during banking
hours. )&he last rule is imortant as the ersons
secondarily liable may claim that resentment is
remature.

Se,. JI. 8resentment where principal
debtor is dead. ; *1ere -1e 8erson
8r.mar.l! l.able on -1e .ns-rmen- .s 5ea5
an5 no 8la,e o0 8a!men- .s s8e,.9e5"
8resen-men- 0or 8a!men- ms- be ma5e -o
1.s 8ersonal re8resen-a-.<e" .0 s,1 -1ere
be" an5 .0" 2.-1 -1e e:er,.se o0 reasonable
5.l./en,e" 1e ,an be 0on5.

Se,. JJ. 8resentment to persons liable as
partners. ; *1ere -1e 8ersons 8r.mar.l!
l.able on -1e .ns-rmen- are l.able as
8ar-ners an5 no 8la,e o0 8a!men- .s
s8e,.9e5" 8resen-men- 0or 8a!men- ma! be
ma5e -o an! one o0 -1em" e<en -1o/1
-1ere 1as been a 5.ssol-.on o0 -1e 9rm.

Se,. JK. 8resentment to @oint debtors. ;
*1ere -1ere are se<eral 8ersons" no-
8ar-ners" 8r.mar.l! l.able on -1e .ns-rmen-
an5 no 8la,e o0 8a!men- .s s8e,.9e5"
8resen-men- ms- be ma5e -o -1em all.
NOTE4 &he rules stated in all ! sections aly
only, to cases where no lace for resentment is
seci"ed. 'f there us a lace seci"ed, these rules
are inalicable and resentment must be made
at the lace seci"ed.
What is the rule on the death of primary
party?
3#
'n case of the death of the erson
rimarily liable, and no lace of ayment is
seci"ed, resentment for ayment may be made
to his e#ecutor or administrator, )1* if there be
one, and )2* if he can be found. &he holder must
use reasonable diligence to "nd the ersonal
reresentati/e, if there be one.
What is the rule if the persons primarily
liable are partners?
Presentment may be made to any one of
the artners, e/en if their artnershi has been
dissol/ed. &he reason is that each artner is an
agent of the artnershi or his coDartners.
Accordingly, in case of death of one of the makers
who are artners, resentment shall not be made
to his ersonal reresentati/e but to the sur/i/ing
artners.
What if the parties primarily liable are not
partners?
'f the ersons rimarily liable are not
artners, their liability is only <oint. 'n <oint
obligation, there are as many debts as there are
debtors, each debt being considered distinct and
searate from 126,, @.@. * &hus, resentment
must be made to all of them. Howe/er, if one of
them is duly authori;ed by the others for the
urose, resentment to him would be su0cient.

Se,. J#. When presentment not required to
charge the drawer. - Presen-men- 0or
8a!men- .s no- re3.re5 .n or5er -o ,1ar/e
-1e 5ra2er 21ere 1e 1as no r./1- -o e:8e,-
or re3.re -1a- -1e 5ra2ee or a,,e8-or 2.ll
8a! -1e .ns-rmen-.

Se,. K0. When presentment not required to
charge the indorser. - Presen-men- .s no-
re3.re5 .n or5er -o ,1ar/e an .n5orser
21ere -1e .ns-rmen- 2as ma5e or
a,,e8-e5 0or 1.s a,,ommo5a-.on an5 1e 1as
no reason -o e:8e,- -1a- -1e .ns-rmen- 2.ll
be 8a.5 .0 8resen-e5.
1:&9: +ec. >? refers only to the drawer
seci"cally. All other arties secondarily liable will
be discharged ) since no resentment*. +imilarly,
+ec. ,6 refers only to the indorser for whose
accommodation an instrument is made or
acceted. All others arties secondarily liable are
discharged. &hese 2 sections gi/e 2 e#cetions to
the general rule that if no resentment for
ayment is made, the ersons secondarily liable
are discharged.
When is presentment not required to
charge the drawer liable?
. 'n case of a check uon which
ayment has been stoed.
!. (here the drawer-s balance is
less than the amount of the
check )at the time of
resentment* unless
arrangements ha/e been made
for ayment of the bill.
". (here the drawer of a bill
containing the words 2Pay from
balance3 had no money on
deosit with the drawee but
e#ected to arrange with the
broker to co/er the drafts.
;. (here the drawer and the
drawee are the same erson or
where the drawee is a "ctitious
erson, or a erson without
caacity to contract )+ec. 1!6*
because the holder mat treat it
as a note and the drawer is
considered a maker. =nder
section >6, a maker is liable
e/en without resentment.
Why is the accommodated party-indorse not
discharged?

&he accommodated artyDindorser is the real
debtor and not the maker or accetor. As the
accommodated arty did not gi/e /alue to the
accommodation arty, the former has no reason
to e#ect that the instrument will be aid uon
resentment.'n eBect, the accomodated arty is
the erson rimarily liable. Hence, the
accomodated arty Gindorser, being in eBect the
erson rimarily liable is not discharged e/en if
no resentment for ayment is made. &his is in
consonance with the rule that failure to make
resentment for ayment will not discharge the
erson rimarily liable.

Se,. K1. When delay in making presentment
is e$cused. ; +ela! .n ma6.n/ 8resen-men-
0or 8a!men- .s e:,se5 21en -1e 5ela! .s
,ase5 b! ,.r,ms-an,es be!on5 -1e ,on-rol
o0 -1e 1ol5er an5 no- .m8-able -o 1.s
5e0al-" m.s,on5,-" or ne/l./en,e. *1en
-1e ,ase o0 5ela! ,eases -o o8era-e"
8resen-men- ms- be ma5e 2.-1 reasonable
5.l./en,e.

Se,. K2. When presentment for payment is
e$cused. ; Presen-men- 0or 8a!men- .s
e:,se54
(a) *1ere" a0-er -1e e:er,.se o0
reasonable 5.l./en,e" 8resen-men-"
as re3.re5 b! -1.s A,-" ,anno- be
ma5e7

A0
(b) *1ere -1e 5ra2ee .s a 9,-.-.os
8erson7

(,) %! 2a.<er o0 8resen-men-" e:8ress
or .m8l.e5.
Se,. K3. When instrument dishonored by
non-payment. ; T1e .ns-rmen- .s
5.s1onore5 b! non;8a!men- 21en4
(a) I- .s 5l! 8resen-e5 0or 8a!men-
an5 8a!men- .s re0se5 or ,anno- be
ob-a.ne57 or

(b) Presen-men- .s e:,se5 an5 -1e
.ns-rmen- .s o<er5e an5 n8a.5.
Se,. KA. 5iability of person secondarily
liable. when instrument dishonored. ;
SbHe,- -o -1e 8ro<.s.ons o0 -1.s A,-" 21en
-1e .ns-rmen- .s 5.s1onore5 b! non;
8a!men-" an .mme5.a-e r./1- o0 re,orse -o
all 8ar-.es se,on5ar.l! l.able -1ereon
a,,res -o -1e 1ol5er.

Se,. KE. %ime of maturity. ; E<er! ne/o-.able
.ns-rmen- .s 8a!able a- -1e -.me 9:e5
-1ere.n 2.-1o- /ra,e. *1en -1e 5a! o0
ma-r.-! 0alls 8on Sn5a! or a 1ol.5a!" -1e
.ns-rmen-s 0all.n/ 5e or be,om.n/
8a!able on Sa-r5a! are -o be 8resen-e5 0or
8a!men- on -1e ne:- s,,ee5.n/ bs.ness
5a! e:,e8- -1a- .ns-rmen-s 8a!able on
5eman5 ma!" a- -1e o8-.on o0 -1e 1ol5er" be
8resen-e5 0or 8a!men- be0ore -2el<e
o=,lo,6 noon on Sa-r5a! 21en -1a- en-.re
5a! .s no- a 1ol.5a!.

Se,. KI. %ime) how computed. ; *1en -1e
.ns-rmen- .s 8a!able a- a 9:e5 8er.o5 a0-er
5a-e" a0-er s./1-" or a0-er -1a- 1a88en.n/ o0
a s8e,.9e5 e<en-" -1e -.me o0 8a!men- .s
5e-erm.ne5 b! e:,l5.n/ -1e 5a! 0rom
21.,1 -1e -.me .s -o be/.n -o rn" an5 b!
.n,l5.n/ -1e 5a-e o0 8a!men-.
1:&9: 'n determining the roer date for
resentment, count from the day following the
date from which the time is to run )e.g. the date
of the instrument, or date of sight, or date of the
haening of the seci"ed e/ent* and include
the last day of the eriod as the maturity date.
.ut if dated % Aril 1??1 and ayable one
month after, the due date is % May 1??1.
'f dated !1 Nanuary and ayable one
month after, the due date is 7eb 2, or 2?
deending on whether it is a lea year.

Se,. KJ. >ule where instrument payable at
bank. ; *1ere -1e .ns-rmen- .s ma5e
8a!able a- a ban6" .- .s e3.<alen- -o an
or5er -o -1e ban6 -o 8a! -1e same 0or -1e
a,,on- o0 -1e 8r.n,.8al 5eb-or -1ereon.

Se,. KK. What constitutes payment in due
course. ; Pa!men- .s ma5e .n 5e ,orse
21en .- .s ma5e a- or a0-er -1e ma-r.-! o0
-1e 8a!men- -o -1e 1ol5er -1ereo0 .n /oo5
0a.-1 an5 2.-1o- no-.,e -1a- 1.s -.-le .s
5e0e,-.<e.
*1a- are -1e re3.s.-es 0or 8a!men- .n 5e
,orse>
)1* ayment must be made at or after the
date of maturity;
- ayment made before maturity would
constitute a negotiation back the
erson rimarily liable and he can reD
negotiate it )sec. %6*.
)2* ayment must be the holder; and
- ayment to indorsee who is not in
ossession of the instrument is not
ayment in due course and is at the
risk of the arty so aying. Party
making ayment must insist on the
resentment of the aer by the
erson demanding ayment in order to
make sure that it is at the time in his
ossession and not outstanding in
other.
)!* ayment must be made by the debtor
in good faith and without notice that
the holder-s title is defecti/e.
- ayment to a erson by the debtor
who knows that such erson stole it, is
not ayment in due course , as such
ayment is not in good faith. &he
maker or accetor must satisfy
himself, when it is resented for
ayment, that the holder traces his
title through genuine indorsements.
Medium of ayment the ayment of debts
in money shall be made in the currency
stiulated and if not ossible, in the
currency which legal tender in the
Philiines. (hen ayment of an
instrument is made by gi/ing )other than
legal tender*, as a general such ayment
will not be considered absolute until the
aer gi/en has been itself aid e#cet
when arties agree otherwise.
A check resented by the holder to the
bank where it is drawn and recei/e as a
deosit and credited to his amount, this
amounts to a ayment of the checks.
PII. NOTICE OF +IS$ONO'

Se,. K#. %o whom notice of dishonor must
be gi+en. - E:,e8- as 1ere.n o-1er2.se
A1
8ro<.5e5" 21en a ne/o-.able .ns-rmen- 1as
been 5.s1onore5 b! non;a,,e8-an,e or non;
8a!men-" no-.,e o0 5.s1onor ms- be /.<en
-o -1e 5ra2er an5 -o ea,1 .n5orser" an5 an!
5ra2er or .n5orser -o 21om s,1 no-.,e .s
no- /.<en .s 5.s,1ar/e5.
*1a- a no-.,e o0 5.s1onor>
1otice of dishonor is bringing, either
/erbally or by writing to the knowledge of
the drawer or indorser of an instrument,
the fact that a seci"ed negotiable
instrument, uon roer roceedings
taken, has not been aid and that the
arty noti"ed is e#ected to ay it. )'f such
notice is gi/en by a notary ublic, it is
called a rotest )sec. 1%!*.
*1a- are -1e 8r8oses o0 a no-.,e o0
5.s1onor>
)1*to inform the arties secondarily liable
that the maker or accetor, as the case
may be has failed to meet his
engagement;
)2* to ad/ice such arties that they will be
required to make ayment.
*1a- .s -1e rle on no-.,e o0 5.s1onor>
(hen an instrument is dishonored by )1* nonD
accetance )bill* or )2* nonD ayment )both bill
and note*, notice of such dishonor must be gi/en
to ersons secondarily liable, namely, the drawer
)in a bill* and indoresers )in both bill and note*.
:therwise, such arties are discharged. Howe/er,
the holder is not required to notify the drawer and
all indorsers. He may select to hold only one or
some of the indorsers and any arty not so
noti"ed is discharge. &herefore, the holder, in
order to "# the liabilities of the arties
secondarily liable, must gi/e a notice of dishonor
at least, to such arties he may ha/e selected.
7urther, it is incumbent uon the holder to ro/e
the fact of gi/ing notice, in accordance with the
law, as art of his case. His cause of action
)enforcement of ayment* will not gi/en
substance or will not be uheld by court if he fails
to ro/e such fact. Oastly, the law does not
require that the notice be gi/en to the ersons
rimarily liable )maker or accetor* because they
are the /ery ones who dishonored the instrument.
1:&9: &he e#cetions to this general rule of
notice are found in secs. 16?, 112, 11$, 11%, 11C,
11>.
'n instruments ayable in installments, does
failure gi/e such notice of dishonor of a re/ious
installment to ersons secondarily liable
discharge them on succeeding installmentM
't deends. 'f the instrument contains no
acceleration clause, they are not discharged
because each installment is equi/alent to a
searate note. 'f there is an acceleration clause
and it is automatic )in oeration*, they are
discharged. 'f the acceleration clause is otional
and it is not e#ercised, it is the same as if no such
clause e#isted and as a result, they are not
discharged therefore. 'f the otional acceleration
clause has been e#ercised, the ersons
secondarily liable are e#cused.

Se,. #0. /y whom gi+en. ; T1e no-.,e ma!
be /.<en b! or on be1al0 o0 -1e 1ol5er" or b!
or on be1al0 o0 an! 8ar-! -o -1e .ns-rmen-
21o m./1- be ,om8elle5 -o 8a! .- -o -1e
1ol5er" an5 21o" 8on -a6.n/ .- 8" 2ol5
1a<e a r./1- -o re.mbrsemen- 0rom -1e
8ar-! -o 21om -1e no-.,e .s /.<en.
*1o /.<es -1e no-.,e o0 5.s1onor>
)1* the holder; or
)2* another behalf of the holder; or
)!* by a arty to the instrument who may be
comelled to ay it to the holders;
D Howe/er, such a arty cannot gi/e notice
of dishonor to e/erybody but only to another
arty against whom he has a right of
reimbursement should such arty gi/ing notice
ay the instrument.
)$* another erson in behalf of such arty;
1otice by a mere stranger is ineBectual unless he
is acting as agent of a arty who is entitled to
gi/e notice of dishonor.
'OO=+&AA&':1: M makes a note ayable to the
order of P. P negotiates the note to A. A to ., . to
@, @ to 8, holder. M dishonors the note in the
hands of 8.
)a* 8 or his agent may gi/e notice of dishonor to
P, A, ., @, or to any one of them.
)b* if the 8 noti"es @ only, the latter, who thereby
can be comelled by 8 to ay, may, in turn, notify
P, A andEor . G to whom @, if he ays,. Has the
right of reimbursement.
)c* if 8 gi/e notice only ., the eBect is to
discharge @ due to lack of notice since . would
ha/e no right of reimbursement from @ and thus,
no right to gi/e notice to him.
)d* @, uon his discharge, becomes a total
stranger and as such is not entitled to gi/e notice
A2
unless he is acting as an agent of a arty who can
gi/e roer notice of dishonor.
)a! a ma6er or a,,e8-or" a- an! -.me" /.<e
no-.,e or 5.s1onor>
Jes, only when the maker or accetor acts as an
agent of the erson entitled to gi/e notice.

Se,. #1. ?otice gi+en by agent. ; No-.,e o0
5.s1onor ma! be /.<en b! an! a/en- e.-1er
.n 1.s o2n name or .n -1e name o0 an! 8ar-!
en-.-le5 -o /.<en no-.,e" 21e-1er -1a- 8ar-!
be 1.s 8r.n,.8al or no-.
1:&9: 1otice of dishonor may be gi/e by an
agent )sec. ?6*. &he agent need not be
authori;ed by the rincial to gi/e the notice.
1otice may be gi/en by the agent: )1* in the
name of any arty entitled to gi/e the notice )sec.
?6*; or )2* in his )agent-s* own name. &hus, any
erson can be agent of any arty entitled to gi/e
notice )so as long as he gi/es notice for such
arty and not for his own sake*.

Se,. #2. 6,ect of notice on behalf of holder.
; *1ere no-.,e .s /.<en b! or on be1al0 o0
-1e 1ol5er" .- .nres -o -1e bene9- o0 all
sbse3en- 1ol5ers an5 all 8r.or 8ar-.es
21o 1a<e a r./1- o0 re,orse a/a.ns- -1e
8ar-! -o 21om .- .s /.<en.
*1a- 5oes Bbene9-D mean>
&he word 2bene"t3 refers to the right to charge
the erson secondarily liable who recei/e notice.
'n other words, the arty to whom this bene"t
inures can charge the arty recei/ing notice of
dishonor, e/en if he himself did not gi/e the
notice.
To 21om 5oes -1.s bene9- .nre -o>
1otice gi/en by or on behalf of the holder inures
to the bene"t:
)1* of all arties rior to the holder, who ha/e the
right of recourse against the arty to whom the
notice is gi/en; and
)2* of all holders subsequent to the holder gi/ing
notice.
'OO=+&AA&':1: M makes a note ayable to the
order of P. P negotiates it to A. A to ., . to @, @ to
8, holder. M dishonors. 8 noti"es P, A ., and @.
)a*the notice gi/en by 8 to P oerates to the
bene"t of A, . and @ although they were not the
one who ga/e the notice as they ha/e the right of
recourse against P if any of them be held liable to
ay the instrument.
)b* but, the notice gi/en by 8 to . does not
oerate to the bene"t of P and A since the latter
do not ha/e the right of recourse against .. &he
notice to ., though, would bene"t @ who has such
right of recourse against ..
)c* if 8 subsequently negotiates the note 9, the
notice inures to 9-s bene"t although he himself
did not gi/e any 9 need not gi/e another notice of
dishonor.
)d* +uose 8, when the instrument was
dishonored, ga/e notice only P, A and @. 8 later
negotiated it to 9. @an 9 go after . to whom
notice was gi/enM 1o. the eBect of 8-s failure to
notify . was to discharge him from liability. &he
bene"t of sec. ?2 cannot be e#tended to those
already discharged. )following this trend of
thought, if 9 goes after @ and the later ays, @
can no longer go after . e/en if he had a right of
recourse against him*.

Se,. #3. 6,ect where notice is gi+en by
party entitled thereto. ; *1ere no-.,e .s
/.<en b! or on be1al0 o0 a 8ar-! en-.-le5 -o
/.<e no-.,e" .- .nres -o -1e bene9- o0 -1e
1ol5er an5 all 8ar-.es sbse3en- -o -1e
8ar-! -o 21om no-.,e .s /.<en.
$o2 .s se,. #3 5.@eren- 0rom se,. #2>
&he rincial in/ol/ed is the same. Howe/er, the
notice sec. ?! is gi/en, not by the holder but by a
arty entitled to gi/e notice under sec. ?6
namely, by arty to the instrument who might be
comelled to ay it to the holder, and who, uon
taking it , would ha/e a right of reimbursement
from the arty to whom notice is gi/en. +uch
notice inures to the bene"t of: )1* the holder, and
)2* all arties subsequent to the arty to whom
notice is gi/en.
'OO=+&AA&':1: M made a note ayable to the
order P. P negotiated it to A. A to ., . to @, @ to 8,
holder. M dishonors the note and 8 noti"es only
@.
)a* :rdinarily, A, . and P are considered
discharged from their liability for lack of notice
)sec. ,?*.
)b* .ut, if @, within the time "#ed by law )sec. ?$,
16>*, gi/es due notice to ., and . gi/es notice to
A and A to P, all three will not be considered
discharged. )+ubsequent notices must each be
within the time "#ed by law*.
)c* @an 8 go after P desite the absence of notice
gi/en by the former to the latterM Jes, the notice
gi/en by A to P inured to the bene"t of 8, holder
)sec. ?!* although the latter failed to gi/e notice
P.
A3
)d* +uose 8 instead went after . and
succeeded in collecting. May . go after PM yes,
Although . ne/er ga/e notice ersonally to P, the
notice by A also inures to the bene"t of arties
subsequent to the arty to whom notice is gi/en.
Se,. #A. When agent may gi+e notice. ;
*1ere -1e .ns-rmen- 1as been 5.s1onore5
.n -1e 1an5s o0 an a/en-" 1e ma! e.-1er
1.msel0 /.<e no-.,e -o -1e 8ar-.es l.able
-1ereon" or 1e ma! /.<e no-.,e -o 1.s
8r.n,.8al. I0 1e /.<es no-.,e -o 1.s 8r.n,.8al"
1e ms- 5o so 2.-1.n -1e same -.me as .0 1e
2ere -1e 1ol5er" an5 -1e 8r.n,.8al" 8on -1e
re,e.8- o0 s,1 no-.,e" 1as 1.msel0 -1e same
-.me 0or /.<.n/ no-.,e as .0 -1e a/en- 1a5
been an .n5e8en5en- 1ol5er.
*1a- ma! -1e a/en- 5o .0 -1e .ns-rmen- .n
1.s 1an5s .s 5.s1onore5>
)1* he may directly gi/e notice to the ersons
secondarily liable thereon; or
; the agent must do so within the time "#ed
by secs. 162, 16!, 16$ and 16>. :therwise, the
arties secondarily liable are discharged for lack
of notice unless the rincial himself noti"ed
them.
)2* he may ga/e notice, within the time "#ed by
law, to his rincial.
D the time in which the rincial was a arty
secondarily liable.the rincial, uon recei/ing
such notice, has also the same time for gi/ing
notice to the arties secondarily liable as if the
instrument was dishonored on the day he
recei/ed the notice. &hus, notice to the agent of
dishonor does not constitute notice to the
rincial. &he agent is treated like an
indeendent holder.

Se,. #E. When notice su'cient. ; A 2r.--en
no-.,e nee5 no- be s./ne5 an5 an
.nsL,.en- 2r.--en no-.,e ma! be
s88lemen-e5 an5 <al.5a-e5 b! <erbal
,ommn.,a-.on. A m.s5es,r.8-.on o0 -1e
.ns-rmen- 5oes no- <.-.a-e -1e no-.,e
nless -1e 8ar-! -o 21om -1e no-.,e .s /.<en
.s .n 0a,- m.sle5 -1ereb!.

Se,. #I. Form of notice. ; T1e no-.,e ma! be
.n 2r.-.n/ or merel! oral an5 ma! be /.<en
.n an! -erms 21.,1 sL,.en-l! .5en-.0! -1e
.ns-rmen-" an5 .n5.,a-e -1a- .- 1as been
5.s1onore5 b! non;a,,e8-an,e or non;
8a!men-. I- ma! .n all ,ases be /.<en b!
5el.<er.n/ .- 8ersonall! or -1ro/1 -1e
ma.ls.
Is -1ere an! 0orm re3.re5 0or -1e no-.,e o0
5.s1onor>
1o. 1otice of dishonor may be in writing or
merely oral. &hus, notice may be gi/en by
telehone ro/ided that it may be clearly shown
that the arty noti"ed was really communicated
with, that is fully indenti"ed as the arty at the
recei/ing end of the line.
*1a- ms- -1e no-.,e ,on-a.n>
)1* su0cient descrition of the instrument to
identify it;
)2* a statement that it has been resented for
ayment or for accetance, and that it has been
dishonored. )'f rotest is necessary, the notice
must also cointain a statement that it has been
rotested*; and
)!* a statement that the arty gi/ing notice to
look for the arty addressed for ayment.
*1a- .0 one o0 -1e -1ree .s om.--e5>
&he fact that the insu0cient does not in/alidated
it. &he notice may be sulemented by oral or
/erbal communications stating the things lacking.
'n fact, e/en if the notice was not be in/alidated.
S88os.n/ -1ere .s a m.s5es,r.8-.on o0 -1e
.ns-rmen-" 2.ll -1a- 0a,- a@e,- -1e <al.5.-!
o0 -1e no-.,e>
4enerally, misdescrition of the instrument, such
as to the amount or the date of the name of the
arties or the date of maturity, does not /itiate
the notice ro/ided that the erson to whom such
notice is addressed is not misled thereby as to
the identity of the instrument, if the said arty is
misled, the notice is /itiated. &he urose of the
notice is to araise the arty entitled thereto of
the dishonor of the instrument so that if the said
arty, desite the misdescrition, is not misled,
the notice is su0cient.
$o2 ma! -1e no-.,e be /.<en>
&he arty gi/ing said notice to ser/e notice: )1*
by ersonal deli/ery; or )2* by mail. .ut, in a
ersonal ser/ice, it must be shown that either
actual ersonal ser/ice, or an ordinary intelligent,
diligent eBort to make ersonal ser/ice uon the
indorser at his lace of business during business
hours or at his residence if he has lace of
business, was made.
Se,. #J. %o whom notice may be gi+en. ;
No-.,e o0 5.s1onor ma! be /.<en e.-1er -o
-1e 8ar-! 1.msel0 or -o 1.s a/en- .n -1a-
be1al0.
AA
1:&9: =nder sec. ?1, the agent gi/ing notice
need not be authori;ed by the rincial. .ut,
under sec. ?>, an agent to be cometent to
recei/e notice of dishonor must be authori;ed.
&he reason for the diBerence is that, while in sec.
?1, the gi/ing of notice bene"ts the rincial, in
sec. ?>, the receit of notice creates liability. 'f
the agent, in sec. ?>, is not authori;ed, the notice
in /alid.
+uose notice was attemted to be gi/en to the
arty himself but he was not resent. 8oes the
notice ha/e to be gi/en only to an authori;ed
agentM
1o. 1otice to agent must be distinguished from
notice attemted to be gi/en to the arty himself
where he is absent. 'n the latter case, the notice
may be left with anyone found in charge in the
arty-s lace of residence or business. +uch
notice is su0cient and it is irrele/ant that the
erson was not so authori;ed by the rincial.

Se,. #K. ?otice where party is dead. - *1en
an! 8ar-! .s 5ea5 an5 1.s 5ea-1 .s 6no2n -o
-1e 8ar-! /.<.n/ no-.,e" -1e no-.,e ms- be
/.<en -o a 8ersonal re8resen-a-.<e" .0 -1ere
be one" an5 .0 2.-1 reasonable 5.l./en,e" 1e
,an be 0on5. I0 -1ere be no 8ersonal
re8resen-a-.<e" no-.,e ma! be sen- -o -1e
las- res.5en,e or las- 8la,e o0 bs.ness o0
-1e 5e,ease5.

*1a- are -1e re3.s.-es o0 -1.s se,.>
(hen the erson to be gi/en notice of dishonor
)the arty sought to be charged* is dead, notice
must be gi/en to his ersonal reresentati/e,
ro/ided that: )1* his death know to the arty
gi/ing notice,; )2* there is a ersonal
reresentati/e; and )!* if with reasonable
diligence he could be found. Accordingly, where
the holder knew the indorser to be dead, he must
use reasonable diligence to "nd out whether
there is a ersonal reresentati/e of such
decedent or not, and, if there is one, his identity.
.ut, although the arty is dead, )1* if his death is
not known to the arty gi/ing notice but there is
no ersonal reresentati/e, or )!* if there is one
but he cannot be found with reasonable diligence,
then, notice may be sent to the last residence or
last lace of the deceased. &he "rst reference
will be the erson, the reresentati/e. :nly in his
absence should the notice be sent to such lace.

Se,. ##. ?otice to partners. ; *1ere -1e
8ar-.es -o be no-.9e5 are 8ar-ners" no-.,e -o
an! one 8ar-ner .s no-.,e -o -1e 9rm" e<en
-1o/1 -1ere 1as been a 5.ssol-.on.
1:&9: the reason for the rule is that each artner
is an agent of the artnershi of which he is a
member. 1otice to one is notice to the others.
&his is true e/en though the notice was
fraudulently suressed by the artners recei/ing
it.

Se,. 100. ?otice to persons @ointly liable. ;
No-.,e -o Ho.n- 8ersons 21o are no- 8ar-ners
ms- be /.<en -o ea,1 o0 -1em nless one o0
-1em 1as a-1or.-! -o re,e.<e s,1 no-.,e
0or -1e o-1ers.
1:&9: +ec. 166 does not aly to <oint ayees or
<oint indorsees. &his is because, under sec. C,,
such ersons deemed solidarily liable.
Accordingly, sec. 166 alies to <oint arties other
than <oint ayees and <oint indorse, such as, to
drawers who sign a bill <ointly, or to <oint
accommodation indorsers who are not solidarily
liable under sec. C,. if one of such <oint arties
are not gi/en notice, he will be discharged.

Se,. 101. ?otice to bankrupt. ; *1ere a
8ar-! 1as been a5H5/e5 a ban6r8- or an
.nsol<en-" or 1as ma5e an ass./nmen- 0or
-1e bene9- o0 ,re5.-ors" no-.,e ma! be /.<en
e.-1er -o -1e 8ar-! 1.msel0 or -o 1.s -rs-ee
or ass./nee.
1:&9: &his sec. contemlates 2 situations: )1*
the arty secondarily liable has been declared a
bankrut or an insol/ent and )2* the arty
secondarily liable has made an assignment of his
roerties for the bene"t of creditors )e/en if not
bankrut or insol/ent*. 'n either case, notice may
be gi/en to the arty himself or to his trustee or
assignee. 7rom the moment that notice is duly
ser/ed, the liability of the secondary arty is
"#ed.
'n the case of bankrutcy or insol/ency, it
does not mean that <ust because notice has been
gi/en, one can immediately roceed against such
arty. 't is still necessary to "le a comlaint with
the insol/ency court and articiate in the
insol/ency roceedings together with all creditors
so that the roerties of the insol/ent may be
distributed to all those with claims G ro rata. .ut,
the act of gi/ing notice of dishonor must be
ro/en in court. :therwise, absence of roof
discharge the insol/ent from liability insofar as
that instrument is concerned.
Se,. 102. %ime within which notice must be
gi+en. ; No-.,e ma! be /.<en as soon as -1e
.ns-rmen- .s 5.s1onore5 an5" nless 5ela!
AE
.s e:,se5 as 1ere.na0-er 8ro<.5e5" ms- be
/.<en 2.-1.n -1e -.me 9:e5 b! -1.s A,-.
1:&9: &he time for gi/ing notice is "#ed in secs.
16!, 16$ I 16>.
)a! no-.,e o0 5.s1onor be /.<en be0ore -1e
5a-e o0 ma-r.-!>
1o, because an instrument cannot be said to be
dishonored for nonDayment unless resented
and resentment must be made on the date of
maturity unless resentment is e#cused. .ut e/en
when resentment is e#cused, the instrument
cannot be said to be dishonored by nonDayment
unless it is o/erdue and unaid. 1otice must be
gi/en only when it is actually dishonored. 1otice
gi/en before the instrument is due is remature
and insu0cient.
'OO=+&AA&':1: A is in ossession of a note which
will mature on +et. 1%, 1??1 )!6 days from
today*. &he arty rimarily liable told A that he
will not ay the instrument on due date. @an A,
before +et. 1%, gi/e notice of dishonor alreadyM
1o, the note has not yet matured and notice
gi/en earlier than such date is remature.
)a! .- be /.<en on -1e 5a-e o0 ma-r.-!>
Jes, ro/ided that the notice of dishonor be gi/en
after the close of banking hours. &he arty
rimarily liable is gi/en the whole day in which to
make ayment. 'f the instrument is resented on
the date of maturity and is dishonored, but later
in the day, the arty is rimarily liable manifests
his willingness to ay, any rior notice would be
remature. Aemember, the arty liable has the
whole day in which to make ayment. 7urther, to
gi/e notice, the instrument must ha/e been: )1*
resented for accetance or for ayment, and )2*
it was dishonored.
*1! ms- no-.,e be 8rom8->
&he urose of gi/ing romt notice is to gi/e the
ersons secondarily liable e/ery oortunity to
secure themsel/es.

Se,. 103. Where parties reside in same
place. - *1ere -1e 8erson /.<.n/ an5 -1e
8erson -o re,e.<e no-.,e res.5e .n -1e same
8la,e" no-.,e ms- be /.<en 2.-1.n -1e
0ollo2.n/ -.mes4
(a) I0 /.<en a- -1e
8la,e o0 bs.ness
o0 -1e 8erson -o
re,e.<e no-.,e" .-
ms- be /.<en
be0ore -1e ,lose o0
bs.ness 1ors on
-1e 5a! 0ollo2.n/.

(b) I0 /.<en a- 1.s
res.5en,e" .- ms-
be /.<en be0ore
-1e sal 1ors o0
res- on -1e 5a!
0ollo2.n/.

(,) I0 sen- b! ma.l" .- ms- be 5e8os.-e5 .n
-1e 8os- oL,e .n -.me -o rea,1 1.m .n sal
,orse on -1e 5a! 0ollo2.n/.
Se,. 10A. Where parties reside in di,erent
places. ; *1ere -1e 8erson /.<.n/ an5 -1e
8erson -o re,e.<e no-.,e res.5e .n 5.@eren-
8la,es" -1e no-.,e ms- be /.<en 2.-1.n -1e
0ollo2.n/ -.mes4
1:&9: +ecs. 16! I 16$ refer to the ma#imum
time limit allowed by the law to gi/e notice. 't
may be gi/en earlier. Howe/er, if the notice was
gi/en beyond the time limit, it would be
considered not to ha/e been gi/en ant the arties
secondarily liable will be discharged from liability.
&he time limit for gi/ing notice deends uon
whether the erson recei/ing notice resides in the
same lace as the erson as the erson gi/ing it,
or not
*1a- means are 8ro<.5e5 0or .n se,s. 103
an5 10A -o /.<e no-.,e>
'n sec. 16!, notice of dishonor may be gi/en
either )1* ersonally; or )2* by mail. 'n sec. 16$, it
may be gi/en either )1* by mail or )2* otherwise
than by mail )eg. Messenger, telegram*.
(hat is meant by
(a) I0 sen- b! ma.l" .- ms- be 5e8os.-e5 .n
-1e 8os- oL,e .n -.me -o /o b! ma.l -1e 5a!
0ollo2.n/ -1e 5a! o0 5.s1onor" or .0 -1ere be
no ma.l a- a ,on<en.en- 1or on las- 5a!" b!
-1e ne:- ma.l -1erea0-er.

(b) I0 /.<en o-1er2.se -1an -1ro/1 -1e 8os-
oL,e" -1en 2.-1.n -1e -.me -1a- no-.,e
2ol5 1a<e been re,e.<e5 .n 5e ,orse o0
ma.l" .0 .- 1a5 been 5e8os.-e5 .n -1e 8os-
oL,e 2.-1.n -1e -.me s8e,.9e5 .n -1e las-
sb5.<.s.on.
Se,. 10E. When sender deemed to ha+e
gi+en due notice. ; *1ere no-.,e o0 5.s1onor
.s 5l! a55resse5 an5 5e8os.-e5 .n -1e 8os-
oL,e" -1e sen5er .s 5eeme5 -o 1a<e /.<en
5e no-.,e" no-2.-1s-an5.n/ an!
m.s,arr.a/e .n -1e ma.ls.
AI

Se,. 10I. (eposit in post o'ce) what
constitutes. ; No-.,e .s 5eeme5 -o 1a<e
been 5e8os.-e5 .n -1e 8os-;oL,e 21en
5e8os.-e5 .n an! bran,1 8os- oL,e or .n an!
le--er bo: n5er -1e ,on-rol o0 -1e 8os-;
oL,e 5e8ar-men-.

Se,. 10J. ?otice to subsequent party) time
of. ; *1ere a 8ar-! re,e.<es no-.,e o0
5.s1onor" 1e 1as" a0-er -1e re,e.8- o0 s,1
no-.,e" -1e same -.me 0or /.<.n/ no-.,e -o
an-e,e5en- 8ar-.es -1a- -1e 1ol5er 1as a0-er
-1e 5.s1onor.

Se,. 10K. Where notice must be sent. ;
*1ere a 8ar-! 1as a55e5 an a55ress -o 1.s
s./na-re" no-.,e o0 5.s1onor ms- be sen-
-o -1a- a55ress7 b- .0 1e 1as no- /.<en s,1
a55ress" -1en -1e no-.,e ms- be sen- as
0ollo2s4
(a) E.-1er -o -1e 8os-;oL,e neares- -o
1.s 8la,e o0 res.5en,e or -o -1e 8os-;
oL,e 21ere 1e .s a,,s-ome5 -o
re,e.<e 1.s le--ers7 or

(b) I0 1e l.<es .n one 8la,e an5 1as 1.s
8la,e o0 bs.ness .n ano-1er" no-.,e
ma! be sen- -o e.-1er 8la,e7 or

(,) I0 1e .s soHorn.n/ .n ano-1er
8la,e" no-.,e ma! be sen- -o -1e 8la,e
21ere 1e .s so soHorn.n/.
%- 21ere -1e no-.,e .s a,-all! re,e.<e5 b!
-1e 8ar-! 2.-1.n -1e -.me s8e,.9e5 .n -1.s
A,-" .- 2.ll be sL,.en-" -1o/1 no- sen- .n
a,,or5an,e 2.-1 -1e re3.remen- o0 -1.s
se,-.on.

Se,. 10#. Wai+er of notice. ; No-.,e o0
5.s1onor ma! be 2a.<e5 e.-1er be0ore -1e
-.me o0 /.<.n/ no-.,e 1as arr.<e5 or a0-er
-1e om.ss.on -o /.<e 5e no-.,e" an5 -1e
2a.<er ma! be e:8resse5 or .m8l.e5.

Se,. 110. Whom a,ected by wai+er. ; *1ere
-1e 2a.<er .s embo5.e5 .n -1e .ns-rmen-
.-sel0" .- .s b.n5.n/ 8on all 8ar-.es7 b-"
21ere .- .s 2r.--en abo<e -1e s./na-re o0
an .n5orser" .- b.n5s 1.m onl!.

Se,. 111. Wai+er of protest. - A 2a.<er o0
8ro-es-" 21e-1er .n -1e ,ase o0 a 0ore./n b.ll
o0 e:,1an/e or o-1er ne/o-.able .ns-rmen-"
.s 5eeme5 -o be a 2a.<er no- onl! o0 a
0ormal 8ro-es- b- also o0 8resen-men- an5
no-.,e o0 5.s1onor.

Se,. 112. When notice is dispensed with. ;
No-.,e o0 5.s1onor .s 5.s8ense5 2.-1 21en"
a0-er -1e e:er,.se o0 reasonable 5.l./en,e" .-
,anno- be /.<en -o or 5oes no- rea,1 -1e
8ar-.es so/1- -o be ,1ar/e5.

Se,. 113. (elay in gi+ing notice) how
e$cused. ; +ela! .n /.<.n/ no-.,e o0 5.s1onor
.s e:,se5 21en -1e 5ela! .s ,ase5 b!
,.r,ms-an,es be!on5 -1e ,on-rol o0 -1e
1ol5er an5 no- .m8-able -o 1.s 5e0al-"
m.s,on5,-" or ne/l./en,e. *1en -1e ,ase
o0 5ela! ,eases -o o8era-e" no-.,e ms- be
/.<en 2.-1 reasonable 5.l./en,e.

Se,. 11A. When notice need not be gi+en to
drawer. ; No-.,e o0 5.s1onor .s no- re3.re5
-o be /.<en -o -1e 5ra2er .n e.-1er o0 -1e
0ollo2.n/ ,ases4
(a) *1ere -1e 5ra2er an5 5ra2ee are
-1e same 8erson7

(b) *1en -1e 5ra2ee .s 9,-.-.os
8erson or a 8erson no- 1a<.n/
,a8a,.-! -o ,on-ra,-7

(,) *1en -1e 5ra2er .s -1e 8erson -o
21om -1e .ns-rmen- .s 8resen-e5 0or
8a!men-7

(5) *1ere -1e 5ra2er 1as no r./1- -o
e:8e,- or re3.re -1a- -1e 5ra2ee or
a,,e8-or 2.ll 1onor -1e .ns-rmen-7

(e) *1ere -1e 5ra2er 1as
,on-erman5e5 8a!men-.
Se,. 11E. When notice need not be gi+en to
indorser. Q No-.,e o0 5.s1onor .s no-
re3.re5 -o be /.<en -o an .n5orser .n e.-1er
o0 -1e 0ollo2.n/ ,ases4
(a) *1en -1e 5ra2ee .s a 9,-.-.os
8erson or 8erson no- 1a<.n/ ,a8a,.-!
-o ,on-ra,-" an5 -1e .n5orser 2as
a2are o0 -1a- 0a,- a- -1e -.me 1e
.n5orse5 -1e .ns-rmen-7

(b) *1ere -1e .n5orser .s -1e 8erson
-o 21om -1e .ns-rmen- .s 8resen-e5
0or 8a!men-7

(,) *1ere -1e .ns-rmen- 2as ma5e
or a,,e8-e5 0or 1.s a,,ommo5a-.on.
1:&9+: Aemember 7'@PA
&his section alies only to the indorser
concerned. 't does not e#cuse notice to other
indorsers. 7ailure to gi/e to the others will result
in their discharge. =nder subsec )c* , the indorser
)the accommodated arty* is in fact the rincial
debtor and is not entitled to notice.
AJ
95AMPO9 :7 @A+9+ (H9A +9@. 11% 8:9+ 1:&
APPOJ:
'n these cases, notice of dishonor to the indorser
is not e#cused:
1. (here the maker of the instrument is a
artnershi and the indorser sought to be
charged is a member thereof;
2. (here no resentment was actually
made;
!. where the indorser was treasurer of the
maker cororation, not acti/e in its
management and signed the note in
behalf of the cor.
&he bottom line, for +ec. 11$ and 11% is that
notice is not needed to the drawer or indorser
concerned when )1* he has knowledge of the
dishonor by means other than through a formal
notice; and )2* he has no reason to e#ect that
the instrument will be honored.
Se,. 11I. ?otice of non-payment where
acceptance refused. ; *1ere 5e no-.,e o0
5.s1onor b! non;a,,e8-an,e 1as been /.<en"
no-.,e o0 a sbse3en- 5.s1onor b! non;
8a!men- .s none,essar! nless .n -1e
mean-.me -1e .ns-rmen- 1as been
a,,e8-e5.

Se,. 11J. 6,ect of omission to gi+e notice
of non-acceptance. ; An om.ss.on -o /.<e
no-.,e o0 5.s1onor b! non;a,,e8-an,e 5oes
no- 8reH5.,e -1e r./1-s o0 a 1ol5er .n 5e
,orse sbse3en- -o -1e om.ss.on.

Se,. 11K. When protest need not be made)
when must be made. ; *1ere an!
ne/o-.able .ns-rmen- 1as been 5.s1onore5"
.- ma! be 8ro-es-e5 0or non;a,,e8-an,e or
non;8a!men-" as -1e ,ase ma! be7 b-
8ro-es- .s no- re3.re5 e:,e8- .n -1e ,ase o0
0ore./n b.lls o0 e:,1an/e.

PIII. +ISC$A'GE OF NEGOTIA%&E
INST'()ENTS

Se,. 11#. 0nstrument) how discharged. ; A
ne/o-.able .ns-rmen- .s 5.s,1ar/e54
(a) %! 8a!men- .n 5e ,orse b! or on
be1al0 o0 -1e 8r.n,.8al 5eb-or7

(b) %! 8a!men- .n 5e ,orse b! -1e
8ar-! a,,ommo5a-e5" 21ere -1e
.ns-rmen- .s ma5e or a,,e8-e5 0or
1.s a,,ommo5a-.on7

(,) %! -1e .n-en-.onal ,an,ella-.on
-1ereo0 b! -1e 1ol5er7

(5) %! an! o-1er a,- 21.,1 2.ll
5.s,1ar/e a s.m8le ,on-ra,- 0or -1e
8a!men- o0 mone!7

(e) *1en -1e 8r.n,.8al 5eb-or
be,omes -1e 1ol5er o0 -1e .ns-rmen-
a- or a0-er ma-r.-! .n 1.s o2n r./1-.
Se,. 120. When persons secondarily liable
on the instrument are discharged. - A
8erson se,on5ar.l! l.able on -1e .ns-rmen-
.s 5.s,1ar/e54
(a) %! an! a,- 21.,1
5.s,1ar/es -1e
.ns-rmen-7

(b) %! -1e .n-en-.onal
,an,ella-.on o0 1.s
s./na-re b! -1e
1ol5er7

(,) %! -1e 5.s,1ar/e o0
a 8r.or 8ar-!7

(5) %! a <al.5 -en5er or
8a!men- ma5e b! a
8r.or 8ar-!7

(e) %! a release o0 -1e
8r.n,.8al 5eb-or nless
-1e 1ol5er=s r./1- o0
re,orse a/a.ns- -1e
8ar-! se,on5ar.l! l.able
.s e:8ressl! reser<e57

(0) %! an! a/reemen-
b.n5.n/ 8on -1e
1ol5er -o e:-en5 -1e
-.me o0 8a!men- or -o
8os-8one -1e 1ol5er=s
r./1- -o en0or,e -1e
.ns-rmen- nless
ma5e 2.-1 -1e assen-
o0 -1e 8ar-!
se,on5ar.l! l.able or
nless -1e r./1- o0
re,orse a/a.ns- s,1
8ar-! .s e:8ressl!
reser<e5.
*1! 2.ll -1e 5.s,1ar/e o0 -1e .ns-rmen-
o8era-e -o 5.s,1ar/e -1e se,on5ar! 8ar-.es>
'f the instrument is discharged under sec. 11?, it
ceases to ha/e force and eBect. Hence, all
arties, rimary or secondary, will also be
discharged since there is no instrument to be
liable on. .ut the discharge of the secondary
arties does not necessarily bring about the
discharge of the instrument.
*1en 2.ll ,an,ella-.on o0 -1e s./na-re
2or6 as a 5.s,1ar/e>
AK
't is only when the signature of the indorser is
intentionally cancelled by the holder that the
former is discharge as if he has ne/er been a
arty to the instrument. 'f there was a mistake in
the areciation of facts, there is no intentional
cancellation. .ut, once an indorsement is
canncelled, there is rima facie resumtion of
intention cancel. Also, the right of the holder to
cancel the signature of an indorser is sub<ect to
the limitation that the indorserment is not
necessary to the holder-s title.
As.5e 0rom -1e .n5orser?s 5.s,1ar/e" 21a-
0r-1er e@e,- 2.ll -1e ,an,ella-.on 1a<e>
&he discharge of a arty by intentional
cancellation of his signature also oerates as a
discharge of arties subsequent to the arty
discharge. &he reason for the rule is that the
discharge deri/es a subsequent arty of a right
of recourse against the arty discharged by the
holder. &hus, suose A, maker, issues a note in
fa/or of .. . negotiates it to @, @ to 8, 8 to 9, 9 to
7, holder. 7 cancels @-s signature. 8 and 9 will
also be discharged because both would be denied
their right of recourse against @ in case one of
them is made to ay the instrument.
PA:.O9M: 'n the same e#amle, if 7, instead of
canceling the indorsement of @, resented the
note to A who refused to ay. 7 noti"es
Se,. 121. >ight of party who discharges
instrument. ; *1ere -1e .ns-rmen- .s 8a.5
b! a 8ar-! se,on5ar.l! l.able -1ereon" .- .s
no- 5.s,1ar/e57 b- -1e 8ar-! so 8a!.n/ .- .s
rem.--e5 -o 1.s 0ormer r./1-s as re/ar5 all
8r.or 8ar-.es" an5 1e ma! s-r.6e o- 1.s o2n
an5 all sbse3en- .n5orsemen-s an5
a/a.ns- ne/o-.a-e -1e .ns-rmen-" e:,e8-4
(a) *1ere .- .s 8a!able -o -1e or5er o0
a -1.r5 8erson an5 1as been 8a.5 b!
-1e 5ra2er7 an5

(b) *1ere .- 2as ma5e or a,,e8-e5
0or a,,ommo5a-.on an5 1as been 8a.5
b! -1e 8ar-! a,,ommo5a-e5.
What are the e,ects of payment by a
secondary party?
1. &he instrument is not discharged. .ut the
arty aying is.
2. &he ayer is remitted to his former rights
against arties rior to him. 'f the ayer
was a H'8@, e/en if at the time of
ayment he already had notice of defects
of title, he can enforce his rights as if he
was a H'8@.
!. &he ayer can strike out his indorsement
and those of subsequent arties to him.
$. &he ayer can renegotiate the
instrument.
1:&9: &he right to renegotiate is quali"ed by the
e#cetion ro/ided in ars. )a* and )b*.
Se,. 122. >enunciation by holder. ; T1e
1ol5er ma! e:8ressl! renon,e 1.s r./1-s
a/a.ns- an! 8ar-! -o -1e .ns-rmen- be0ore"
a-" or a0-er .-s ma-r.-!. An absol-e an5
n,on5.-.onal renn,.a-.on o0 1.s r./1-s
a/a.ns- -1e 8r.n,.8al 5eb-or ma5e a- or
a0-er -1e ma-r.-! o0 -1e .ns-rmen-
5.s,1ar/es -1e .ns-rmen-. %- a
renn,.a-.on 5oes no- a@e,- -1e r./1-s o0 a
1ol5er .n 5e ,orse 2.-1o- no-.,e. A
renn,.a-.on ms- be .n 2r.-.n/ nless -1e
.ns-rmen- .s 5el.<ere5 8 -o -1e 8erson
8r.mar.l! l.able -1ereon.

Se,. 123. 3ancellation) unintentional)
burden of proof. ; A ,an,ella-.on ma5e
n.n-en-.onall! or n5er a m.s-a6e or
2.-1o- -1e a-1or.-! o0 -1e 1ol5er" .s
.no8era-.<e b- 21ere an .ns-rmen- or an!
s./na-re -1ereon a88ears -o 1a<e been
,an,elle5" -1e br5en o0 8roo0 l.es on -1e
8ar-! 21o alle/es -1a- -1e ,an,ella-.on 2as
ma5e n.n-en-.onall! or n5er a m.s-a6e or
2.-1o- a-1or.-!.

Se,. 12A. *lteration of instrument) e,ect of.
; *1ere a ne/o-.able .ns-rmen- .s
ma-er.all! al-ere5 2.-1o- -1e assen- o0 all
8ar-.es l.able -1ereon" .- .s a<o.5e5" e:,e8-
as a/a.ns- a 8ar-! 21o 1as 1.msel0 ma5e"
a-1or.ze5" or assen-e5 -o -1e al-era-.on
an5 sbse3en- .n5orsers.
%- 21en an .ns-rmen- 1as been ma-er.all!
al-ere5 an5 .s .n -1e 1an5s o0 a 1ol5er .n
5e ,orse no- a 8ar-! -o -1e al-era-.on" 1e
ma! en0or,e 8a!men- -1ereo0 a,,or5.n/ -o
.-s or./.nal -enor.

Se,. 12E. What constitutes a material
alteration. - An! al-era-.on 21.,1 ,1an/es4
(b) T1e 5a-e7
(b) T1e sm 8a!able"
e.-1er 0or 8r.n,.8al or
.n-eres-7
(,) T1e -.me or 8la,e o0
8a!men-4
(5) T1e nmber or -1e
rela-.ons o0 -1e 8ar-.es7
(e) T1e me5.m or
,rren,! .n 21.,1 8a!men-
.s -o be ma5e7
(0) Or 21.,1 a55s a 8la,e
o0 8a!men- 21ere no 8la,e
A#
o0 8a!men- .s s8e,.9e5" or
an! o-1er ,1an/e or
a55.-.on 21.,1 al-ers -1e
e@e,- o0 -1e .ns-rmen- .n
an! res8e,-" .s a ma-er.al
al-era-.on.
%I&&S OF EFC$ANGE
IF. FO') AN+ INTE'P'ETATION
Se,. 12I. /ill of e$change. de#ned. ; A b.ll
o0 e:,1an/e .s an n,on5.-.onal or5er .n
2r.-.n/ a55resse5 b! one 8erson -o ano-1er"
s./ne5 b! -1e 8erson /.<.n/ .-" re3.r.n/ -1e
8erson -o 21om .- .s a55resse5 -o 8a! on
5eman5 or a- a 9:e5 or 5e-erm.nable 0-re
-.me a sm ,er-a.n .n mone! -o or5er or -o
bearer.

Se,. 12J. /ill not an assignment of funds in
hands of drawee. ; A b.ll o0 .-sel0 5oes no-
o8era-e as an ass./nmen- o0 -1e 0n5s .n
-1e 1an5s o0 -1e 5ra2ee a<a.lable 0or -1e
8a!men- -1ereo0" an5 -1e 5ra2ee .s no-
l.able on -1e b.ll nless an5 n-.l 1e a,,e8-s
-1e same.

Se,. 12K. /ill addressed to more than one
drawee. - A b.ll ma! be a55resse5 -o -2o or
more 5ra2ees Ho.n-l!" 21e-1er -1e! are
8ar-ners or no-7 b- no- -o -2o or more
5ra2ees .n -1e al-erna-.<e or .n s,,ess.on.

Se,. 12#. 0nland and foreign bills of
e$change. - An .nlan5 b.ll o0 e:,1an/e .s a
b.ll 21.,1 .s" or on .-s 0a,e 8r8or-s -o be"
bo-1 5ra2n an5 8a!able 2.-1.n -1e
P1.l.88.nes. An! o-1er b.ll .s a 0ore./n b.ll.
(nless -1e ,on-rar! a88ears on -1e 0a,e o0
-1e b.ll" -1e 1ol5er ma! -rea- .- as an .nlan5
b.ll.

Se,. 130. When bill may be treated as
promissory note. ; *1ere .n a b.ll -1e
5ra2er an5 5ra2ee are -1e same 8erson or
21ere -1e 5ra2ee .s a 9,-.-.os 8erson or a
8erson no- 1a<.n/ ,a8a,.-! -o ,on-ra,-" -1e
1ol5er ma! -rea- -1e .ns-rmen- a- 1.s
o8-.on e.-1er as a b.ll o0 e:,1an/e or as a
8rom.ssor! no-e.

Se,. 131. >eferee in case of need. - T1e
5ra2er o0 a b.ll an5 an! .n5orser ma! .nser-
-1ereon -1e name o0 a 8erson -o 21om -1e
1ol5er ma! resor- .n ,ase o0 nee57 -1a- .s -o
sa!" .n ,ase -1e b.ll .s 5.s1onore5 b! non;
a,,e8-an,e or non;8a!men-. S,1 8erson .s
,alle5 a re0eree .n ,ase o0 nee5. I- .s .n -1e
o8-.on o0 -1e 1ol5er -o resor- -o -1e re0eree
.n ,ase o0 nee5 or no- as 1e ma! see 9-.

F. ACCEPTANCE

Se,. 132. *cceptance) how made. by and so
forth. ; T1e a,,e8-an,e o0 a b.ll .s -1e
s./n.9,a-.on b! -1e 5ra2ee o0 1.s assen- -o
-1e or5er o0 -1e 5ra2er. T1e a,,e8-an,e
ms- be .n 2r.-.n/ an5 s./ne5 b! -1e
5ra2ee. I- ms- no- e:8ress -1a- -1e
5ra2ee 2.ll 8er0orm 1.s 8rom.se b! an!
o-1er means -1an -1e 8a!men- o0 mone!.

Se,. 133. <older entitled to acceptance on
face of bill. ; T1e 1ol5er o0 a b.ll 8resen-.n/
-1e same 0or a,,e8-an,e ma! re3.re -1a-
-1e a,,e8-an,e be 2r.--en on -1e b.ll" an5" .0
s,1 re3es- .s re0se5" ma! -rea- -1e b.ll
as 5.s1onore5.

Se,. 13A. *cceptance by separate
instrument. - *1ere an a,,e8-an,e .s
2r.--en on a 8a8er o-1er -1an -1e b.ll .-sel0"
.- 5oes no- b.n5 -1e a,,e8-or e:,e8- .n 0a<or
o0 a 8erson -o 21om .- .s s1o2n an5 21o"
on -1e 0a.-1 -1ereo0" re,e.<es -1e b.ll 0or
<ale.

Se,. 13E. 8romise to accept) when
equi+alent to acceptance. ; An
n,on5.-.onal 8rom.se .n 2r.-.n/ -o a,,e8- a
b.ll be0ore .- .s 5ra2n .s 5eeme5 an a,-al
a,,e8-an,e .n 0a<or o0 e<er! 8erson 21o"
8on -1e 0a.-1 -1ereo0" re,e.<es -1e b.ll 0or
<ale.

Se,. 13I. %ime allowed drawee to accept. ;
T1e 5ra2ee .s allo2e5 -2en-!;0or 1ors
a0-er 8resen-men- .n 21.,1 -o 5e,.5e
21e-1er or no- 1e 2.ll a,,e8- -1e b.ll7 -1e
a,,e8-an,e" .0 /.<en" 5a-es as o0 -1e 5a! o0
8resen-a-.on.

Se,. 13J. 5iability of drawee returning or
destroying bill. ; *1ere a 5ra2ee -o 21om a
b.ll .s 5el.<ere5 0or a,,e8-an,e 5es-ro!s -1e
same" or re0ses 2.-1.n -2en-!;0or 1ors
a0-er s,1 5el.<er! or 2.-1.n s,1 o-1er
8er.o5 as -1e 1ol5er ma! allo2" -o re-rn
-1e b.ll a,,e8-e5 or non;a,,e8-e5 -o -1e
1ol5er" 1e 2.ll be 5eeme5 -o 1a<e a,,e8-e5
-1e same.

Se,. 13K. *cceptance of incomplete bill. ; A
b.ll ma! be a,,e8-e5 be0ore .- 1as been
s./ne5 b! -1e 5ra2er" or 21.le o-1er2.se
.n,om8le-e" or 21en .- .s o<er5e" or a0-er .-
1as been 5.s1onore5 b! a 8re<.os re0sal
-o a,,e8-" or b! non 8a!men-. %- 21en a
b.ll 8a!able a0-er s./1- .s 5.s1onore5 b!
E0
non;a,,e8-an,e an5 -1e 5ra2ee
sbse3en-l! a,,e8-s .-" -1e 1ol5er" .n -1e
absen,e o0 an! 5.@eren- a/reemen-" .s
en-.-le5 -o 1a<e -1e b.ll a,,e8-e5 as o0 -1e
5a-e o0 -1e 9rs- 8resen-men-.

Se,. 13#. :inds of acceptance. - An
a,,e8-an,e .s e.-1er /eneral or 3al.9e5. A
/eneral a,,e8-an,e assen-s 2.-1o-
3al.9,a-.on -o -1e or5er o0 -1e 5ra2er. A
3al.9e5 a,,e8-an,e .n e:8ress -erms
<ar.es -1e e@e,- o0 -1e b.ll as 5ra2n.

Se,. 1A0. What constitutes a general
acceptance. ; An a,,e8-an,e -o 8a! a- a
8ar-.,lar 8la,e .s a /eneral a,,e8-an,e
nless .- e:8ressl! s-a-es -1a- -1e b.ll .s -o
be 8a.5 -1ere onl! an5 no- else21ere.

Se,. 1A1. =uali#ed acceptance. ; An
a,,e8-an,e .s 3al.9e5 21.,1 .s4
(,) Con5.-.onal7 -1a- .s -o
sa!" 21.,1 ma6es
8a!men- b! -1e
a,,e8-or 5e8en5en- on
-1e 0l9llmen- o0 a
,on5.-.on -1ere.n
s-a-e57

(b) Par-.al7 -1a- .s -o
sa!" an a,,e8-an,e -o
8a! 8ar- onl! o0 -1e
amon- 0or 21.,1 -1e
b.ll .s 5ra2n7

(,) &o,al7 -1a- .s -o sa!"
an a,,e8-an,e -o 8a!
onl! a- a 8ar-.,lar
8la,e7

(5) Sal.9e5 as -o -.me7

(e) T1e a,,e8-an,e o0
some" one or more o0
-1e 5ra2ees b- no- o0
all.
Se,. 1A2. >ights of parties as to quali#ed
acceptance. ; T1e 1ol5er ma! re0se -o -a6e
a 3al.9e5 a,,e8-an,e an5 .0 1e 5oes no-
ob-a.n an n3al.9e5 a,,e8-an,e" 1e ma!
-rea- -1e b.ll as 5.s1onore5 b! non;
a,,e8-an,e. *1ere a 3al.9e5 a,,e8-an,e .s
-a6en" -1e 5ra2er an5 .n5orsers are
5.s,1ar/e5 0rom l.ab.l.-! on -1e b.ll nless
-1e! 1a<e e:8ressl! or .m8l.e5l! a-1or.ze5
-1e 1ol5er -o -a6e a 3al.9e5 a,,e8-an,e" or
sbse3en-l! assen- -1ere-o. *1en -1e
5ra2er or an .n5orser re,e.<es no-.,e o0 a
3al.9e5 a,,e8-an,e" 1e ms-" 2.-1.n a
reasonable -.me" e:8ress 1.s 5.ssen- -o -1e
1ol5er or 1e 2.ll be 5eeme5 -o 1a<e
assen-e5 -1ere-o.

FI. P'ESENT)ENT FO' ACCEPTANCE

Se,. 1A3. When presentment for acceptance
must be made. ; Presen-men- 0or
a,,e8-an,e ms- be ma5e4
(a) *1ere -1e b.ll .s 8a!able a0-er
s./1-" or .n an! o-1er ,ase" 21ere
8resen-men- 0or a,,e8-an,e .s
ne,essar! .n or5er -o 9: -1e ma-r.-!
o0 -1e .ns-rmen-7 or

(b) *1ere -1e b.ll e:8ressl!
s-.8la-es -1a- .- s1all be 8resen-e5
0or a,,e8-an,e7 or

(,) *1ere -1e b.ll .s 5ra2n 8a!able
else21ere -1an a- -1e res.5en,e or
8la,e o0 bs.ness o0 -1e 5ra2ee.
In no o-1er ,ase .s 8resen-men- 0or
a,,e8-an,e ne,essar! .n or5er -o ren5er
an! 8ar-! -o -1e b.ll l.able.

Se,. 1AA. When failure to present releases
drawer and indorser. ; E:,e8- as 1ere.n
o-1er2.se 8ro<.5e5" -1e 1ol5er o0 a b.ll
21.,1 .s re3.re5 b! -1e ne:- 8re,e5.n/
se,-.on -o be 8resen-e5 0or a,,e8-an,e
ms- e.-1er 8resen- .- 0or a,,e8-an,e or
ne/o-.a-e .- 2.-1.n a reasonable -.me. I0 1e
0a.ls -o 5o so" -1e 5ra2er an5 all .n5orsers
are 5.s,1ar/e5.
What is presentment for acceptance?
Presentment for accetance is the roduction or
e#hibition of a bill of e#change to the drawee for
his accetance.
What is the general rule on presentment for
acceptance?
491.A=O9: Presentment for accetance is not
necessary to render any arty to the bill liable.
95@9P&':1+:
1. (here it is ayable after sight or in any
case where resentment for accetance
is necessary to "# the maturity of the
instrument;
2. (here it is e#ressly stiulated;
!. (here it is drawn ayable elsewhere than
at the residence or lace of business of
the drawee.
'n these three cases, it is necessary )1* to
resent the bill for accetance, or )2* to negotiate
E1
it within reasonable time to charge the drawer
and all indorsers. &he reason is that the drawer
and indorser ha/e a right in ha/ing the bill
acceted immediately in order to shorten the
time of ayment and thus ut a limit to the
eriod of their liability and likewise to enable
them to rotect themsel/es by other means
before it is too late, if the bill is not acceted and
aid within the time originally contemlated by
them. 'n the ! cases, where the bill is not
resented for accetance nor negotiated within
reasonable time, the arties secondarily liable will
be discharged from liability. :ther than the !
cases, resentment for accetance is not required
and failure to do so would not aBect the
instrument in any manner.
Howe/er, there is nothing wrong in making
resentment for accetance in other cases )e/en
if not required*. And, if the bill is dishonored, by
nonDaccetance, the holder may treat the bill as if
it had required accetance.
What are the reasons for the e$ceptions?
'n e#cetion )1* it is essential to resent
for accetance to "# the maturity date of the
instrument. )e.g. A bill ayable !6 days after sight
will not mature unless seen by the drawee. :nly
when it is seen will the !6 day eriod start*. 'n
e#cetion )2* it is to comly with the e#ressed
stiulation of the arties in the bill itself. 'n
e#cetion )!* it is to inform the drawee of the
e#istence of the bill so that he can make
arrangements for its ayment on the date of
maturity at the lace designated.
Se,. 1AE. 8resentment) how made. ;
Presen-men- 0or a,,e8-an,e ms- be ma5e
b! or on be1al0 o0 -1e 1ol5er a- a
reasonable 1or" on a bs.ness 5a! an5
be0ore -1e b.ll .s o<er5e" -o -1e 5ra2ee or
some 8erson a-1or.ze5 -o a,,e8- or re0se
a,,e8-an,e on 1.s be1al07 an5
(a) *1ere a b.ll .s a55resse5 -o -2o
or more 5ra2ees 21o are no-
8ar-ners" 8resen-men- ms- be ma5e
-o -1em all nless one 1as a-1or.-!
-o a,,e8- or re0se a,,e8-an,e 0or all"
.n 21.,1 ,ase 8resen-men- ma! be
ma5e -o 1.m onl!7

(b) *1ere -1e 5ra2ee .s 5ea5"
8resen-men- ma! be ma5e -o 1.s
8ersonal re8resen-a-.<e7

(,) *1ere -1e 5ra2ee 1as been
a5H5/e5 a ban6r8- or an .nsol<en-
or 1as ma5e an ass./nmen- 0or -1e
bene9- o0 ,re5.-ors" 8resen-men- ma!
be ma5e -o 1.m or -o 1.s -rs-ee or
ass./nee.
<ow should presentment for acceptance be
made?
'n order that resentment for accetance may be
roer, it is necessary that it be:
)a* made by or on behalf of the holder;
)b* at a reasonable hour;
)c* on a business day;
)d* before the bill is o/erdue;
)e* within a reasonable time after
acquisition thereof; and
)f* to the drawee or some erson
authori;ed to accet or refuse
accetance on his behalf.
%o whom should presentment for
acceptance be made?
4enerally, it must be made to the drawee
or some erson authori;ed to accet or refuse
accetance on his behalf. Howe/er, where there
are 2 or more drawees, resentment must be
made to all of them unless )1* one is duly
authori;ed to accet or refuse accetance, or )2*
they are artners. (here the drawee is dead, it
may be made to his ersonal reresentati/e.
2May3 is used because by +ec. 1$,)a*,
resentment is really e#cused. (here the drawee
is ad<udged a bankrut or has made an
assignment, it may be made to him or his trustee
or his assignee. .ut, here, the use of 2may3 does
not e#cuse nonDresentment. 't is used to mean
that the choice of to whom resentment will be
made is in the alternati/e.
Se,. 1AI. -n what days presentment may
be made. ; A b.ll ma! be 8resen-e5 0or
a,,e8-an,e on an! 5a! on 21.,1 ne/o-.able
.ns-rmen-s ma! be 8resen-e5 0or 8a!men-
n5er -1e 8ro<.s.ons o0 Se,-.ons se<en-!;
-2o an5 e./1-!;9<e o0 -1.s A,-. *1en
Sa-r5a! .s no- o-1er2.se a 1ol.5a!"
8resen-men- 0or a,,e8-an,e ma! be ma5e
be0ore -2el<e o=,lo,6 noon on -1a- 5a!.
NOTE4 &he rule in +ec. >2 and ,% regarding day
of resentment for ayment is the same as for
resentment for accetance. :nly in +ec. 1$C, no
distinction is made between instruments ayable
on demand and those ayable at a "#ed or
determinable future time unlike in +ec. ,%. &hus,
whether it is ayable on demand or at a "#ed
date, where it is resentment for accetance, it
may be made before 12 noon on +aturday
ro/ided it is not a holiday.

Se,. 1AJ. 8resentment where time is
insu'cient. ; *1ere -1e 1ol5er o0 a b.ll
E2
5ra2n 8a!able else21ere -1an a- -1e 8la,e
o0 bs.ness or -1e res.5en,e o0 -1e 5ra2ee
1as no -.me" 2.-1 -1e e:er,.se o0 reasonable
5.l./en,e" -o 8resen- -1e b.ll 0or a,,e8-an,e
be0ore 8resen-.n/ .- 0or 8a!men- on -1e 5a!
-1a- .- 0alls 5e" -1e 5ela! ,ase5 b!
8resen-.n/ -1e b.ll 0or a,,e8-an,e be0ore
8resen-.n/ .- 0or 8a!men- .s e:,se5 an5
5oes no- 5.s,1ar/e -1e 5ra2ers an5
.n5orsers.
NOTE: +ec. 1$> e#cuses delay in making
resentment for ayment when such is caused by
resenting the bill for accetance at a lace other
than the lace where the bill ids drawn ayable.

Se,. 1AK. Where presentment is e$cused. -
Presen-men- 0or a,,e8-an,e .s e:,se5 an5
a b.ll ma! be -rea-e5 as 5.s1onore5 b! non;
a,,e8-an,e .n e.-1er o0 -1e 0ollo2.n/ ,ases4
(a) *1ere -1e 5ra2ee .s 5ea5" or 1as
abs,on5e5" or .s a 9,-.-.os 8erson or
a 8erson no- 1a<.n/ ,a8a,.-! -o
,on-ra,- b! b.ll.

(b) *1ere" a0-er -1e e:er,.se o0
reasonable 5.l./en,e" 8resen-men-
,an no- be ma5e.

(,) *1ere" al-1o/1 8resen-men- 1as
been .rre/lar" a,,e8-an,e 1as been
re0se5 on some o-1er /ron5.
1:&9: +ec. 1$> e#cuses delay in making
resentment for ayment caused by resenting
the bill for accetance. +ec. 1$, e#cuses nonD
resentment for accetance.
(here the drawee is )1* dead; )2* has
absconded; )!* "ctitious; or )$* a erson not
ha/ing caacity to contract, resentment for
accetance is e#cused because it would be futile
to e#ect that a /alid accetance would be gi/en.
An irregular resentment in which
accetance is refused on the other ground is
where resentment is made on a +unday and
thus, irregular but the accetance is refused on
the ground that the drawee has no funds ion the
hands of the drawee.
Se,. 1A#. When dishonored by
nonacceptance. ; A b.ll .s 5.s1onore5 b!
non;a,,e8-an,e4
(a) *1en .- .s 5l! 8resen-e5 0or
a,,e8-an,e an5 s,1 an a,,e8-an,e
as .s 8res,r.be5 b! -1.s A,- .s re0se5
or ,an no- be ob-a.ne57 or

(b) *1en 8resen-men- 0or a,,e8-an,e
.s e:,se5 an5 -1e b.ll .s no-
a,,e8-e5.
1:&9: As to ar )a* cases ro/ided for in +ec.
1!2, 1!! and 1$2. As to ar. )b*, it refers to +ec,.
1$,. .ut, it is not su0cient that resentment for
accetance be e#cused but also that the bill
remains not acceted.
Se,. 1E0. (uty of holder where bill not
accepted. - *1ere a b.ll .s 5l! 8resen-e5
0or a,,e8-an,e an5 .s no- a,,e8-e5 2.-1.n
-1e 8res,r.be5 -.me" -1e 8erson 8resen-.n/
.- ms- -rea- -1e b.ll as 5.s1onore5 b!
nona,,e8-an,e or 1e loses -1e r./1- o0
re,orse a/a.ns- -1e 5ra2er an5 .n5orsers.

What is the duty of the holder in 1ec. BC?
'f, within 2$ hrs. after resentment )sec.
1!C* the bill is not acceted, the erson
resenting it must treat the bill as dishonored.
&his means that the holder must take the
necessary roceedings against the drawer and
each indorser , that is, ha/e the bill rotested
when required and gi/e notice of dishonor.
:therwise, the drawer and the indorsers will be
discharged.

Se,. 1E1. >ights of holder where bill not
accepted. ; *1en a b.ll .s 5.s1onore5 b!
nona,,e8-an,e" an .mme5.a-e r./1- o0
re,orse a/a.ns- -1e 5ra2er an5 .n5orsers
a,,res -o -1e 1ol5er an5 no 8resen-men-
0or 8a!men- .s ne,essar!.
What are the rights of the holder where bill
is not accepted?
(hen a bill is dishonored by nonD
accetance, the holder, after gi/ing notice of
dishonor and rotesting when required, may
immediately roceed against the drawer and
indorsers for the /alue of the bill without waiting
for the date of maturity. Presentment for ayment
need not be made since ayment can not be
e#ected after accetance has been refused.
&here is no oint in waiting for the date of
maturity to resent the bill for ayment. .ut if the
bill is subsequently acceted, resentment for
ayment is necessary.
FII. P'OTEST

Se,. 1E2. 0n what cases protest necessary. ;
*1ere a 0ore./n b.ll a88ear.n/ on .-s 0a,e -o
be s,1 .s 5.s1onore5 b! nona,,e8-an,e" .-
ms- be 5l! 8ro-es-e5 0or nona,,e8-an,e"
b! nona,,e8-an,e .s 5.s1onore5 an5 21ere
s,1 a b.ll 21.,1 1as no- 8re<.osl! been
E3
5.s1onore5 b! non8a!men-" .- ms- be 5l!
8ro-es-e5 0or non8a!men-. I0 .- .s no- so
8ro-es-e5" -1e 5ra2er an5 .n5orsers are
5.s,1ar/e5. *1ere a b.ll 5oes no- a88ear on
.-s 0a,e -o be a 0ore./n b.ll" 8ro-es- -1ereo0
.n ,ase o0 5.s1onor .s nne,essar!.

Se,. 1E3. 8rotest) how made. - T1e 8ro-es-
ms- be anne:e5 -o -1e b.ll or ms- ,on-a.n
a ,o8! -1ereo0" an5 ms- be n5er -1e 1an5
an5 seal o0 -1e no-ar! ma6.n/ .- an5 ms-
s8e,.0!4
(a) T1e -.me an5 8la,e o0
8resen-men-7

(b) T1e 0a,- -1a- 8resen-men- 2as
ma5e an5 -1e manner -1ereo07

(,) T1e ,ase or reason 0or 8ro-es-.n/
-1e b.ll7

(5) T1e 5eman5 ma5e an5 -1e ans2er
/.<en" .0 an!" or -1e 0a,- -1a- -1e
5ra2ee or a,,e8-or ,ol5 no- be
0on5.
Se,. 1EA. 8rotest. by whom made. ; Pro-es-
ma! be ma5e b!4
(a) A no-ar! 8bl.,7 or

(b) %! an! res8e,-able res.5en- o0 -1e
8la,e 21ere -1e b.ll .s 5.s1onore5" .n
-1e 8resen,e o0 -2o or more ,re5.ble
2.-nesses.
Se,. 1EE. 8rotest) when to be made. ; *1en
a b.ll .s 8ro-es-e5" s,1 8ro-es- ms- be
ma5e on -1e 5a! o0 .-s 5.s1onor nless
5ela! .s e:,se5 as 1ere.n 8ro<.5e5. *1en a
b.ll 1as been 5l! no-e5" -1e 8ro-es- ma! be
sbse3en-l! e:-en5e5 as o0 -1e 5a-e o0 -1e
no-.n/.

Se,. 1EI. 8rotest) where made. - A b.ll ms-
be 8ro-es-e5 a- -1e 8la,e 21ere .- .s
5.s1onore5" e:,e8- -1a- 21en a b.ll 5ra2n
8a!able a- -1e 8la,e o0 bs.ness or
res.5en,e o0 some 8erson o-1er -1an -1e
5ra2ee 1as been 5.s1onore5 b!
nona,,e8-an,e" .- ms- be 8ro-es-e5 0or
non;8a!men- a- -1e 8la,e 21ere .- .s
e:8resse5 -o be 8a!able" an5 no 0r-1er
8resen-men- 0or 8a!men- -o" or 5eman5 on"
-1e 5ra2ee .s ne,essar!.

Se,. 1EJ. 8rotest both for non-acceptance
and non-payment. - A b.ll 21.,1 1as been
8ro-es-e5 0or non;a,,e8-an,e ma! be
sbse3en-l! 8ro-es-e5 0or non;8a!men-.

Se,. 1EK. 8rotest before maturity where
acceptor insol+ent. ; *1ere -1e a,,e8-or
1as been a5H5/e5 a ban6r8- or an
.nsol<en- or 1as ma5e an ass./nmen- 0or
-1e bene9- o0 ,re5.-ors be0ore -1e b.ll
ma-res" -1e 1ol5er ma! ,ase -1e b.ll -o be
8ro-es-e5 0or be--er se,r.-! a/a.ns- -1e
5ra2er an5 .n5orsers.

Se,. 1E#. When protest dispensed with. ;
Pro-es- .s 5.s8ense5 2.-1 b! an!
,.r,ms-an,es 21.,1 2ol5 5.s8ense 2.-1
no-.,e o0 5.s1onor. +ela! .n no-.n/ or
8ro-es-.n/ .s e:,se5 21en 5ela! .s ,ase5
b! ,.r,ms-an,es be!on5 -1e ,on-rol o0 -1e
1ol5er an5 no- .m8-able -o 1.s 5e0al-"
m.s,on5,-" or ne/l./en,e. *1en -1e ,ase
o0 5ela! ,eases -o o8era-e" -1e b.ll ms- be
no-e5 or 8ro-es-e5 2.-1 reasonable
5.l./en,e.

Se,. 1I0. 8rotest where bill is lost and so
forth. ; *1en a b.ll .s los- or 5es-ro!e5 or .s
2ron/l! 5e-a.ne5 0rom -1e 8erson en-.-le5
-o 1ol5 .-" 8ro-es- ma! be ma5e on a ,o8! or
2r.--en 8ar-.,lars -1ereo0.

FIII. ACCEPTANCE FO' $ONO'

Se,. 1I1. When bill may be accepted for
honor. ; *1en a b.ll o0 e:,1an/e 1as been
8ro-es-e5 0or 5.s1onor b! non;a,,e8-an,e
or 8ro-es-e5 0or be--er se,r.-! an5 .s no-
o<er5e" an! 8erson no- be.n/ a 8ar-!
alrea5! l.able -1ereon ma!" 2.-1 -1e
,onsen- o0 -1e 1ol5er" .n-er<ene an5 a,,e8-
-1e b.ll supra 8ro-es- 0or -1e 1onor o0 an!
8ar-! l.able -1ereon or 0or -1e 1onor o0 -1e
8erson 0or 21ose a,,on- -1e b.ll .s 5ra2n.
T1e a,,e8-an,e 0or 1onor ma! be 0or 8ar-
onl! o0 -1e sm 0or 21.,1 -1e b.ll .s 5ra2n7
an5 21ere -1ere 1as been an a,,e8-an,e 0or
1onor 0or one 8ar-!" -1ere ma! be a 0r-1er
a,,e8-an,e b! a 5.@eren- 8erson 0or -1e
1onor o0 ano-1er 8ar-!.

Se,. 1I2. *cceptance for honor) how made.
; An a,,e8-an,e 0or 1onor s8ra 8ro-es-
ms- be .n 2r.-.n/ an5 .n5.,a-e -1a- .- .s an
a,,e8-an,e 0or 1onor an5 ms- be s./ne5 b!
-1e a,,e8-or 0or 1onor. ,1anrobles la2

Se,. 1I3. When deemed to be an
acceptance for honor of the drawer. ; *1ere
an a,,e8-an,e 0or 1onor 5oes no- e:8ressl!
s-a-e 0or 21ose 1onor .- .s ma5e" .- .s
5eeme5 -o be an a,,e8-an,e 0or -1e 1onor
o0 -1e 5ra2er.

Se,. 1IA. 5iability of the acceptor for honor.
- T1e a,,e8-or 0or 1onor .s l.able -o -1e
1ol5er an5 -o all 8ar-.es -o -1e b.ll
EA
sbse3en- -o -1e 8ar-! 0or 21ose 1onor 1e
1as a,,e8-e5.

Se,. 1IE. *greement of acceptor for honor. ;
T1e a,,e8-or 0or 1onor" b! s,1 a,,e8-an,e"
en/a/es -1a- 1e 2.ll" on 5e 8resen-men-"
8a! -1e b.ll a,,or5.n/ -o -1e -erms o0 1.s
a,,e8-an,e 8ro<.5e5 .- s1all no- 1a<e been
8a.5 b! -1e 5ra2ee an5 8ro<.5e5 also -1a-
.s s1all 1a<e been 5l! 8resen-e5 0or
8a!men- an5 8ro-es-e5 0or non;8a!men-
an5 no-.,e o0 5.s1onor /.<en -o 1.m.

Se,. 1II. Daturity of bill payable after
sight) accepted for honor. ; *1ere a b.ll
8a!able a0-er s./1- .s a,,e8-e5 0or 1onor" .-s
ma-r.-! .s ,al,la-e5 0rom -1e 5a-e o0 -1e
no-.n/ 0or non;a,,e8-an,e an5 no- 0rom -1e
5a-e o0 -1e a,,e8-an,e 0or 1onor.

Se,. 1IJ. 8rotest of bill accepted for honor.
and so forth. ; *1ere a 5.s1onore5 b.ll 1as
been a,,e8-e5 0or 1onor s8ra 8ro-es- or
,on-a.ns a re0eree .n ,ase o0 nee5" .- ms-
be 8ro-es-e5 0or non;8a!men- be0ore .- .s
8resen-e5 0or 8a!men- -o -1e a,,e8-or 0or
1onor or re0eree .n ,ase o0 nee5.

Se,. 1IK. 8resentment for payment to
acceptor for honor. how made. ;
Presen-men- 0or 8a!men- -o -1e a,,e8-or
0or 1onor ms- be ma5e as 0ollo2s4
(a) I0 .- .s -o be 8resen-e5 .n -1e 8la,e
21ere -1e 8ro-es- 0or non;8a!men-
2as ma5e" .- ms- be 8resen-e5 no-
la-er -1an -1e 5a! 0ollo2.n/ .-s
ma-r.-!.

(b) I0 .- .s -o be 8resen-e5 .n some
o-1er 8la,e -1an -1e 8la,e 21ere .-
2as 8ro-es-e5" -1en .- ms- be
0or2ar5e5 2.-1.n -1e -.me s8e,.9e5 .n
Se,-.on one 1n5re5 an5 0or.
Se,. 1I#. When delay in making
presentment is e$cused. ; T1e 8ro<.s.ons o0
Se,-.on e./1-!;one a88l! 21ere -1ere .s
5ela! .n ma6.n/ 8resen-men- -o -1e
a,,e8-or 0or 1onor or re0eree .n ,ase o0
nee5.

Se,. 1J0. (ishonor of bill by acceptor for
honor. ; *1en -1e b.ll .s 5.s1onore5 b! -1e
a,,e8-or 0or 1onor" .- ms- be 8ro-es-e5 0or
non;8a!men- b! 1.m.

FIP. PAG)ENT FO' $ONO'

Se,. 1J1. Who may make payment for
honor. ; *1ere a b.ll 1as been 8ro-es-e5 0or
non;8a!men-" an! 8erson ma! .n-er<ene
an5 8a! .- supra 8ro-es- 0or -1e 1onor o0
an! 8erson l.able -1ereon or 0or -1e 1onor
o0 -1e 8erson 0or 21ose a,,on- .- 2as
5ra2n.

Se,. 1J2. 8ayment for honor) how made. ;
T1e 8a!men- 0or 1onor supra 8ro-es-" .n
or5er -o o8era-e as s,1 an5 no- as a mere
<oln-ar! 8a!men-" ms- be a--es-e5 b! a
no-ar.al a,- o0 1onor 21.,1 ma! be
a88en5e5 -o -1e 8ro-es- or 0orm an
e:-ens.on -o .-.

Se,. 1J3. (eclaration before payment for
honor. - T1e no-ar.al a,- o0 1onor ms- be
0on5e5 on a 5e,lara-.on ma5e b! -1e 8a!er
0or 1onor or b! 1.s a/en- .n -1a- be1al0
5e,lar.n/ 1.s .n-en-.on -o 8a! -1e b.ll 0or
1onor an5 0or 21ose 1onor 1e 8a!s.

What is payment for honor?
Payment for honor is ayment made by a erson,
whether a arty to the bill or not, after it has
been rotested for nonDayment, for the bene"t
of any arty liable thereon, or for the bene"t of
the erson whose account it was drawn. 't is also
called ayment sura rotest because rior
rotest for nonDayment is required. 't is not
alicable to romissory notes. Payment for
honor may be a/ailed of when the holder,
knowing that the bill has already been dishonored
for nonDayment, does not want to indorse the bill
and thereby incur the liabilities of an indorser.
What is the di,erence between acceptance
for honor and payment for honor?
'n accetance for honor, there is an accetor for
honor. 'n ayment for honor, there is a ayor for
honor. &he diBerence between the two is that
while in the former, the accetor must ber a
stranger to the bill, in the latter, the ayer for
honor may be a arty liable on the bill. 7urther, in
the former, the bill must not be o/erdue. 'n the
latter, it is o/erdue. Also, in the former, there may
be se/eral accetors while, in the latter, there
can only be one ayer. 7inally, in the former, the
rotest must be for nonDaccetance or for better
security, while, in the latter, it is for nonDayment.
What are the requisites to perform a +alid
payment for honor?
1. &he bill has been dishonored for nonDayment
2. &he bill has been rotested for nonDayment
!. Payment sura rotest is made by any erson,
e/en a arty thereto and as to form
EE
$. the ayment must be attested by notarial act
aended to the rotest, or form an e#tension
to it
%. &he notarial act must be based on the
declaration by the ayer for honor or his
agent of his intention to ay the bill for honor
and for whose honor he ays.
What is the procedure for payment for
honor?
. &he ayer or his agent goes to a notary ublic
and declares his intention to ay the bill and
for whose honor he ays.
!. &he notary then records the declaration in
the rotest or in a searate aer attached to
it.
". the ayer then noti"es the erson for whose
honor he ays within reasonable time.
What if the payment for honor is not
attested by a notarial act?
't will oerate as a mere /oluntary
ayment and the ayer acquires no right to full
reimbursement against the arty for whose honor
he ays. )Art. 12!CD12!>, 1@@*. He acquires the
right of reimbursement only u to the e#tent that
the arty for whose honor he aid is bene"ted
thereby. +imilarly, failure to notify the erson for
whose honor he ays within reasonable time will
result in the ayment being considered in the
same manner.
Se,. 1JA. 8reference of parties o,ering to
pay for honor. ; *1ere -2o or more 8ersons
o@er -o 8a! a b.ll 0or -1e 1onor o0 5.@eren-
8ar-.es" -1e 8erson 21ose 8a!men- 2.ll
5.s,1ar/e mos- 8ar-.es -o -1e b.ll .s -o be
/.<en -1e 8re0eren,e.
1ote: &he rule is diBerent in accetance for
honor )+ec. 1C1, last clause*
'OO=+&AA&':1:
A draws a bill ayable to ., with 5 as
drawee. . negotiates it to @, @ to 8, 8 to 9, 9 to 7,
holder. 5 refuses to honor it and 7 duly rotests
nonDayment. 'f J oBers to ay for the honor of @,
while K oBers to ay for the honor of ., the
latter-s )K* will be referred as K-s ayment will
discharge more )@, 8, 9*. J-s oBer will only work
to discharge 8 I 9.

Se,. 1JE. 6,ect on subsequent parties
where bill is paid for honor. ; *1ere a b.ll
1as been 8a.5 0or 1onor" all 8ar-.es
sbse3en- -o -1e 8ar-! 0or 21ose 1onor .-
.s 8a.5 are 5.s,1ar/e5 b- -1e 8a!er 0or
1onor .s sbro/a-e5 0or" an5 s,,ee5s -o"
bo-1 -1e r./1-s an5 5-.es o0 -1e 1ol5er as
re/ar5s -1e 8ar-! 0or 21ose 1onor 1e 8a!s
an5 all 8ar-.es l.able -o -1e la--er.
What are the e,ects of payment for honor?
1. All arties subsequent to the arty whose
honor it is aid are discharged; and
2. &he ayer for honor is subrogated for, and
succeeds to, both the rights and duties of
the holder as regards the arty whose
honor he ays and all arties liable to the
latter.
'OO=+&AA&':1: 'n the e#amle abo/e, suose K
did not oBer and, as a result, J made ayment.
(hat are the eBectsM
a. 8 and 9 are discharged because
they are arties subsequent to the
arty for whose honor it is aid
) @ *.
b. J acquires the rights of 7, holder,
as against @, .,A and 5 because @
is the arty for whose honor he
ays and the rest are considered as
arties liable to @.

Se,. 1JI. Where holder refuses to recei+e
payment supra protest. - *1ere -1e 1ol5er
o0 a b.ll re0ses -o re,e.<e 8a!men- supra
8ro-es-" 1e loses 1.s r./1- o0 re,orse
a/a.ns- an! 8ar-! 21o 2ol5 1a<e been
5.s,1ar/e5 b! s,1 8a!men-.
NOTE4 'n ayment for honor, the holder cannot
refuse ayment. 'f he does, he cannot reco/er
from the arties who would ha/e been discharged
had he acceted it. &he rule is diBerent from
accetance for honor because in such a case, the
holder-s consent is necessary.
I&&(ST'ATION4 'n the abo/e e#amle, if J oBers
to ay for the honor of @ and 7 refuses, 7 loses
the right of recourse against 8 and 9 as they are
arties who would ha/e been discharged had the
holder acceted ayment. .ut as to @, the arty
in whose honor J oBers to ay, is not discharged
because, as to him, e/en if 7 acceted, @ would
not be discharged. &he arty for whom the
instrument is aid for is ne/er discharged from
liability by the ayment for honor of the ayer.

Se,. 1JJ. >ights of payer for honor. ; T1e
8a!er 0or 1onor" on 8a!.n/ -o -1e 1ol5er -1e
amon- o0 -1e b.ll an5 -1e no-ar.al e:8enses
.n,.5en-al -o .-s 5.s1onor" .s en-.-le5 -o
re,e.<e bo-1 -1e b.ll .-sel0 an5 -1e 8ro-es-.
EI
What are the rights of the rights of the
payer for honor?
1. He acquires the rights of the holder )+ec.
1>%*; and
2. He has also the right to recei/e the bill
and the rotest.
&he urose of )2* is to enable him to enforce
his rights against those who are liable to him
by /irtue of +ec. 1>%.

FP. %I&&S IN SET

Se,. 1JK. /ills in set constitute one bill. ;
*1ere a b.ll .s 5ra2n .n a se-" ea,1 8ar- o0
-1e se- be.n/ nmbere5 an5 ,on-a.n.n/ a
re0eren,e -o -1e o-1er 8ar-s" -1e 21ole o0
-1e 8ar-s ,ons-.--es one b.ll.

Se,. 1J#. >ight of holders where di,erent
parts are negotiated. ; *1ere -2o or more
8ar-s o0 a se- are ne/o-.a-e5 -o 5.@eren-
1ol5ers .n 5e ,orse" -1e 1ol5er 21ose
-.-le 9rs- a,,res .s" as be-2een s,1
1ol5ers" -1e -re o2ner o0 -1e b.ll. %-
no-1.n/ .n -1.s se,-.on a@e,-s -1e r./1- o0 a
8erson 21o" .n 5e ,orse" a,,e8-s or 8a!s
-1e 8ar-s 9rs- 8resen-e5 -o 1.m.

Se,. 1K0. 5iability of holder who indorses
two or more parts of a set to di,erent
persons. ; *1ere -1e 1ol5er o0 a se-
.n5orses -2o or more 8ar-s -o 5.@eren-
8ersons 1e .s l.able on e<er! s,1 8ar-" an5
e<er! .n5orser sbse3en- -o 1.m .s l.able
on -1e 8ar- 1e 1as 1.msel0 .n5orse5" as .0
s,1 8ar-s 2ere se8ara-e b.lls.

Se,. 1K1. *cceptance of bill drawn in sets. ;
T1e a,,e8-an,e ma! be 2r.--en on an! 8ar-
an5 .- ms- be 2r.--en on one 8ar- onl!. I0
-1e 5ra2ee a,,e8-s more -1an one 8ar- an5
s,1 a,,e8-e5 8ar-s ne/o-.a-e5 -o 5.@eren-
1ol5ers .n 5e ,orse" 1e .s l.able on e<er!
s,1 8ar- as .0 .- 2ere a se8ara-e b.ll.

Se,. 1K2. 8ayment by acceptor of bills
drawn in sets. ; *1en -1e a,,e8-or o0 a b.ll
5ra2n .n a se- 8a!s .- 2.-1o- re3.r.n/ -1e
8ar- bear.n/ 1.s a,,e8-an,e -o be 5el.<ere5
8 -o 1.m" an5 -1e 8ar- a- ma-r.-! .s
o-s-an5.n/ .n -1e 1an5s o0 a 1ol5er .n 5e
,orse" 1e .s l.able -o -1e 1ol5er -1ereon.

Se,. 1K3. 6,ect of discharging one of a set.
; E:,e8- as 1ere.n o-1er2.se 8ro<.5e5"
21ere an! one 8ar- o0 a b.ll 5ra2n .n a se-
.s 5.s,1ar/e5 b! 8a!men- or o-1er2.se" -1e
21ole b.ll .s 5.s,1ar/e5.

FPI. P'O)ISSO'G NOTES AN+ C$ECOS

Se,. 1KA. 8romissory note. de#ned. ; A
ne/o-.able 8rom.ssor! no-e 2.-1.n -1e
mean.n/ o0 -1.s A,- .s an n,on5.-.onal
8rom.se .n 2r.-.n/ ma5e b! one 8erson -o
ano-1er" s./ne5 b! -1e ma6er" en/a/.n/ -o
8a! on 5eman5" or a- a 9:e5 or
5e-erm.nable 0-re -.me" a sm ,er-a.n .n
mone! -o or5er or -o bearer. *1ere a no-e
.s 5ra2n -o -1e ma6er=s o2n or5er" .- .s no-
,om8le-e n-.l .n5orse5 b! 1.m.

Se,. 1KE. 3heck. de#ned. ; A ,1e,6 .s a b.ll
o0 e:,1an/e 5ra2n on a ban6 8a!able on
5eman5. E:,e8- as 1ere.n o-1er2.se
8ro<.5e5" -1e 8ro<.s.ons o0 -1.s A,-
a88l.,able -o a b.ll o0 e:,1an/e 8a!able on
5eman5 a88l! -o a ,1e,6.

Se,. 1KI. Within what time a check must be
presented. - A ,1e,6 ms- be 8resen-e5 0or
8a!men- 2.-1.n a reasonable -.me a0-er .-s
.sse or -1e 5ra2er 2.ll be 5.s,1ar/e5 0rom
l.ab.l.-! -1ereon -o -1e e:-en- o0 -1e loss
,ase5 b! -1e 5ela!.
When are checks supposed to be presented for
payment?
@hecks are to be resented within a
reasonable time after its issue or the drawer will
be discharged from liability to the e#tent of the
loss caused by the delay of resentment.
Although a check is a .:9, it must be resented
within a reasonable time from issues and not from
last negotiation so that the transfer of a check to
successi/e holders does not e#tend the time for
resentment. A check is intended for immediate
use and not to circulate as romissory note. .ut
the discharge of the drawer is redicated on the
fact of loss so that, if there were no lose, then the
drawer is not discharged )though the check is
stale* and the original obligation subsists.
What are the requisites in order to discharge the
drawer?
1. &he check is not resented within a
reasonable time after its issue;
2. &he drawer suBers loss; and
!. &he loss suBered by the drawer is
attributable to the delay.
What is reasonable time?
(hat constitutes reasonable time is deendent
uon the circumstances of each case. .ut the test
EJ
is whether or not the ayee emloyed such
diligence as a rudent man would e#ercise in his
own aBairs. As stated earlier, our banking
ractice sets the eriod within which resentment
of a check must be madeD C months. :therwise, it
is considered as stale.
What is meant by to the extent of the loss
caused by the delay?
&he discharge of the drawer is conditioned uon
the suBering of a loss attributable to the delay. 'f
no loss or in<ury is shown, the drawer is not
discharged. &he only loss which would be
sustained by the drawer in case resentment was
not made within a reasonable time would be that
caused by the insol/ency of the bank subsequent
to the deli/ery and rior to the resentment of
the check. 't does not include the withdrawal by
the drawer of the funds or deosits as the
bene"ts from the money he withdrew.
H:( @:MP=&98: P8'@D the insurance
bene"ts gi/en for deosits is set at Ph$6,666.66:
7ormula:
1. 4et ratio between G P8'@: amount of
deosit
2. M=O&'POJ AA&': ('&H AM:=1& :7 @H9@P
!. &hus, OossX P8'@RRRRRRRRRR # amount of
check
Amount of 8eosit
$. OossX e#tent of drawer-s discharge
+uose 7, holder of a check for Ph16,666.66
drawn by A. A has a deosit with the bank of
Ph,6,666.66. 7 fails to resent the check within
reasonable time from issue. 8uring such time, the
bank collased. @an A go against the bankM
1o. the fact that A issued a check does not mean
that the issuance immediately resulted in an
assignment of funds in fa/or of the ayee. &here
is as yet no ri/ity of contract between 7 and the
bank so that 7 cannot go against the bank.
@an 7 go against A, drawerM Jes, but only
to the e#tent not considered as lost. P8'@ insures
the deositor of Ph$6,666.66. &he amount of
loss is thus comuted:
O:++X P8'@ # amt. of check X $6,666.66 #
16,666.66
8eosit ,6,666.66
X [ # P16,666.66X P%,666.66
&he loss being to the e#tent of P%,666.66. 7 can
only collect P%,666.66 from A.
7inally, an unreasonable delay in the
resentment of a check will discharge the
indorsers whether or not he is re<udiced by the
delay as the law resumes that he is re<udiced.

Se,. 1KJ. 3erti#cation of check) e,ect of. ;
*1ere a ,1e,6 .s ,er-.9e5 b! -1e ban6 on
21.,1 .- .s 5ra2n" -1e ,er-.9,a-.on .s
e3.<alen- -o an a,,e8-an,e.
What is certi!cation of a check?
@erti"cation is an agreement whereby the bank
against whom a check is drawn, undertakes to
ay it at any future time when resented for
ayment. 't is equi/alent to accetance in that
the drawee bank is bound on the instrument uon
certi"cation. 't imlies that the bank recogni;es
that the check is good; that the check is drawn
uon su0cient funds in the hands of the drawee;
that they ha/e been set aart for its satisfaction;
and that they shall be so alied whene/er the
check is resented for ayment. &he urose of
rocuring certi"cation is to imart strength and
credit to the aer by obtaining an
acknowledgment from the certifying bank that
the drawer has funds therein su0cient to co/er
the check and securing the engagement of the
bank that the check will be aid uon
resentation. (hen a check is certi"ed, it ceases
to ossess the character of a check, and
reresents so much money on deosit, ayable to
the holder on demand.
"uppose the bank wrote across the check
certi!ed and it was signed by an authori#ed
o$cial% is that su$cient certi!cation? &s there a
form required?
Jes, it is su0cient as no articular form, is
required, only that it be in writing. &his is the
usual method of certi"cation. Another is the use
of the word 2good3 followed by the bank o0cer-s
signature. .ut, 2ok3 followed by the signature is
not accetable. 'f it-s 2good3 it-s ok. 'f it-s 2ok3 it-s
not good.
What are the efects of certi!cation
1.* 't is equi/alent to accetance and is the
oerati/e act that makes the drawee bank
liable;
2.* 't oerates as an assignment of the funds
of the drawer in the hands of the drawee
bank;
!.* 'f obtained by the holder, it discharges
ersons secondarily liable thereon; and
$.* &he ayee or holder for all intents and
uroses, becomes the deositor of the
drawee bank with rights and duties of one.
EK
"upposing the holder of the check presented the
check for certi!cation but the bank refused. 'an
the instrument be considered by the holder as
dishonored?
1o. &he certi"cation of the check is not art of
the warranties of the drawer. 'n so far as the
drawer is concerned, he only warrants that the
check will be aid if it is resented for ayment. 't
is not art of the warranties of the drawer that
the check, if resented , will be certi"ed or
acceted by the bank. &he refusal to certify will
not mean a dishonor of the check. (hat will
constitute a dishonor will be the nonDayment of
the check because the checks being ayable on
demand need not be resented for accetance.

Se,. 1KK. 6,ect where the holder of check
procures it to be certi#ed. - *1ere -1e
1ol5er o0 a ,1e,6 8ro,res .- -o be a,,e8-e5
or ,er-.9e5" -1e 5ra2er an5 all .n5orsers are
5.s,1ar/e5 0rom l.ab.l.-! -1ereon.
1:&9: (here the holder rocures the
certi"cation, the drawer and endorsers are
discharged. &he reason for the rule is that
certi"cation has the same eBect as if the holder
had drawn the money redeosited it and taken a
certi"cate of deosit for it. &hus, the drawer )and
indorser* is discharged on the check and on the
original debt. 7urther, only indorsers at the time
of certi"cation are discharged, not those
subsequent.
Howe/er, if the certi"cation is not
obtained by the holder but by other, i.e. the
drawer )e/en at the instance of the holder*, or
any other erson, the drawer and the indorsers
are not discharged from liability.

Se,. 1K#. When check operates as an
assignment. ; A ,1e,6 o0 .-sel0 5oes no-
o8era-e as an ass./nmen- o0 an! 8ar- o0 -1e
0n5s -o -1e ,re5.- o0 -1e 5ra2er 2.-1 -1e
ban6" an5 -1e ban6 .s no- l.able -o -1e
1ol5er nless an5 n-.l .- a,,e8-s or
,er-.9es -1e ,1e,6.
What is the rule on checks as regards the funds?
@heck drawn in the ordinary form is not an
assignment of the funds of the drawer in the
bank. 't does not constitute a transfer of any
money to the credit of the holder. 't is simly an
order by the drawer to ay the amount of the
check on resentment, and which may be
countermanded and ayment forbidden by the
drawer at any time before it is actually cashed.
&he banker-s liability to accet and ay is
conditioned uon the su0ciency of the drawer-s
money in the hands of the bank. (hen the holder
rocures the check to be certi"ed, the check
oerates as an assignment of a art of the funds
to the credit of the drawer with the bank. &he
funds to be under the control of the drawer and
transfer to the credit of the holder or ayee.
'an the holder sue the bank of the check is not
accepted or certi!ed?
1o. .efore accetance or certi"cation, the
bank is not liable and the holder has no right to
sue the drawee bank on the check. As a general
rule, an action may not be maintained by the
ayee of the check against the bank on which it is
drawn, unless the check has been acceted or
certi"ed. (ithout accetance or certi"cation
there is no ri/ity of contract between the drawee
bank and the ayee or holder of the check.
When may a stop payment order be made?
As a check of itself does not oerate as a
n assignment of funds of the drawer, the latter
may countermand )withdraw the order to ay*
ayment before its accetance or certi"cation.
&he order to sto ayment must be
communicated to the bank before the check to
which it refers has been aid.
S())A'G OF 'IG$TS AN+ &IA%I&ITIES OF
T$E PA'TIES

2. (here the drawee bank refuses to certify, or
accet, or ay a check:
&he holder has no action against it as a
check is of itself is not an assignment if
the funds of the drawer and the drawee
bank is not liable on the check until it has
acceted or certi"ed it.
1either has the holder a right of action
against the drawer where the drawee bank
refuses to accet or certify the check but
he has a right of action against the drawer
where the drawee bank refuses to ay.
(hile the holder has no right of action
against the drawee bank which refuses to
ay, accet, or certify the check, the
drawer has a right of action against the
drawee bank so refusing.
FPII. GENE'A& P'OPISIONS

Se,. 1#0. 1hort title. ; T1.s A,- s1all be
6no2n as -1e Ne/o-.able Ins-rmen-s &a2.

Se,. 1#1. (e#nition and meaning of terms. ;
E#
In -1.s A,-" nless -1e ,on-ra,- o-1er2.se
re3.res4
4*cceptance4 means an a,,e8-an,e
,om8le-e5 b! 5el.<er! or no-.9,a-.on7

4*ction4 .n,l5es ,on-er,la.m an5
se-;o@7

4/ank4 .n,l5es an! 8erson or
asso,.a-.on o0 8ersons ,arr!.n/ on
-1e bs.ness o0 ban6.n/" 21e-1er
.n,or8ora-e5 or no-7

4/earer4 means -1e 8erson .n
8ossess.on o0 a b.ll or no-e 21.,1 .s
8a!able -o bearer7

4/ill4 means b.ll o0 e:,1an/e" an5
Rno-eR means ne/o-.able 8rom.ssor!
no-e7

4(eli+ery4 means -rans0er o0
8ossess.on" a,-al or ,ons-r,-.<e"
0rom one 8erson -o ano-1er7

4<older4 means -1e 8a!ee or .n5orsee
o0 a b.ll or no-e 21o .s .n 8ossess.on
o0 .-" or -1e bearer -1ereo07

40ndorsement4 means an .n5orsemen-
,om8le-e5 b! 5el.<er!7

40nstrument4 means ne/o-.able
.ns-rmen-7

40ssue4 means -1e 9rs- 5el.<er! o0 -1e
.ns-rmen-" ,om8le-e .n 0orm" -o a
8erson 21o -a6es .- as a 1ol5er7

48erson4 .n,l5es a bo5! o0 8ersons"
21e-1er .n,or8ora-e5 or no-7

49alue4 means <alable
,ons.5era-.on7

4Written4 .n,l5es 8r.n-e5" an5
4writing4 .n,l5es 8r.n-.
Se,. 1#2. 8ersons primarily liable on
instrument. ; T1e 8erson 4primarily4 l.able
on an .ns-rmen- .s -1e 8erson 21o" b! -1e
-erms o0 -1e .ns-rmen-" .s absol-el!
re3.re5 -o 8a! -1e same. All o-1er 8ar-.es
are 4secondarily4 l.able.

Se,. 1#3. >easonable time. what
constitutes. ; In 5e-erm.n.n/ 21a- .s a
4reasonable time4 re/ar5 .s -o be 1a5 -o -1e
na-re o0 -1e .ns-rmen-" -1e sa/e o0 -ra5e
or bs.ness 2.-1 res8e,- -o s,1
.ns-rmen-s" an5 -1e 0a,-s o0 -1e 8ar-.,lar
,ase.

Se,. 1#A. %ime. how computed) when last
day falls on holiday. ; *1ere -1e 5a!" or -1e
las- 5a! 0or 5o.n/ an! a,- 1ere.n re3.re5 or
8erm.--e5 -o be 5one 0alls on a Sn5a! or
on a 1ol.5a!" -1e a,- ma! be 5one on -1e
ne:- s,,ee5.n/ se,lar or bs.ness 5a!.

Se,. 1#E. *pplication of *ct. ; T1e
8ro<.s.ons o0 -1.s A,- 5o no- a88l! -o
ne/o-.able .ns-rmen-s ma5e an5 5el.<ere5
8r.or -o -1e -a6.n/ e@e,- 1ereo0.

Se,. 1#I. 3ases not pro+ided for in *ct. -
An! ,ase no- 8ro<.5e5 0or .n -1.s A,- s1all
be /o<erne5 b! -1e 8ro<.s.ons o0 e:.s-.n/
le/.sla-.on or .n 5e0al- -1ereo0" b! -1e rles
o0 -1e la2 mer,1an-.

Se,. 1#J. >epeals. ; All a,-s an5 la2s an5
8ar-s -1ereo0 .n,ons.s-en- 2.-1 -1.s A,- are
1ereb! re8eale5.

Se,. 1#K. %ime when *ct takes e,ect. ; T1.s
A,- s1all -a6e e@e,- n.ne-! 5a!s a0-er .-s
8bl.,a-.on .n -1e OL,.al Gaze--e o0 -1e
P1.l.88.ne Islan5s s1all 1a<e been
,om8le-e5.

6nacted4 Febrar! 3" 1#11

I0

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