Negotiable Instruments Law

Intended to serve as substitute to money

It must have certain features - Compare with non-NI Ex: Deed of
sale
1. Exemption from defenses from underlying contract
2. Accumulation of secondary liabilities
Endorsement - Guarantees instruments are genuine
Ensure fairness in commercial transaction
2 parts of NIL
o requisites of negotiability if absence of any requisites, it
is still a valid contract but not under NIL
promise to pay
order to pay
pass to man to man how do you transfer it? By
signing and delivery
if to payable to bearer delivery is sufficient
o liabilities
what happens if there is forgery
4 stages of the transaction
o execution of the promissory note
o execution of an order to pay
you always go back to requisites of a valid contract
o ex: consent how? By accepting
4 important stages: making drawing, negotiating and accepting
protects the holder in due course
o if you have actual knowledge that it was issued for an
illegal activity or if the check was stolen the one who has
knowledge cant raise the defenses (estoppel)
comparative . compare the specimen
if the negligence of the drawer outweighs the negligence of the
bank, bends to the drawer
holder in due course section 52
o someone who took the instrument in good faith. No
knowledge of defects or for value before the maturity of
the instrument and without notice of defenses.
o If with a period, there must first be a delay
Section 1 and 2 of NIL
o Symbol is irrelevant if the one signing intended the said
signature.
o Acknowledgment of debt is evidentiary of an existing
obligationnot an order to pay
o Promise to pay creates a NEW obligation.

o Authority to pay is not equivalent to an order to pay

o Order to pay must be unconditional, payable in money
because NI was intended to substitute money.
o It must be certain people must know how much he/she
would get out of it.
o Time so that the person would know when it is
demandable. It must be complete so as to enable the other
party to know the exact time.
o Bearer or holder or possessor
o If bill of exchange, drawer must be indicated with certainty
so that the person would know from where he should get
he payment -Section 2 to 9.
o Discretion of the credit is not absolute if it is
unconscionable (30% or more - interest)
o Indicate the amount of which installment and when it
should be paid. Acceleration clause when it is due.
Exchange -contemplates at least 2 currencies
Only LOOK at the four corners of the instrument, DO NOT LOOK
AT EXTRINSICE EVIDENCE
Abubakar v. governor general, metropolitan bank case trust vs.
CA(treasury warrants) (section 66 cannot be invoked in this case)
o Section 66 can be invoked when it does not prohibit from
using other funds when the funds are no longer sufficient.
Accelerating payment better view
Section 6 refer to 17 and 24 and 73
Section 8