Incidents in the "life" of negotiable instrument

1. issue - 1st delivery complete in form to a holder

 delivery - transfer of possession w/ intent to transfer title
 w/o delivery = incomplete and revocable until delivery
2. negotiation - mode of transferring
 bearer - delivery (here delivery = negotiation)
 to order - indorsement + delivery
 indorsement (transfer + implied warranty) - legal transaction, effected by the writing
of one's own on the back or upon paper attached (allonged) w/ or w/o addt'l words
 special indorsement - specifies a person to whom it is payable
 blank indorsement - does NOT specificy to whom payable
3. presentment for acceptance (in certain kinds of bill of exchange) - exhibit the bill to the drawee and
demanding that he accept (signify his assent to the order or command of the drawer)
4.
a. acceptance -signification by the drawee of his assent to the order of the drawer
 usually by writing "accepted" followed by signature
 If check stamped with "certified"
b. dishonor by non-acceptance -
 when presented and acceptance is refused by the drawee or CANNOT be obtained or
 where the presentment for acceptance is excused and the bill is NOT accepted
5.
a. presentment for payment (req. for all kinds of negotiable instruments) - consists
of exhibiting the instrument to the person primarily liable thereon and demanding
payment from him on the date of maturity
b. dishonor by non-payment
 where the instrument is presented for payment and payment is reused or CANNOT be
obtained or
 where presentment for payment is excused and the instrument is overdue and unpaid
6. notice of dishonor
 when dishonored by non-acceptance or by non-payment, a notice of dishonor must be
given to the drawer and each indorser and any drawer or indorser to whom such notice
is NOT given is discharged
 prupose: notify that NOT paid
7. discharge - by payment in due course by or on behalf of the principal debtor

Parties liable:
 Primarily liable - absolutely required to pay
 Bills of exchange: acceptor
 Secondarily liable - others
 Bills of exchange: drawer, general and qualified indorsers (Secs. 65 & 66), person
negotiating by mere delivery (Sec. 65)
Negotiable instruments are distinguish from cash
 CANNOT be compelled to accept it in transaction
 Purpose: supplement currency of gov't
 check - immediate payment
 ordinary bill of exchange and promissory note - circulation of credits
 Delivery is NOT payment, payment only when encashed
 Principal features

1. negotiability - passes or may pass from hand to hand similar to money so as to give
the holder in due course the right to hold the instrument and collect the sum payable
for himself free from personal defense
 2. accumulation of secondary contracts as they are transferred from 1 person to another
Negotiability v. Assignability
 Assignability
 more comprehensive since contracts in general
 subject to defenses among orig. parties
 necessary to allege and prove consideration
 assignor in GF does NOT warrant solvency of the debtor UNLESS
 expressly stated
 insolvency was prior to the assign. and of common knowledge
 Negotiability
 special class of contracts: negotiable instruments
 free from personal defenses avail. among parties
 consideration is presumed
 indorser is not liable on his indorsement UNLESS presented for payment and prompt
notice of dishonor (in case of dishonor)
 general indorser is secondarily liable for any cause for w/c the party primarily liable on
a negotiable instrument does NOT or CANNOT pay
 qualified indorser and the person negotiatin by mere delivery have a limited secondary
liability
In non-negotiable:
 indorsement = assignment
 indorser = assignor
 indorsee = assignee