NEGOTIABLE INSTRUMENT Written contract for the payment of money, by its form intended as substitute for money and

intended to pass from hand to hand to give the holder in due course the right to hold the same and collect the sum due PROMISSORY NOTE unconditional promise in writing made by one person to another signed by the maker engaging to pay on demand, or at a fixed or determinable future time a sum certain in money to order or to bearer where a note is drawn to the makers own order, it is not complete until indorsed by him Parties: 1. Makerone who makes a promise and signs the instrument 2. Payeeparty to whom the promise is made or the instrument is payable BILL OF EXCHANGE unconditional order in writing addressed by one person to another signed by the person giving it requiring the person to whom its addressed to pay on demand or at a fixed or determinable future time a sum certain in money to order or to bearer Parties: 1. Drawerone who gives the order to pay money to a 3rd party 2. Draweeperson to whom the bill is addressed and who is ordered to pay 3. Payeeparty in whose favor the bill is drawn or is payable TYPES OF BILL OF EXCHANGE: 1. Draft a common term for all bills of exchange and they are used synonymously. N.B. In bank drafts, DRAWER and DRAWEE are liable to purchaser of draft for not complying with his instructions. 2. Trade Acceptance a bill of exchange payable to order and at a certain maturity, drawn by a seller against the purchaser of goods as drawee, for a fixed sum of money, showing on its face the acceptance of the purchaser of the goods and that it has arisen out of a purchase by goods by the acceptor. 3. Bankers Acceptance a draft or a bill of exchange of which the acceptor is a bank or banker engaged generally in the business of granting bankers acceptance credit. It is similar to a trade acceptance, the fundamental difference being that the bankers acceptance is drawn against a bank instead of the buyer. 4. Trust Receipt the written or printed document signed by the entrustee in favor of the entruster containing terms and conditions substantially complying with the provisions of PD 115 (Trust Receipt Law, which took effect on January 21, 1973). No further formality of execution or authentication shall be necessary to the validity of the trust receipt. Note: It is the ENTRUSTEE NOT the ENTRUSTER is the real owner of the trust receipt. The liability of the entrustee to the entruster is EX CONTRACTU not ex delicto. 5. Treasury Warrants a treasury warrant bearing on its face the words payable from the appropriation for food administration is actually an order for payment out of a particular fund and is NOT UNCONDITIONAL, and does not fulfill the one of the essential requirements of a negotiable instrument. (Abubakar v. Auditor General)

6. Money Order a species of draft drawn by the post-office upon another for an amount of money deposited at the first post office by the person purchasing the money order and payable at the second office to a payee named in the order. Note: Money order is NOT negotiable. 7. Clean and Documentary Bills of Exchange Clean bill of exchange is one to which are not attached to documents of title to be delivered to the person against whom the bill is drawn when he either accepts or pays the bill. Documentary Bill of Exchange is one to which are attached documents of title to be delivered and surrendered to the drawee when he accepts or pays the bill. 8. D/A and D/P Bills of Exchange Documents Against Payment Bill D/P Bill is a sight or time bill to which are attached documents to be delivered and surrendered to the drawee when he has paid the corresponding bill. Documents Against Acceptance Bill D/A Bill is a time bill to which are attached documents to be delivered and surrendered to the drawee when he accepts the bill. 9. Sight bills are bills which are payable upon presentation or at sight or on demand. 10. Time or usance bills are bills which are payable at a fixed future time or at a determinable future time. Inland Bill of Exchange is a bill which is or on its face purports to be BOTH drawn and payable within the Philippine Islands. Foreign Bill of Exchange- is a bill which is, or on its face purports to be, drawn or payable outside the Philippine Islands. a. to be drawn in the Philippines but payable outside thereof; or b. to be payable in the Philippines but drawn outside thereof. Importance of the distinction: The distinction is important in: 1. That foreign bills are required to be protested. Failure to protest foreign bills will discharge persons secondarily liable thereon. 2. The distinction is also important for the determination of the law applicable. When bill may be treated as promissory note. 1. Where the drawer and the drawee are the person such as, in a draft drawn by an agent on his principal by authority of the principal. 2. Where the drawee is a fictitious person. 3. Where the drawee has no capacity to contract. Referee in case of need is the person whose name was inserted by the drawer of the bill and any indorser to whom the holder may resort in case of need that is in case the bill is dishonored by non-acceptance or by non-payment. Note: It is the option of the holder to resort to the referee in case of need or not as he may see fit.

BEARER Person in possession of a bill/note payable to bearer HOLDER Payee or indorsee of a bill or note who is in possession of it, or the bearer thereof. THE LIFE OF A NEGOTIABLE INSTRUMENT: (INPAD-PD-N-PD) 1. issue 2. negotiation 3. presentment for acceptance in certain bills 4. acceptance 5. dishonor by on acceptance 6. presentment for payment 7. dishonor by nonpayment 8. notice of dishonor 9. protest in certain cases 10. discharge