NEGOTIABLE INSTRUMENTS LAW ACT NO.

2031
Negotiable (N) vs. Non- Negotiable (NN)

REPORTER:

KHERVY B. REYES 2012400251 2-S

NEGOTIABLE INSTRUMENTS LAW (ACT NO. 2031)

Negotiable vs. Non-Negotiable

Negotiation vs. Assignment

Bill of Exchange vs. Promissory Notes

Prof. Khervy B. Reyes

3/15/2014

Negotiable (N) vs. Non- Negotiable (NN)

NEGOTIABLE (N) 1. Contains ALL the requisites of Section 1 of the Negotiable Instruments Law NON- NEGOTIABLE (NN) Does not contain ANY, SOME, OR ALL of the requisites in Section 1 of the law.

2. Transferred by negotiation 3. Prior parties warrant payment 4. A holder in due course (HDC) can have rights better than his transferor.

Transferred by assignment Prior parties warrant only the legality of the title but not payment Its transferee acquires no better right than his transferor.

Sec. 1 Form of negotiable instruments.

a. It must be in writing and signed by the maker or drawer; b. Must contain an unconditional promise or order to pay a sum certain in money;

c. Must be payable on demand or at a fixed or determinable future time;

d. Must be payable to order or bearer; and e. Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty.

Negotiation (N) vs. Assignment (A)

MODES OF TRANSFER OF NEGOTIABLE INSTRUMENT (Sec. 30)

1. By assignment
2. By operation of law 3. By negotiation

Negotiation (N) vs. Assignment (A)

MODES OF TRANSFER

1. By assignment

A mode of transferring a negotiable instrument other than by indorsement if the instrument is payable to order, or by delivery where payable to bearer, whereby the assignee is placed in the position of the assignor, and acquires no greater right than that of the assignor.

2. By operation of law 3. By negotiation

Negotiation (N) vs. Assignment (A)

MODES OF TRANSFER 1. By assignment

2. By operation of law

A transfer of the instrument without assignment or negotiation, but by operation of law, namely: a. By the death of the holder b. By the bankruptcy of the holder c. Upon the death of the joint payee or indorsee

3. By negotiation

Negotiation (N) vs. Assignment (A)

MODES OF TRANSFER 1. By assignment 2. By operation of law 3. By negotiation The transfer of a negotiable instrument from one person to another in such a manner as to constitute the transferee the holder of the instrument.

Negotiation may be made as follows:

1. If the instrument is payable to order, negotiation may be made by indorsement completed by delivery. 2. If the instrument is payable to bearer, negotiation may be made by: a. Mere delivery, (Section 30) or b. Indorsement completed by delivery

Negotiation (N) vs. Assignment (A)

NEGOTIATION (N) 1. Applies only to negotiable instruments. ASSIGNMENT (A) Applies to contracts in general including negotiable instruments.

2. In negotiation, transferee becomes a holder.

3. A person who takes an instrument by negotiation and becomes a holder in due course, is subject only to real defenses.

In assignment, transferee becomes a mere assignee.

A person who takes an instrument by assignment is subject to both real and personal defenses obtaining among the original parties.

Negotiation (N) vs. Assignment (A)

NEGOTIATION (N) 4. In negotiation, a general indorser warrants the solvency of prior parties. ASSIGNMENT (A) In assignment, an assignor does not warrant the solvency of prior parties, unless there is a stipulation to the contrary or he knows of such insolvency. In assignment, the assignor is liable even without notice of dishonor.

5. In negotiation, presentment for payment and notice of dishonor is required to make an indorser liable.

Negotiation (N) vs. Assignment (A)

NEGOTIATION (N) ASSIGNMENT (A)

6. Negotiation is governed by the Negotiable Instruments Law (Act No. 2031)

Assignment is governed by the Civil Code (Art. 16241635) on assignment of credits.

Bill of Exchange (BoE) vs. Promissory Note (PN)

Bill of Exchange (BoE) Promissory Note (PN)
1. Unconditional order to pay a Unconditional promise made sum certain in money by the maker
2. Parties are drawer, drawee and payee 4. If payable to the drawers order, complete even without indorsement 5. Must be presented for acceptance Parties are maker and payee only If payable to the makers own order, not complete until indorsed by maker No need of acceptance

3. Drawer is secondarily liable Maker is primarily liable

Bill of Exchange (BoE) vs. Promissory Note (PN)

Bill of Exchange (BoE)
6. If payable on demand, it must be presented for payment within a reasonable time from its last negotiation.

Promissory Note (PN)

If payable on demand, it must be presented for payment within a reasonable time from its issue.