ATTORNEYSOATH

I,dosolemnlyswearthatIwillmaintainallegiancetotheRepublicofthePhilippines,IwillsupporttheConstitutionandobeythe
lawsaswellasthelegalordersofthedulyconstitutedauthoritiestherein;Iwilldonofalsehood,norconsenttothedoingofanyin
court;Iwillnotwittinglyorwillinglypromoteorsueanygroundless,false,orunlawfulsuit,orgiveaidnorconsenttothesame;Iwill
delaynomanformoneyormalice,andwillconductmyselfasalawyeraccordingthebestofmyknowledgeanddiscretion,withall
good fidelity as well to the courts as to my clients; and I impose upon myself these voluntary obligations without any mental
reservationorpurposeofevasion.SohelpmeGod.
WEEK1
Chapter1:RequisitesofNegotiability
Sec.1 FormofnegotiableinstrumentsAninstrumenttobenegotiablemust
(5pts.) conformtothefollowingrequirements:
a) Itmustbeinwritingandsignedbythemakerordrawer;
b) Must contain an unconditional promise or order to pay a sum
certaininmoney;
c) Must be payable on demand, or at a fixed or determinable
futuretime;
d) Mustbepayabletoorderortobearer;and
e) Where the instrument is addressed to a drawee, he must be
named or otherwise indicated therein with reasonable
certainty.
184
Promissory note, defined A negotiable promissory note within the
(5)
meaningofthisActisanunconditionalpromiseinwritingmadebyone
persontoanother,signedbythemaker,engagingtopayondemand,or
atafixeddeterminablefuturetime,asumcertaininmoneytoorderor
to bearer. Where the note is drawn to the makers order, it is not
completeuntilindorsedbyhim.
(2)
OriginalPartiesinPN:
Maker
Payee
126
Billofexchange,definedAbillofexchangeisanunconditionalorder
(5)
in writing addressed by one person to another, signed by the person
givingit[drawer],requiringthepersontowhomitisaddressed[drawee]
to pay on demand or at a fixed or determinable future time a sum
certaininmoneytoorderortobearer.
(3)
OriginalPartiesinBE:
Drawer
Drawee
Payee
WrittenFormandSignature
18
Liability of person signing in trade or assumed name No person is
(1)
liable on the instrument whose signature does not appear thereon,
exceptashereinotherwiseexpresslyprovided.Butonewhosignsina
trade or assumed name will be liable to the same extent as if he has
signedinhisownname.
19
Signaturebyagent;authority;howshownThesignatureofanyparty
(1)
may be made by a duly authorized agent. No particular form of
appointment is necessary for this purpose; and the authority of the
agentmaybeestablishedasinothercasesofagency.
UnconditionalOrderorPromisetoPay:
3
When promise is unconditional An unqualified order or promise to
WhenUnconditional
(3)
payisunconditionalwithinthemeaningofthisActthoughcoupledwith:
a) Anindicationofaparticularfundoutofwhichreimbursement
is to be made or a particular account to be debited with the
amount;or
b) A statement of the transaction which gives rise to the
instrument.Butanorderorpromisetopayoutofaparticular
funisnotunconditional.
SumPayableMustbeCertain
2
What constitutes certainty as to sum The sum payable is a sum
(5)
certainwithinthemeaningofthisAct,althoughitistobepaid:
a) Withinterest;or
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CertaintyofTimeofPayment:WhenPayable
onDemand

7
(3)

CertaintyofTimeofPayment:Payableata
DeterminableFutureTime

4
(4)

11
(1)

17
(7)

MustbePayabletoOrderortoBearer:
WheninstrumentisPayabletoOrder

8
(7)

b) Bystatedinstallments;or
c) By stated installments, with a provision that, upon default in
payment of any installment or of interest, the whole shall
becomedue[accelerationclause];or
d) Withexchange,whetheratafixedrateoratthecurrentrate;
or
e) Withcostsofcollectionoranattorneysfee,incasepayment
shallnotbemadeatmaturity.
WhenpayableondemandAninstrumentispayableondemand:
a) Whenitissoexpressedtobepayableondemand,oratsight,
oronpresentation;or
b) Inwhichnotimeforpaymentisexpressed.
Whereaninstrumentisissued,accepted,orindorsedwhenoverdue,it
is,asregardsthepersonsoissuing,accepting,orindorsingit,payableon
demand.
Determinablefuturetime;whatconstitutesAninstrumentispayable
atadeterminablefuturetime,withinthemeaningofthisAct,whichis
expressedtobepayable:
a) Atafixedperiodafterdateorsight;or
b) On or before a fixed or determinable future time specified
therein;or
c) Onoratafixedperiodaftertheoccurrenceofaspecifiedevent
which is certain to happen, though the time of happening be
uncertain.
An instrument payable upon a contingency is not negotiable, and the
happeningoftheeventdoesnotcurethedefect[incurable].
Date, presumption as to Where the instrument or an acceptance or
anyindorsementthereonisdated,suchdateisdeemedprimafacieto
bethetruedateofthemaking,drawing,acceptance,orindorsement,as
thecasemaybe.
ConstructionwhereinstrumentisambiguousWherethelanguageof
the instrument is ambiguous or there are omissions therein, the
followingruledofconstructionapply:
a) Where the sum payable is expressed in words and also in
figures and there is discrepancy between the two, the sum
denotedbythewordsisthesumpayable;butifthewordsare
ambiguousoruncertain,referencemaybehadtothefiguresto
fixtheamount;
b) Where the instrument provides for the payment of interest,
withoutspecifyingthedatefromwhichinterestistorun,the
interest runs from the date of the instrument, and if the
instrumentisundated,fromtheissuethereof;
c) Wheretheinstrumentisnotdated,itwillbeconsideredtobe
datedasofthetimeitwasissued;
d) Where there is conflict between the written and printed
provisionsoftheinstrument,thewrittenprovisionsprevail;
e) Where the instrument is so ambiguous that there is doubt
whetheritisabillornote,theholdermaytreatitaseitherat
hiselection;
f) Where a signature is so placed upon the instrument that it is
not clear in what capacity the person making the same
intendedtosign,heisdeemedanindorser;
g) WhereaninstrumentcontainingthewordIpromisetopayis
signedbytwoormorepersons,theyaredeemedtobejointly
andseverallyliablethereon[solidaryliability].
WhenpayabletoorderTheinstrumentispayabletoorderwhereitis
drawnpayabletotheorderofaspecifiedpersonortohimorhisorder.
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MustbePayabletoOrderortoBearer:
WhenInstrumentisPayabletoBearer

9
(5)

PartiesMustbeDesignatedwithCertainty:
Payee

PartiesMustbeDesignatedwithCertainty:
Drawee

128

130

ProvisionsNotAffectingNegotiability

5
(4)

OmissionsNotAffectingNegotiability

6
(5)

Itmaybedrawnpayabletotheorderof:
a) Apayeewhoisnotthemaker,drawer,ordrawee;or
b) Thedrawerormaker;or
c) Thedrawee;or
d) Twoormorepayeesjointly;or
e) Oneorsomeofseveralpayees;or
f) Theholderofanofficeforthetimebeing.
Wheretheinstrumentispayabletoorder,thepayeemustbenamedor
otherwiseindicatedthereinwithreasonablecertainty.
WhenpayabletobearerTheinstrumentispayabletobearer:
a) Whenitisexpressedtobesopayable;or
b) Whenitispayabletoapersonnamedthereinorbearer;or
c) When it is payable to the order of a fictitious or nonexisting
person, and such fact was known to the person making it so
payable;or
d) Whenthenameofthepayeedoesnotpurporttobethename
ofanyperson;or
e) Whentheonlyorlastindorsementisanindorsementinblank.
WEEK2
WhenpayabletoorderTheinstrumentispayabletoorderwhereitis
drawnpayabletotheorderofaspecifiedpersonortohimorhisorder.
Itmaybedrawnpayabletotheorderof:
a) Apayeewhoisnotthemaker,drawer,ordrawee;or
b) Thedrawerormaker;or
c) Thedrawee;or
d) Twoormorepayeesjointly;or
e) Oneorsomeofseveralpayees;or
f) Theholderofanofficeforthetimebeing.
Wheretheinstrumentispayabletoorder,thepayeemustbenamedor
otherwiseindicatedthereinwithreasonablecertainty.
Bill addressed to more than one drawee A bill may be addressed to
twoormoredraweesjointly,whethertheyarepartnerornot;butNOT
totwoormoredraweesinthealternativeorinsuccession.
When bill may be treated as promissory note Where in a bill the
drawer and drawee are the same person or where the drawee is a
fictitious person not having capacity to contract, the holder may treat
the instrument at his option either as a bill of exchange or as a
promissorynote.
AdditionalprovisionsnotaffectingnegotiabilityAninstrumentwhich
containsanorderorpromisetodoanyactinadditiontothepaymentof
moneyisnotnegotiable.
But the negotiable character of an instrument otherwise negotiable is
notaffectedbyaprovisionwhich:
a) Authorizes the sale of collateral securities in case the
instrumentbenotpaidatmaturity;or
b) Authorizes a confession of judgment if the instrument be not
paidatmaturity;or
c) Waives the benefit of any law intended for the advantage or
protectionoftheobligor;or
d) Givestheholderanelectiontorequiresomethingtobedone
INLIEUofpaymentofmoney.
But nothing in this section shall validate any provision or stipulation
otherwiseillegal.
Omissions; seal; particular money The validity and negotiable
characterofaninstrumentarenotaffectedbythefactthat:
a) Itisnotdated;or
b) Does not specify the value given, or that any value had been
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giventherefor;or
Doesnotspecifytheplacewhereitisdrawnortheplacewhere
itispayable;or
d) Bearsaseal;or
e) Designates a particular kind of current money in which
paymentistobemade.
But nothing in this section shall alter or repeal any statute requiring in
certain cases the nature of the consideration to be stated in the
instrument.
ConstructionwhereinstrumentisambiguousWherethelanguageof
the instrument is ambiguous or there are omissions therein, the
followingruledofconstructionapply:
a) Where the sum payable is expressed in words and also in
figures and there is discrepancy between the two, the sum
denotedbythewordsisthesumpayable;butifthewordsare
ambiguousoruncertain,referencemaybehadtothefiguresto
fixtheamount;
b) Where the instrument provides for the payment of interest,
withoutspecifyingthedatefromwhichinterestistorun,the
interest runs from the date of the instrument, and if the
instrumentisundated,fromtheissuethereof;
c) Wheretheinstrumentisnotdated,itwillbeconsideredtobe
datedasofthetimeitwasissued;
d) Where there is conflict between the written and printed
provisionsoftheinstrument,thewrittenprovisionsprevail;
e) Where the instrument is so ambiguous that there is doubt
whetheritisabillornote,theholdermaytreatitaseitherat
hiselection;
f) Where a signature is so placed upon the instrument that it is
not clear in what capacity the person making the same
intendedtosign,heisdeemedanindorser;
WhereaninstrumentcontainingthewordIpromisetopayissigned
by two or more persons, they are deemed to be jointly and severally
liablethereon[solidaryliability].
Delivery; when effectual; when presumed Every contract on a
negotiableinstrumentisincompleteandrevocableuntildeliveryofthe
instrument for the purpose of giving effect thereto. As between the
immediatepartiesandasregardsaremotepartyotherthanaholderin
duecourse,thedelivery,inordertobeeffectual,mustbemadeeither
by or under the authority of the party, drawing, accepting, or
indorsing, as the case may be; and, in such case, the delivery may be
showntobeconditional,orforaspecialpurposeonly,andnotforthe
purpose of transferring the property in instrument. But where the
instrument is in the hands of a holder in due course, a valid delivery
thereof by all parties prior to him so as to make them liable to him is
conclusively presumed. And where the instrument is no longer in the
possession of a party whose signature appears thereon, a valid and
intentionaldeliverybyhimispresumeduntilthecontraryisproved.
WhatconstitutesnegotiationAninstrumentisnegotiatedwhenitis
transferred from one person to another in such a manner as to
constitutethetransfereetheholderthereof.Ifpayabletobearer,itis
negotiated by delivery; if payable to order, it is negotiated by the
indorsementoftheholderandcompletedbydelivery.
Definition and meaning of terms In this Act, unless the contract
otherwiserequires:
Acceptance means an acceptance completed by delivery or
notification;
c)

RulesofConstruction

17

Chapter2:TransferDeliveryandIssuance

16

Negotiation

30
(3)

191

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HowIndorsementisMade:BySignatureon
InstrumentoronAllonge

31

HowIndorsementisMade:IfName
Misspelled

43

IndorsementMustbeofEntireInstrument

32

KindsofIndorsement

33
(3)
34

KindsofIndorsement:SpecialIndorsement
&BlankIndorsement

Actionincludescounterclaimandsetoff;
Bankincludesanypersonorassociationofpersonscarryingon
thebusinessofbanking,whetherincorporatedornot;
Bearermeansthepersoninpossessionofabillornotewhichis
payabletobearer;
Bill means bill of exchange, and note means negotiable
promissorynote;
Delivery means transfer of possession, actual or constructive,
fromonepersontoanother;
Holdermeansthepayeeorindorseeofabillornotewhoisin
possessionofit,orthebearerthereof;
Indorsementmeansanindorsementcompletedondelivery;
Instrumentmeansnegotiableinstrument;
Issue means the first delivery of the instrument, complete in
form,toapersonwhotakesitasaholder;
Person includes a body of persons, whether incorporated or
not;
Valuemeansvaluableconsideration;
Writtenincludesprinted,andwritingincludesprint.
Indorsement, how made The indorsement must be written on the
instrumentitselforuponapaperattachedthereto.Thesignatureofthe
indorser,withoutadditionalwords,isasufficientindorsement.
Indorsementwherenameismisspelled,andsoforthWherethename
of a payee or indorsee is wrongly designated or misspelled, he may
indorsetheinstrumentasthereindescribedadding,ifhethinksfit,his
propersignature.
IndorsementmustbeofentireinstrumentTheindorsementmustbe
an indorsement of the entire instrument. An indorsement which
purportstotransfertotheindorseeapartonlyoftheamountpayable,
orwhichpurportstotransfertheinstrumenttotwoormoreindorsees
severally, does not operate as a negotiation of instrument. But where
the instrument has been paid in part, it may be indorsed as to the
residue.
Kinds of indorsement An indorsement may either be special or in
blank;anditmayalsobeeitherrestrictiveorqualifiedorconditional.
Special indorsement; indorsement in blank A special indorsement
specifiesthepersontowhom,ortowhoseorder,theinstrumentistobe
payable, and the indorsement of such indorsee is necessary to the
furthernegotiationoftheinstrument.Anindorsementinblankspecifies
no indorsee, and an instrument so indorsed is payable to bearer, and
maybenegotiatedbydelivery.
Indorsement of instrument payable to bearer Where an instrument,
payable to bearer, is indorsed specially, it may nevertheless be further
negotiated by delivery; but the person indorsing specially is liable as
indorsertoonlysuchholdersasmaketitlethroughhisindorsement.
Blankindorsement;howchangedtospecialindorsementTheholder
mayconvertablankindorsementintoaspecialindorsementbywriting
overthesignatureoftheindorserinblankanycontractconsistentwith
thecharacteroftheindorsement.
Qualified indorsement A qualified indorsement constitutes the
indorseramereassignorofthetitletotheinstrument.Itmaybemade
by adding to the indorsers signature the words without recourse or
anywordsofsimilarimport.Suchanindorsementdoesnotimpairthe
negotiablecharacteroftheinstrument.
Conditional indorsement Where an indorsement is conditional, the
party required to pay the instrument may disregard the condition and
makepaymenttotheindorseeorthistransfereewhetherthecondition

40

35

KindsofIndorsement:QualifiedIndorsement

38

KindsofIndorsement:Conditional
Indorsement

39

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KindsofIndorsement:Restrictive
Indorsement

36
(3)

37

NegotiationbyJointorAlternativePayeesor
Indorsees

41

UnindorsedInstruments

49

CancellationofIndorsements

48

IndorsementbyAgent

44

PresumptionsastoIndorsements

45

46

42

ContinuationofNegotiableCharacter

47

Chapter3:HolderinDueCourse

52
(4)

core

has been fulfilled or not. But any person to whom an instrument so

indorsed is negotiated will hold the same, or the proceeds thereof,
subjecttotherightsofthepersonindorsingconditionally.
When indorsement restrictive An indorsement is restrictive which
either:
a) Prohibitsthefurthernegotiationoftheinstrument;or
b) Constitutestheindorseetheagentoftheindorser;or
c) Veststhetitleintheindorseeintrustforortotheuseofsome
otherperson.
But the mere absence of the words implying power to negotiate does
notmakeanindorsementrestrictive.
Effect of restrictive indorsement; rights of indorsee A restrictive
indorsementconfersupontheindorseetheright:
a) Toreceivepaymentoftheinstrument;
b) Tobringanyactionthereonthattheindorsercouldbring;
c) To transfer his right as such indorsee, where the form of the
indorsementauthorizeshimtodoso.
Butallsubsequentindorseesacquireonlythetitleofthefirstindorsee
undertherestrictiveindorsement.
Indorsement where payable to two or more persons Where an
instrumentispayabletotheorderoftwoormorepayeesorindorsees
who are not partners, all must indorse unless the one indorsing has
authoritytoindorsefortheothers.
Transfer without indorsement; effect of Where the holder of an
instrumentpayabletohisordertransfersitforvaluewithoutindorsing
it, the transfer vests in the transferee such title as the transferor had
therein, and the transferee acquires in addition, the right to have the
indorsement of the transferor. But for the purpose of determining
whetherthetransfereeisaholderinduecourse,thenegotiationtakes
effectasofthetimewhentheindorsementisactuallymade.
Striking out indorsement The holder may at any time strike out any
indorsement which is not necessary to his title. The indorser whose
indorsementisstruckout,andallindorserssubsequenthim,arethereby
relievedfromliabilityontheinstrument.
Indorsement in representative capacity Where any person is under
obligation to indorse in a representative capacity, he may indorse in
suchtermsastonegativepersonalliability.
Time of indorsement; presumption Except where an indorsement
bears date after the maturity of the instrument, every negotiation is
deemedprimafacietohavebeeneffectedbeforetheinstrumentwas
overdue.
Place of indorsement; presumption Except when the contrary
appears, every indorsement is presumed prima facie to have been
madeattheplacewheretheinstrumentisdated.
EffectofinstrumentdrawnorindorsedtoapersonascashierWhere
an instrument is drawn or indorsed to a person as cashier or other
fiscal officer of a bank or corporation, it is deemed prima facie to be
payabletothebankorcorporationofwhichheissuchofficer,andmay
benegotiatedbyeithertheindorsementofthebankorcorporationor
theindorsementoftheofficer.
ContinuationofnegotiablecharacterAninstrumentnegotiableinits
origincontinuestobenegotiableuntilithasbeenrestrictivelyindorsed
ordischargedbypaymentorotherwise.
WEEK3
What constitutes a holder in due course A holder in due course is a
holderwhohastakentheinstrumentunderthefollowingconditions:
a) Thatitiscompleteandregularupontheface;
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overdue
good faith value
infirmity defect

RightsofaHolderinDueCourse

57
(3)

defect
defenses
enforce payment

58
(2)

HolderforValue:WhatConstitutesValue

24

25

HolderforValue:WhatConstitutesaHolder
forValue

26
(1)

HolderforValue:WhereHolderhasaLienon
Instrument

27

HolderforValue:BurdenofProof

24

HolderinGoodFaith

55
(7)

Fraud
Duress
Force or Fear
Unlawful means
Illegal consideration
breach of faith
such circumstances as amount to
fraud

56
(3)

EffectofNoticeBeforeFullPayment

54
(1)

NoticeofAccommodationNotNoticeof
Defect

29
(4)

b) That he became the holder of it before it was overdue, and

withoutnoticethatithasbeenpreviouslydishonored,ifsuch
wasthefact;
c) Thathetookitingoodfaithandforvalue;
d) Thatatthetimeitwasnegotiatedtohim,hehadnonoticeof
any infirmity in the instrument or defect in the title of the
personnegotiatingit.
Rights of holder in due course A holder in due course holds the
instrumentfreefromanydefectoftitleofpriorparties,andfreefrom
defensesavailabletopriorpartiesamongthemselves,andmayenforce
payment of the instrument for the full amount thereof against all
partiesliablethereon.
When subject to original defense In the hands of any holder other
than a holder in due course, a negotiable instrument is subject to the
same defenses as if it were nonnegotiable. But a holder who derives
histitlethroughaholderinduecourse,andwhoisnothimselfaparty
toanyfraudorillegalityaffectingtheinstrument,hasalltherightsof
suchformerholderinrespectofallpartiespriortothelatter.
PresumptionofconsiderationEverynegotiableinstrumentisdeemed
primafacietohavebeenissuedforavaluableconsideration;andevery
person whose signature appears thereon to have become a party
theretoforvalue.
Value, what constitutes Value is any consideration sufficient to
support a simple contract. An antecedent or preexisting debt
constitutes value; and is deemed such whether the instrument is
payableondemandoratafuturetime.
WhatconstitutesholderforvalueWherevaluehasatanytimebeen
given for the instrument, the holder is deemed a holder for value in
respecttoallpartieswhobecomesuchpriortothattime.
When lien on instrument constitutes holder for value Where the
holder has a lien on the instrument arising either from contract or by
implicationoflaw,heisdeemedaholderforvaluetotheextentofhis
lien.
PresumptionforconsiderationEverynegotiableinstrumentisdeemed
primafacietohavebeenissuedforavaluableconsideration;andevery
person whose signature appears thereon to have become a party
theretoforvalue.
WEEK4
When title defective The title of a person who negotiates an
instrumentisdefectivewithinthemeaningofthisActwhenheobtained
theinstrument,oranysignaturethereto,byfraud,duress,orforceand
fear,orotherunlawfulmeans,orforanillegalconsideration,orwhen
he negotiates it in breach of faith, or under such circumstances as
amounttoafraud.
WhatconstitutesnoticeofdefectToconstitutesnoticeofaninfirmity
in the instrument or defect in the title of the person negotiating the
same, the person to whom it is negotiated must have had actual
knowledge of the infirmity or defect, or knowledge of such facts that
hisactionintakingtheinstrumentamountedtobadfaith.
Notice before full amount is paid Where the transferee receives
notice of any infirmity in the instrument or defect in the title of the
personnegotiatingthesamebeforehehaspaidthefullamountagreed
tobepaidtherefore,hewillbedeemedaholderinduecourseonlyto
theextentoftheamountthereforepaidbyhim.
Liability of accommodation party An accommodation party is one
who has signed the instrument as maker, drawer, acceptor, or
indorser, without receiving value therefore, and for the purpose of
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HolderinDueCourse

52

CompleteandRegular

124
(2)

HolderAtorAfterMaturity&Without
NoticeofDishonor

53
(1)

HolderinDueCourse

52

EffectofPostDatingorAnteDating

12
(2)

RightsofaPurchaserfromaHolderinDue
Course

58

PresumptioninFavorofDueCourseHolding

59
(2)

TransferofUnindorsedInstrument

49
(3)

lending his name to some other person. Such person is liable on the
instrument to a holder for value, notwithstanding such holder, at the
timeoftakingtheinstrument,knewhimtobeonlyanaccommodation
party.
WEEK5
What constitutes a holder in due course A holder in due course is a
holderwhohastakentheinstrumentunderthefollowingconditions:
a) Thatitiscompleteandregularupontheface;
b) That he became the holder of it before it was overdue, and
withoutnoticethatithasbeenpreviouslydishonored,ifsuch
wasthefact;
c) Thathetookitingoodfaithandforvalue;
d) Thatatthetimeitwasnegotiatedtohim,hehadnonoticeof
any infirmity in the instrument or defect in the title of the
personnegotiatingit.
Alteration of instrument; effect of Where a negotiable instrument is
materiallyalteredwithouttheassentofallpartiesliablethereon,itis
AVOIDED,exceptasagainstapartywhohashimselfmade,authorized,
orassentedtothealterationandsubsequentindorsers.

Butwhenaninstrumenthasbeenmateriallyalteredandisinthehands
ofaholderinduecoursenotapartytothealteration,hemayenforce
paymentthereofaccordingtoitsoriginaltenor.
WhenpersonnotdeemedholderinduecourseWhereaninstrument
payable on demand is negotiated on an unreasonable length of time
afteritsissue,theholderisnotdeemedaholderinduecourse.
WEEK6
What constitutes a holder in due course A holder in due course is a
holderwhohastakentheinstrumentunderthefollowingconditions:
a) Thatitiscompleteandregularupontheface;
b) That he became the holder of it before it was overdue, and
withoutnoticethatithasbeenpreviouslydishonored,ifsuch
wasthefact;
c) Thathetookitingoodfaithandforvalue;
d) Thatatthetimeitwasnegotiatedtohim,hehadnonoticeof
any infirmity in the instrument or defect in the title of the
personnegotiatingit.
AntedateandpostdatedTheinstrumentIsnotinvalidforthereason
onlythatitisantedatedorpostdated,providedthisisnotdoneforan
illegalorfraudulentpurpose.Thepersontowhomaninstrumentisso
datedisdeliveredacquiresthetitletheretoasofdateofdelivery.
When subject to original defense In the hands of any holder other
than a holder in due course, a negotiable instrument is subject to the
samedefensesasifitwerenonnegotiable.Butaholderwhoderiveshis
title through a holder in due course, and who is not himself a party to
anyfraudorillegalityaffectingtheinstrument,hasalltherightsofsuch
formerholderinrespectofallpartiespriortothelatter.
Who is deemed holder in due course Every holder is deemed prima
facietobeaholderinduecourse;butwhenitisshownthatthetitleof
any person who has negotiated the instrument was defective, the
burdenisontheholdertoprovethatheorsomepersonunderwhom
he claims acquired the title as holder in due course. But the last
mentionedruledoesnotapplyinfavorofapartywhobecamebound
ontheinstrumentpriortotheacquisitionofsuchdefectivetitle.
Transfer without indorsement; effect of Where the holder of an
instrumentpayabletohisordertransfersitforvaluewithoutindorsing
it, the transfer vests in the transferee such title as the transferor had
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Chapter4:Defenses&Equities
Defenses&EquitiesinGeneral

57

58

55

Incapacity

22

Forgery:InGeneral

23
(5)

18

Forgery:Acceptance&PaymentUnder
MistakeWhenDraweeAcceptsorPays
ForgedInstrument

62
(2)

MaterialAlteration:InGeneral

124

125
(7)

therein, and the transferee acquires in addition, the right to have the
indorsement of the transferor. But for the purpose of determining
whetherthetransfereeisaholderinduecourse,thenegotiationtakes
effectasofthetimewhentheindorsementisactuallymade.
WEEK7
Rights of holder in due course A holder in due course holds the
instrumentfreefromanydefectoftitleofpriorparties,andfreefrom
defensesavailabletopriorpartiesamongthemselves,andmayenforce
payment of the instrument for the full amount thereof against all
partiesliablethereon.
When subject to original defense In the hands of any holder other
than a holder in due course, a negotiable instrument is subject to the
same defenses as if it were nonnegotiable. But a holder who derives
histitlethroughaholderinduecourse,andwhoisnothimselfaparty
toanyfraudorillegalityaffectingtheinstrument,hasalltherightsof
suchformerholderinrespectofallpartiespriortothelatter.
When title defective The title of a person who negotiates an
instrumentisdefectivewithinthemeaningofthisActwhenheobtained
theinstrument,oranysignaturethereto,byfraud,duress,orforceand
fear,orotherunlawfulmeans,orforanillegalconsideration,orwhen
he negotiates it in breach of faith, or under such circumstances as
amounttoafraud.
Effect of indorsement by infant or corporation The indorsement or
assignment of the instrument by a corporation or by an infant passes
the property therein, notwithstanding that from want of capacity, the
corporationorinfantmayincurnoliabilitythereon.
Forged signature, effect of When a signature is forged or made
withouttheauthorityofthepersonwhosesignatureitpurporttobe,it
iswhollyinoperative,andnorighttoretaintheinstrument,ortogivea
discharge thereof, or to enforce payment thereof against any party
thereto, can be acquired through or under such signature, unless the
partyagainstwhomitissoughttoenforcesuchrightisprecludedfrom
settinguptheforgeryorwantofauthority.
Liability of person signing in trade or assumed name No person is
liable on the instrument whose signature does not appear thereon,
exceptashereinotherwiseexpresslyprovided.Butonewhosignsina
trade or assumed name will be liable to the same extent as if he has
signedinhisownname.
Liability of acceptor The acceptor, by accepting the instrument,
engagesthathewillpayitaccordingtothetenorofhisacceptanceand
admits:
a) Theexistenceofthedrawer,thegenuinenessofhissignature,
andhiscapacityandauthoritytodrawtheinstrument;and
b) Theexistenceofthepayeeandhiscapacitytoindorse.
Alteration of instrument; effect of Where a negotiable instrument is
materiallyalteredwithouttheassentofallpartiesliablethereon,itis
AVOIDED,exceptasagainstapartywhohashimselfmade,authorized,
orassentedtothealterationandsubsequentindorsers.

Butwhenaninstrumenthasbeenmateriallyalteredandisinthehands
ofaholderinduecoursenotapartytothealteration,hemayenforce
paymentthereofaccordingtoitsoriginaltenor.
WhatconstitutesamaterialalterationAnyalterationwhichchanges:
a) Thedate;
b) Thesumpayable,eitherforprincipalorinterest;
c) Thetimeorplaceofpayment;
d) Thenumberortherelationsoftheparties;
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e)
f)

CompleteInstrumentiswhichisUndelivered

16

IncompleteInstrumentiswhichis
Undelivered

15

IncompleteInstrumentiswhichisDelivered

14

Consideration

28
(2)

Chapter5:LiabilityofParties
InGeneral

192
(1)

70
(3)

LiabilityofMaker

60
(2)

StatusofDraweePriortoAcceptanceor

127

Themediumorcurrencyinwhichpaymentistobemade;
Orwhichaddsaplaceofpaymentwherenoplaceofpayment
is specified, or any other change or addition which alters the
effectoftheinstrumentinanyrespect,isamaterialalteration.
Delivery; when effectual; when presumed Every contract on a
negotiableinstrumentisincompleteandrevocableuntildeliveryofthe
instrument for the purpose of giving effect thereto. As between the
immediatepartiesandasregardsaremotepartyotherthanaholderin
duecourse,thedelivery,inordertobeeffectual,mustbemadeeither
by or under the authority of the party, drawing, accepting, or
indorsing, as the case may be; and, in such case, the delivery may be
showntobeconditional,orforaspecialpurposeonly,andnotforthe
purpose of transferring the property in instrument. But where the
instrument is in the hands of a holder in due course, a valid delivery
thereof by all parties prior to him so as to make them liable to him is
conclusively presumed. And where the instrument is no longer in the
possession of a party whose signature appears thereon, a valid and
intentionaldeliverybyhimispresumeduntilthecontraryisproved.
Incomplete instrument not delivered Where an incomplete
instrument has not been delivered, it will not, if completed and
negotiated without authority, be a valid contract in the hands of any
holder, as against any person whose signature was placed thereon
beforedelivery.
Blanks; when may be filled Where the instrument is wanting in any
materialparticular,thepersoninpossessionthereofhasaprimafacie
authority to complete it by filling up the blanks therein. And a
signature on a blank paper delivered by the person making the
signature in order that the paper may be converted into a negotiable
instrument,operatesasaprimafacieauthoritytofillitupassuchfor
any amount. In order, however, that any such instrument when
completed may be enforced against any person who became a party
thereto prior its completion, it must be filled up strictly in accordance
withtheauthoritygivenandwithinareasonabletime.Butifanysuch
instrument,aftercompletion,isnegotiatedtoaholderinduecourse,it
isvalidandeffectualforallpurposesonhishands,andhemayenforce
it as if it had been filled up strictly in accordance with the authority
givenandwithinreasonabletime.
EffectofwantofconsiderationAbsenceorfailureofconsiderationis
a matter of defense against any person NOT a holder in due course;
andpartialfailureofconsiderationisadefenseprotanto,whetherthe
failureisanascertainedandliquidatedamountorotherwise.
WEEK8
Persons primarily liable on instrument The person primarily liable
onaninstrumentisthepersonwho,bythetermsoftheinstrument,is
absolutelyrequiredtopaythesame.Allotherpartiesaresecondarily
liable.
Effect of want of demand on principal debtor Presentment for
paymentisnotnecessaryinordertochargethepersonprimarilyliable
on the instrument; but if the instrument is, by its terms, payable at a
special place, and he is able and willing to pay it there at maturity,
such ability and willingness are equivalent to a tender of payment
upon his part. But except as herein otherwise provided, presentment
forpaymentisnecessaryinordertochargethedrawerandindorsers.
LiabilityofmakerThemakerofanegotiableinstrument,bymakingit,
engages that he will pay according to its tenor, and admits the
existenceofthepayeeandhisthencapacitytoindorse.
Bill not an assgnment of funds in hands of drawee A bill itself does
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Payment;EffectofStopOrder

(2)

189
(2)

LiabilityofAcceptor

62

FormalRequisitesofAcceptance

191

132
(3)

133

138

ConstructiveAcceptance

136

137

150

AcceptanceonaSeparateInstrument

134

135

KindsofAcceptanceGeneralAcceptance

139

not operate as an assignment of the funds in the hands of the drawee

available for the payment thereof, and the drawee is not liable on the
billunlessanduntilheacceptsthesame.
When check operates as an assignment A check itself does not
operate as an assignment of any part of the funds to the credit of the
drawerwiththebank,andthebankisnotliabletotheholderunlessand
untilitacceptsorcertifiesthecheck.
Liability of acceptor The acceptor, by accepting the instrument,
engagesthathewillpayitaccordingtothetenorofhisacceptanceand
admits:
a) Theexistenceofthedrawer,thegenuinenessofhissignature,
andhiscapacityandauthoritytodrawtheinstrument;and
b) Theexistenceofthepayeeandhiscapacitytoindorse.
Definition and meaning of terms In this Act, unless the contract
otherwiserequires:

Acceptance means an acceptance completed by delivery or

notification.
Acceptance,howmade,byandsoforthTheacceptanceofabillisthe
signification by the drawee of his assent to the order of the drawer.
The acceptance must be in writing and signed by the drawee. It must
not express that the drawee will perform his promise by another
meansthanthepaymentofmoney.
Holder entitled to acceptance on face of bill The holder of a bill
presentingthesameforacceptancemayrequirethattheacceptancebe
writtenonthebill,and,ifsuchrequestofrefused,maytreatthebillas
dishonored.
Acceptance of incomplete bill A bill may be accepted before it has
beensignedbythedrawer,orwhileotherwiseincomplete,orwhenitis
overdue,orafterithasbeendishonoredbyapreviousrefusaltoaccept,
orbynonpayment.Butwhenabillpayableaftersightisdishonoredby
nonacceptanceandthedraweesubsequentlyacceptsit,theholder,in
the absence of any different agreement, is entitled to have the bill
acceptedasofthedateofthefirstpresentment.
Time allowed drawee to accept The drawee is allowed twentyfour
hours after presentment in which to decide whether or not he will
accept the bill; the acceptance, if given, dates as of the day of
presentation.
Liability of drawee returning or destroying bill Where a drawee to
whom a bill is delivered for acceptance destroys the same, or refuses
within twentyfour hours after such delivery or within such other
period as the holder may allow, to return the bill accepted or non
acceptedtotheholder,hewillbedeemedtohaveacceptedthesame.
DutyofholderwherebillnotacceptedWhereabillisdulypresented
for acceptance and is not accepted within the prescribed time, the
person presenting it must treat the bill as dishonored by non
acceptance or he loses the right to recourse against the drawer and
indorsers.
Acceptance by separate instrument Where an acceptance is written
onapaperotherthanthebillitself,itdoesnotbindtheacceptorexcept
infavorofapersontowhomitisshownandwho,onthefaiththereof,
receivesthebillforvalue.
Promise to accept; when equivalent to acceptance An unconditional
promiseinwritingtoacceptabillbeforeitisdrawnisdeemedanactual
acceptance in favor of every person who, upon the faith thereof,
receivesthebillforvalue.
Kinds of acceptance An acceptance is either general or qualified. A
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140

QualifiedAcceptance

141

142

CHECKS:Definition,NatureandKinds

185
(4)
63

CertificationandItsEffects

187
(1)
188
(1)
189

LiabilityofSecondaryParties

70

LiabilityofDrawer

61
(4)

general acceptance assents without qualification to the order of the

drawer.Aqualifiedacceptanceinexpresstermsvariestheeffectofthe
billasdrawn.
What constitutes a general acceptance An acceptance to pay at a
particular place is a general acceptance unless it expressly states that
thebillistobepaidthereonlyandnotelsewhere.
QualifiedacceptanceAnacceptanceisqualifiedwhichis:
a) Conditional; that is to say, which makes payment by the
acceptor dependent on the fulfillment of a condition therein
stated;
b) Partial; that is to say, an acceptance to pay part only of the
amountforwhichthebillisdrawn;
c) Local; that is to say, an acceptance to pay only at a particular
place;
d) Qualifiedastotime;
e) Theacceptanceofsome,oneormoreofthedraweesbutnotof
all.
Rightsofpartiesastoqualifiedacceptancetheholdermayrefuseto
take a qualified acceptance and if he does not obtain an unqualified
acceptance, he may treat the bill as dishonored by nonacceptance.
Where a qualified acceptance is taken, the drawer and indorsers are
discharged from liability on the bill unless they have expressly or
impliedly authorized the holder to take a qualified acceptance, or
subsequently assent thereto. When the drawer or an indorser receives
notice of a qualified acceptance, he must, within a reasonable time,
expresshisdissenttotheholderorhewillbedeemedtohaveassented
thereto.
WEEK9
Check,definedAcheckisabillofexchangedrawnonabankpayable
ondemand.Exceptashereinotherwiseprovided,theprovisionsofthis
Acttoabillofexchangepayableondemandapplytoacheck.
WhenapersondeemedindorserApersonplacinghissignatureupon
an instrument otherwise than as maker, drawer, or acceptor, is
deemed to be an indorser unless he clearly indicates by appropriate
wordshisintentiontobeboundinsomeothercapacity.
Certificationofcheck;effectofWhereacheckiscertifiedbythebank
onwhichitisdrawn,thecertificationifequivalenttoacceptance.
Effect where the holder of check procures it to be certified Where a
holderofacheckprocuresittobeacceptedorcertified,thedrawerand
allindorsersaredischargedfromliabilitythereon.
When check operates as an assignment A check itself does not
operate as an assignment of any part of the funds to the credit of the
drawerwiththebank,andthebankisnotliabletotheholderunlessand
untilitacceptsorcertifiesthecheck.
Effect of want of demand on principal debtor Presentment for
paymentisnotnecessaryinordertochargethepersonprimarilyliable
on the instrument; but if the instrument is, by its terms, payable at a
special place, and he is able and willing to pay it there at maturity,
such ability and willingness are equivalent to a tender of payment
upon his part. But except as herein otherwise provided, presentment
forpaymentisnecessaryinordertochargethedrawerandindorsers.
LiabilityofdrawerThedrawerbydrawingtheinstrumentadmitsthe
existence of the payee and his capacity to indorse; and engages that,
onduepresentment,theinstrumentwillbeacceptedorpaid,orboth,
according to its tenor, and that if it be dishonored and the necessary
proceedingsondishonorbedulytaken,hewillpaytheamountthereof
totheholderortoanysubsequentindorserwhomaybecompelledto
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LiabilityofQualifiedIndorserandOne
NegotiatingbyDelivery

65
(5)

LiabilityofGeneralorUnqualifiedIndorser

66
(4)

67
(1)

63

40

OrderofLiabilityAmongIndorsers

68
(3)

LiabilityofAccommodationParty

29

63

64

pay it. But the drawer may insert in the instrument an express
stipulationnegativingorlimitinghisownliabilitytotheholder.
Warranty where negotiation by delivery and so forth Every person
negotiating an instrument by delivery or by a qualified indorsement
warrants:
a) That the instrument is genuine and in all respects what it
purportstobe;
b) Thathehasagoodtitletoit;
c) Thatallpriorpartieshadcapacitytocontract;
d) Thathehasnoknowledgeofanyfactwhichwouldimpairthe
validityoftheinstrumentorrenderitvalueless.

But when the negotiation is by delivery only, the warranty extends in

favorofnoholderotherthantheimmediatetransferee.

Theprovisionsofsubdivision(c)ofthissectiondonotapplytoaperson
negotiatingpublicorcorporationsecuritiesotherthanbillsandnotes.
Liability of general indorser Every indorser who indorses without
qualification,warrantstoallsubsequentholdersinduecourse:
a) The matters and things mentioned in subdivisions (a), (b), and
(c)ofthenextprecedingsection;and
b) Thattheinstrumentis,atthetimeofhisindorsement,validand
subsisting;

And, in addition, he engages that, on due presentment, it shall be

acceptedorpaid,orboth,asthecasemaybe,accordingtoitstenor,and
that if it be dishonored and the necessary proceedings on dishonor be
duly taken, he will pay the amount thereof to the holder, or to any
subsequentindorserwhomaybecompelledtopayit.
Liability of indorser where paper negotiable by delivery Where a
personplaceshisindorsementonaninstrumentnegotiablebydelivery,
heincursalltheliabilityofanindorser.
WhenapersondeemedindorserApersonplacinghissignatureupon
an instrument otherwise than as maker, drawer, or acceptor, is
deemed to be an indorser unless he clearly indicates by appropriate
wordshisintentiontobeboundinsomeothercapacity.
Indorsement of instrument payable to bearer Where an instrument,
payable to bearer, is indorsed specially, it may nevertheless be further
negotiated by delivery; but the person indorsing specially is liable as
indorseronlytosuchholdersasmaketitlethroughhisindorsement.
Order in which indorsers are liable As respect on another, indorsers
areliableprimafacieintheorderinwhichtheyindorse;butevidenceis
admissibletoshowthat,asbetweenoramongthemselves,theyhave
agreed otherwise. Joint payees or joint indorsees who indorse are
deemedtoindorsejointlyandseverally.
Liability of accommodation party An accommodation party is one
who has signed the instrument as maker, drawer, acceptor, or
indorser, without receiving value therefore, and for the purpose of
lending his name to some other person. Such person is liable on the
instrument to a holder for value, notwithstanding such holder, at the
timeoftakingtheinstrument,knewhimtobeonlyanaccommodation
party.
WhenapersondeemedindorserApersonplacinghissignatureupon
an instrument otherwise than as maker, drawer, or acceptor, is
deemed to be an indorser unless he clearly indicates by appropriate
wordshisintentiontobeboundinsomeothercapacity.
Liability of irregular indorser Where a person, not otherwise a party
KHerrera2A11

toaninstrument,placesthereonhissignatureinblankbeforedelivery,
heliableasindorser,inaccordancewiththefollowingrules:
a) Iftheinstrumentispayabletotheorderofathirdperson,heis
liabletothepayeeandtoallsubsequentparties.
b) If the instrument is payable to the order of the maker or
drawer, or is payable to bearer, he is liable to all parties
subsequenttothemakerordrawer.
c) Ifhesignsfortheaccommodationofthepayee,heisliableto
allpartiessubsequenttothepayee.

KHerrera2A11