NEGOTIABLE INSTRUMENTS LAWINTRODUCTION Instruments are negotiable when they conform to ALL the requirements prescribed by NIL. 2 main Groups:1. PROMISSORY NOTE2. BILL OF EXCHANGEOthers include the certificate of deposit and bond Certificate of deposit- issued by a bank reciting a deposit of a certain sum of money payable either at a fixed time or on demand. Bond- evidence of indebtedness issued by a corporation (usually for a long term) It is in EFFECT a written promise of the corporation to pay a definite sum or money on the day named DRAFT form of bill of exchange used mainly in transactions between persons physically remote from each other. PARTIES AND THE NATURE OF THEIR LIABILITYPN MAKER promissory PAYEE promise madeBOE DRAWER gives the order to pay in a bill of exchange DRAWEE addressee of the order PAYEE person the payment is to be paidAS TO LIABILITYPRIMARY absolutely and unconditionally required to pay the instrument when it falls dueIn PN: makerIn BOE: no person until and unless he negotiates tl holder to accept to pay itSECONDARY - : drawer and the indorsers of either bill or note are parties They can be held responsible should the primary parties fail to pay Liability is conditioned on two factors (1) that a demand or presentment be duly made on primary party; (2) should the party dishonour such instrument a notice of such dishonour be given to the secondary party

An indorser by indorsing the bill or note impliedly enters into two contracts:1. He is elling or transferring the instrument to his indorsee (like a seller or transferor of personal property. 2. He warrants that he will pay the instrument when the tow conditions for his liability have been fulfilled. FUNCTIONS OF NEGOTIABLE INSTRUMENTs(ayaw to ni sir!) 1. As a substitute for money2. Transferring credit3. Facilitate the sale of goods***does not constitute as legal tender

THE CONCEPT OF NEGOTIABILITYNB. There are usually two contracts involved whenever a negotiable instrument is issued.1, is the contract of sale of the car, and the other is the promise to pay, so that the promise to pay is dependent on the validity of the contract of sale, it becomes completely INDEPENDENT of the sale which gave rise to it

ORIGIN From merchants and traders of Middle Ages Facilitate cambium and to avoid the risks of transporting moneyHISTORY Verbatim! (gosh) haha. Reproduction of the uniform negotiable instruments law of the US Enactd in 1911 , not a single amendment to it has been made. (siguro, dahil magulo at mahirap. Wahaha)APPLICABILITY Applies only to negotiable instruments Should any requisites be absent, the instrument would not be negotiable and would therefore not be governed by NIL, but the general law on contracts S. 196 CASES NOT PROVIDED FOR IN ACT. Any cases not provided for in this act shall be governed by the provisions of existing legislation, or in default thereof,m by the rules of the Law Merchant. **law merchant is a system of law which does not rest exclusively on the positive institutions and local customs of any particular countryREQUISITES OF NEGOTIABILITY

S. 1. FORM OF NEGOTIABLE INSTRUMENTS. An instrument to be negotiable must conform to the following requirements:(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 and determinable future time(d) must be payable to order or to bearer; and(e) where the instrument is payable to order or to bearer; and drawee, he must be named or otherwise indicated therein with reasonable certainty.

S. 184 PROMISSORY NOTE DEFINED A negotiable promissory note within the meaning of theis Act is an 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.

S. 126 BILL OF EXCHANGE DEFINED A bill of exchange is an unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to order or to bearer. N.B. the fact that an instrument does not meet the foregoing requisites will not affect its validity, the only consequence being that it will be governed not by the NIL but by the general law on contracts

1. Written form and signatures. 18. LIABILITY OF PERSON SIGNING IN TRADE OR ASSUMED NAME. No person is liable on the instrument whose signature does not appear thereon, except as herein otherwise provided. But one who signs in trade or assumed name will be liable to the same extent as if he had signed in his own name.S. 19. SIGNATURE BY AGENT; AUTHORITY; HOW SHOWN. The signature of any pary may be made by a duly authorized agent. No particular form of appointment is necessary for this purpose, and the authority of the agent may be established as in other cases of agency. Must be in writing and signed by the maker or drawer In writing includes print , pen or pencil, also be typed Signature is binding whether it is ones handwriting, or printed, engraved, lithographed or photographed. = intented or adopted as the signature of the signer or made with his authority It does not matter where the signature is placed, as long as the intention to make the instrument the makers or drawers is shownUNCONDITIONAL ORDER OR PROMISE TO PAY The instrument must contain a promise or an order to pay Mere acknowledgment of a debt doesnt doesnt constitute a promise to pay money ORDER imperative or a command and not mere request or authority to pay WHEN UNCONDITIONAL S. 3. WHEN PROMISE IS UNCONDITIONAL. An unqualified order of promise to pay is unconditional within the meaning of this Act though coupled with (a) An indication of a particular fund out of which reimbursement 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 instrumentBut an order or promise to pay out of a particular fund is not unconditional MUST BE UNQUALIFIED NOT UNCONDITIONAL promise to pay out of a particular fund (profits may never be realized) HOWEVER, if mere indication of the particular fund out of which reimbursement is to be made, or an indication of a particular account to be debited with the amout will not render an order conditional subject to some other contract is conditional and negotiability is destroyed

SUM PAYABLE MUST BE CERTAIN S. 2. CERTAINTY AS TO SUM; WHAT CONSTITUTES. The sum payable is a sum certain within the meaning of this Act, although it is to be paid (a) With interest; or(b) By stated instalments; or(c) By stated instalments with a provision that upon default in payment of any instalment or of interest, the whole shall become due; or(d) With exchange, whether at a fixed rate or at the current rate; or(e) with costs of collection or attorneys fee, in case payment shall not be made at maturity.

The amount payable must be certain

LIABILITY OF PARTIES

I. Liability of primary partiesS. 192. PERSON PRIMARILY LIABILITY ON INSTRUMENT. The person primarily liable on an instrument is the person who by the terms of the instrument is absolutely required to pay the same. All other parties are secondarily liable.s. 70. EFFECT OF WANT OF DEMAND ON PRINCIPAL DEBTOR. Presentment for payment is not necessary in order to charge the person primarily liable on the instrument; but if the instrument in, by its terms, payable at 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 for payment is necessary in order to charge the drawer and indorser. 1. Primary party a. maker (PN)b. acceptor (BOE)*drawee is not a party on the instrument until and unless he accepts2. secondary party a. indorsers (PN and BOE)b. drawer (BOE)

DisitinctionsPrimarily liableSecondarily liable

Unconditionally liableConditionally liable

Duty bound to pay the holder at the date of maturity, WON holder demands paymentNot bound to pay unless the following conditions have been fulfilled: Due presentment or demand y the primary party for payment or acceptance Taking of proceedings required by law after dishonour to the secondary party and, in cases of foreign bills of exchange, protest of bill.

Liability of the MAKER

S. 60

PRESENTMENT FOR ACCEPTANCE

a. When necessary; effect of non-presntments. 143 . WHEN PRESENTMENT FOR ACCEPTANCE MUST BE MADE. Presentment for acceptance must be made;a. where the bill is payable after sight, or in other case where presentment for acceptance is necessary in order to fix the maturity of the instrument; orb. where the bill expressly stipulates that it shall be presented for acceptance; or c. when the bill is drawn payable elsewhere than at the residence or place of business of the drawee.In no other cases is presentment for acceptance necessary in order to render any party to the bill liable.s. 144. WHEN FAILURE TO PRESENT RELEASES DRAWER AND INDORSER. Except as herein provided, the holder of a bill which is required by the next preceding section to be presented for acceptance must either present it for acceptance or negotiate it within a reasonable time. If he fails to do so, the drawer and all indorsers are discharged. s. 193. REASONALBE TIME, WHAT CONSTITUTES. In determining what is reasonable time or an unreasonable time, regard is to be had the nature of instrument, the usage of trade or business (if any) with respect to such instruments, and the facts of each particular case.

Presentment for acceptance refers to BOE only. Production or exhibition of the bill --- PURPOSE: OBTAIN his acceptance or his assent to the order of the drawer. S. 143 enumerates the cases where it is necessary. (i.e. a bill payable after sight has to be presented for acceptance, and non acceptance will be deemed bills dishonoured by non-acceptance The law sets no definite time--- must be negotiated within a reasonable time.

DISCHARGE

1. DISCHARGE OF THE INSTRUMENT

NOTICE OF DISHONOR

a. When necessary S. 89 WHOM NOTICE OF DISHONOR MUST BE GIVEN. Except as herein otherwise provided, when a negotiable instrument has been dishonoured by non-acceptance or non-payment, notice of dishonour must be given to the drawer and to each indorser, and any drawer or indorser to whom such notice is not given is discharged.

Notice of dishonor: bringing either verbally or in writing, to the knowledge of the drawer or the indorser The fact that a nego instrument, has not been accepted, or has not been paid and the party notified is expected to pay it. PURPOSE: Notify the drawer and/or the indorsers that the holder is enforcing his right against them under their contract to pay should the instrument not be paid or accepted at maturity WITHOUT NOTICE secondary party may be held liable, (xpt as otherwise provided)COMPLAINT: must allege and prove presentment to the maker and notice of dishonor, or that the same are dispensed with under s. 82 and s. 118.