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ACT NO 2031 - Summary rules or sections of NIL for review.
Obligations on Contract (LAW 20043)
Taguig City University
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ACT NO. 2031
February 03, 1911
THE NEGOTIABLE INSTRUMENTS LAW
I. FORM AND INTERPRETATION
Section 1. Form of negotiable instruments. (WU-POA)- 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 or determinable future time;
(d) Must be payable to Order or to bearer; and
(e) Where the instrument is Addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty.
Sec. 2. What constitutes certainty as to sum. (ISDEA)- 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 installments; or
(c) by stated installments, with a provision that, upon Default in payment of any installment 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 an Attorney's fee, in case payment shall not be made at maturity.
Sec. 3. When PROMISE IS UNCONDITIONAL. - An unqualified order or 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 instrument.
But an order or promise to pay out of a particular fund is not unconditional.
Sec. 4. Determinable future time; what constitutes. - An instrument is payable at a determinable future time, within the meaning of this Act, which is expressed to be payable:
(a) At a fixed period after date or sight; or
(b) On or before a fixed or determinable future time specified therein; or
(c) On or at a fixed period after the occurrence of a specified event which is certain to happen, though the time of happening be uncertain.
An instrument payable upon a contingency is not negotiable, and the happening of the event does not cure the defect.
Sec. 5. Additional PROVISIONS NOT AFFECTING NEGOTIABILITY. (SECo-Law)
- GR: An instrument which contains an order or promise to do any act in addition to the payment of money is not negotiable. EXPN: But the negotiable character of an instrument otherwise negotiable is not affected by a provision which:
Sec. 7. When payable on demand. - An instrument is payable on demand:
(a) When it is so expressed to be payable on demand, or at sight, or on presentation ; or
(b) In which no time for payment is expressed.
Where an instrument is issued, accepted, or indorsed when overdue, it is, as regards the person so issuing, accepting, or indorsing it, payable on demand.
Sec. 8. When payable to order. - The instrument is payable to order where it is drawn payable to the order of a specified person or to him or his order. It may be drawn payable to the order of:
(a) A payee who is not maker, drawer, or drawee; or
(b) The drawer or maker; or
(c) The drawee; or
(d) Two or more payees jointly; or
(e) One or some of several payees; or
(f) The holder of an office for the time being.
Where the instrument is payable to order, the payee must be named or otherwise indicated therein with reasonable certainty.
Sec. 9. When payable to bearer(ENaF- PaLa). - The instrument is payable to bearer:
(a) When it is Expressed to be so payable; or
(b) When it is payable to a person NAmed therein or bearer; or
(c) When it is payable to the order of a Fictitious or non-existing person, and such fact was known to the person making it so payable; or
(d) When the name of the PAyee does not purport to be the name of any person; or
(e) When the only or LAst indorsement is an indorsement in blank.
Sec. 10. Terms, when sufficient. - The instrument need not follow the language of this Act, but any terms are sufficient which clearly indicate an intention to conform to the requirements hereof.
Sec. 11. Date, presumption as to. - Where the instrument or an acceptance or any indorsement thereon is dated, such date is deemed prima facie (presumed) to be the true date of the making, drawing, acceptance, or indorsement, as the case may be.
Sec. 12. Ante-dated and post-dated. - The instrument is not invalid for the reason only that it is ante-dated or post-dated, PROVIDED this is not done for an illegal or fraudulent purpose. The person to whom an instrument so dated is delivered acquires the title thereto as of the date of delivery.
Sec. 13. When date may be inserted. - Where an instrument expressed to be payable at a fixed period after date is issued undated, or where the acceptance of an instrument payable at a fixed period after sight is undated , any holder may insert therein the true date of issue or acceptance, and the instrument shall be payable accordingly. The insertion of a wrong date does not avoid the instrument in the hands of a subsequent holder in due course; but as to him, the date so inserted is to be regarded as the true date.
Sec. 14. Blanks; when may be filled. - Where the instrument is wanting in any
of the instrument is ambiguous or there are omissions therein, the following rules of construction apply:
(a) Where the sum payable is expressed in words and also in figures and there is a DISCREPANCY BETWEEN THE TWO, the sum denoted by the words is the sum payable; but IF THE WORDS ARE AMBIGUOUS or uncertain, reference may be had to the figures to fix the amount ;
(b) Where the instrument provides for the payment of interest , without specifying the date from which interest is to run, THE INTEREST RUNS FROM THE DATE OF THE INSTRUMENT, and if the instrument is undated , FROM THE ISSUE THEREOF;
(c) Where the instrument is not dated, it will be considered to be dated as of the time it was issued;
(d) Where there is a CONFLICT BETWEEN the WRITTEN AND PRINTED provisions of the instrument, the WRITTEN PROVISIONS PREVAIL;
(e) Where the INSTRUMENT IS SO AMBIGUOUS that there is doubt whether it is a bill or note, the holder may treat it as either at his election;
(f) Where A SIGNATURE is so placed upon the instrument that it is not clear in what capacity the person making the same intended to sign, he is to be deemed an indorser;
(g) Where AN INSTRUMENT containing the word "I PROMISE TO PAY" is signed by two or more persons, they are deemed to be jointly and severally liable thereon.
Sec. 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 expressly provided. But ONE WHO SIGNS IN A TRADE OR
ASSUMED NAME will be liable to the same extent as if he had signed in his own name.
Sec. 19. Signature by agent; AUTHORITY; HOW SHOWN. - The signature of any party 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.
Sec. 20. Liability of PERSON SIGNING AS AGENT, and so forth. - Where the instrument contains or a person adds to his signature words indicating that he signs for or on behalf of a principal or in a representative capacity, HE IS NOT LIABLE ON THE INSTRUMENT IF HE WAS DULY AUTHORIZED; but the mere addition of words describing him as an agent, or as filling a representative character, without disclosing his principal, DOES NOT EXEMPT HIM from personal liability.
Sec. 21. SIGNATURE BY PROCURATION; effect of. - A signature by "procuration" OPERATES AS NOTICE that the agent has but a limited authority to sign, and the principal is bound ONLY in case the agent in so signing acted within the actual limits of his (agent’s) authority.
Sec. 22. 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 corporation or infant may incur no liability thereon.
Sec. 23. Forged signature; effect of. - When a signature is forged or made without the authority of the person whose signature it purports to be, it is WHOLLY INOPERATIVE , and no right to retain the instrument, or to give a discharge therefor, or to enforce payment thereof against any party thereto, can be acquired through or under such signature, unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority.
III. NEGOTIATION
Sec. 30. What constitutes negotiation. - An instrument is negotiated when it is transferred from one person to another in such manner as to constitute the transferee the holder thereof. If payable to bearer, it is negotiated by delivery; if payable to order, it is negotiated by the indorsement of the holder and completed by delivery.
Sec. 31. Indorsement; how made. - The indorsement must be written on the instrument itself or upon a paper attached thereto. The signature of the indorser, without additional words, is a sufficient indorsement.
Sec. 32. Indorsement must be of entire instrument. - The indorsement must be an indorsement of the entire instrument. An indorsement which purports to transfer to the indorsee a part only of the amount payable, or which purports to transfer the instrument to two or more indorsees severally, does not operate as a negotiation of the instrument. But where the instrument has been paid in part, it may be indorsed as to the residue.
Sec. 33. Kinds of indorsement. - An indorsement may be either special or in blank; and it may also be either restrictive or qualified or conditional.
Sec. 34. Special indorsement; indorsement in blank. - A special indorsement specifies the person to whom, or to whose order, the instrument is to be payable, and the indorsement of such indorsee is necessary to the further negotiation of the instrument. An indorsement in blank specifies no indorsee, and an instrument so indorsed is payable to bearer, and may be negotiated by delivery.
Sec. 35. Blank indorsement; how changed to special indorsement. - The holder may convert a blank indorsement into a special indorsement by writing over the signature of the indorser in blank any contract consistent with the character of
the indorsement.
Sec. 36. When indorsement restrictive. - An indorsement is restrictive which either:chanroblesvirtuallawlibrary
(a) Prohibits the further negotiation of the instrument; or
(b) Constitutes the indorsee the agent of the indorser; or
(c) Vests the title in the indorsee in trust for or to the use of some other persons.
But the mere absence of words implying power to negotiate does not make an indorsement restrictive.
Sec. 37. Effect of restrictive indorsement; rights of indorsee. - A restrictive indorsement confers upon the indorsee the right:chanroblesvirtuallawlibrary
(a) to receive payment of the instrument;
(b) to bring any action thereon that the indorser could bring;
(c) to transfer his rights as such indorsee, where the form of the indorsement authorizes him to do so.
But all subsequent indorsees acquire only the title of the first indorsee under the restrictive indorsement.
Sec. 38. Qualified indorsement. - A qualified indorsement constitutes the indorser a mere assignor of the title to the instrument. It may be made by adding to the indorser's signature the words "without recourse" or any words of similar import. Such an indorsement does not impair the negotiable character of the instrument.
Sec. 39. Conditional indorsement. - Where an indorsement is conditional, the party required to pay the instrument may disregard the condition and make
Sec. 46. Place of indorsement; presumption. - Except where the contrary appears, every indorsement is presumed prima facie to have been made at the place where the instrument is dated.
Sec. 47. Continuation of negotiable character. - An instrument negotiable in its origin continues to be negotiable until it has been restrictively indorsed or discharged by payment or otherwise.
Sec. 48. Striking out indorsement. - The holder may at any time strike out any indorsement which is not necessary to his title. The indorser whose indorsement is struck out, and all indorsers subsequent to him, are thereby relieved from liability on the instrument.
Sec. 49. Transfer without indorsement; effect of. - Where the holder of an instrument payable to his order transfers it for value without indorsing 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 whether the transferee is a holder in due course, the negotiation takes effect as of the time when the indorsement is actually made.
Sec. 50. When prior party may negotiate instrument. - Where an instrument is negotiated back to a prior party, such party may, subject to the provisions of this Act, reissue and further negotiable the same. But he is not entitled to enforce payment thereof against any intervening party to whom he was personally liable.
IV. RIGHTS OF THE HOLDER
Sec. 51. Right of holder to sue; payment. - The holder of a negotiable instrument may to sue thereon in his own name; and payment to him in due course discharges the instrument.
Sec. 52. What constitutes a holder in due course. - A holder in due course is a holder who has taken the instrument under the following conditions:
(a) That it is complete and regular upon its face;
(b) That he became the holder of it before it was overdue, and without notice that it has been previously dishonored, if such was the fact;
(c) That he took it in good faith and for value;
(d) That at the time it was negotiated to him, he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it.
Sec. 53. When person not deemed holder in due course. - Where an instrument payable on demand is negotiated on an unreasonable length of time after its issue, the holder is not deemed a holder in due course.
Sec. 54. Notice before full amount is paid. - Where the transferee receives notice of any infirmity in the instrument or defect in the title of the person negotiating the same before he has paid the full amount agreed to be paid therefor, he will be deemed a holder in due course only to the extent of the amount therefore paid by him.
Sec. 55. When title defective. - The title of a person who negotiates an instrument is defective within the meaning of this Act when he obtained the instrument, or any signature thereto, by fraud, duress, or force and fear, or other unlawful means, or for an illegal consideration, or when he negotiates it in breach of faith, or under such circumstances as amount to a fraud.
Sec. 56. What constitutes notice of defect. - To constitutes notice of an infirmity 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 his action in taking the instrument amounted to bad faith.
in the instrument an express stipulation negativing or limiting his own liability to the holder.
Sec. 62. Liability of acceptor. - The acceptor, by accepting the instrument, engages that he will pay it according to the tenor of his acceptance and admits:chanroblesvirtuallawlibrary
(a) The existence of the drawer, the genuineness of his signature, and his capacity and authority to draw the instrument; and
(b) The existence of the payee and his then capacity to indorse.
Sec. 63. When a person deemed indorser. - A person placing his signature upon an instrument otherwise than as maker, drawer, or acceptor, is deemed to be indorser unless he clearly indicates by appropriate words his intention to be bound in some other capacity.
Sec. 64. Liability of irregular indorser. - Where a person, not otherwise a party to an instrument, places thereon his signature in blank before delivery, he is liable as indorser, in accordance with the following rules:chanroblesvirtuallawlibrary
(a) If the instrument is payable to the order of a third person, he is liable to the payee and to all subsequent parties.
(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 subsequent to the maker or drawer.
(c) If he signs for the accommodation of the payee, he is liable to all parties subsequent to the payee.
Sec. 65. Warranty where negotiation by delivery and so forth. — Every person negotiating an instrument by delivery or by a qualified indorsement warrants:chanroblesvirtuallawlibrary
(a) That the instrument is genuine and in all respects what it purports to be;
(b) That he has a good title to it;
(c) That all prior parties had capacity to contract;
(d) That he has no knowledge of any fact which would impair the validity of the instrument or render it valueless.
But when the negotiation is by delivery only, the warranty extends in favor of no holder other than the immediate transferee.
The provisions of subdivision (c) of this section do not apply to a person negotiating public or corporation securities other than bills and notes.
Sec. 66. Liability of general indorser. - Every indorser who indorses without qualification, warrants to all subsequent holders in due course:chanroblesvirtuallawlibrary
(a) The matters and things mentioned in subdivisions (a), (b), and (c) of the next preceding section; and
(b) That the instrument is, at the time of his indorsement, valid and subsisting;
And, in addition, he engages that, on due presentment, it shall be accepted or paid, or both, as the case may be, according to its tenor, 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 subsequent indorser who may be compelled to pay it.
Sec. 67. Liability of indorser where paper negotiable by delivery. — Where a person places his indorsement on an instrument negotiable by delivery, he incurs all the liability of an indorser.
(b) At a reasonable hour on a business day;
(c) At a proper place as herein defined;
(d) To the person primarily liable on the instrument, or if he is absent or inaccessible, to any person found at the place where the presentment is made.
Sec. 73. Place of presentment. - Presentment for payment is made at the proper place:chanroblesvirtuallawlibrary
(a) Where a place of payment is specified in the instrument and it is there presented;
(b) Where no place of payment is specified but the address of the person to make payment is given in the instrument and it is there presented;
(c) Where no place of payment is specified and no address is given and the instrument is presented at the usual place of business or residence of the person to make payment;
(d) In any other case if presented to the person to make payment wherever he can be found, or if presented at his last known place of business or residence.
Sec. 74. Instrument must be exhibited. - The instrument must be exhibited to the person from whom payment is demanded, and when it is paid, must be delivered up to the party paying it.
Sec. 75. Presentment where instrument payable at bank. - Where the instrument is payable at a bank, presentment for payment must be made during banking hours, unless the person to make payment has no funds there to meet it at any time during the day, in which case presentment at any hour before the bank is closed on that day is sufficient.
Sec. 76. Presentment where principal debtor is dead. - Where the person
primarily liable on the instrument is dead and no place of payment is specified, presentment for payment must be made to his personal representative, if such there be, and if, with the exercise of reasonable diligence, he can be found.
Sec. 77. Presentment to persons liable as partners. - Where the persons primarily liable on the instrument are liable as partners and no place of payment is specified, presentment for payment may be made to any one of them, even though there has been a dissolution of the firm.
Sec. 78. Presentment to joint debtors. - Where there are several persons, not partners, primarily liable on the instrument and no place of payment is specified, presentment must be made to them all.
Sec. 79. When presentment not required to charge the drawer. - Presentment for payment is not required in order to charge the drawer where he has no right to expect or require that the drawee or acceptor will pay the instrument.
Sec. 80. When presentment not required to charge the indorser. - Presentment is not required in order to charge an indorser where the instrument was made or accepted for his accommodation and he has no reason to expect that the instrument will be paid if presented.
Sec. 81. When delay in making presentment is excused. - Delay in making presentment for payment is excused when the delay is caused by circumstances beyond the control of the holder and not imputable to his default, misconduct, or negligence. When the cause of delay ceases to operate, presentment must be made with reasonable diligence.
Sec. 82. When presentment for payment is excused. - Presentment for payment is excused:chanroblesvirtuallawlibrary
(a) Where, after the exercise of reasonable diligence, presentment, as required by this Act, cannot be made;
ACT NO 2031 - Summary rules or sections of NIL for review.
Course: Obligations on Contract (LAW 20043)
University: Taguig City University
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