Promissory Note vs. Bill of Exchange cae? Aaa Unconditional promise _| unconditional order Involves 2 parties involves 3 parties (drawer, maker, payee! payee, drawea) NEGOTIABLE INSTRUMENT Maker primaniy liable | crawer only secondarily ‘Whitten contracts for the payment of monay; by its | able form, intended as a substitute for money and Only 1 presentment-for | generally 2 presentments - intended to pass from hand to hand, to give the payment for acceptance and for holder in due course the right to hold the same and payment collect the sum due. Check vs. Bill of Exchange CHARACTERISTICS OF NEGOTIABLE INSTRUMENTS: ~ always drawn upon +. Negotiability - right of transferee to hold the bank or banker instrument and collect the sum due 2, Accumulation of secondary contracts - ~ may or may not be Grawn against a bank ~aliways payable on = may be payable on. instrument is negotiated from person to oad ene person - determinable future time notnecessary thatitbe | - necessary thatitbe Negotiable instruments vs. _Non-Negotlable presented for acceptance | presented for Instruments (see Annex G) acceptance drawn on a deposi not drawn on a deposi = the death of a drawer of a | - the death of the drawer Negotiable Instruments vs. Negotiable check, with knowledge by | of the ordinary bill of Documents of Title (see Annex F) the banks, revokes the | exchange does not authority of the bankerto | revoke the authority of PROMISSORY NOTE pay the banker to pay ‘An unconditional promise to pay in writing made bj Imus Ibs SSeS TOE a) BS ESET] one person to another, signed by the maker, must be presented lor nay be presented for engaging to pay on demand or a fixed determinable payment within payment within a future time a sum certain in money to order or bearer. nem When the note is drawn to maker's own order, itis Issue (6 months) last negotiation. ‘Rot complete until indorsed by him. (Sac. 184) Promissory Note vs. Check PN (re ‘An uncondttional order in writing addressed by one person to another, signed by the person giving it, there are two (2) parties, | there are three (3) parties, eyuring tre perecn ta whom i fs eodrossed to pay the maker and the payee | the drawer. the drawee on demand or at a fixed or determinable future tne a bank and the payee sum certain in money to order or to bearer. (Sec. Thay be drawn against always orawn against 126) any person, nct bank necessariy a bank CHECK A bil of exchange drawn on a bank and payable on may be payable on always payable on aoe ears demand orat a fixed or | demand OS determinable future time ‘@ promise to pay ‘Tn order to payJIYPES OF CHECKS: 1. Manager's check - One drawn by the banks manager upon the bank itself: and it is similar to a cashier's check both as to effect and use. [international Corporate Bank v Gueco 351 SCRA 516 (2001) By its peculiar character “and general use in} | commerce, a manager's check is regarded substantially t0 be aS good as the money it represents Consequently, when a bank allows the delivery of a manager's check to a person who is not directly charged with the collection of its tax liabilities, such | bank must be deemed to have assumed the risk of a! | possible misuse thereof. as it appears to have fallen} short of the diligence expected from it. It may stil, however, pursue an action against the person responsible or who may have unjustly benefited. Pabugais vs. Sahijwani, 423 SCRA 596 (2004) Generally, a manager's check is not legal tender and + the creditor may accept or refuse it. But, payment by check may be accepted as val if no prompt objection is made. 2, Crossed check ‘Though the NIL is silent as to crossed checks, courts can take judicial cognizance of the practice that a check crossed with two parallel lines in the upper lett hand corer means that it can only be deposited and not converted to cash. The effects of a crossed check thus relate to the mode of payment ~ meaning that the drawer intends it to be only for deposit by the rightful person, the named payee. Bataan Cigarvs. CA : A holder of crossed-checks is not obliged to inquire, | when he acquires them, as to purpose for which the | checks were issued. A payee who further negotiates cross-checks that he accepted from someone cannot’ be considered a holder in good faith (and thus not a! HIDC) is net applicable to this case. Here, when the ‘payee acquired the checks, he duly deposited them jin his bank account, and therefore, the purpose behind the crossina was satisfied by the navee. The law does not require the payee to be interested in the obligation in consideration for which the check was issued. The cause or reason of issuance is! inconsequential (in connection with BP 22) ini determinina criminal liability. The payee of crossed checks issued with the notation “for payee's account only” can sue a collecting bank which allowed an unauthorized third person to deposit the checks in his own account and to withdraw the proceeds of the checks, because the proceeds of the checks belonged io the payee and’ the bank paid the checks although the third person } had no title to the checks. REQUISITES OF A NEGOTIABLE INSTRUMENT ‘Sec. 1. An instrument to be negotiable, must conform 1 10 the following requirements: 1 (a) It must be in writing and signed by the maker, 1 or drawer: 1 (b) Must contain an unconditional promise or 1 order to pay a certain sum in money: 1 (c) Must be payable on demand, or at a fixed or 1 determinable future time: 1 (d) Must be payable to order or tobearer; and 1 Where the instrument is addressed to a drawee. he 4 1 must be named or otherwise indicated therein with 1. By the provisions of the Negotiable Instrument’ Law, particularly Section 1 thereot 2. By considering the whole instrument 3. By what appears on the face of the instrument and not elsewhere NOTE: In determining whether the instrument is Negotiable, only the instrument itseit and no other. must be examined and compared with the requirements stated in Seo. 1. If it appears on the instrument that it lacks one of the requirements, itis ot negotiable and the provisions of the NIL do not govern the instrument. The requirement lacking cannot be supplied by using a separate instrument in which that requirement appears.WHEN A SUMIS CERTAIN _ _ _______ ‘Sec 2. The sum payable is a sum certain within the | ' meaning of this Act, although itis to be paid: 1 1 “(a) With interest; or 1 (b) By stated installments; or 1 1 () By Slated installments, with a provision that, 4 ' upon default in payment of any installment or 4 of interest, the whole shall become due; or 1 (@) With costs of collection or an attorney's foo, 4 ' in case payment shall not be made at 4 ‘maturity. : EFFECT OF A CONDITIONAL PROMISE OR ORDER A promise or order should not depend on a contingent event. If it is conditional, it is non- negotiable. WHEN PROMISE IS UNCONDITIONAL, ‘Sec 3. An unqualified order or promise to pay is 1) unconditional within the meaning of this Act, though 1 coupled with / ' 1 (a) An indication of 2 particular fund out of which 1 reimbursement is to be made, or a particular account 1 to be debited with the amount; or 1 (b) A statement of the transaction which gives rise to 4 the instrument 1 . But an order or promise to pay out of a particular fund is not unconditional, WHA CONSINIUIES DEIEKMINABLE FUIUKE TIME ‘See 4. An instrument is payable at a determinable 1 future time, within the meaning of this Act, which is 1 expressed to be payable / (a) Ata fited period after date or sight; or 11 (b) On of before a fixed or determinable future time 11 specitied therein; or (©) On or at a fixed period alter the occurrence of a spectied event, wien 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 doss not ‘cure the defect. _ WHEN SOME OTHER ACT IS REQUIRED OTHER THAN PAYMENT OF MONEY IN AN INSTRUMENT. {Sec 5. ‘An instrument which contains an order or | {promise to do any act in addition to the payment of ¢ money is not negotiable. But the negotiable character {of an instrument otherwise negotiable is not affected | ey @ provision which / ' (a) Authorizes the sale of collateral securties in case * " the instrument be not paid at maturity; or ' ¥(b) Authorizes a coniession of judgment it the # instrument be not paid at maturity; or ' (c) Waivos tho bonofit of any law intonded for the # ‘advantage or pratection of the obligorvor_ _ _ _ _ _. (@) Gives the holder an election torequire someting " to be done in lieu of payment of money. " But nothing in this section shall validate any provision oF stipulation othorwiseillogal. Notes on Section 1. Limitation on the provision: it cannot require something illegal 2. There are two kinds of judgments by confession: a. cognovit actionem b. elicta verificatione 3. Confessions of judgment in the Philippines are void as against public policy 4. Ifthe choice lies with the debtor, the instrument is rendered non-negotiable. INSTANCES THAT DO NOT AFFECT THE VALIDITY AND NEGOTIABILITY OF AN INSTRUMENT ‘Sec 6. The validity and negotiable character of an” instrument are nat affected by the fact that / (2) Ibis not dated: or (b) Does not specify the value given. or that any value has been given therefor: or (c) Does not specify the place where it is drawn or the place where itis payable: or (@) Bears aseal; or (€) Designates particular kind of current money in which payment is to be made. 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.