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(Negotiation

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43. If an instrument payable to the order has been transferred by the holder without
his indorsement, what rights does the transferee acquire?

 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.

44. When shall such transferee become a holder in due course?

 He becomes a holder in due course as of the time of actual indorsement.

45. What are the rights of a prior party to whom an instrument is negotiated back?

 The right to reissue and further negotiate the instrument the instrument.

CHAPTER 4- RIGHTS OF HOLDERS

1. Who is considered a holder?
 The payee or indorser of a bill or note, who is in possession of it or bearer
thereof.

2. Name the kinds of holders under the Negotiable Instruments Law.
 Holders simply
 Holders for value
 Holders in due course
 Holders not in due course

3. What are the rights of a holder?
 He may sue on the instrument in his name.
 He may receive payment and if the payment is in due course, instrument is
discharged.
 He may transfer his rights through negotiation.

4. 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 had been previously dishonoured, 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.

5. Must the four conditions be present at all times the holder is in possession of the
instrument?

he will be deemed a holder in due course only to the extent of the amount theretofore paid by him. can the holder be still a holder in due course?  Yes. or for an illegal consideration. or force and fear. his intentional ignorance may amount bad faith. If the instrument was dishonored by non-payment has been negotiated. 9. 12. 13. or any signature thereto. Can there be a holder in due course for part of the instrument?  Yes. if the instrument was negotiated at maturity. Does it necessarily follow that if the title of the person negotiating is defective. duress. What kind of defense is a holder in due course free from?  The defenses that cannot be set up against a holder in due course are the personal defenses or equities. 8. 6.  Not necessarily present at all times. 11. When may title of a person who negotiates the instrument be considered defective?  The title of a person who negotiates an instrument is defective within the meaning of this Act when he obtained the instrument. the holder must have had actual knowledge of suspicious circumstances. d) He may enforce payment of the instrument for the full amount thereof against all parties liable thereon. b) He may receive payment and if the payment is in due course. If the instrument is negotiated to a holder after it was dishonored by non- acceptance. or other unlawful means. 7. . by fraud. and he willfully abstained from making inquiries. c) He holds the instrument free from defenses available to prior parties among themselves. 10. the holder is not deemed a holder in due course. the holder shall also have a defective title?  No. or under such circumstances as amount to a fraud. or when he negotiates it in breach of faith. if he had no notice that it had been previously dishonored at the time it was negotiated to him. the instrument is discharged. When a holder is not deemed a holder in due course?  Where an instrument payable on demand is negotiated an unreasonable length of time after its issue. can the holder be still a holder in due course?  No. where the transferee receives notice of any infirmity in the instrument or defect in the title of the person negotiating the same before he had pad the full amount agreed to be paid therefore. What are the rights of a holder in due course?  The rights of a holder in due course: a) He may sue on the instrument in his own name.

in respect of all parties prior to him he is a holder through a holder in due course. What kind of liability has the maker?  Primary 2. What is the liability of the drawee?  Not liable until he accepts the instrument in which case he becomes an acceptor. What are the warranties of a maker?  The maker warrants the: a) Existence of the payee b) Capacity of the payee to contract 3. What is the status of a negotiable instrument in the hands of a holder not in due course?  Negotiable 15. 6.Who is deemed a holder in due course?  Every holder is deemed prima facie to be a holder in due course CHAPTER V.LIABILITIES OF PARTIES 1.14. What is the liability of a drawer?  Secondary 4. b) He must not be a party to any fraud or illegality affecting the instrument. If a holder not in due course has acquired the rights of a holder. 16. 17. Under what circumstances may a holder not in due course acquire the rights of a holder in due course?  A holder not in due course may acquire the rights of a holder in due course provided: a) He must derive his title through a holder in due course. is he already a holder in due course?  No. What are the warranties of a drawer?  The drawer warrants the: a) Existence of the payee b) Capacity of the payee to endorse 5. What is the liability of the acceptor?  Primary 7. What are the warranties of an acceptor?  The acceptor warrants the: .

he is liable to all parties subsequent to the payee 12. . Who is an irregular indorser?  A person. 9. drawer or acceptor is deemed to be an indorser. c) That all prior parties had capacity to contract. not otherwise a party to an instrument places thereon his signature in blank before delivery. 15. When is a person deemed to be an indorser?  A person placing his signature upon an instrument otherwise than as maker. To whom shall the warranties of a qualified indorser extend?  The warranties extend to all subsequent holders who make title through his indorsement for a breach of any of his warranties. In what respect does a maker differ from the acceptor as regards their primary liability?  The liability depends on the tenor of acceptance. he is liable to a party subsequent to the maker and to subsequent parties but not to the maker. When may an instrument be negotiated by delivery?  When it is a bearer instrument 13. To whom shall an irregular indorser be liable?  Rules as to liability of irregular or anomalous indorser: a) When instrument is payable to the order of a third person. 10. 11. c) When an irregular indorser signs for accommodation of payee. a) Existence of the drawer and his capacity and authority to draw the instrument. b) When instrument is payable to the order of the maker or drawer or to bearer. he is liable to the payee but not to the maker. unless he clearly indicates by appropriate words his intention to be bound in some other capacity. What are the warranties of a person who negotiates be mere delivery and person who makes a qualified indorsement?  One who negotiates by delivery and qualified indorsement (completed by delivery) warrants: a) That the instrument is genuine and in all respects what it purports to be b) That he has a good title to it. d) That he has no knowledge of any fact which would impair the validity of the instrument or render it valueless 14. b) Existence of the payee and his capacity to indorse 8.To whom shall the warranties of a person negotiating by delivery extend?  The warranties extend in favor of no holder other than the immediate transferee.

16. If a person places his indorsement on an instrument negotiable by delivery.PRESENTMENT FOR PAYMENT . what order are indorsers liable?  In the order in which they indorse 23. whether or not he has knowledge of that fact Qualified Indorser: warrants that he has no knowledge of any fact which could invalidate the instrument or render it valueless 20. 17. 19. solidary 24. Respecting one another. Fourth warranty of the general indorser vs. what liabilities does he incur?  All liabilities of an indorser 22. To whom shall the warranties of a general indorser extend?  To all subsequent holders in due course. 65 unless he discloses the name of his principal and the fact that he is acting only as agent.If a broker or agent negotiates an instrument by delivery. who has greater liability?  A person who makes qualified indorsement 21.What is the liability of the qualified indorser?  Merely as assignor of credit. who shall be liable? Is it the agent or the principal?  He incurs all the liabilities prescribed by Sec. valid and subsisting f) That the instrument will be honored g) That the prior indorsements are genuine 18. What is the nature of the liability of joint payees or joint indorsees who indorse?  Joint and severally. qualified indorser?  General Indorser: valid and subsisting. What are the warranties of a general indorser?  The general indorser warrants: a) That the instrument is genuine and in all respects what it purports to be b) That he has a good title to it. CHAPTER VI. Between a person negotiating by delivery and a person who makes a qualified indorsement. d) That he has no knowledge of any fact which would impair the validity of the instrument or render it valueless e) That the instrument is. at the time of his indorsement. c) That all prior parties had capacity to contract.

Which is the proper place of presentment?  A proper place for presentment is: a) The place specified in the instrument. b) The address of the person to make payment. What is the effect if the holder does not present for payment?  The drawer and indorsers are discharged. if such is specified. or if he is absent or inaccessible. presentment must be made on the day it falls due. presentment must be made within a reasonable time after its issue. 7. to be sufficient. such as drawer and indorsers. d) To the person primarily liable on the instrument. . presentment for payment will be sufficient if made within a reasonable time after the last negotiation thereof. c) At a proper place as herein defined. c) At the usual place of business or residence of the person to make payment. or by some person authorized to receive payment on his behalf. 6. 3. Why is it necessary to present for payment?  Presentment to persons secondarily liable. d) If the first three are not available. b) At a reasonable hour on a business day. is necessary to charge them with liability. must be made: a) By the holder. if such is given and no place for payment is specified. Where it is payable on demand. if the first two places are not specified. When does the law allow presentment for payment to one who may not be primarily liable on the instrument?  If the person primary liable is absent or inaccessible. What is presentment for payment?  Presentment for payment is the presentation or exhibition of the instrument for the purpose of demanding and receiving payment 2. at the place where he can be found or at his last known place of business or residence. 4. What constitutes sufficient presentment for payment?  Presentment for payment. to any person found at the place where the presentment is made. to any person found at the place where the presentment is made. 8. 5. What constitutes tender of payment under NIL?  The ability and willingness on the part of the primary party to pay there at maturity constitutes tender of payment under NIL. When shall presentment for payment be made?  Where the instrument is not payable on demand. except that in the case of a bill of exchange.1.

How is presentment for payment made?  The instrument must be presented to the person from whom payment I demanded. 11. . presentment for payment may be made to any one of them. with the exercise of reasonable diligence. presentment may be made at any hour before the close of the bank on that day. even if such partnership is dissolved.9. at what time shall it be presented for payment?  Presentment must be made during the banking hours. and if such instrument is paid. 13. if such there be. he can be found. it must be delivered to the party paying it. Where the instrument is payable at a bank. When may presentment for payment be made after banking hours?  When the person making the payment has no funds to make such payment during the day. To whom shall presentment for payment be made if the principal debtor is dead?  Presentment for payment must be made to his personal representative. 12. To whom shall presentment be made in case the persons primarily liable are partners?  If the persons primarily liable are partners and no place of payment is specified. Is demand for payment by telephone sufficient?  No. and if. because exhibition of the instrument is not possible. 10. 14.