NEGOTIABLE INSTRUMENTS

1) Introduction
2) Class rules
a) Oral recitations must get 1.75
b) Midterm essay, TF, mcq
c) Attendance absent during orals 5.0
3) What is a negotiable instrument?
a) Sec. 1 need to memorize
b) In practice
i) PN
Jan 15, 2017

I promise to pay to the order of Juliet (PAYEE) the sum of P500 on or

before Jan 30, 2017
- RomeO (MAKER)
ii) BoE check
Jan 15, 2017

Pay to the Order of _____.

The sum of ____________.

- Sgd.
4) Functions
a) Substitute for money
i) Not legal tender cannot compel to receive
ii) Produce effect of payment when cashed or impaired through fault of cr
b) Creating and transferring credit
c) Facilitate sale of goods
5) Concept of negotiability
a) Romeo buys a car P5,000,000 from Juliet. Pays cash 100,000 , Issues a check
for P4,900,000.
b) Juliet indorses the note to Mr. X Y Z Bank
6) Non-negotiable but used in commerce
a) Letter of credit
i) Romeo imports tea from China. Juliet agreed to supply. How will Romeo
pay Juliet?
ii) Romeo goes to PNB, Phils to make a letter to PNB, China ordering PNB
China to pay Juliet.
iii) Not negotiable paid to a specific person
b) Treasury warrant
i) Mayor Romeo incurred expenses while on OB.
ii) Not nego paid to a specific fund
7) For next meeting: (requisites for negotiability)
a) Sec 1, 184, 126, 18, 19, 3, 2, 7, 4, 11, 17(c), 8, 9, 128, 130, 5, 6, 17

Section 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 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.

1) Instruments which does not comply with Sec. 1 is not a negotiable instrument.
2) Two Kinds of NI
a) PN
b) Sec. 184. Promissory note, defined. - A negotiable promissory note within the
meaning of this 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 maker's own order, it is not complete
until indorsed by him. (a to d) to be discussed in indorsement

Example:

Jan 15, 2017

I promise to pay to the order of Juliet (PAYEE) the sum of P500 on or

before Jan 30, 2017
- RomeO (MAKER)

c) BOE
d) Sec. 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. (a to e)

Example
METROBANK (DRAWEE) Jan 15, 2017

Pay to the Order of _____.

The sum of ____________.

- Sgd. (DRAWER)

Requisites:

1) It must be in writing and signed by the maker or drawer

a) Writing includes print
b) Pwede sa tissue paper e butang? Y, as long as written and signed by
maker or drawer
c) Where to put the signature? Anywhere! As long as it is the intention of the
person signing it that he is to be bound as maker or drawer.
i) If intention is not clear then he is deemed an indorser
d) Can I put a thumbmark? Or X? or initials? YES! As long there is intention to be
bound by it.
e) May I use a trade name in signing? Yes.
i) 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.
f) May I ask another to sign for me?
i) 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.
(1) No need for spa