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18-00306 02/28/2019
Law on Negotiable Instruments Quiz #8

Notice of Dishonor
Concept of Dishonor – Notice of dishonor means bringing either orally or in writing, to the
knowledge of the drawer or indorser of an instrument the fact that a specified negotiable
instrument, upon proper proceedings taken, has not been accepted or has not been paid, and
that the party notified is expected to pay it.
Purpose of notice of dishonor – The purpose is to enable the party to be charge to preserve
and protect his rights against prior parties.
Grounds for the giving of notice of dishonor
1. Non-acceptance of the instrument, or
2. Non-payment of the instrument. [Sec. 89]
Necessity of giving notice of dishonor
1. As against Notice of dishonor need not be given to the party primarily liable
party primarily to make them liable because he is the very person who dishonored
liable the instrument. Thus, notice need not be given to the maker
(whether joint maker or accommodation maker) nor the acceptor
of a bill of exchange.
2. As against Notice of dishonor must be given to the drawer and to each
party indorser [Sec. 89] to make them liable. Exceptions, i.e., the drawers
secondarily and indorsers are liable even without notice of dishonor in the
liable following cases :
a) In case of waiver
Notice of dishonor may be waived, either before the giving
notice has arrived or after the omission to give notice, and
the waiver may be expressed or implied. [Sec. 109]
Where the waiver is embodied in the instrument itself, it is
binding upon all parties; but where it is written above the
signature of an indorser, it binds him only. [Sec. 110]
A waiver of protest whether in the case of a foreign bill of
exchange or other negotiable instrument, is deemed to be
a waiver not only of a formal protest, but also of
presentment and notice of dishonor. [Sec. 111]
b) When notice is dispensed with
Notice of dishonor is dispensed with when, after the
exercise of reasonable diligence, it cannot be given or does
not reach the parties sought to be charged. [Sec. 112]
Thus, political disturbances that interrupt and obstruct the
ordinary negotiations of trade, or the prevalence of
infectious disease that has become so extensive as to
suspend commercial business and intercourse, are
considered sufficient excuse that will dispense with the
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giving of a notice of dishonor. As regards the drawer in

following cases:
 When the drawer and drawee are the same person.
 When the drawee is a fictitious person or a person
not having capacity to contract.
 When the drawer is the person to whom the
instrument is presented for payment.
 Where the drawer has not right to expect or require
that the drawee or acceptor will honor the
instrument.
 Where the drawer has countermanded payment.
c) As regards the indorser in the following cases:
 When the drawee is a fictitious person a person not
having capacity to contract, and the indorser was
aware of that fact at the time he indorsed the
instrument.
 Where the indorser is the person to whom the
instrument is presented or payment.
 Where the instrument was made or accepted for his
accommodation.[Sec. 115]
d) When notice of dishonor by non-acceptance was
previously given
 Thus, where due notice of dishonor by non-
acceptance has been given, notice of subsequent
dishonor by non-payment is not necessary, unless in
the meantime the instrument has been accepted.
[Sec. 116]
e) As regards a holder in due course without notice
 An omission to give notice of dishonor by non-
acceptance does not prejudice the rights of a holder
in due course subsequent to the omission.[Sec.117]
Effect of failure to give notice – Any drawer or indorser to whom such notice is not given is
discharged. [Sec. 89]
Requisites of notice of dishonor
1. By whom notice The notice may be given by any of the following:
is given  By the holder or on behalf of the holder [Sec.90]
 By or on behalf of any party to the instrument whom might
be compelled to pay it to the holder, and who, upon taking
it up would have the right to reimbursement from the party
to whom notice is given. [Sec. 90]
If notice is given by an agent he may do so in his own name or in
the name of any party entitled to give notice, whether that party be
his principal or not. [Sec. 91]
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Persons benefited by notice

 Where notice is given by or on behalf of the holder, it
ensures to the benefit of all subsequent holders and all
prior parties who have a right of recourse against the party
to whom notice is given. [Sec. 92]
 Where notice is given by or on behalf of a party entitled to
give notice, it inures to the benefit of the holder and all
parties subsequent to the party to whom notice is given.
[Sec. 93]
2. How notice is a. Form of notice
given  Oral
 Written
A written notice need not be signed, and an insufficient
may be supplemented and validated by verbal
communication. A mis-description of the instrument does
not vitiate the notice unless the party to whom the notice is
given is in fact misled thereby. [Sec. 95]
The notice, whether in writing or merely oral, may be given
in any terms which sufficiently identify the instrument, and
indicated that it has been dishonored by non-acceptance or
non-payment. [Sec. 96]
b. How notice is served
 Personal delivery, or
 By mail. [Sec. 96]
 Notice is deemed to have been deposited in the
post-office when deposited in any branch post-
office or in in any letter box under the control of the
post-office department. [Sec. 106]
 Where notice of dishonor is duly addressed and
deposited in the post-office, the sender is deemed
to have given due notice, notwithstanding any
miscarriage in the mails. [Sec. 105]
3. To whom notice Notice may be given either to the party himself or to his agent in
is given that behalf, [Sec. 97] subject to the following rules;
i. Where party is dead [Sec. 98]
 When any party is dead, and his death is known to
the party giving notice, the notice may be given to
his personal representative, if there be one, and if
with reasonable diligence, he can be found.
 If there be no personal representative, notice may
be sent to the last residence or last place of
business of the deceased.
ii. Where parties are partners [Sec. 99]
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 Notice to any partners is notice to the firm even

though there has been dissolution.
iii. Where parties are joint but are not partners [Sec. 100]
 Notice must be given to each of them, unless one of
them has authority to receive such notice for the
others.
iv. When party was adjusted bankrupt or insolvent, or has
made an assignment for the benefit of creditors [Sec. 101]
Notice may e given either to the party himself of to his
trustee or assignee.
4. When notice Notice may be given as soon as the instrument is dishonored [Sec.
must be given 102] subject to the following rules:
I. Where parties resides in the same place [Sec. 103]
 If given at the place of the person to receive notice,
it must be given before the close of business hours
on the day following.
 If given at his residence, it must be given before the
usual hours of rest on the day following.
 If sent by mail, it must be deposited in the post-
office in time to reach him in usual course on the
day following.
II. Where parties reside in different places [Sec. 104] Notice
must be given within the following times:
 If sent by mail, it must be deposited in the post-
office in time to go by mail the day following the
day of dishonor, or if there be no mail at a
convenient hour on that day, by the next mail
thereafter.
 If given otherwise than through the post office, then
within the time that notice would have been
received in the due course of mail, if it had been
deposited in the due curse of mail, if it had
deposited in the post office within the time
specified above.
III. Notice to antecedent parties [Sec. 107]
 Where a party receives notice of dishonor, he has,
after the receipt of such notice, the same time for
giving notice to antecedent parties that the holder
has after the dishonor.
5. Where notice A. Where notice must be sent [Sec. 108]
must be sent  Where a party has added an address to his
[Sec. 108] signature, notice of dishonor must be sent to that
address.
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 If he has not given such address, notice must be

sent as follows:
 Either to the post-office nearest to his place
of residence or to the post-office where he is
accustomed to receive his letters; or
 If he lives in one place, and has his place of
business in another, notice may be sent to
either place; or
 If he is sojourning in another place, notice
may be sent to the place where he is so
sojourning.
Where notice is actually received by the party within the time
specified in the preceding rules, it will be sufficient though not sent
in accordance with the requirements aforementioned.