HANDOUT NO.

4N

Holder – refers to the payee or indorsee of a bill or note who is in possession of

it or the bearer thereof. (Lim v. CA, 251 SCRA 408)

Two requisites of a holder –

a) Physical possession of the instrument; and

b) The right to be paid thereunder under the terms of the instrument, that
is, as payee or indorsee.

Bearer Instrument – it is one which on its face, is payable to bearer. Even if

indorsed specially, it continues to be negotiable by mere delivery. (The only way
to stop further negotiation is to indorse it restrictively, e.g. “For deposit only”)

Order Instrument – it is one, which on its face, is payable to the order of a

specified person. (It can be negotiated only by the indorsement of the holder,
completed with delivery, unless the last or only indorsement is in blank or to
bearer.)

Incomplete instrument – it is an instrument that is lacking material particulars

like the name of the payee and the amount of the instrument.

Delivery – it is the transfer of possession with intent to transfer title. It consists of

placing the transferee in possession of the instrument, accompanied by the intent
to transfer title.

Legal Tender – notes and coins issued by Bangko Sentral ng Pilipinas.

N.B. – Please refer to Section 191 of Act 2031 for other definitions

A. Villegas