DEBBIE GRACE L.

LINAZA BSA-3

BUS LAW 103

Assignment

1. What are the kinds of bill of exchange?

(1) Demand or Sight draft- the bill of exchange is payable on demand at sight,
that is, when the holder presents it for payment, or a stated time after sight.
(2) Time draft- the bill of exchange is payable at a definite future time or some
future determinable time.
(3) Inland bill of exchange- a bill which is drawn and payable within the same
state
(4) Foreign bills of exchange- a bill drawn in one state or country and payable
in another state or country
(5) Trade acceptance- is a draft or bill of exchange drawn by the seller on the
purchaser of goods and accepted by the latter by signing it as drawee.
(6) Bills in set- are usually availed of in cases where a bill had to be sent to a
distant place through some conveyance.

2. What are the kinds of promissory note?

(1) Certificate of deposit. It is a written acknowledgment by a bank of the

receipt of money received or on deposit which the bank promises to pay to
the depositor, or to him or his order, or to some other person, or to him or his
order, or to bearer, or to a specified person or bearer, on demand or on a
fixed date, often with interest.
(2) Bond. It is an evidence of indebtedness issued by a public or private
corporation, promising to pay a sum of money on a day certain in die future.
Its negotiability is controlled by the same rules governing promissory notes. It
runs for a longer period of time than a promissory note and is issued for debts
of substantially larger amounts.
(3) Bank note. It is an instrument issued by a bank for circulation as money
payable to bearer on demand.
 (4) Due bill. It is a promissory note which shows on its face an acknowledgment
by a person of his indebtedness to another. The word "due" is usually used.
(5) Mortgage note. Two kinds are: the chattel mortgage note and the real estate
mortgage note. As the name implies, the first is secured by personal property
and the second, by real property. In sale of a house, for example, the note
secured by mortgage on the property, is for the unpaid balance of the
purchase price. The security contract, known as a mortgage, most frequently
provides that the mortgage can be foreclosed if the note is not paid when it is
due.
(6) Title-retaining note. This type is secured by a conditional sales contract
which ordinarily provides that the title to the goods shall remain in the payee's
name until the note is paid in full. It is used to secure the purchase price of
goods.
(7) Collateral note. It is used when the maker pledges securities (shares of
stocks, bonds, and other personal property) to the payee to secure the
payment of the amount of the note. The securities are usually placed with the
holder as collateral security. Banks also use a device called "signature note"
for short-term unsecured loans or loans made without collaterals.
(8) Judgment note. This is a note to which a power of attorney is added
enabling the payee to take judgment against the maker without the formality
of a trial if the note is not paid on its due date.
(9) Installment note. It is a note payable in specified or periodic installments at
predetermined time such as for payment of a refrigerator over a 12-month
period.

3. When bill of exchange may be treated as promissory note?

Under Sec. 130 of the Law on Negotiable Instruments, the bill of exchange may
be treated as promissory note, when:
 (1) The drawer and the drawee are the same person, like a draft drawn by a bank
on its branch, or by a corporation on its treasurer, or by an agent on his
principal by authority of the latter;
(2) The drawee is a fictitious person, and;
(3) The drawee has no capacity to contract.

4. Who are the parties in a promissory note?

(1) Maker- the one who makes die promise and signs the instrument
(2) Payee- the party to whom the promise is made or the instrument is
payable

5. Who are the parties in a bill of exchange?

A bill of exchange requires in its inception at least three parties — the drawer,
the drawee, and the payee.
(1) Drawer. The person who issues and draws the order bill is called the
drawer. He gives the order to pay money to a third party. He does not pay
directly.
(2) Drawee. The party upon whom the bill is drawn is called the drawee. He is
the person to whom the bill is addressed and who is ordered to pay. He
becomes an acceptor when he indicates a willingness to accept
responsibility for the payment of the bill. (Sec. 62.) The drawee is a bank
in the case of a check.
(3) Payee. The party in whose favor the bill is originally drawn or is payable is
called the payee. Up to the time of acceptance by the drawee, the payee
looks exclusively to the drawer. Again, the payee, as in a promissory note,
may be specifically designated, or may be an office or title, or unspecified.
6. Enumerate the types of defective instrument.
(1) Fraud. Ex. Brokers employed to buy stock represented that they bought
the stock and received a check therefor, but had not in fact bought. It was
held that their title to the check was defective because they obtained it by
means of fraud.
(2) Duress, or force or fear. Ex. Where A, by the use of violence and
intimidation, forced P to indorse a promissory note in favor of A.
(3) Other unlawful means. Where the instrument has been stolen. It has
been held that a person who acquires an instrument by endorsement of a
part thereof gets title by unlawful means since the transfer is in
contravention of the law.
(4) Illegal consideration. A note given to stifle a criminal prosecution is
invalid, or in consideration of the payee killing a person.
(5) Negotiation in breach of faith. Where the payee of a note negotiated it
after receiving payment from the maker; where the payee transfer the
instrument in breach of agreement; where a note is given in payment of
goods to be delivered and the note is negotiated without delivery of the
goods; where a note held merely as collateral or security is negotiated.
(6) Circumstances amounting to fraud. Where the payee of a note
negotiated it after being told that the maker intends to resist payment or
that the transferor had no legal right to transfer.