Activity 1

Discussion

1. (a) Yes he is liable to the payee because he is primarily liable to the holder upon acceptance of
the instrument. In case he didn’t accept the instrument he isn’t liable to the payee.
(b) Yes the drawee becomes liable to the drawer when the drawer has funds for the purpose of
payment in the drawee. He will be liable if there is an agreement obligating the drawee to honor
the order of the drawer.
2. Section 18 general rule says, Only persons whose signature appear on an instrument are liable
thereon. BUT, there are exceptions:
(a) Where a person signs in a trade or assumed name (Se. 18, par 2.)
(b) The principal is liable if a duly authorized agent signs on his own behalf (Sec 19.)
(c) In case of forgery (Sec. 23.), the forger is liable even if his signature does not appear on the
instrument.
(d) Where the acceptor make his acceptance of a bill on a separate paper (Sec. 134.)
(e) Where a person makes a written promise to accept a bill before it is drawn. (Sec. 135)
3. According to sec. 3, promise become unconditional when it contains an unconditional promise
to pay.
Example: “reimburse yourself from the rentals of my house.” “Reimburse yourself from the
rentals of my car.
4. Yes, according to sec. 5 general rule “ An instrument which contains an order or promise to do
any act in addition to the payment of money is not negotiable.”
5. Yes, according to Sec. 2 “ the sum payable is a sum certain within the meaning of this act,
although it is to be paid (e) With costs of collection or an attorney’s fee, in case payment shall
not be made at maturity.
6. Sec. 20. In order that an agent who signs a negotiable instrument may escape personal liability,
the following are the requisites:
(1) He is duly authorized;
(2) He adds words to his signature indicating that he signs as an agent, that is, for or on behalf
of a principal, or in a representative capacity; and
(3) he disclose his principal.

Problems

1. Z is deemed a holder for value in respect to all parties who become such prior to that time. If Z is
a holder in due course according to SEC. 52 he may enforce payment for the full amount of the
note against W, X and Y. If Z is not a holder in due course, W can set up the defense of absence
of consideration. (sec. 58)
2. In this case it depends, because it is not clearly stated that he disclosed his principal which is one
of the requisites to escape personal liability. If he disclosed his principal then he will not be
personally liable to X, but he didn’t disclosed his principal then he would still be personally
liable.
3. A has the right to collect payment for the full amount of the note against W and X.
4. Yes the instrument is negotiable, because the choice was given to the payee or to the holder not
to the maker.
5. Yes, because under sec. 16 presumption that delivery has been made but is subject to rebuttal
by W.
6. Yes, Section 3 states “ An unqualified order or promise to pay is unconditional within the
meaning of this Act though coupled with (b) a statement of the transaction which gives rise to
the instrument.
7. No, because the mode of payment depend on contingent act, or it gives the right of choice to
the maker.