Definition (Lalabas sa exam), Create an Illustration 126, 184, 185

1. Holder

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.

Principal Parties:

Maker – the maker is the debtor, the one who executes or drop the promissory notes infavor of the
payee (the maker is the primarily liable)
Payee – the payee is the creditor,

The maker and the payee are the principal parties, but not necessarily the only parties.

Mag iisuue si maker ng promissory note kay payee, the latter has an option to demand the sale to the
payee or can negotiate it to the 3rd party. WHEN

For Example:

Who are the parties secondarily liable in a promissory note?

FORMS OR KINDS OF PROMISSORY NOTES

1. Bond – it is a series of instruments that represents indebtedness, (for example, treasury bonds)
Parties:
a. Bond holder – (the creditor) the one who purchase the bond from the bond issuer
b. Bond Issuer –
c. Trustee – it is a 3rd party to whom the issuing company or organization mortgage the
corporate property as a security. In case the bond issuer ails to pay the bond holder on a
certain period of time, the trustee would be held liable.

Bill of exchange –

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.

Parties:
Drawer – (debtor) the one who orders the drawee to pay

Drawee – (creditor) the one who receives the instruments

Payee – the person who was the one being ordered by the drawer

The party primarily liable is the drawee in a BOE, the parties secondarily liable is the drawer

IS THE DRAWEE AUTOMATICALLY PARTLY PRIMARILY LIABLE?

No. The drawee becomes PARTLY primarily liable upon her acceptance. Being partly liable is not
transferrable.

FORMS OF BOE (KASAMA SA EXAM)

CHECK

Sec. 185. Check defined. —A check is a bill of exchange drawn on a bank AND ALWAYS payable on
demand. Except as herein otherwise provided, the provisions of this Act applicable to a bill of exchange
payable on demand apply to a check.

PRINICIPAL PARTIES:

a. Drawer – who issues the check

b. Payee – the person on who’s favor the check is issue or made payable
c. Drawee – usually the bank, who receives and paid the order

WHAT IS THE DISTINCTIVE CHARACTERISTIC OF CHECK FROM OTHER BOE

In a check the drawee is always a bank, in ordinary BOE the drawee, may be a company, it may
an organization, or it may be a person.

Upon the death of the parties

In check, the banks have an authority to stop payment when the drawer dies, however, in an
ordinary BOE, it does not affect the payment even in case of the death of the drawer.

As to the liabilities of the parties

As to the negotiabilities
In case of PN, it is an unconditional promise by the maker. However, In the BOE or in a Check it
is an unconditional order.

WHAT ARE THE INCIDENTS OR PHASES IN THE LIFE OF NEGOTIABLE INSTRUMENTS

1. Preparation and Signing

2. Issuance
3. Negotiation
4. Discharged of the Instrument (Specifically in the NI) (Sec. 119)

WHEN AN INSTRUMENT NEGOTIABLE?

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.
WHEN IS PN NEGOTIABLE?
In conformity with the requirements of Sec. 1, it must be in writing and signed by the maker, it contains
an unconditional promise or order to pay a sum certain in money, payable on demand or at a fixed or
determinable future time, payable to order or to bearer,

WHEN IS THE BOE NEGOTIABLE?

Pursuant to Sec. 1 it must be in writing and signed by the drawer, it contains an unconditional order to
pay a sum certain in money, payable on demand or at a fixed or determinable future time, payable to
order or to bearer, lastly, Where the instrument is addressed to a drawee, he must be named or
otherwise indicated therein with reasonable certainty.

CAN THERE BE A VERBAL PN?

No. Because under Sec. 1 of NIL, it must be in writing.

Regardless of the usage of what kind of signature that you affixed to other documents. The factor or the
main consideration is the intention of the party as long as the party intense that thumb mark of his or
her signature as a maker or as drawer in that particular instruments that would suffice. The controlling
factor is the intent or the intention of the party affixing his thumbmark.

IF THE SIGNATURE DOES NOT APPEAR ON THE INSTRUMENT DO YOU STILL BE HELD LIABLE?

As a general rule, a person whose signature does not appear on the instrument will not be held liable.
Except: In case of forgery, a separate paper use for additional indorsement, principals who signs thru his
agents (yung agent ang nag sign in his behalf) provided: 1. There should be an agreement between the
principal and agent that the principal authorizes the agent and that the agent is acting on the half of the
principal (there should be 3, kulang pa ng dalawa), person that negotiate your instrument buying your
delivery they should liable for immediate indorsees. PERSON WHO SIGNS OR ASSUME IT IN TRADE
NAME OR BUSINESS

WHAT INSTRTUMENT THAT COULD BE TRANSFER FROM ONE PERSON TO ANOTHER BY MERE
DELIVERY ONLY.

A. BEARER INSRUMENT

IS THERE AN INSTANCE WHERE A PERSON SIGNATURE APPEARS ON THE INSTRUMENT BUT THAT
PERSON CANNOT BE HELD LIABLE?

a. Forgery
b. Trade name or Assume name

Note: Dapat alam mo yung requisites ng agent and principal. Liability of the agents and principals. (18,
19, 21, 23)

SIGNATURE THROUGH PROCURATION

SEC. 191 DEFINES WHO IS A HOLDER

"Holder"  means the payee or indorsee of a bill or note who is in
possession of it, or the bearer thereof
The illegal consideration does not affect the negotiable character of an instrument. If the instrument is
negotiable who is now the holder, the holder is the creditor, B, the

Maker is a minor, it is a real defense