QUITAYEN, IANNA CARMEL Y.

JD – II
LAW 202 Negotiable Instruments Law
Professor: Atty. Deen Asliah D. Macarandang
May 15, 2021 – 5.30PM to 8.30PM

FINAL EXAM
Question no. 1:
Write TRUE if the statement is correct; write FALSE if the statement is wrong. In each
question explain your answer with reasons.
a. A notice of dishonor is done either verbally or by writing. If such notice is given by
a notary public, it is called a protest. (2%)

Answer: TRUE. The Negotiable Instruments Law provides that a notice of dishonor
may be done verbally or in writing, while a protest must be made either by a notary
public or a respectable resident in the presence of at least two witnesses.

b. A bank deposit is really a loan which creates the relationship of debtor and creditor.
(2%)

Answer: TRUE. A bank deposit in reality actually creates a debtor-creditor

relationship between the depositor and the bank, the depositor being the creditor
and the bank being the debtor.

c. A check, payable on demand, which was long overdue by about 2-1/2 years, was
considered a stale check. (2%)

Answer: TRUE. Banks consider check outstanding for more than six months or
180 days as stale check.

d. A stranger may make payment for honor. (2%)

Answer: TRUE. The Negotiable Instruments Law provides that any person,
whether a party to a bill or not, may make a payment for honor.

e. The payment for honor supra protest may or may not be attested by a notarial act
of honor. (2%)

Answer: FALSE. The Negotiable Instruments Law provides that for there to be a
valid payment for honor supra protest, it must be attested by a notarial act of honor
which must be appended to it or form an extension of it.

f. In payment for honor, the consent of the holder is required; while in acceptance for
honor, the consent of the holder is not required. (2%)

Answer: FALSE. In the case of payment for honor, the consent of the holder is not
required; while in the case of acceptance for honor, it must be made with consent
of the holder of the instrument.

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QUITAYEN, IANNA CARMEL Y.
JD – II
LAW 202 Negotiable Instruments Law
Professor: Atty. Deen Asliah D. Macarandang
May 15, 2021 – 5.30PM to 8.30PM

g. A drawee is a stranger to the bill drawn on him, unless and until he accepts the
same. When he accepts, he becomes the acceptor, thus he is secondarily liable
to the bill. (2%)

Answer: FALSE. When the drawee becomes the acceptor, he becomes a party to
the bill who is primarily liable thereon.

h. The discharge of a secondarily liable party by intentional cancellation of his

signature operates as a discharge of parties prior to the party discharged. (2%)

Answer: FALSE. An intentional cancellation of a signature of party secondarily

liable operates as a discharge of the parties subsequent to the party whose
signature has been cancelled.

Question no. 2:

Rose draws a bill payable to Pia or order with EW as the drawee. Pia indorses to Ana;
Ana indorses to Ben; Ben indorses to Cathy; Cathy indorses to Dino; and Dino indorses
to Ellen the present holder. For failure of EW to pay the bill, Ellen protested for non-
payment. Tony offers to pay supra protest for the honor of Cathy, while Lulu offers to pay
supra protest for the honor of Ana.

A. May Tony and Lulu make payment for honor at the same time? Explain your
answer with reasons. (4%)

Answer: No, Tony and Lulu cannot make payment for honor at the same time. Only
one can make the payment for honor. The Negotiable Instruments Law provides
that when two or more persons offer to make payment for honor the preferential
rule shall be followed which provides that the party whose offer discharges most
parties on the bill shall be preferred.

B. Suppose Lulu pays for the honor of all parties to the bill, explain with reasons Lulu’s
the right to recovery. (4%)

Answer: Lulu has a right to recover from all the parties to the bill. The Negotiable
Instruments Law provides that a payer for honor is subrogated to both the rights
and duties of the holder as regards the party whose honor he pays and all parties
liable to the latter. If the payment is made for the honor of all parties to the bill, the
payer for honor may have recourse against all of them. Therefore, Lulu has a right
to recover from all of the parties.

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QUITAYEN, IANNA CARMEL Y.
JD – II
LAW 202 Negotiable Instruments Law
Professor: Atty. Deen Asliah D. Macarandang
May 15, 2021 – 5.30PM to 8.30PM

Question no. 3:

Maria makes an instrument payable to the order of Pia. Pia indorses to Ana; Ana indorses
to Ben; and Ben indorses to Cathy the present holder.

A. Suppose Cathy releases Maria, in effect, are the other parties also released?
Explain your answer with reasons. (4%)

Answer: No, the parties prior to Cathy are not released. The Negotiable
Instruments Law provides that a discharge of a prior party operates as a discharge
of the parties subsequent to him. In this case, Maria, Pia, Ana, and Ben are not
parties subsequent to Cathy, instead they are parties prior to Cathy.

B. Suppose in releasing Maria, Cathy expressly reserved her right against the parties
secondarily liable. Can Pia, Ana, and Ben validly argue that they are likewise
released? (4%)

Answer: No, they cannot. The act of Cathy expressly reserving her right against
the parties secondarily liable does not discharge them from their liability on the
instrument.

Question no. 4:

Maria makes an instrument payable to Pia or order. Pia indorses to Ana; Ana indorses to
Ben; Ben indorses to Cathy; and Cathy indorses to Dino the present holder of the
instrument.

a. Suppose Dino renounces in favor of Maria, what is the effect of such renunciation?
Explain your answer with reasons. (4%)

Answer: It has the effect of discharging the instrument. The release of the principal
debtor, who in this case is Maria, discharges the instrument and renders the
instrument without force and effect, and consequently, no longer negotiable. Since
it is the instrument that is discharged, it also releases all the parties liable thereon,
both primary and secondary.

b. Suppose Dino, after he made the renunciation, negotiates the instrument to

Eddie, a holder in due course, can Eddie still enforce the instrument? Explain your
answer with reasons. (4%)

Answer: Yes, Eddie can still enforce the instrument. The law expressly provides
that renunciation does not affect the rights of a holder in due course without notice.

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QUITAYEN, IANNA CARMEL Y.
JD – II
LAW 202 Negotiable Instruments Law
Professor: Atty. Deen Asliah D. Macarandang
May 15, 2021 – 5.30PM to 8.30PM

Since there is no showing that Eddie had notice of the renunciation and being a
holder in due course, he is not affected by the renunciation of Maria by Dino.

Question no. 5:

What are the requisites for a valid payment for honor? (2%)

The following must be present for there to be a valid payment for honor:
1. The bill must have been dishonored for non-payment;
2. The bill must have been protested for non-payment;
3. The payment for honor is made by any person;
4. The payment for honor is attested by a notarial act of honor which is appended to
or form an extension of it; and
5. The notarial act must be on declaration made by the payer for honor, or by his
agent in his behalf, declaring his intention to pay the bill for honor and for whose
honor he should pay.

Question no. 6:

When is presentment for acceptance not necessary? (2%)

Answer: Presentment for acceptance is not necessary when the bill in question is a bill
payable on demand, the bill is payable on sight, the bill is payable at a day certain or at a
fixed time, or in any other case that does not fall under the rule provided by the Negotiable
Instruments Law when presentment for acceptance must be made.

Question no. 7:

Discuss with reasons the liabilities of parties, such as the maker, drawer, and indorser.
(2%)

Answer:
The maker, being a party primarily liable on the instrument, engages to pay the
instrument according to its tenor and admits the existence of the payee and the payee’s
then capacity to indorse.

The drawer, being a party secondarily liable on the instrument, engages that on due
presentment the instrument will be accepted or paid, or both, according to the
instrument’s tenor and that if it be dishonored and the necessary proceedings on dishonor
be duly taken, he will pay the amount on the instrument to the holder, or to any
subsequent indorser who may be compelled to pay it. The drawer also admits the
existence of the payee and the payee’s then capacity to indorse.

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QUITAYEN, IANNA CARMEL Y.
JD – II
LAW 202 Negotiable Instruments Law
Professor: Atty. Deen Asliah D. Macarandang
May 15, 2021 – 5.30PM to 8.30PM

The indorser, qualified or unqualified, is also a party secondarily liable thereon. In

addition to his secondary liability to pay on the instrument if such be dishonored and the
necessary proceedings on dishonor be duly taken, he also has warranty liabilities on the
instrument.
For a qualified indorser, he warrants that the instrument is genuine and in all respects
what it purports to be, that he has good title to it, that all prior parties had the capacity to
contract and that he had no knowledge of any fact which would impair the validity of the
instrument. For an unqualified indorser, he has the same first, second and third
warranties as that of a qualified indorser, and that the instrument is valid and subsisting
at the time of his indorsement.

Question no. 8:
Explain the following:

a. The formal and content requirements of a valid certificate of protest. (2%)

The following are the formal and content requirements of a valid certificate of
protest:
1. The protest must be annexed to the bill of exchange or must contain a copy
thereof;
2. The protest must be under the hand and seal of the notary public making it;
3. It must specify the time and place of presentment;
4. It must specify that presentment was made and the manner of presentment;
5. It must specify the cause for protesting the bill; and
6. It must specify the demand made and the answer that was given, if any, or the
fact that drawee or acceptor cannot be found.

b. The liability of the acceptor for honor. (2%)

The acceptor for honor is liable to the holder and to all the parties subsequent to
the party for whose honor he has accepted.

Question no. 9:
Distinguish the following:
a. Acceptance for honor and ordinary acceptance. (2%)

1. In the former, the acceptor must be a stranger to the bill, while in the latter, the
acceptor must be the drawee named therein;
2. In the former, it requires that there must have been a protest, while in the latter,
protest is not necessary;
3. In the former, the consent of the holder is required, while in the latter it does
not require the consent of the holder;
4. In the former, the acceptor is only secondarily liable while in the latter the
acceptor is primarily liable;

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QUITAYEN, IANNA CARMEL Y.
JD – II
LAW 202 Negotiable Instruments Law
Professor: Atty. Deen Asliah D. Macarandang
May 15, 2021 – 5.30PM to 8.30PM

5. In the former, payment made by the acceptor for honor does not discharge the
instrument, while in the latter, payment in due course by the acceptor
discharges the instrument.

b. Protest and notice of dishonor. (2%)

1. In the former, it is only required in the case of dishonor of a foreign bill, while in
the latter, it is required in any negotiable instrument other than a foreign bill;
2. The former must always be made in writing while the latter made be done
verbally or in writing;
3. The former may be made by either a notary public or by any respectable
resident in the presence of at least two witnesses, while the latter may be made
by a party to the instrument or a person in his behalf;
4. The former must be made in the place where the bill is dishonored while the
latter does not require that it be made in the place where it is dishonored;
5. The former requires that it must be made on the day the bill is dishonored while
the latter requires that the notice be given within the specified time prescribed
by the Negotiable Instruments Law.

Question no. 10:

Define the following terms:

a. Certified check (1%)

A certified check is a check that bears upon its face an agreement by the drawee-
bank that such check will be paid on presentation.

b. Acceptor (1%)

An acceptor is a party to a bill of exchange who engages to pay such bill according
to tenor of his acceptance.

c. Deemed indorser (1%)

A deemed indorser is one who places his signature upon an instrument otherwise
than as maker, drawer, or acceptor unless he should clearly indicate by
appropriate words his intention to be bound in some other capacity.

d. Referee in case of need (1%)

A referee in case of need is a person who is named by the drawer or indorser as

one to whom the holder of the instrument may resort to in case of need, such as
in the case that the bill be dishonored.

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QUITAYEN, IANNA CARMEL Y.
JD – II
LAW 202 Negotiable Instruments Law
Professor: Atty. Deen Asliah D. Macarandang
May 15, 2021 – 5.30PM to 8.30PM

e. Bills in set (1%)

Bills in set are those composed of several parts, each part is numbered and
contains a reference to the other parts. A bill in a set is considered as constituting
one bill.

f. Protest for better security (1%)

A protest for better security is a protest made on a bill which has been accepted
but prior to its maturity, the acceptor is adjudged a bankrupt, an insolvent or an
assignment has been made for the benefit of the creditors.

----Nothing Follows----

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