Since 1977

BUSINESS LAW ATTY. ONG

BL.2905-Negotiable Instruments/ BP22 OCT 2020

NEGOTIABLE INSTRUMENTS NIL

Transferable by negotiation Transferable by assignment
NEGOTIABLE INSTRUMENTS - a written contract for the and assignment. only

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payment of money which complies with the requirements of Holder in due course can A transferee acquires no
Sec. 1 of the NIL, which by its form and on its face, is acquire better rights than hisbetter right than his

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intended as a substitute for money and passes from hand to transferor transferor

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hand as money, so as to give the holder in due course (HDC) Prior parties warrant payment Prior parties do not warrant
the right to hold the instrument free from defenses available (secondary liability). payment but merely the
to prior parties. legality of his title.

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Governed by Negotiable Negotiable Instrument Law

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Form of Negotiable Instruments Instrument Law only applies by analogy
To determine whether the instrument is negotiable or not, the

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Transferee is a holder in due Transferee is assignee only.

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following must be considered: course.
1. The whole of the instrument
2. Those only appear on the face of the instrument Defenses generally not All defenses available
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3. Compliance with the requirement under Section 1 of the available. against last transferee
Act.
The instrument need not follow the language of this Act, but
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any terms are sufficient which clearly indicate an intention to Special form of Promissory note
conform to the requirements hereof. (Sec 10)
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1. Certificate of deposit – It is a written acknowledgement

by a bank of the receipt of money on deposit which the
Two Distinctive Features of Negotiable Instrument:
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bank promises to pay to the depositors.

1. NEGOTIABILITY - it is that attribute or property 2. Bond – It is an evidence of indebtedness issued by a
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whereby a bill or note or check may pass from hand to
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public or private corporation, promising to pay a sum of

hand similar to money, so as to give the holder in due
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money on a day certain in the future.

course the right to hold the instrument and to collect the a. Registered bond – or one payable only to the person
sum payable for himself free from defenses. whose name appears on the face of the certificate and
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2. ACCUMULATION OF SECONDARY CONTRACTS - in the books of the company. – Non-negotiable

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secondary contracts are picked up and carried along with b. Coupon bond – or one to which are attached coupon
Negotiable Instruments as they are negotiated from one
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which entitle the holder to interest when due. The

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person to another; or in the course of negotiation of interest coupon may be detached and negotiated just
negotiable instruments, a series of juridical ties between like promissory notes independent of the main
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the parties thereto arise either by law or by privity. The instrument.

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indorsers become secondarily liable to the holder. 3. Bank note – It is an instrument issued by a bank for
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circulation as money payable to bearer on demand.

Instrument with limited negotiability 4. Due bill – It is a promissory note which shows on its face
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1. Letter of credit – Payable to specified person. an acknowledgement by a person of his indebtedness to

2. Treasury warrant – Payable out of specific fund or
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appropriation, hence conditional
3. Postal money order – Subject to restriction and limitation
under postal laws and regulation. (1 indorsement is
allowed)
4. Bill of lading – Not contain an unconditional promise or
order to pay a sum certain in money
5. Certificate of stock - Not contain an unconditional
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another.
5. Chattel mortgage note – Note secured by personal
property
6. Real estate mortgage note – Note secured by real
property
7. Title retaining note – Secured by conditional sales
contract which ordinarily provides that the title to the
goods shall remain in the payee’s name until the note is

promise or order to pay a sum certain in money paid in full.

6. Warehouse receipt - Not contain an unconditional 8. Collateral note – It is used when the maker pledge
promise or order to pay a sum certain in money. securities to the payee to secure the payment of the
7. Quedan - Not contain an unconditional promise or order amount of the note.
to pay a sum certain in money. 9. Judgment note – Note to which is added a power of
8. Now account – Not payable to order or bearer attorney enabling the payee to take judgment against the
maker without the formality of a trial if the note is not
Distinction between negotiable and non-negotiable paid on its due date.
instruments
NEGOTIABLE NON-NEGOTIABLE Other classes of bill of exchange
INSTRUMENTS INSTRUMENTS 1. Bank draft – a bill of exchange drawn by a bank against
Must contain all requisites of Does not contain all its branch or another bank.
Sec.1 of the NIL requisites of Sec.1 of the 2. Trade acceptance – a draft or bill of exchange drawn by a

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 EXCEL PROFESSIONAL SERVICES, INC. (ATTY. ONG - OCT 2020)

seller on the purchaser of goods and accepted by the

latter by signing it as drawee. If the instrument is drawn (b) Must contain an unconditional promise or order
against a bank instead of the purchaser, it is called to pay a sum certain in money;
banker’s acceptance. Unconditional promise Certainty as to sum (Sec
(Sec 3) 2)
Special type of checks Unqualified order or The sum payable is a sum
1. Memorandum check - check with the word promise to pay is certain within the meaning
“memorandum” “mem” or “memo” is written upon the unconditional within the of this act, although it is to
face of the check, signifying that the drawer engages to meaning of this Act be paid -
pay the bona fide holder absolutely, and not upon a though coupled with: (a) With interest; or
condition to pay upon presentment at maturity and if due

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(a) An indication of a (b) By stated installments;
notice of the presentment and non-payment should be particular fund out of or

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given. which reimbursement (c) By stated installments,

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2. Cashier’s check – Drawn by the cashier of a bank upon is to be made or a with a provision that,
the bank itself and deemed accepted by the act of particular account to upon default in
issuance. be debited with the payment of any

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3. Manager’s check – one drawn by the bank’s manager amount; or installment or of

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upon the bank itself. (b) A statement of the interest, the whole shall
4. Traveler’s check – It is one upon which the holder’s transaction which become due; or

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signature must appear twice, one to be affixed by him at gives rise to the (d) With exchange,

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the time it is issued and the second or countersignature, instrument. whether at a fixed rate
to be affixed by him in the presence of the payee before it But an order or promise or at the current rate; or
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is paid, otherwise, it is incomplete. to pay out of a particular (e) With costs of collection
5. Certified check – One which bears upon its face an fund is not unconditional. or an attorney's fee, in
agreement by the drawee bank that the check will be paid case payment shall not
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on presentment. be made at maturity.
6. Crossed check – One which bears across its face two
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parallel lines drawn diagonally, usually on the upper left (c) Must be payable on demand, or at a fixed or
side. determinable future time;
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7. Stale check – One which has not been presented for Demand (Sec 7) Determinable future time
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payment within a reasonable time after its issue. It is (Sec 4)
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valueless and, therefore, should not be paid. An instrument is payable An instrument is payable at
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on demand - a determinable future time,

Effectivity of Act 2031 – Sec 198 (a) When it is so within the meaning of this
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Sec. 1. Form of negotiable instruments. - An instrument

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expressed to be payable Act, which is expressed to

to be negotiable must conform to the following on demand, or at sight, or be payable -
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requirements: on presentation; or (a) At a fixed period after

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(a) It must be in writing and signed by the maker or (b) In which no time for date or sight; or
drawer; payment is expressed. (b) On or before a fixed or
"Written" includes printed, and "writing" includes print.
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Where an instrument is determinable future

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(Sec 191) issued, accepted, or time specified therein;

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Signature
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indorsed when overdue, it or

No person is liable on the instrument whose signature is, as regards the person (c) On or at a fixed period
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does not appear thereon (Sec. 18) so issuing, accepting, or after the occurrence of
Exception: indorsing it, payable on a specified event
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1. One who signs in a trade or assumed name will be demand. which is certain to
liable to the same extent as if he had signed in his happen, though the
own name. (Sec 18, (2)) time of happening be
2. The principal is bound by the signature of his duly uncertain.
authorized agent (Sec 19)
3. Forgery (Sec 23) (d) Must be payable to order or to bearer; and
4. Acceptance by the acceptor in a separate paper (Sec Payable to order (Sec 8) Payable to bearer (Sec 9)
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134) The instrument is payable The instrument is payable to

5. Written promise by a person to accept the bill before to order where it is drawn bearer -
it is drawn. (Sec 135) payable to the order of a a. When it is expressed to
specified person or to him be so payable; or
Nota bene: or his order. It may be b. When it is payable to a
a. Where a signature is so placed upon the instrument drawn payable to the order person named therein or
that it is not clear in what capacity the person making of – bearer; or
the same intended to sign, he is to be deemed an (a) A payee who is not c. When it is payable to
indorser; (Sec 17, f) maker, drawer, or the order of a fictitious
b. A person placing his signature upon an instrument drawee; or or non-existing person,
otherwise than as maker, drawer, or acceptor, is (b) The drawer or maker; and such fact was
deemed to be indorser unless he clearly indicates by or known to the person
appropriate words his intention to be bound in some (c) The drawee; or making it so payable; or
other capacity. (Sec 63)

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(d) Two or more payees d. When the name of the d. Gives the holder an e. Designates a
jointly; or payee does not purport election to require particular kind of
(e) One or some of to be the name of any something to be done in current money in
several payees; or person; or lieu of payment of money. which payment is to
(f) The holder of an e. When the only or last be made.
office for the time being. indorsement is an * An instrument which
Where the instrument is indorsement in blank. contains an order or promise to
payable to order, the payee do any act in addition to the
must be named or payment of money is not
otherwise indicated therein negotiable.

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with reasonable certainty.
Provisions on Joint parties (payees/drawees/indorsers)

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• Two or more payees jointly. (Sec 8 d)

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(e) Where the instrument is addressed to a drawee, • One or some of several payees. (Sec 8 e)
he must be named or otherwise indicated therein • I promise to pay" is signed by two or more persons, they
with reasonable certainty. are deemed to be jointly and severally liable thereon.

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A bill may be addressed to two or more drawees (Sec 17 g)

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jointly, whether they are partners or not; but not to • Where an instrument is payable to the order of two or
two or more drawees in the alternative or in more payees or indorsees who are not partners, all must

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succession. (Sec 128)

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indorse unless the one indorsing has authority to indorse
for the others. (Sec 41)
Distinction of requisites of promissory note, bill of • Joint payees or joint indorsees who indorse are deemed
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exchange and a check: to indorse jointly and severally. (Sec 68)
Promissory note Bill of exchange Check (Sec 185) • Where there are several persons, not partners (Joint
(Sec. 184) (Sec 126)
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debtors), primarily liable on the instrument and no place
It must be in It must be in It must be in of payment is specified, presentment must be made to
writing and signed writing and writing and
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them all (Sec 78)

by the maker signed by the signed by the • Notice to joint persons who are not partners must be
drawer drawer
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given to each of them unless one of them has authority to

Must contain an Must contain an Must contain an receive such notice for the others. (Sec 100)
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unconditional unconditional unconditional
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• A bill may be addressed to two or more drawees jointly,

promise to pay a order to pay a order to pay a
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whether they are partners or not; but not to two or more

sum certain in sum certain in sum certain in drawees in the alternative or in succession. (Sec 128)
money money money
• Where a bill is addressed to two or more drawees who
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Must be payable Must be payable Must be payable are not partners, presentment must be made to them all
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on demand, or at a on demand, or at on demand unless one has authority to accept or refuse acceptance
fixed or a fixed or
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for all, in which case presentment may be made to him

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determinable determinable only. (Sec 145)

future time future time
• An indorsement which purports to transfer to two or
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Must be payable Must be payable Must be payable more indorsees severally, does not operate as a
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to order or to to order or to to order or to

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negotiation of the instrument. (Sec 32)

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bearer bearer bearer

• Where two or more persons offer to pay a bill for the
Where the Where the
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honor of different parties, the person whose payment will

instrument is instrument is
discharge most parties to the bill is to be given the
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addressed to a addressed to a
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preference. (Sec 174)

drawee, he must bank, it must be
be named or named or
Rules on Date:
otherwise otherwise
• The validity and negotiable character of an instrument
indicated therein indicated therein
are not affected by the fact that (a) It is not dated; (Sec 6)
with reasonable with reasonable
certainty. certainty • Where the instrument or an acceptance or any
indorsement thereon is dated, such date is deemed prima
facie to be the true date of the making, drawing,
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Additional provisions not Omissions; seal;

affecting negotiability (Sec 5)
a. Authorizes the sale of
collateral securities in case
the instrument be not paid
at maturity;
b. Authorizes a confession of
judgment if the instrument
be not paid at maturity;
c. Waives the benefit of any
law intended for the
advantage or protection of
the obligor;
acceptance, or indorsement, as the case may be. (Sec 11)
particular money (Sec 6)
• The instrument is not invalid for the reason only that it is
a. It is not dated;
ante-dated or post-dated, provided this is not done for an
b. Does not specify the
illegal or fraudulent purpose. The person to whom an
value given, or that
instrument so dated is delivered acquires the title thereto
any value had been
as of the date of delivery. (Sec 12)
given therefor;
c. Does not specify the • When date may be inserted
place where it is a. Where an instrument expressed to be payable at a
drawn or the place fixed period after date is issued undated (e.g. 30 days
where it is payable; after date, pay to the order of X (Sgd Y)
or b. Where the acceptance of an instrument payable at a
d. Bears a seal; fixed period after sight is undated (e.g. 30 days after
sight, pay to the order of X (sgd Y))

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Any holder may insert therein the true date of issue or
acceptance, and the instrument shall be payable
accordingly. The insertion of a wrong date does not avoid
the instrument in the hands of a subsequent holder in due
course; but as to him, the date so inserted is to be
regarded as the true date.
• Where the instrument is not dated, it will be considered
to be dated as of the time it was issued. (Sec 17, c)
• Except where an indorsement bears date after the
maturity of the instrument, every negotiation is deemed
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prima facie to have been effected before the instrument
was overdue. (Sec 45)
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• Material alteration. Any alteration which changes the: a.)
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The date; (Sec 124)
Construction where instrument is ambiguous. (Sec 17)
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a. Where the sum payable is expressed in words and also in
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figures and there is a discrepancy between the two, the
sum denoted by the words is the sum payable; but if the
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words are ambiguous or uncertain, reference may be had
to the figures to fix the amount;
b. Where the instrument provides for the payment of
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interest, without specifying the date from which interest
is to run, the interest runs from the date of the instrument,
and if the instrument is undated, from the issue thereof;
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c. Where the instrument is not dated, it will be considered
to be dated as of the time it was issued;
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d. Where there is a conflict between the written and printed
provisions of the instrument, the written provisions
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prevail;
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e. Where the instrument is so ambiguous that there is doubt
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whether it is a bill or note, the holder may treat it as
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either at his election;
Instances where the holder may treat the instrument
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as bill or notes at his option:
1. Where the instrument is so ambiguous that there is
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doubt whether it is a bill or note (Sec 17, e)
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2. When the drawer and the drawee is the same person
3. Where the drawee is a fictitious person
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4. When the drawee is a person not having capacity to
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contract
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f. Where a signature is so placed upon the instrument that it
is not clear in what capacity the person making the same
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intended to sign, he is to be deemed an indorser;
• A person placing his signature upon an instrument
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otherwise than as maker, drawer, or acceptor, is
deemed to be indorser unless he clearly indicates by
appropriate words his intention to be bound in some
other capacity. (Sec 63)
g. Where an instrument containing the word "I promise to
pay" is signed by two or more persons, they are deemed
to be jointly and severally liable thereon
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• A signature by "procuration" operates as notice that the
agent has but a limited authority to sign, and the principal
is bound only in case the agent in so signing acted within
the actual limits of his authority. (Sec 21)
• The indorsement or assignment of the instrument by a
corporation or by an infant passes the property therein,
notwithstanding that from want of capacity, the
corporation or infant may incur no liability thereon. (Sec
22)
• When a signature is forged or made without the authority
of the person whose signature it purports to be, it is
wholly inoperative, and no right to retain the instrument,
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(ATTY. ONG - OCT 2020)
or to give a discharge therefor, or to enforce payment
thereof against any party thereto, can be acquired through
or under such signature, unless the party against whom it
is sought to enforce such right is precluded from setting
up the forgery or want of authority. (Sec 23)
Cases of forgery
Cases of forgery of negotiable instrument may be divided as
follows:
• Promissory note
a. Forgery of the maker’s signature
b. Forgery of the indorser’s signature
• Bill of exchange or check
a. Forgery of the drawer’s signature
1. With acceptance by the drawee
2. Without acceptance of the drawee but the bill is
paid by the drawee
b. Forgery of the indorser’s signature
RULES IN CASES OF FORGED SIGNATURE:
• Where the drawer’s signature is forged and the drawee
pays it without having detected the forgery, he cannot
charge the amount thereof to the drawer’s account.
MOREOVER: The drawee who has paid a forged bill
whether previously accepted or not, is prevented from
recovering from the recipient the amount he paid because
he is bound to know the drawer’s signature.
EXCEPT, if the person to whom it was paid was guilty of
fraud, negligence, or who has not given value therefore.
RECOURSE: Recover from the forger.
• Where the payee’s indorsement is forged and the drawee
bank pays it, he cannot charge the account of the drawer
BUT he can recover from the one to whom he paid since
he makes no warranty as to genuineness of any
indorsement.
BUT IF BEARER instrument, the drawee may debit the
drawer’s account since the indorsement may be
disregarded.
HOWEVER: if the DRAWEE’S negligence is the
proximate cause of the payment under a forged
instrument, the drawee is liable to the collecting bank.
BUT: Where both the drawee and the collecting banks
are guilty of negligence, the degree of negligence of each
shall be weighed in considering the amount of loss which
each should bear.
• Where a check has several indorsements on it and one of
the indorser’s signatures is forged, it was held that it is
only the negotiation based on the forged or unauthorized
signature, which is inoperative. Thus, where the drawee
bank paid it to the encasher, the drawee bank can recover
since the indorser [Sec. 65-66] is supposed to warrant to
the drawee that the signature of the payee and previous
indorsers are genuine. One who purchases a check is
bound to satisfy himself that the paper is genuine and that
by indorsing it or presenting it for payment, he impliedly
assets that he has performed his duty.
• Prior parties are not liable to forgery of signature.
NOTE: CUT-OFF RULE – only if forged signature is
necessary to vest title to subsequent parties will prior parties
be excused from liability.
CONSIDERATION
• Every negotiable instrument is deemed prima facie to
have been issued for a valuable consideration; and every
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person whose signature appears thereon to have become
a party thereto for value. (Sec 24)
• Value is any consideration sufficient to support a simple
contract. An antecedent or pre-existing debt constitutes
value; and is deemed such whether the instrument is
payable on demand or at a future time. (Sec 25)
• What constitutes holder for value. — Where value has at
any time been given for the instrument, the holder is
deemed a holder for value in respect to all parties who
become such prior to that time. (Sec 26)
• When lien on instrument constitutes holder for value. —
valueless. The warranty however, extends in favor of no
holder other than the immediate transferee. (Sec 65)
Indorsement
1. Indorsement means an indorsement completed by deliver
(Sec 191)
2. The indorsement must be written on the instrument itself
or upon paper attached thereto (allonged) (Sec 31)
3. The indorsement must be an indorsement of the entire
instrument.
Tenor of the Instrument: Pay to the order of X P10,000

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Where the holder has a lien on the instrument arising (Sgd Y)

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either from contract or by implication of law, he is a. Pay to A P8,000 – Partial indorsement

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deemed a holder for value to the extent of his lien. (Sec b. Pay to A P5,000 and B P5,000 (Sgd X) – two or
27) more indorsee severally
• Effect of want of consideration. — Absence or failure of

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consideration is a matter of defense as against any person Exception: When the instrument has been paid in part, it

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not a holder in due course; and partial failure of may indorsed as to the residue.
consideration is a defense pro tanto, whether the failure is Allowed indorsement:

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a. Pay to A and B

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an ascertained and liquidated amount or otherwise. (Sec
28) b. Pay to A or B
• An accommodation party is one who has signed the
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instrument as maker, drawer, acceptor, or indorser, Distinction between negotiation and assignment
without receiving value therefor, and for the purpose of Negotiation Assignment
lending his name to some other person. Such a person is Only negotiable instrument Ordinary contract
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liable on the instrument to a holder for value, Transferee is a holder Transferee is an assignee
notwithstanding such holder, at the time of taking the Holder in due course acquire Assignee merely step into the
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instrument, knew him to be only an accommodation better title than his transferor shoes of his transferor
party. (Sec. 29) Holder in due course is Assignee is subject to
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subject to real defense only personal and real defense

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NEGOTIATION General indorser warrants the Assignor does not warrant

Mode of transfer of negotiable instruments solvency of prior parties the solvency of prior parties
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a. Issue - means the first delivery of the instrument, Governed by Negotiable Governed by Civil code on
complete in form, to a person who takes it as a holder; instrument law assignment of credits.
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(Sec 191)
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b. Negotiation - An instrument is negotiated when it is Kinds of Indorsement

1. Special (Sec 34) – specify the indorsee
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transferred from one person to another in such manner as

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to constitute the transferee the holder thereof. (Sec 30) 2. Blank (ibid) – specify no indorsee
Instrument Negotiation 3. Restrictive
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Payable to bearer Delivey 1. Prohibit further negotiation (i.e. Pay to “A ony”; “A

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Payable to order Indorsement + Delivery and no other person”)

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c. Assignment – Transfer of order instrument without 2. Constitute the indorsee the agent of the indorser (i.e.,
pay to A for “Collecton”; “collection or remittance”;
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indorsement.
“collection only”; “deposit”)
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3. Vests the title in the indorsee in trust for another (i.e.,

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Instrument payable to bearer

• Where an instrument, payable to bearer, is indorsed
specially, it may nevertheless be further negotiated by
delivery; but the person indorsing specially is liable as
indorser to only such holders as make title through his
indorsement. (Sec 40)
• The holder may at any time strike out any indorsement
which is not necessary to his title. The indorser whose
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Pay to A “in trust for B”; as trustee for B”; “for my
use”; for the use of B”)
But all subsequent indorsees acquire only the title of the
first indorsee under the restrictive indorsement. (Sec 36)
Effect: (Sec 37)
1.) Receive payment
2.) Bring any action thereon that the indorser could

indorsement is struck out, and all indorsers subsequent to bring;

him, are thereby relieved from liability on the instrument.
(Sec 48)
• Where a person places his indorsement on an instrument
negotiable by delivery, he incurs all the liability of an
indorser. (Sec. 67)
• Every person negotiating an instrument by delivery
warrants: (a) That the instrument is genuine and in all
respects what it purports to be; (b) That he has a good
title to it; (c) That all prior parties had capacity to
contract; (d) That he has no knowledge of any fact which
would impair the validity of the instrument or render it
3.) Transfer his rights as such indorsee, where the form
of the indorsement authorizes him to do so.
Note: Only restrictive indorsement which prohibit the
further negotiation of the instrument rendered the
instrument non negotiable.
4. Non restrictive
5. Qualified – Constitute the indorser as a mere assignor of
the title to the instrument. (i.e. Pay to A “without
recourse”; “indorser not holder”; sans recourse”; “at
indorsee’s own risk”; “indorser not holder”. (Sec 38)
Such an indorsement does not impair the negotiable
character of the instrument.

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6. Unqualified or general – no condition
7. Conditional – Where an indorsement is conditional, the
party required to pay the instrument may disregard the
condition and make payment to the indorsee or his
transferee whether the condition has been fulfilled or not.
But any person to whom an instrument so indorsed is
negotiated will hold the same, or the proceeds thereof,
subject to the rights of the person indorsing
conditionally. (Sec 39)
8. Unconditional
9. Joint - Where an instrument is payable to the order of
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two or more payees or indorsees who are not partners, all
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must indorse unless the one indorsing has authority to
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indorse for the others. (Sec 41)
10. Successive - Where an instrument is negotiated back to a
prior party, such party may, subject to the provisions of
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this Act, reissue and further negotiable the same. But he
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is not entitled to enforce payment thereof against any
intervening party to whom he was personally liable. (Sec
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50) As respects one another, indorsers are liable prima
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facie in the order in which they indorse; but evidence is
admissible to show that, as between or among
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themselves, they have agreed otherwise. (Sec 68)
11. Irregular or anomalous - Where a person, not otherwise a
party to an instrument, places thereon his signature in
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blank before delivery, he is liable as indorser, in
accordance with the following rules: (Sec 64)
O IN N O
a. If the instrument is payable to the order of a third
person, he is liable to the payee and to all subsequent
S
parties.
E
b. If the instrument is payable to the order of the maker
U L HN
or drawer, or is payable to bearer, he is liable to all
S
parties subsequent to the maker or drawer.
c. If he signs for the accommodation of the payee, he is
C
liable to all parties subsequent to the payee.
BO IA . JO
12. Facultative (Sec 111)
I
G
N E
Holder
1. Holder – means a payee or indorsee of a bill or a note
who, is in possession of it, or the bearer thereof. (Sec
O TY
B
191)
TO
In the hands of any holder other than a holder in due
C
course, a negotiable instrument is subject to the same
EG AT
defenses as if it were non-negotiable. (Sec. 58)
T
2. Holder in due course (Sec 52)
Holder who has taken the instrument under the following
condition:
a. That it is complete and regular upon its face;
b. That he became the holder of it before it was
overdue, and without notice that it has been
previously dishonored, if such was the fact;
N
c. That he took it in good faith and for value;
d. That at the time it was negotiated to him, he had no
notice of any infirmity in the instrument or defect in
the title of the person negotiating it.
* Every holder is deemed prima facie to be a holder in
due course.
Exception: When it is shown that the title of any person
who has negotiated the instrument was defective, the
burden is on the holder to prove that he or some person
under whom he claims acquired the title as holder in due
course. But the last-mentioned rule does not apply in
favor of a party who became bound on the instrument
prior to the acquisition of such defective title. (Sec 59)
Page 6 of 18 www.prtc.com.ph
(ATTY. ONG - OCT 2020)
Right of a holder in due course
a. He may sue in its own name; (Sec 51)
b. A holder in due course holds the instrument free
from any defect of title of prior parties,
c. Free from defenses available to prior parties among
themselves; (Sec 57)
d. May enforce payment of the instrument for the full
amount thereof against all parties liable thereon. (Sec
57) and payment to hi in due course discharged the
instrument. (Sec 51)
3. Holder for value (Sec 26) – Where value has at any time
given for the instrument.
4. Partial holder in due course (Sec 54)
Where the transferee receives notice of any infirmity in
the instrument or defect in the title of the person
negotiating the same before he has paid the full amount
agreed to be paid therefor, he will be deemed a holder in
due course only to the extent of the amount therefore
paid by him.
5. Holder in due course by subrogation (Sec 58)
A holder who derives his title through a holder in due
course, and who is not himself a party to any fraud or
illegality affecting the instrument, has all the rights of
such former holder in respect of all parties prior to the
latter.
Multiple Choice
1. Under the Negotiable Instruments Law, a certificate of
stock is not a negotiable instrument because it lacks the
requisites of: (Phil CPA, 96-2)
a. It must contain an unconditional promise or order to
pay a sum certain in money.
b. It must be payable on demand or at a fixed or
determinable future time.
c. It must be payable to order or bearer.
d. It must be in writing and signed by the maker or
drawer.
2. Which of the following instrument is negotiable? (Phil
CPA, 87-2)
a. “Pay to B or order P1,000 and reimburse yourself out
of my money in your hands.
(Sgd) A”
b. “I hereby authorized you to pay P1,000 on our
account to order of X.
(Sgd) A”
c. “I promise to pay X or order P1,000 on or before
October 25
(Sgd) A”
d. “Please to let the bearer have P1,000 and place to any
account and you will oblige
(Sgd) A”
3. One of the requisites of a negotiable instrument is that it
must contain an unconditional promise or order to pay a
sum certain in money. Which of the following denotes
non-negotiability? (Phil CPA, 97-1)
a. I promise to pay to the order of L the sum of P900 at
the DBP Manila;
b. I promise to pay to the order of Y the sum of P600
and to deliver one-fourth of the rice harvest in my
farm;
c. I promise to pay N or bearer in Manila the sum of
P18,000 in Philippine pesos or US Dollar.
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 EXCEL PROFESSIONAL SERVICES, INC. (ATTY. ONG - OCT 2020)

d. I promise to pay E or bearer in Manila the sum of d. The omission of the signature of the maker above his
P27,000 in Philippine pesos or US dollars, at the typewritten name.
option of the holder. 12. It is a written confession of action by the defendant
4. A promissory note is signed in behalf of the principal by acknowledging his indebtedness to the plaintiff after the
an agent as follows: action has been filed
Juan Dela Cruz a. Warrant of attorney to confess judgment
Per Procuration: Manuel S. Canete b. Relicta verificationem
This operates as notice that the agent has: (Phil CPA, 91- c. Cognovit actiomen
2) d. Waiver of notice of dishonor
a. Unlimited authority to sign for and in behalf of the 13. Which of the following instruments is non-negotiable?
principal. a. "Pay to P or order P20,000 out of my cash in your

W
b. A limited authority to sign, and the principal is possession". (Addressed to X, signed D)

20 K NT NG
bound only in case the agent in so signing acted with b. "Pay to P or order P20.000 and reimburse yourself

W LA
the actual limits of his authority. out of my cash in your possession". (Addressed to
c. A limited authority to sign, but the principal is bound X, Signed by D)
even in case the agent in so signing acted outside the c. "I promise to pay P or order, P20.000". (Signed D)

R C E O
actual limits of his authority. d. "Pay P or order P20.000". (Addressed to X, Signed

20 LA S
d. Answer not given. by D)
5. Which of these is not requisite of negotiability of a bill of 14. Which of these is a valid indorsement of an instrument

.
exchange? payable to the order of B for P100,000?

BE H UM .H
a. It must be in writing and signed by the drawer. a. Pay to C P600,000
b. Must contain an unconditional promise to pay a sum Sgd. B
TR A
certain in money. b. Pay to C P60,000 and to D P40,000
c. Must be payable on demand or at a fixed or Sgd. B
determinable future time. c. Pay to C and D
N
d. Must be payable to order or to bearer. Sgd. B
e. None of the above d. Pay to C or D
O IN N O

6. This check is not an order for the bank to pay but merely Sgd. B
a reminder between the parties of what the drawer owes e. Both (c) and (d)
S

the payee. 15. A makes a promissory note payable to the order of B, but
E
a. Memorandum's check delivers it to C. Who may be considered holder of the
U L HN

b. Crossed check note?

S

c. Cashier's check a. B
d. Certified check b. C
C

7. This check has drawn on its face two transversal parallel c. Both B and C
BO IA . JO

lines the effect of which is that the check cannot be d. Neither B nor C
I

encashed but only be deposited. 16. A is maker of a promissory note for P100,000 payable to
G
N E

a. Cashier's check the order of B who negotiates the same in favor of C. C

b. Certified check loses the note and is found by X who forges the signature
c. Crossed check of C and pretending to be C negotiates the note to D, D to
O TY
B

d. Memorandum check E, E to F and F to G who is a holder in due course. Under

TO

8. This instrument is inherently non-negotiable – the circumstances which of these is not an incorrect
C

a. Check statement?
EG AT

b. Promissory note a. Being a holder in due course, G can recover from

c. Bill of exchange maker A.
T

d. Treasury warrant b. The signature of C being forged, it becomes

9. An instrument which is not dated will be considered inoperative and payment cannot be enforced as
dated as at the time of: against him.
a. acceptance. c. last indorsement. c. E is not liable to F precisely because he was not the
b. First indorsement. d. issuance. one who forged the signature of C.
10. X issued a check in favor of his creditor, Y. It reads: d. X is not liable to any party to the instrument since his
“Pay to Y the amount of Seven Thousand Hundred Pesos name does not appear thereon.
(Php700,000.00). Signed, X”. What amount should be
N

17. The following are all personal defenses, except:

construed as true in such a case? (2011 Bar) a. Fraud in factum.
a. Php700,000.00. b. Insertion of wrong date.
b. Php700.00. c. Incomplete but delivered instrument.
c. Php7,000.00. d. Absence or failure of consideration.
d. Php700,100.00. 18. This indorsement makes the indorser a mere assignor of
11. Which of the following omissions on the face of an the title to the instrument and thus decreases his liability.
instrument will render it non-negotiable? a. General indorsement
a. The omission of the date of issue. b. Qualified indorsement
b. The omission of any statement that value has been c. Irregular indorsement
given. d. Facultative indorsement
c. The omission of the place where the instrument was 19. "Pay to C for collection only, Sgd. B" is an example of a
drawn. restrictive type of endorsement which is classified as:
a. Prohibitive type

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 EXCEL PROFESSIONAL SERVICES, INC. (ATTY. ONG - OCT 2020)

b. Agency type Certifier of a check (Sec. 187)

c. Trust type 2. Secondarily liable
d. All of the above Drawer of a bill (Sec. 61)
20. Which of these constitutes a real defense? General indorser of a bill or note (Sec. 66)
a. Fraud in factum Acceptor for honor (Sec 165)
b. Extrinsic fraud 3. Not liable on the instrument
c. Insertion of wrong date a. Drawee of a bill unless he accepts the bill.
d. Absence or failure of consideration A bill of itself does not operate as an assignment of
e. Defective delivery the funds in the hands of the drawee available for the
21. A as maker makes a promissory note for P500,000 payment thereof, and the drawee is not liable on the
payable to the order of B as payee. The note is bill unless and until he accepts the same. (Sec 127)

W
successively negotiated from B to C to D. D died leaving b. Drawee bank in a check unless it accepts or certifies

20 K NT NG
as an only heir S. S becomes the owner of the note – the check.

W LA
a. By assignment A check of itself does not operate as an assignment
b. By negotiation of any part of the funds to the credit of the drawer
c. By operation of law with the bank, and the bank is not liable to the holder

R C E O
d. None of the above unless and until it accepts or certifies the check. (Sec.

20 LA S
22. X found a check on the street, drawn by Y against ABC 189)
Bank, with Z as payee. X forged Z's signature as an

.
indorser, then indorsed it personally and delivered it to Condition of Drawer for Secondary liability (Sec 61)

BE H UM .H
DEF Bank. The latter, in turn, indorsed it to ABC Bank
which charged it to the Y’s account. Y later sued ABC
TR A
Bank but it set up the forgery as its defense. Will it
prosper? (2011 Bar)
a. No, since the payee's signature has been forged.
N
b. No, since Y’s remedy is to run after the forger, X.
c. Yes, since forgery is only a personal defense.
O IN N O
1. That the bill is presented for acceptance (Sec. 143) when
required or presented for payment (Sec. 70), as the case
may be, to the drawer.
2. That the bill is dishonored by non acceptance (Sec. 149)
or non payment (Sec 83) as the case may be.
3. That the necessary proceedings on dishonor be duly
taken such as notice of dishonor is given to the drawer or

d. Yes, since ABC Bank is bound to know the signature in case of a foreign bills, protest is made followed by a
of Y, its client. notice of protest. (Sec 152)
S

23. B borrowed Php1 million from L and offered to him his

E
BMW car worth Php1 Million as collateral. B then Condition of General indorser for Secondary liability
U L HN

executed a promissory note that reads: “I, B, promise to (Sec. 66)

S

pay L or bearer the amount of Php1 Million and to keep 1. That the instrument is presented for acceptance (Sec.
my BMW car (loan collateral) free from any other 143) when required or presented for payment (Sec. 70),
C

encumbrance. Signed, B.” Is this note negotiable? (2011 as the case may be, to the drawer.
BO IA . JO

Bar) 2. That the instrument is dishonored by non-acceptance

I

a. Yes, since it is payable to bearer. (Sec. 149) or non-payment (Sec 83) as the case may be.
G
N E

b. Yes, since it contains an unconditional promise to 3. That the necessary proceedings on dishonor be duly
pay a sum certain in money. made.
c. No, since the promise to just pay a sum of money is
O TY
B

unclear. Non acceptance (Sec 149) Nonpayment (Sec 83)

TO

d. No, since it contains a promise to do an act in

C

A bill is dishonored by The instrument is dishonored

addition to the payment of money. nonacceptance — by non-payment when:
EG AT

24. In a signature by procuration, the principal is bound only (a) When it is duly (a) It is duly presented
in case the agent acted within the actual limits of his presented for acceptance for payment and payment is
T

authority. The signature of the agent in such a case and such an acceptance as is refused or cannot be obtained;
operates as notice that he has (2011 Bar) prescribed by this Act is or
a. a qualified authority to sign. refused or cannot be (b) Presentment is
b. a limited authority to sign. obtained; or excused and the instrument is
c. a special authority to sign. (b) When presentment overdue and unpaid.
d. full authority to sign. for acceptance is excused
25. Which of the following are wrong construction and and the bill is not accepted.
N

interpretation of negotiable instruments?

a. Words prevail over figure Distinction between Maker and Drawer
b. Written words prevail over printed provisions Maker Drawer
c. If the instrument is undated, the instrument is Party to a Promissory note Party to a bill of exchange
deemed dated at its issue. Primary liable Secondary liable
d. Interest stipulated runs from the date its issue. Cannot limit his liability Can limit his liability
Unconditionally bound to pay Conditionally bound to
Classification of parties according to liability the instrument pay the instrument
Parties to a negotiable instrument (e.g. promissory note, bill
of exchange and checks) are classified according to their Distinction between Maker and Acceptor
liability as follows: Maker Acceptor
1. Primarily liable Party to a promissory note Party to a bill of exchange
Maker of a promissory note (Sec 60)
Engage to pay the Engage to pay the
Acceptor of a bill of exchange (Sec. 62)

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 EXCEL PROFESSIONAL SERVICES, INC. (ATTY. ONG - OCT 2020)

instrument according to its instrument according to its
tenor acceptance.
Do not admit the existence Admit the existence of the
of the drawer. drawer, the genuineness of
his signature, and his
capacity and authority to
draw the instrument
Distinction between qualified indorser (Sec. 65) and
general indorser (Sec. 66)
complete it by filling up the blanks therein. And a
signature on a blank paper delivered by the person
making the signature in order that the paper may be
converted into a negotiable instrument operates as a
prima facie authority to fill it up as such for any amount.
In order, however, that any such instrument when
completed may be enforced against any person who
became a party thereto prior to its completion, it must be
filled up strictly in accordance with the authority given
and within a reasonable time. But if any such instrument,
after completion, is negotiated to a holder in due course,

W
Qualified indorser General indorser
(Sec 65) (Sec 66) it is valid and effectual for all purposes in his hands, and

20 K NT NG
1. That the instrument is he may enforce it as if it had been filled up strictly in

W LA
genuine and in all Same accordance with the authority given and within a
respects what it purports reasonable time. (Sec 14)
to be; • Incomplete and undelivered - Where an incomplete

R C E O
2. That he has a good title instrument has not been delivered, it will not, if

20 LA S
to it; completed and negotiated without authority, be a valid
3. That all prior parties had contract in the hands of any holder, as against any person

.
whose signature was placed thereon before delivery.

BE H UM .H
capacity to contract
Warrant that he has no Warrant that the instrument (Sec. 15)
knowledge of any fact is, at the time of his • Complete but undelivered - Every contract on a
TR A
which would impair the indorsement, valid and negotiable instrument is incomplete and revocable until
validity of the instrument or subsisting delivery of the instrument for the purpose of giving effect
render it valueless thereto. As between immediate parties and as regards a
N
There is no secondary There is secondary liability. remote party other than a holder in due course, the
liability. delivery, in order to be effectual, must be made either by
O IN N O

or under the authority of the party making, drawing,

Defenses accepting, or indorsing, as the case may be; and, in such
S

1. Real defense – are defense that are available against all case, the delivery may be shown to have been
E
conditional, or for a special purpose only, and not for the
U L HN

parties including a holder in due course because the

defect is attached to the res or instrument itself. purpose of transferring the property in the instrument.
S

2. Personal defense – are defenses available to prior parties But where the instrument is in the hands of a holder in
among themselves but not against a holder in due course. due course, a valid delivery thereof by all parties prior to
C
BO IA . JO

Personal Defense Real defense him so as to make them liable to him is conclusively
presumed. And where the instrument is no longer in the
I

Incomplete but delivered (Sec Incomplete and

possession of a party whose signature appears thereon, a
G

14) undelivered (Sec 15)

N E

Complete but undelivered Indorsement by infant or valid and intentional delivery by him is presumed until
(Sec 16) corporation (available to the contrary is proved. (Sec. 16)
O TY

minor or corporation only)

B

(Sec 22) Summary on Presentment for payment

TO
C

Insertion of a wrong date (Sec Forgery (Sec 23) General Rule: Presentment for payment is not necessary to
charge the person primarily liable but it is necessary to
EG AT

13)
Ante date or post dated (Sec Want of authority, charge the Drawer and Indorser.
Exception:
T

12) apparent and real (Sec 23)

Absence or failure of
consideration (Sec 28)
Simple fraud or fraud in
inducement (Sec 55)
Acquisition of instrument by
fraud, duress, or force and
fear
N
a. Drawer - The drawer has no right to expect or require
Material alteration (Sec
124) that the drawee or acceptor will pay the instrument. (Sec
79)
Prescription
b. Indorser – The instrument was made or accepted for
indorser accomodation and he has no reason to expect
Fraud in factum or fraud
that the instrument will be paid if presented. (Sec 80)
in esse contractus
c. When presentment is dispensed with (Sec 82)

1. Presentment cannot be made after exercise of

Acquisition of instrument by
reasonable diligence
unlawful means
2. Drawee is a fictitious person
Acquisition of instrument for 3. Waiver f presentment, express or implied
an illegal consideration d. When the bill is dishonored by non acceptance (Sec 151)
By negotiation of the
instrument in breach of faith Requisites for sufficient presentment
By negotiation under The instrument must be exhibited to the person from whom
circumstances that amount to payment is demanded and when it is paid must be delivered
fraud. up to the party paying it. (Sec 74)
By Whom Holder or person authorized to received
• Incomplete but delivered - Where the instrument is payment on his behalf
wanting in any material particular, the person in To whom General Rule:
possession thereof has a prima facie authority to

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 EXCEL PROFESSIONAL SERVICES, INC. (ATTY. ONG - OCT 2020)

- Person primarily liable or in his absence,

any person found at the place where
presentment is made.
Exception: When no place of payment is
specified
1. When principal debtor Dead (Sec. 76)
o Personal representative if there be, and
if, with the exercise of reasonable
diligence he can be found.
2. Persons liable as Partners (Sec 77)
o Any partner

W
3. Joint Debtor (Sec 78)

20 K NT NG
o Each of them

W LA
When 1. Not payable on demand (Sec 71)
a. On the day it falls due
2. Payable on demand

R C E O
a. Promissory note – Reasonable time

20 LA S
after its issue
b. Bill of exchange – Reasonable time

.
Notice of Dishonor
after the last negotiation

BE H UM .H
General Rule:
3. Payable at bank (Sec 75) When a negotiable instrument has been dishonored by non-
c. Has fund - during banking hours acceptance or non-payment, notice of dishonor must be given
TR A
d. No funds to meet it at any time to the drawer and to each indorser, and any drawer or
during the day – Any hour before indorser to whom such notice is not given is discharged.
the bank is closed
N
It is equivalent to an order to the bank to pay Exception:
the same for the account of the principal debtor.
O IN N O

1. Notice of dishonor is waived (Sec 109)

(Sec 87) Notice of dishonor may be waived either before the time
S

of giving notice has arrived or after the omission to give

Time of maturity (Sec 85) due notice, and the waiver may be expressed or implied.
E
1. Time fixed – At the time fixed without
U L HN

2. Protest is waived (Sec 111)

grace A waiver of protest, whether in the case of a foreign bill
S

2. Maturity fall on Sunday, holiday – next of exchange or other negotiable instrument, is deemed to
succeeding business day be a waiver not only of a formal protest but also of
C

3. Maturity fall on Saturday

BO IA . JO

presentment and notice of dishonor.

a. Payable on demand – Before 12:00
I

3. Notice is dispensed with (Sec 112)

noon if Saturday is not a holiday
G

Notice of dishonor is dispensed with when, after the

N E

b. Not payable on demand - next exercise of reasonable diligence, it cannot be given to or

succeeding business day does not reach the parties sought to be charged.
O TY

4. To the drawer (Sec 114)

B

Note: The time of payment is determined by Notice of dishonor is not required to be given to the
TO
C

excluding the day from which the time is to drawer in either of the following cases:
begin to run, and by excluding the date of
EG AT

a. Where the drawer and drawee are the same person;

payment. b. When the drawee is fictitious person or a person not
Where 1. Place of payment specified – Place
T

having capacity to contract;

specified (Sec 73)
2. Place not specified but the address of the
person to make is given - Address indicated
in the instrument;
3. Place of payment and address not given –
Usual place of business or residence of the
person to make payment.
N
c. When the drawer is the person to whom the
instrument is presented for payment;
d. Where the drawer has no right to expect or require
that the drawee or acceptor will honor the
instrument;
e. Where the drawer has countermanded payment.
5. To the indorser (Sec 115)

4. Other cases – Where the person to make
payment he can be found or if presented at
his last known place of business or
residence.
Dishonored by non payment (Sec 83)
a. Duly presented for payment and payment is refused or
cannot be obtained.
b. Presentment is excused and the instrument is overdue and
unpaid.
6. Due notice of dishonor by non acceptance has been given
Effect: Subject to the provision of the act, an immediate right
of recourse to all parties secondary liable thereon accrues to
the holder. (Sec 84)
Notice of dishonor is not required to be given to an
indorser in either of the following cases:
a. When the drawee is a fictitious person or person not
having capacity to contract, and the indorser was
aware of that fact at the time he indorsed the
instrument;
b. Where the indorser is the person to whom the
instrument is presented for payment;
c. Where the instrument was made or accepted for his
accommodation.
(Sec 116)

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 EXCEL PROFESSIONAL SERVICES, INC. (ATTY. ONG - OCT 2020)

Where due notice of dishonor by non-acceptance has 104)

been given, notice of a subsequent dishonor by non- c. If sent by mail, it must be deposited in
payment is not necessary unless in the meantime the the post office in time to go by mail
instrument has been accepted the day following the day of dishonor,
7. An omission to give notice of dishonor by non- or if there be no mail at a convenient
acceptance does not prejudice the rights of a holder in hour on last day, by the next mail
due course subsequent to the omission (Sec 117) thereafter.
d. If given otherwise than through the
Delay in giving notice of dishonor post office, then within the time that
Delay in giving notice of dishonor is excused when the delay notice would have been received in
is caused by circumstances beyond the control of the holder

W
due course of mail, if it had been
and not imputable to his default, misconduct, or negligence. deposited in the post office within the

20 K NT NG
When the cause of delay ceases to operate, notice must be time specified in the last subdivision.

W LA
given with reasonable diligence. (Sec 113) Where 1. Address given - Address indicated in the
instrument;
• Where notice is given by or on behalf of the holder, it 2. Address not given

R C E O
inures to the benefit of all subsequent holders and all a. Either to the post-office nearest to his

20 LA S
prior parties who have a right of recourse against the place of residence or to the post-office
party to whom it is given. (Sec. 92) where he is accustomed to receive his

.
• Where notice is given by or on behalf of a party entitled letters; or

BE H UM .H
to give notice, it inures to the benefit of the holder and all b. If he lives in one place and has his
parties subsequent to the party to whom notice is given. place of business in another, notice
TR A
(Sec. 93) may be sent to either place; or
• Where the instrument has been dishonored in the hands c. If he is sojourning in another place,
of an agent, he may either himself give notice to the notice may be sent to the place where
N
parties liable thereon, or he may give notice to his he is so sojourning. (Sec 108)
principal. If he gives notice to his principal, he must do
O IN N O

so within the same time as if he were the holder, and the DISCHARGEOF NEGOTIABLE INSTRUMENTS
principal, upon the receipt of such notice, has himself the Discharge of instrument - a release of all parties, whether
S

same time for giving notice as if the agent had been an primary or secondary, from the obligations arising
E
independent holder. (Sec. 94) thereunder. It renders the instrument without force and effect
U L HN

and, consequently, it can no longer be negotiated.

S

Summary on Notice of Dishonor

By Whom By or on behalf of the holder, or by or on • A negotiable instrument is discharged: (Sec 119)
C
BO IA . JO

behalf of any party to the instrument who a. By payment in due course by or on behalf of the
principal debtor;
I

might be compelled to pay it to the holder.

(Sec 90) b. By payment in due course by the party
G
N E

To whom General Rule: accommodated, where the instrument is made or

- Party himself accepted for his accommodation;
O TY

- Duly authorized agent c. By the intentional cancellation thereof by the holder;

B

Exception: d. By any other act which will discharge a simple

TO
C

1. When party is Dead (Sec. 98) contract for the payment of money;
o Personal representative e. When the principal debtor becomes the holder of the
EG AT

o Last residence or last place of instrument at or after maturity in his own right.
business • A person secondarily liable on the instrument is
T

2. Notice to partner (Sec 99) discharged: (Sec 120)

o Any partner a. By any act which discharges the instrument;
3. Joint person (Sec 100) b. By the intentional cancellation of his signature by the
o Each of them holder;
4. Bankrupt/insolvent (Sec 101) c. By the discharge of a prior party;
o Party himself, or d. By a valid tender or payment made by a prior party;
o Trustee or assignee e. By a release of the principal debtor unless the
N

When 2. Parties residing in the same place (Sec
103)
b. If given at the place of business of the
person to receive notice, it must be
given before the close of business
hours on the day following.
c. If given at his residence, it must be
given before the usual hours of rest on
the day following.
d. If sent by mail, it must be deposited in
the post office in time to reach him in
usual course on the day following
3. Parties not residing in the same place (Sec
holder's right of recourse against the party
secondarily liable is expressly reserved;
f. By any agreement binding upon the holder to extend
the time of payment or to postpone the holder's right
to enforce the instrument unless made with the assent
of the party secondarily liable or unless the right of
recourse against such party is expressly reserved.
• Spoliation – alteration made by a stranger.
• Where the instrument is paid by a party secondarily
liable thereon, it is not discharged; but the party so
paying it is remitted to his former rights as regard all
prior parties, and he may strike out his own and all

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 EXCEL PROFESSIONAL SERVICES, INC.
subsequent indorsements and against negotiate the
instrument, except:
a. Where it is payable to the order of a third person and
has been paid by the drawer; and
b. Where it was made or accepted for accommodation
and has been paid by the party accommodated.
• The holder may expressly renounce his rights against any
party to the instrument before, at, or after its maturity. An
absolute and unconditional renunciation of his rights
W
against the principal debtor made at or after the maturity
of the instrument discharges the instrument. But a
20 K NT NG
renunciation does not affect the rights of a holder in due
W LA
course without notice. A renunciation must be in writing
unless the instrument is delivered up to the person
primarily liable thereon. (Sec 122)
R C E O
20 LA S
Effects of Renunciation:
1. A renunciation in favor of a secondary party may be
.
made by the holder before, at or after maturity of the
BE H UM .H
instrument.
Effect: only such secondary party is discharged and all
TR A
parties subsequent to him but the instrument itself
remains in force.
2. A renunciation in favor of the principal debtor may be
N
effected at or after maturity.
Effect: the instrument is discharged and all parties thereto
O IN N O
provided the renunciation is made
S
• A cancellation made unintentionally or under a mistake
E
or without the authority of the holder, is inoperative but
U L HN
where an instrument or any signature thereon appears to
S
have been cancelled, the burden of proof lies on the party
who alleges that the cancellation was made
C
BO IA . JO
unintentionally or under a mistake or without authority.
(Sec 123)
I
• Where a negotiable instrument is materially altered
G
N E
without the assent of all parties liable thereon, it is
avoided, except as against a party who has himself made,
O TY
authorized, or assented to the alteration and subsequent
B
indorsers. But when an instrument has been materially
TO
C
altered and is in the hands of a holder in due course not a
party to the alteration, he may enforce payment thereof
EG AT
according to its original tenor. (Sec. 124)
T
What constitutes a material alteration - Any alteration
which changes:
a. The date;
b. The sum payable, either for principal or interest;
c. The time or place of payment:
d. The number or the relations of the parties;
e. The medium or currency in which payment is to be
N
made;
f. Or which adds a place of payment where no place of
payment is specified, or any other change or addition
which alters the effect of the instrument in any
respect, is a material alteration.
BILL OF EXCHANGE
• An inland bill of exchange is a bill which is, or on its
face purports to be, both drawn and payable within the
Philippines. Any other bill is a foreign bill. Unless the
contrary appears on the face of the bill, the holder may
treat it as an inland bill. (Sec 129)
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(ATTY. ONG - OCT 2020)
• The drawer of a bill and any indorser may insert thereon
the name of a person to whom the holder may resort in
case of need; that is to say, in case the bill is dishonored
by non-acceptance or non-payment. Such person is called
a referee in case of need. It is in the option of the holder
to resort to the referee in case of need or not as he may
see fit. (Sec 131)
Acceptance
• The acceptance of a bill is the signification by the drawee
of his assent to the order of the drawer. The acceptance
must be in writing and signed by the drawee. It must not
express that the drawee will perform his promise by any
other means than the payment of money. (Sec 132)
• The holder of a bill presenting the same for acceptance
may require that the acceptance be written on the bill,
and, if such request is refused, may treat the bill as
dishonored. (Sec 133)
• Where an acceptance is written on a paper other than the
bill itself, it does not bind the acceptor except in favor of
a person to whom it is shown and who, on the faith
thereof, receives the bill for value. (Sec 134)
• The drawee is allowed twenty-four hours after
presentment in which to decide whether or not he will
accept the bill; the acceptance, if given, dates as of the
day of presentation. (Sec 136)
• Where a drawee to whom a bill is delivered for
acceptance destroys the same, or refuses within twenty-
four hours after such delivery or within such other period
as the holder may allow, to return the bill accepted or
non-accepted to the holder, he will be deemed to have
accepted the same. (Sec 137)
• A bill may be accepted before it has been signed by the
drawer, or while otherwise incomplete, or when it is
overdue, or after it has been dishonored by a previous
refusal to accept, or by non-payment. But when a bill
payable after sight is dishonored by non-acceptance and
the drawee subsequently accepts it, the holder, in the
absence of any different agreement, is entitled to have the
bill accepted as of the date of the first presentment. (Sec
138)
Kinds of acceptance (Sec 139)
a. General acceptance. — assents without qualification to
the order of the drawer. An acceptance to pay at a
particular place is a general acceptance unless it
expressly states that the bill is to be paid there only and
not elsewhere. (Sec 140)
b. Qualified acceptance - An acceptance is qualified which
is: (Sec 141)
a. Conditional - that is to say, which makes payment
by the acceptor dependent on the fulfillment of a
condition therein stated;
b. Partial - that is to say, an acceptance to pay part only
of the amount for which the bill is drawn;
c. Local - that is to say, an acceptance to pay only at a
particular place;
d. Qualified as to time;
e. The acceptance of some, one or more of the
drawees but not of all.
• The holder may refuse to take a qualified acceptance and
if he does not obtain an unqualified acceptance, he may
treat the bill as dishonored by non-acceptance. Where a
qualified acceptance is taken, the drawer and indorsers
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 EXCEL PROFESSIONAL SERVICES, INC.
are discharged from liability on the bill unless they have
expressly or impliedly authorized the holder to take a
qualified acceptance, or subsequently assent thereto.
When the drawer or an indorser receives notice of a
qualified acceptance, he must, within a reasonable time,
express his dissent to the holder or he will be deemed to
have assented thereto. (Sec 142)
PRESENTMENT FOR ACCEPTANCE
• Presentment for acceptance must be made: (Sec 143)
W
a. Where the bill is payable after sight, or in any other
case, where presentment for acceptance is necessary
20 K NT NG
in order to fix the maturity of the instrument; or
W LA
b. Where the bill expressly stipulates that it shall be
presented for acceptance; or
c. Where the bill is drawn payable elsewhere than at the
R C E O
residence or place of business of the drawee.
20 LA S
In no other case is presentment for acceptance necessary
in order to render any party to the bill liable.
.
BE H UM .H
General Rule:
The holder of a bill which is required to present it for
TR A
acceptance must either present it for acceptance or negotiate
it within a reasonable time. If he fails to do so, the drawer
and all indorsers are discharged.
N
Exception:
O IN N O
Presentment for acceptance is excused and a bill may be
treated as dishonored by non-acceptance in either of the
S
following cases: (Sec 148)
E
a. Where the drawee is dead, or has absconded, or is a
U L HN
fictitious person or a person not having capacity to
S
contract by bill.
b. Where, after the exercise of reasonable diligence,
C
presentment can not be made.
BO IA . JO
c. Where, although presentment has been irregular,
I
acceptance has been refused on some other ground.
G
N E
• Presentment for acceptance must be made by or on
O TY
behalf of the holder at a reasonable hour, on a business
B
day and before the bill is overdue, to the drawee or some
TO
C
person authorized to accept or refuse acceptance on his
behalf; and (Sec 145)
EG AT
a. Where a bill is addressed to two or more drawees
who are not partners, presentment must be made to
T
them all unless one has authority to accept or refuse
acceptance for all, in which case presentment may be
made to him only;
b. Where the drawee is dead, presentment may be made
to his personal representative;
c. Where the drawee has been adjudged a bankrupt or
an insolvent or has made an assignment for the
N
benefit of creditors, presentment may be made to him
or to his trustee or assignee.
• A bill may be presented for acceptance on any day on
which negotiable instruments may be presented for
payment under the provisions of Sections seventy-two
and eighty-five of this Act. When Saturday is not
otherwise a holiday, presentment for acceptance may be
made before twelve o'clock noon on that day. (Sec 146)
Sec. 72. What constitutes a sufficient presentment. —
Presentment for payment, to be sufficient, must be made:
1. By the holder, or by some person authorized to
receive payment on his behalf
2. At a reasonable hour on a business day;
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(ATTY. ONG - OCT 2020)
3. At a proper place as herein defined;
4. To the person primarily liable on the instrument, or if
he is absent or inaccessible, to any person found at
the place where the presentment is made.
Sec 85. Time of maturity. — Every negotiable instrument
is payable at the time fixed therein without grace. When
the day of maturity falls upon Sunday or a holiday, the
instruments falling due or becoming payable on Saturday
are to be presented for payment on the next succeeding
business day except that instruments payable on demand
may, at the option of the holder, be presented for
payment before twelve o'clock noon on Saturday when
that entire day is not a holiday..
• Where the holder of a bill drawn payable elsewhere than
at the place of business or the residence of the drawee
has no time, with the exercise of reasonable diligence, to
present the bill for acceptance before presenting it for
payment on the day that it falls due, the delay caused by
presenting the bill for acceptance before presenting it for
payment is excused and does not discharge the drawers
and indorsers. (Sec 147)
•
Where a bill is duly presented for acceptance and is not
accepted within the prescribed time, the person
presenting it must treat the bill as dishonored by
nonacceptance or he loses the right of recourse against
the drawer and indorsers. (Sec 150)
• When a bill is dishonored by nonacceptance, an
immediate right of recourse against the drawer and
indorsers accrues to the holder and no presentment for
payment is necessary. (Sec 151)
PROTEST
General Rule:
Where a foreign bill appearing on its face to be such is
dishonored by nonacceptance, it must be duly protested for
nonacceptance, by nonacceptance is dishonored and where
such a bill which has not previously been dishonored by
nonpayment, it must be duly protested for nonpayment. If it
is not so protested, the drawer and indorsers are
discharged. Where a bill does not appear on its face to be a
foreign bill, protest thereof in case of dishonor is
unnecessary. (Sec 152)
Exception:
Protest is dispensed with by any circumstances which would
dispense with notice of dishonor.
A notice of dishonor is dispensed with when, after the
exercise of reasonable diligence, it cannot be given to or does
not reach the parties sought to be charged. (Sec 112)
Delay in noting or protesting is excused when delay is:
1. Caused by circumstances beyond the control of the
holder and not imputable to his default, misconduct, or
negligence.
2. When the cause of delay ceases to operate, the bill must
be noted or protested with reasonable diligence
Summary on PROTEST
How The protest must be annexed to the bill or
must contain a copy thereof, and must be
under the hand and seal of the notary making
it and must specify:
(a) The time and place of presentment;
(b) The fact that presentment was made
and the manner thereof;
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 EXCEL PROFESSIONAL SERVICES, INC. (ATTY. ONG - OCT 2020)

(c) The cause or reason for protesting
the bill;
(d) The demand made and the answer
given, if any, or the fact that the drawee or
acceptor could not be found. (Sec 153)
By whom Protest may be made by — (Sec 154)
(a) A notary public; or
(b) By any respectable resident of the
place where the bill is dishonored, in the
presence of two or more credible witnesses
a. A check must be presented for payment within a
reasonable time after its issue or the drawer will be
discharged from liability thereon to the extent of the
loss caused by the delay. (Sec 186)
b. Where a check is certified by the bank on which it is
drawn, the certification is equivalent to an
acceptance. (Sec 187)
c. Where the holder of a check procures it to be
accepted or certified, the drawer and all indorsers
are discharged from liability thereon. (Sec 188)
d. A check of itself does not operate as an assignment

W
When When a bill is protested, such protest must be
made on the day of its dishonor unless delay of any part of the funds to the credit of the drawer

20 K NT NG
is excused as herein provided. When a bill with the bank, and the bank is not liable to the holder

W LA
has been duly noted, the protest may be unless and until it accepts or certifies the check. (Sec
subsequently extended as of the date of the 189)
noting. (Sec 155)

R C E O
Where A bill must be protested at the place where it Multiple Choice

20 LA S
is dishonored, except that when a bill drawn 1. The instrument is worded as follows:
payable at the place of business or residence "To Mr. X

.
of some person other than the drawee has 123 Rizal Avenue, Manila

BE H UM .H
been dishonored by nonacceptance, it must I promise to pay B or order P500,000 on demand.
be protested for non-payment at the place Sgd. A"
TR A
where it is expressed to be payable, and no B has since then presented the instrument for payment to
further presentment for payment to, or Mr. X. The instrument is to be considered as:
demand on, the drawee is necessary. (Sec a. A promissory note because of its tenor.
N
156) b. A bill of exchange because there is a drawee to
whom the instrument is addressed.
O IN N O

• A bill which has been protested for non-acceptance may c. It is either a bill or a note at the election of B or his
be subsequently protested for non-payment. (Sec 157) order.
S

• Protest before maturity where acceptor insolvent. — d. It is a bill of exchange under the facts of the case
E
since the instrument was presented for payment by B
U L HN

Where the acceptor has been adjudged a bankrupt or an

insolvent or has made an assignment for the benefit of to X, thus showing his election.
S

creditors before the bill matures, the holder may cause 2. "Admits the existence of the payee and his then capacity
the bill to be protested for better security against the to indorse" is a warranty of:
C

a. Maker
BO IA . JO

drawer and indorsers. (Sec. 158)

• b. Drawer
I

When a bill is lost or destroyed or is wrongly detained

c. Acceptor
G

from the person entitled to hold it, protest may be made

N E

on a copy or written particulars thereof. (Sec 160) d. All of the above

3. Forgery of bills of exchange may be classified into, a)
forgery of an indorsement on the bill and b) forgery of
O TY

ACCEPTANCE FOR HONOR

B

Sec. 161. When bill may be accepted for honor. — When a the drawer's signature, which may either be with
TO

acceptance by the drawee, or

C

bill of exchange has been protested for dishonor by non-

acceptance or protested for better security and is not overdue, a. without acceptance but the bill is paid by the drawee.
EG AT

any person not being a party already liable thereon may, with b. with acceptance but the bill is paid by the drawer.
c. with acceptance but the bill is paid by the drawee.
T

the consent of the holder, intervene and accept the bill supra
protest for the honor of any party liable thereon or for the
honor of the person for whose account the bill is drawn. The
acceptance for honor may be for part only of the sum for
which the bill is drawn; and where there has been an
acceptance for honor for one party, there may be a further
acceptance by a different person for the honor of another
party.
N
d. without acceptance but the bill is paid by the drawer.
4. M signs a promissory note payable to the order of P
which is blank as to amount. M delivers the note to P
with instruction to type the amount of P20,000,00 on the
blank. P, however, types the amount of P50.000.00, and
negotiates the same to A, A to B, B to C, and C to H, a
holder in due course. A, B, C and also H had no

knowledge of the wrongful completion of the blank.

XVI — PROMISSORY NOTES AND CHECKS a. H may collect from M nothing because P violated
M's instructions.
• PROMISSORY NOTE - an unconditional promise in
b. H may collect from M P20,000.00 the amount
writing made by one person to another, signed by the
M instructed P to place on the space for the amount.
maker, engaging to pay on demand, or at a fixed or
c. H may collect from M P50,000.00, the amount
determinable future time, a sum certain in money to order
actually placed by P.
or to bearer. Where a note is drawn to the maker's own
d. H may collect from A, B or C P20,000.00 since they
order, it is not complete until indorsed by him. (Sec 184)
had no knowledge of the wrongful completion.
• CHECK - A check is a bill of exchange drawn on a bank
5. M signs a promissory note payable to the order of P
payable on demand. Except as herein otherwise provided,
which is blank as to amount. M delivers the note to P
the provisions of this Act applicable to a bill of exchange
with instruction to type the amount of P20,000,00 on the
payable on demand apply to a check. (Sec 185)
blank. P, however, types the amount of P50,000.00, and
negotiates the same to A, A to B, B to C, and C to H, a

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 EXCEL PROFESSIONAL SERVICES, INC. (ATTY. ONG - OCT 2020)

holder in due course. A, B, C and also H had no
knowledge of the wrongful completion of the blank.
a. H may collect from M nothing because P violated
M's instructions.
b. H may collect from M P20,000.00 the amount
M instructed P to place on the space for the amount.
c. H may collect from M P50,000.00, the amount
actually placed by P.
d. H may collect from A, B or C P20,000.00 since they
had no knowledge of the wrongful completion.
6. Which is not correct? The acceptor by accepting a
12. A promissory note where A is a maker payable to the
order of B is negotiated to C, D, E, F, G and H who is
now the holder. On maturity date, H presented for
payment to A who could not pay. H then gave notice of
dishonor to F and E who in turn gave notice to dishonor
to D and C. Which of these statements is not correct?
a. C can give valid notice to B.
b. Notice of dishonor given by E to D and C inures to
the benefit of H only.
c. G is discharged from liability.
d. None of the above.

W
negotiable instrument: 13. A is maker of a promissory note payable to the order of B

20 K NT NG
a. Admits the existence of the payee and his capacity to and then successively negotiated to C to D to E to F to G

W LA
endorse who is the holder. G strikes out intentionally the
b. Admits the existence of the drawer, the genuiness of indorsement of C.
his signature and his authority to draw the a. Only C is discharged.

R C E O
instrument. b. A and D are discharged but not E and F.

20 LA S
c. Admits the existence of the endorser, the c. All of C, D, E and F are discharged; C by the striking
genuineness of his signature and his authority to out of his indorsement and D, E and F by discharge

.
draw the instrument. of a prior party.

BE H UM .H
d. Admits that he will pay it according to the tenor of d. No one is discharged because the problem does not
his acceptance. say that the striking out of the indorsement was
TR A
7. The acceptor does not warrant the: before or after the maturity of the instrument.
a. Genuineness of drawer's signature 14. A bill of exchange payable thirty days after sight is
b. Existence of the payee addressed to X, as drawee, payable to the order of Y for
N
c. Due execution of the instrument P100,000 where Z appears to be drawer. Y negotiated to
d. Capacity of the payee to indorse A who alters the amount from P100,000 to P400,000 and
O IN N O

8. The rule is that the intentional cancellation of a person then negotiates to B and B to C. Choose the statement
secondarily liable results in the discharge of the latter. which is correct?
S

With respect to an indorser, the holder's right to cancel a. C can only recover from B P400,000 if he is a holder
E
his signature is: (2011 Bar) in due course.
U L HN

a. without limitation. b. Even if C is not a holder in due course he can recover

S

b. not limited to the case where the indorsement is from B P400,000 because the latter is an indorser
necessary to his title. after the alteration.
C

c. limited to the case where the indorsement is not c. Z as drawer can be held liable for P400,000 by C if
BO IA . JO

necessary to his title. he is a holder in due course.

I

d. limited to the case where the indorsement is d. Z as drawer can be held liable for P100,000 by C if
G
N E

necessary to his title. he is a holder in due course because the amount is the
9. This indorser expressly warrant the following: 1.) it is original tenor of the bill.
genuine and all respect what it purport to be; 2) he has a e. Both b and d
O TY
B

good title to it; 3) all prior parties have capacity to 15. A stranger to the instrument makes a material alteration
TO

negotiate; and 4) it is valid and subsisting at the time of changing the amount thereof from P100,000 to P400,000
C

his indorsement? - this act is known as

EG AT

a. The general indorser. a. Forgery

b. The irregular indorser. b. Material alteration
T

c. The regular indorser c. Spoliation

d. The qualified indorser. d. All of the above
10. Which of these is a party primarily liable on the 16. The following are all modes of discharging negotiable
instrument? instruments - choose the exception.
a. Drawer a. Payment in due course made by or on behalf of the
b. Indorser principal debtor.
c. Acceptor for honor b. Payment made by or on behalf of the accommodation
N

d. All of the above party.

e. None of them
11. Under which of these circumstances may the instrument
be regarded as either a promissory note or a bill of
exchange?
a. When drawer and the drawee are the same person.
b. When the drawee is a fictitious name.
c. When the drawee is without capacity to contract.
d. When there is a doubt as to whether the instrument is
a bill or a note.
e. All of the above.
c. By the intentional cancellation of the instrument.
d. By any act which discharges a simple contract for the
payment of money.
e. None of the above.
17. The following are all requisites of an acceptance for
honor - choose the exception.
a. That the bill must have been previously dishonored
by non-acceptance or protested for better security.
b. That the bill is already overdue.
c. That the acceptance for honor must be with the
consent of the holder.
d. That the acceptor for honor must not be a party
already liable on the instrument.

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 EXCEL PROFESSIONAL SERVICES, INC. (ATTY. ONG - OCT 2020)

a. 1st - A bill of exchange may be drawn payable to the BATAS PAMBANSA BLG. 22
drawer's own order.
2nd - The acceptor for honor is only secondarily liable on AN ACT PENALIZING THE MAKING OR DRAWING
the instrument. AND ISSUANCE OF A CHECK WITHOUT SUFFICIENT
a. Both are true FUNDS OR CREDIT AND FOR OTHER PURPOSES.
b. Both are false Effectivity: June 29, 1979
c. No. 1 is true; No. 2 is false
d. No. 1 is false; No. 2 is true What is punish under BP 22?
18. Presentment for acceptance of a bill of exchange is not What the law punishes is the issuance of a bouncing check
necessary: not the purpose for which it was issued nor the term and
a. Where the bill is payable after sight conditions relating to its issuance. The mere act of issuing a

W
b. Where the bill is drawn payable elsewhere than at the worthless check is malum prohibitum.

20 K NT NG
residence or place of business of the drawee The gravamen of the offense punished by BP 22 is the act of

W LA
c. Where it is payable at a certain number of days after making and issuing a worthless check or a check that is
date dishonored upon its presentation for payment. It is not the
d. Answer not given non-payment of all obligation which the law punishes. The

R C E O
19. A bill of exchange to which no document is attached law is not intended or designed to coerce a debtor to pay his

20 LA S
when presentment for payment or acceptance is made debt, The thrust of the law is to prohibit, under pain of penal
a. Trade acceptance sanctions, the making of worthless checks and putting them

.
b. Bank acceptance in circulation. Because of its deleterious effects on the public

BE H UM .H
c. Clean bill of exchange interest, the practice is proscribed by the law. The law
d. Documentary bill of exchange punishes the act not as an offense against property, but an
TR A
20. When negotiable instrument had been dishonored by offense against public order. (Caram Resource Corporation
non-acceptance or nonpayment, notice of dishonor must vs. Conterars, Adm. Matter No. MTJ-93-849, October 26,
be given to the following, otherwise they are discharged 1994)
N
a. Maker c. Drawee
b. Drawer d. Acceptor Check covered
O IN N O

21. The separate paper attached to an instrument on which an The language of BP 22 is broad enough to cover all kinds of
indorsement or acceptance of the instrument is written is checks, whether present dated or postdated, or whether issued
S

called: in payment of pre-existing obligations or given in mutual or

E
a. Allonge c. enclosure simultaneous exchange for something of value. (Lozano vs.
U L HN

b. Memorandum d. attachment. Martinez, GRN L-63419. December 18, 1986.)

S

22. A bill of exchange may be treated as a promissory note

a. When the drawee and the payee are the same person How BP 22 is committed?
C

b. When the drawer and the payee are the same person 1. Any person who makes or draws and issues any check
BO IA . JO

c. When the drawee and the drawer are the same person to apply on account or for value, knowing at the time of
I

d. All of them issue that he does not have sufficient funds in or

G
N E

23. Protest is not necessary: credit* with the drawee bank for the payment of such
a. Upon dishonor by non-acceptance of a foreign bill check in full upon its presentment, which check is
appearing on its face to be such; subsequently dishonored by the drawee bank for
O TY
B

b. Upon dishonor by non-payment of a foreign bill insufficiency of funds or credit or would have been
TO

appearing on its face to be such, if not having been dishonored for the same reason had not the drawer,
C

previously dishonored by non-acceptance; without any valid reason, ordered the bank to stop
EG AT

c. In cases of inland bills and promissory notes payment.

d. Answer not given 2. Any person who, having sufficient funds in or credit with
T

24. If the drawee destroys the bill the drawee bank when he makes or draws and issues a
a. The bill is considered accepted check, shall fail to keep sufficient funds or to maintain a
b. The bill is considered dishonored credit to cover the full amount of the check if presented
c. The bill is discharged within a period of ninety (90) days from the date
d. The bill is cancelled appearing thereon, for which reason it is dishonored by
25. In relation to checks and bills of exchange, which is not a the drawee bank.
correct statement? Where the check is drawn by a corporation, company or
N

a. A bill may be drawn addressed to any person as entity, the person or persons who actually signed the
drawee, but a check can only be addressed to a bank check in behalf of such drawer shall be liable under this
as drawee. Act. (Sec 1)
b. A check is always payable on demand whereas a bill
may be made payable on demand or at a fixed or Distinction between BP 22 and Estafa under
determinable future time. Bouncing Check Law Estafa
c. A check must be presented for payment within a BP 22 (Art 315, par 2, RPC)
reasonable time from its date of issue, whereas a bill
1. Making, drawing, and 1. That the offender
within a reasonable time from the date of last
issuance of any check to postdated or issued a
negotiation.
apply on account or for check in payment of
d. Where the check and the bill of exchange are not
value; an obligation
presented for payment within a reasonable time as
2. Knowledge of the maker, contracted at the time
stated in choice (c) the drawers are considered
drawer, or issuer that at the check was issued.
discharged absolutely.

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 EXCEL PROFESSIONAL SERVICES, INC. (ATTY. ONG - OCT 2020)

the time of issue he does 2. That such postdating
not have sufficient funds or issuing a check was
in or credit with the done when the
drawee bank for the offender had no funds
payment of the check in in the bank, or his
full payment upon its funds deposited
presentment; therein were not
3. Subsequent dishonor of sufficient to cover the
the check by the drawee amount of the check
bank for insufficiency of 3. Deceit or damage to
Violation of B.P. Blg. 22 prescribes in four (4) years from the
commission of the offense or, if the same be not known at the
time, from the discovery thereof. (Panaguitton vs. DOJ, G.R.
No. 167571, November 25, 2008)
Multiple Choice
1. The crime of BP 22 is?
a. Mala in se
b. Mala prohibita
c. Both mala in se and mala prohibita
d. Answer not given

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funds or credit or the payee thereof.
dishonor of the check for (People vs Ojeda, 430 2. The following are elements of BP 22, except

20 K NT NG
the same reason had not SCRA 436) a. the making, drawing, and issuance of any check to

W LA
the drawer, without any apply for account or for value
valid cause, ordered the b. the knowledge of the maker, drawer, or issuer that at
bank to stop payment. the time of issue he does not have sufficient funds in

R C E O
or credit with the drawee bank for the payment of the

20 LA S
Penalty for violation of BP 22 check in full upon its presentment.
1. Imprisonment of not less than thirty days but not more c. Deceit or damage to the payee thereof.

.
than one (1) year, or d. the subsequent dishonor of the check by the drawee

BE H UM .H
2. By a fine of not less than but not more than double the bank for insufficiency of funds or credit or dishonor
amount of the check which fine shall in no case exceed for the same reason had not the drawer, without any
TR A
Two Hundred Thousand Pesos, or valid cause, ordered the bank to stop payment.
3. Both such fine and imprisonment at the discretion of the 3. The penalty for violation of BP 22 is?
court. a. Imprisonment of not less than thirty days but not
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more than one (1) year, or a fine of not less than but
Note: * The word "credit" as used herein shall be construed not more than double the amount of the check which
O IN N O

to mean an arrangement or understanding with the bank for fine shall in no case exceed Two Hundred Thousand
the payment of such check (Sec 4) Pesos or both such fine and imprisonment at the
S

discretion of the court.

E
Evidence of knowledge of insufficient funds b. Imprisonment of not less than sixty days but not
U L HN

The making, drawing and issuance of a check payment of more than one (1) year, or a fine of not less than but
S

which is refused by the drawee because of insufficient funds not more than double the amount of the check which
in or credit with such bank, when presented within ninety fine shall in no case exceed Two Hundred Thousand
C

(90) days from the date of the check, shall be prima facie Pesos or both such fine and imprisonment at the
BO IA . JO

evidence of knowledge of such insufficiency of funds or discretion of the court.

I

credit unless such maker or drawer pays the holder thereof c. Imprisonment of not less than thirty days but not
G
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the amount due thereon, or makes arrangements for payment more than two (2) year, or a fine of not less than but
in full by the drawee of such check within (5) banking days not more than double the amount of the check which
fine shall in no case exceed Two Hundred Thousand
O TY

after receiving notice that such check has not been paid by
B

the drawee. (Sec 2) Pesos or both such fine and imprisonment at the
TO

discretion of the court.

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Duty of drawee; rules of evidence d. Imprisonment of not less than sixty days but not
EG AT

It shall be the duty of the drawee of any check, when refusing more than one (2) year, or a fine of not less than but
to pay the same to the holder thereof upon presentment, to not more than double the amount of the check which
T

cause to be written, printed, or stamped in plain language fine shall in no case exceed Two Hundred Thousand
thereon, or attached thereto, the reason for drawee's dishonor Pesos or both such fine and imprisonment at the
or refusal to pay the same: Provided, That where there are no discretion of the court.
sufficient funds in or credit with such drawee bank, such fact 4. Under BP 22, if the amount of the check involved is
shall always be explicitly stated in the notice of dishonor or P80,000, the maximum fine that may be imposed is?
refusal. In all prosecutions under this Act, the introduction in a. P80,000 c. P200,000
evidence of any unpaid and dishonored check, having the b. P160,000 d. P250,000
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drawee's refusal to pay stamped or written thereon or
attached thereto, with the reason therefor as aforesaid, shall
be prima facie evidence of the making or issuance of said
check, and the due presentment to the drawee for payment
and the dishonor thereof, and that the same was properly
dishonored for the reason written, stamped or attached by the
drawee on such dishonored check.
Notwithstanding receipt of an order to stop payment, the
drawee shall state in the notice that there were no sufficient
funds in or credit with such bank for the payment in full of
such check, if such be the fact. (Sec 3)
Prescriptive period of BP 22
5. There is a prima facie evidence of knowledge of such
insufficiency of funds when the check is refused within a
period of?
a. 60 days from the date of check
b. 90 days from the date of check
c. 60 days from issue
d. 90 days from issue
6. Under Section 2 of the bouncing check law (BP 22), The
making, drawing and issuance of a check payment of
which is refused by the drawee because of insufficient
funds in or credit with such bank, when presented within
ninety (90) days from the date of the check, shall be
prima facie evidence of knowledge of such insufficiency
of funds or credit unless such maker or drawer pays the

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 EXCEL PROFESSIONAL SERVICES, INC. (ATTY. ONG - OCT 2020)

holder thereof the amount due thereon, or makes

arrangements for payment in full by the drawee of such
check within five (5) banking days after receiving notice
that such check has not been paid by the drawee.
The notice required under Section 2 of the bouncing
check law (BP 22)?
a. must be a notice of dishonor in writing
b. must be an oral notice of dishonor
c. maybe oral or writing at the option of the holder
d. must be a notice of dishonor in a public instrument.
7. The prescriptive period for violation of Bouncing Check

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law (BP 22) is?

20 K NT NG
a. One (1) year c. Four (4) years

W LA
b. Two (2) years d. Five (5) years

R C E O
20 LA S
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BE H UM .H
TR A
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O IN N O S

E
U L HN
S
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BO IA . JO

I
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N E
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