MONDAY - May 15, 2023

If the promissory note is clear, it is not open to interpretation anymore. - not ambiguous

Promissory note - done by the maker

Bill of Exchange - drawn by the drawer

Promissory note
- maker (makes the check) -> payee = there is a maker-payee relationship (maker makes a
credit in favor of the payee; later on, the payee may negotiate it to pay somebody else -
because there is credit = negotiation by indorsement or by delivery) - Indorsement,
Indorsers

Bill of exchange
- drawer (draws the check) -> drawee -> payee

Check = drawee (bank)

Is legal tender money? - YES. if the money is tendered into the right amount

Is money legal tender? - NOT ALWAYS.

Not all money is legal tender. Example: US Dollar - is it legal tender in the PH? No.
CHECK
“1,000 USD” - YES because of Section 1
(payable in sum certain of money)

CHECK - purchasing medium but won’t be accepted in other transactions

CONTRACTS
- meeting of the minds (consent)
- binding
- consideration is also presumed under Section 24
 THURSDAY - May 18, 2023

Negotiation - transferring of the instrument by the transferor to the transferee

Transferor - transfers the instrument
Transferee - recipient

Obligor
- debtor (active subject); creditor (passive subject)
- obligation is to pay (obligation to give)

Obligee - transferee

PROMISSORY NOTE
- drawer (transferor)
- Payee (transferee)
- If the maker makes a PN, he promises to pay a sum certain of money to the payee
- Maker becomes the debtor (obligor)
- Payee becomes the holder of the instrument (obligee)
- Debtor-creditor relationship was created = resulting into a special contract (negotiable
instrument)
- Special contract

Requisites of a valid contract

1. Consent
2. Object (to pay a sum certain of money to the payee)
3. Consideration

Negotiable instrument
- special contract
- because it has 3 requisites of a valid contract but there are also other requisites

Holder
- payee, bearer or indorsee

Check
- drawer, drawee, payee

In negotiation, there is a transfer (maker to the payee) = contract is created

PAYABLE TO ORDER
- Payee indorsed it to X (indorsee)
- Can X transfer it to another person? = Promissory note represents credit (it can be
transferred if it will be accepted by the subsequent indorsee)

PAYABLE TO BEARER
- Just delivery

Check is not money. It is not legal tender

- Legal tender is money that can compel the creditor when tendered in the right amount
- From the maker to the payee = primary contract/principal
- From payee to X = secondary contract
- X to Y = secondary contract
- Y to Z = secondary contract
- The more contracts there are, the more creditors & debtors
- Payee becomes the debtor to X (creditor)
- X (debtor) to Y (creditor)
- Y (debtor) to Z (creditor)
- Demand payment from the person primarily liable
- He can only collect once
 THURSDAY - May 25, 2023

Tangible
- something that can be touched

Typewritten is written. Handwritten is written. - As long as the requisites of a negotiable

instrument are present

If it is a handwritten promissory note, it is a negotiable instrument = because it is written by the

hand.

Where do you write a negotiable instrument? What material should a person write on?
- Durable Paper
- Can you write on a handkerchief? = If you write on a piece of cloth or leaves, it will not
be acceptable (It will create doubt.) - If doubt is created, the instrument you wrote on a
piece of cloth will not be accepted = destroys the essence of negotiability = prevent the
negotiation of the instrument
- Modern times - has to be written in paper now
- If we continue to write on clothes, it will just create doubt

What writing instrument should you use in making a promissory note?

- If no pen, pencil can be used (but least ideal because it can be easily tampered)
- How about a typewriter? = Yes, because the meaning of the word “writing” does not
only concern a pen and paper (Any writing instrument like a pen)
- How about a Fountain Pen? = Most desirable for handwriting; written in ink;
- Any writing instrument

The check is printed by the bank. You can either type the name of the payee or just write using a
pen, together with the amount and date. How would you sign if you were to sign as a drawer
of the check? How should a person sign?
- Name of the drawee is already printed - bank
- For bills of exchange, it should be signed
How should one sign?
- Sign using your customary signature (usual signature) - accustomed to/accustomed with
- Can a person sign with a “dot”? = Yes but you must (1) adopt the marking, initial as
your own & (2) you have the intention to be bound
- Adopting it as your own and accepting it
- Dots, Initials, Swastika Signs, Star, or any other marking
Example: Promissory Note by Nicole Bato
- Name is typed
- So how will Nicole sign? = She can sign using initials (N.B.)

MONDAY - May 29, 2023

❖ SECTION 2 - enumerates the instances where the sum will still be certain although it is
still to be paid in interest, stated installments, with costs of collection, or in a foreign
currency
- will not affect the certainty of the sum

When is a sum certain in money?

- When the sum is fixed

A. With interest; or
Php 100,000 with interest beginning today until May 29, 2024.
- Why is the sum certain although it is to be paid with interest? = Even if there is still an
agreement to pay interest, the sum is still certain in money

RATES ON LOANS
If the parties agreed on an interest but there is no rate set, 6% (legal interest will be applied) -
originally, it was 12%

Lawful rates - maximum rates of interest allowed by law

If the rates of interest exceed the lawful rates, which becomes usurious (eventually becomes
void).
Originally— 12% per year (applies when there is collateral) & 14% (applies when there is no
collateral)
If there is an agreement to pay interest, it must be in writing (whether it must be 12%, 14, 16% or
more)

B. By stated installments; or
- Stated installment = Php 1,000 payable in 10 months, interest is Php 120.
- Installment is Php 10/month
- Why is it still certain? = You have to state the installment; as long as the installments
can be determined (Principal + Installment)
C. With acceleration clause
- The maturity will be accelerated
- Will it affect the negotiability of the instrument? = No, it is still certain because
- Acceleration clause takes place when the instrument is overdue

D. With exchange, whether at a fixed rate or at the current rate; or

- Refers to instruments payable in foreign currency
- Does not destroy negotiability = Sum is still certain
- Check the current/fixed rate
- Refer to Section 6 - “it designates a particular kind of current money in which payment is
to be made”
- Will it still be certain even if it is to be paid with exchange? = Yes
- Exchange rates of dollars can be seen in the news via television
- Does the law require that the sum payable is not in Philippine currency? = No. SUM
CERTAIN IN MONEY, even if not in Philippine money

E. Cost of collection and attorney’s fees

- Cost of collection = fee you pay to the court for filing the case (Filing Fee); it varies,
there is a designated table for it
- If there is an agreement to pay in foreign exchange,
- Attorney’s fees (a kind of damages) are awarded by the court; sometimes fixed by the
parties
- It will not affect the negotiability of the instrument

❖ SECTION 3

When is a promise or order unconditional?

- Unconditional promise = note
- Unconditional order = bill/check

Paragraph b speaks of an unconditional order/promise

Statement of a consideration (for the issuance) in the instrument = it will not affect the
negotiability of the instrument
Example: In consideration of the bicycle I bought from you, I promise to pay to the order of Jose
Javier, the sum of Php 100,000
- Consideration— the purchase of the bicycle
- Consideration need not be stated (Sec 24 says that there is a presumption that the
instrument has a consideration)
- Even if there is a debit of the amount from the bank, it is still a negotiable instrument
Example of paragraph A, Section 3:
- “I promise to pay to the order of ….” specifying the amount to be reimbursed with
- I promise to pay to the order of Juan Dela Cruz the sum of Php 20,000.
- Then reimburse yourself out of the funds you have in your possession = SUM IS STILL
CERTAIN

Does the law require that the sum payable is in legal tender?
- No, the law simply says sum certain in money

Legal Tender in the Philippines: Philippine Peso

Even if you promise to pay in US Dollars

- The agreement to pay is void but the law still accepts it

MONDAY - June 5, 2023

Section 4
When is an instrument payable on demand?
- Check Section 7
- An instrument is payable on demand:
a. Where it is expressed to be payable on demand, or at sight, or on presentation; or
b. In which no time for payment is expressed

FIXED TIME
- You cannot sabay “on demand” and “on a fixed time” — only either of the two

“Payable to order/bearer” = word of negotiability; needs to be complete

Pure Obligation
When you are making a negotiable instrument, you are making a sentence - “I promise to pay to
the order of…”
- it is important you know the sequence = period to pay

PAYABLE AT A FIXED TIME (Example)

- “I promise to pay to the order of Juan Dela Cruz the sum of Php 100,000 on September 1,
2020.

DETERMINABLE FUTURE TIME (Example)

- “On or before the start of the next opening of the first trimester, I promise to pay Juan or
order Php 10,000.”
“10 days after sight”
- 10 days after it is seen by the drawee

“I promise to pay to the order of Juan Dela Cruz Php 100,000 on or before”

Determinable - something to be determined yet

Determined - something that is already known

DAY CERTAIN
- not a certain day
- something to be determined (since it is determinable)
- Example: death (event which will certainly occur but you do not know when)

Example:
I promise to pay to Juan Dela Cruz or order the sum of Php 100,000 on the death of the dog of
*insert name*.

❖ 10 days after the death of the dog of Juan Dela Cruz, I promise to pay Juan Dela Cruz the
sum of Php 50,000.
❖ IS THIS NEGOTIABLE? “I promise to the order of Juan dela cruz the sum of Php
100,000 10 days before the death of his dog.”
- The law says fixed period after death, not before

When is an instrument payable to order?

- Check Section 8

“I promise to pay the sum of Php 10,000 to Juan Dela Cruz on May 30, 2023”

Specified person or his order

- When payable to order

Without the word “order” the instrument is not negotiable.

- I promise to pay to the order of Juan Dela Cruz/ I promise to pay to Juan Dela Cruz or
order
- Either of the two
- Following what the law says
Section 9
1. Expressed to be payable to bearer
- I promise to pay to bearer Php 10,000

THURSDAY - June 8, 2023

Section 6
◆ Section 6 Paragraph A - Refer to Section 17 Paragraph C
◆ Section 3 Paragraph B - About Consideration
◆ Section 6 Paragraph B - Refer to Section 24

➔ Valuable Consideration is one of the three requisites in contract

➔ Negotiable instruments is a special contract as it has other requisites
➔ When you write a promissory notes or documents put a date in the right hand side

Section 6: Seal
● Seal has different kinds: dry seal or wet seal ex: notary seal
● Dry Seal: proof of authenticity; genuineness
● Seal is a proof of authenticity and the notary public do this
● When the document is notarized it is a public document
❖ A promissory notes indicate a foreign currency the instrument is still negotiable but
payable in Philippine Peso

Section 5: Additional Provisions

● Extra provisions to the negotiable instruments but does not affect the negotiability
● Even though Section 5 (A,B,C,D) is present the document is still negotiable
○ The instruments must state only a sum certain in money, cannot add additional act
(ex: cannot deliver a carabao)

● Section 5 Paragraph A
○ Collateral Security - to secure or ensure the payment of money you put up as
collateral. If you fail to do the promissory note the holder will have the right to
bring you to court
○ If you borrow in the bank and the borrower cannot pay the collateral can be sold
in a auction and the money would be used as a payment
○ Pawnshops: Moveable (can be auctioned)

● Section 5 Paragraph B
○ Confession of a judgment - it admits liability and deprives you of due process
○ Due Process - notice and hearing; gives you a chance to explain
 ● Section 5 Paragraph C
○ Notice of dishonor being waved and this will not affect
○ It will only affect if the instrument is not due
○ Example of benefit given to the maker of the instrument - giving of notice of
dishonor; there should be a notice that the maker did not pay and the holder will
make this notice
○ The holder has the obligation to do the notice of dishonor
○ Person secondary liable can also receive this notice of dishonor as they are
discharged from liability
○ Example - the giving of notice to you (the person secondary liable)

MONDAY - June 19, 2023

Words of Negotiability
- Order or bearer (no substitute words yet)

Drawer
- draws the bill, check
- Drawer draws the check against the payee

Prima Facie
- latin phrase meaning "on the face"

Ante-dating & Post-dating

- talks about the date of the instrument, not the maturity

Check
- Always payable on demand
- If you draw a check, and you date it 3 months advance, the check that you issued is not
payable on demand
- When a check is issued, it should be dated today
- Is a bill of exchange drawn against the bank and payable on demand

Ante-dating
- Date appearing on the instrument is earlier than the actual date of issuance
- Sometimes used to charge more interest (usurious interest)
- Usurious interest is not recoverable (invalid)
- Lawful rates (maximum rates of interest that are recoverable)
- BSP allow interest rates to flow depending on the law of supply and demand
 - Usury law has already become a dead law
- Usury Law = the unlawful act of charging interest on a debt (including discount points,
fees and other charges) at a rate greater than what is permitted under any applicable law
or exemption from a law

Post-dating
- date appearing on the instrument is later than the actual date of issuance

Section 13
- The holder in due course can insert the true date
- But if the wrong date is inserted and the holder in due course has it, it will be marked as
the true date

THURSDAY - June 22, 2023

Elements: Consent, Consideration, Object

Promissory Note
● Maker and Payee - principal parties
Bill of Exchange
● Drawer, Drawee, Payee - principal parties

Section 17
● Will only be applied if the instruments are ambiguous
● It is the duty of the lawyers to write clearly worded contracts
● Amount in words - shows the clear intention of the parties
● Interest can only be recovered if there is a written agreement to that effect
● When will the interest begin to run? - Will begin on the date specified in the body of the
instrument
● The interest will begin to run from the date stipulated in the instrument (agreed upon by
the parties)
● If there is no date, the date of issuance will be considered as the date to when the interest
will be running
● Written provisions clearly show the intention of the parties
● Why indorser? - The liability of the maker - principal; indorsers are secondarily liable

Section 18
● No signature; no liability
● As a general rule, only persons whose signatures appear on an instrument are liable
 ● Exceptions: (1) where a person signs in a trade/assumed name; (2) principal is liable if a
duly authorized agent signs on his own behalf; (3) in case of forgery, the forger is liable
even if his signature does not appear on the instrument; (4) where the acceptor makes his
acceptance of a bill on a separate paper; and (5) where a person makes a written promise
to accept a bill before it is drawn

Example:
● Signed Cardo Dalisay - example of an assumed name/alias
● On the due date, you demanded payment from Mr. Cardo Dalisay the amount of the PM -
Cardo says he is not liable because he is not Cardo, he is Coco Martin.
● He will be liable as if he signed his own name

Agent signs on behalf of the principal = Principal-Agent Relationship

● Who is liable? Even if his signature did not appear = Principal

Provisions on Agents: Sections 19 & 20

● REQUISITES — Agent in order to not be personally liable, he must have been: (1)
Authorized to sign for the principal; (2) Agent must disclose the name of the principal;
(3) Agent must put/place words to show that he is only acting as an agent

Section 21
● If the agent signs on behalf of the principal, near his signature is seen “per proc” =
limited liability of the agent
Sections 22 and 23 will be tackled when we reach Holder in Due Course.

CONSIDERATION - sections 2 and 3 of the Law of Negotiable Instruments; section 6

Section 24
● Every instrument is deemed to have valuable consideration (there is a presumption)
● Prima facie = on the face of the instrument
● Statement of the transaction = valuable consideration

Section 25
● Valuable Consideration = any consideration; need not be adequate
● Each contract has 3 elements: Consent, Object, Consideration
● What was the reason why the instrument was issued? What was the reason why the
maker promises to pay Php 10,000?
Section 26
● Holder for Value = somebody who has issued a valuable consideration
● Holder in Due Course = holder in good faith; every holder is supposed to be a holder for
valuable consideration

Section 27
● Lien on Instrument = lien means interest/claim
● If a person has a lien on the instrument, he is a claimant
● Lien = interest/reason/consideration

Section 28
● Absence = no consideration
● Failure = there is consideration but it failed
● Lack of consideration = personal defense

Section 29 will be discussed when we reach Kinds of Indorsers.

● He signs an instrument to accommodate somebody

Example: Mr. Marzan would like to borrow from the bank but he is not allowed to borrow
money. He goes to Vince Florencio and asks. Can you ask somebody to make a promissory note
to guarantee you?
● Mr. Marzan would look for Breanna Melencio “Breanna can you accommodate me?”
● Breanna says that she does not know Vince.
● Let Breanna execute a promissory note
● Promising to pay to Ramon Marzan
● Payee - Marzan; Payee - Breanna Melencio
● “Can I indorse it to you?” Marzan asks Vince. Vince will give him the sum of money
required
● On the due date, Vince can get the money from Breanna but Breanna says that the one
liable is Marzan.
● Marzan is indeed the one liable

Negotiation
● To make the transferee the holder of the instrument
● How is the instrument negotiated? = Check Section 30
● Payable to order - indorsement completed by delivery
● Bearer instrument - you have to deliver it; no need for indorsement
● When is the instrument payable to order? - Section 8
● When is the instrument payable to bearer? - Section 9
● What constitutes indorsement? - Section 31
 ● Indorsement must be signed and on a separate paper - Section 32
● How is an indorsement? - must be in writing and signed by the indorser
● Indorsement must be of the entire instrument
● Requisites of indorsement - writing, signed by the indorser; entire instrument must be
turned over
● Kinds of indorsements - Sections 33-35

Section 33 - KINDS OF INDORSEMENTS

● Blank/Special
● Restrictive/Non-Restrictive
● Qualified/Unqualified
● Conditional/Unconditional

Section 34 - Special Indorsement

● Specifies the person to whom the order is payable

Section 35 - Blank Indorsement

● Does not specify the indorsee
● Name of the indorser only is seen
● May be converted to a special instrument by writing over the signature of the indorser
 MONDAY - June 26, 2023

Special Indorsement
- specifies the indorsee

Blank Indorsement
- just the signature is present
- instrument is converted to a bearer instrument (Section 9)

Restrictive Indorsement
a. Prohibits the further negotiation - will affect the negotiability of the instrument
b. Constitutes the indorsee the agent of the indorser - no effect on negotiability
c. Vests the title in the indorsee in trust for or to the use of some other person - no effect on
negotiability

Section 37
- explanation why the instrument will not be affected
- gives the indorsee the right to transfer

Section 38. Qualified Indorsement

- An indorsee's own risk - sans recourse
- Will a qualified indorsement affect the negotiability? - No, it will not impair the negotiable
character of the negotiable instrument
- You can indorse it again to some other person
Example: Pay to Mr. Paras, at your own risk.

Sections 65 & 66
- qualities of the qualified indorser
- taking your own risk = limited liability

Section 39. Conditional Indorsement

a. Absolute indorsement - binds himself to pay; no other condition
b. Conditional indorsement - some other conditions to his liability

Section 40.
Example: Payable to Danica Alcantara or Bearer
- Bearer instrument
- how will she negotiate/transfer it? = delivery (ex: grab, uber, lyft, etc.)
Example: Transfer to Simone Ledesma
- Deliver
- Special indorsement to Vince Florencio (not needed)
- Vince Florencio indorsed it to Thomas Estanislao
- they will have the liability of the indorser
- Thomas Estanislao may strike out any indorsement
- effect: the preceding indorsers/bearers will be striked out also (except Mr. Paras)
Can Mr. Paras go to Danica and demand payment from her at night?
- Yes because Danica is still the Payee

Section 41. Indorsement where payable to two or more persons

Section 42. Effect of Instrument drawn or indorsed to a person as cashier

Example: Payable to cashier (Vince Florencio, cashier of DLSU)
- he can indorse

Section 43. Indorsement where name is misspelled

- You can indorse using the misspelled name

Section 44. Indorsement in representative capacity

Section 45. Time of indorsement; presumption

- before it is overdue
- do not negotiate an instrument where it is already overdue because the person you are indorsing
will not become a holder in due course

Section 46. Place of indorsement; presumption

- where the instrument is issued
- if it is not indicated, where the instrument is dated
Example: Dear Danica, pay to the order of... (Bill of Exchange)
- What will Mr. Paras put? = Date when you wrote it, Place (Manila, Philippines; in my room;
inside the toilet)

Section 49. Transfer without indorsement; effect of

- if the instrument is payable to order, the person who you delivered the instrument to can request
the transferor
- transferee acquires the right to have the indorsement of the transferor
Time of holder due course
- when the person becomes a holder

HOLDER IN DUE COURSE

Justice is the maker until it reaches Mr. Keng, he becomes the holder.
- May Mr. Keng indorse/negotiate it back to Justice? = Yes, if it is negotiated back to Justice on
the due date itself, according to Sec. 119 letter E, instrument is discharged
- discharge = released off of liability
- if not on the due date = such party must re-issue or further negotiate; he will not be liable (why
will he run after a person to whom he was liable?)
- when the principal debtor becomes the holder
- why is the instrument discharged? = extinguished because of letters A-E of Section 119
(confusion/merger in his character)
 THURSDAY - July 13, 2023

Section 52 - Holder in due course

● COGI (keyword)
1. Complete - complies with the requisites found in Section 1
2. Regular - If the check is folded many times, it will create doubt in the integrity of the
instrument
3. Overdue - holder in due course must have acquired the instrument that is not
overdue/past due or if it has been previously dishonored
- valuable consideration (when the instrument is issued by the maker, there is valuable
consideration — it is always presumed; when you negotiate it, there is valuable
consideration given)
- not every holder is a holder in due course — aside from holder for value, he must comply
with the other requisites of Section 52
- a holder for value is not necessarily a holder in due course
- a holder in due course is always a holder for value
4. Good faith - no notice/knowledge that there is an infirmity or defect in the title of the
person negotiating it

Section 14 - Person’s signature was forged - not liable

The holder in due course cannot collect from the person whose signature was forged

Section 23 - Signature is inoperative and does not give any right to retain or recover

Section 51 & 57 - both rights of Holder in Due Course (has 5 rights in total) but if only a holder,
only Section 51

Section 51 - Holder has two rights (right to sue and receive payment)
- Payment to him discharges the instrument

Section 57 - Rights of a holder in due course

1. Sue on the instrument in his own name
2. May receive payment and if the payment is in due course, the instrument is discharged
3. Holds the instrument free from any defect of title of prior parties
4. Free from defenses available to prior parties among themselves
5. Enforce payment for the full amount against all parties
Section 55
When is a person’s title defective?
- Obtained the instrument by fraud, duress, force, fear, unlawful means, illegal
consideration, breach of faith
- Real defense = can be set up against any holder in due course (for example, forgery)

Section 56
What constitutes notice?
- It is when you have actual or substantial knowledge of the circumstances surrounding the
instrument
- Knowledge of some facts but it may not be the whole set (substantial knowledge is
enough)
- It has to be actual knowledge

Section 53
- When the instrument is payable on demand and it has been circulating for the whole time,
the holder will not be the holder in due course
- If later on you come across a NI that has already been in circulation for an unreasonable
amount of time, then you are not a holder in due course
- The check becomes useless 6 months after it has been issued (Definition of a check—
drawn on a bank, payable on demand)

Section 54
Notice for whole amount is paid
- When the holder in due course receives notice for infirmity, if there is partial payment,
then it is alright

Section 58
When the instrument is in the hands other than the holder in due course

Section 59
- Presumption that when an instrument is received by a party to the instrument, he is
deemed to be a holder in due course, the burden is on the holder to prove that he acquired
the instrument as the holder in due course
- Every holder is a holder in due course but if the maker questions your right, the burden
proof is on you (holder)
DEFENSES
1. Personal Defense
- Cannot be used against a holder in due course
- Cannot be used to defeat the right against the holder in due course

Example: Absence or Failure of Consideration (Section 28)

2. Real Defense
- can be used against a holder in due course
- Against the whole world

Lack of consideration/Failure of Consideration (not a defense against a holder in due course;

but is a defense against a person not a holder in due course)
● Absence of consideration - no consideration
● Failure of consideration - there was cons but it was not delivered

Section 28 - is a personal defense only can be used to defeat the right of a person not a holder in
due course

Unlike in Section 23
EXAMPLE OF A REAL DEFENSE: Forgery
● Defense that can be used against any holder including a holder in due course

Example: Suppose Alejandro issued a check. Suppose somebody forged his signature to make it
appear that Alejandro issued a check to Vince (payee of the check).
● A forged signature - signature made without the authority of the person

Two types of Forged Signature

A. Forged Signature
● it is wholly inoperative (not the instrument but the right to collect)
● The one who forged no right to retain the instrument to enforce payment
● When is there forgery? - When there is a duplicate; you fraudulently imitate the signature

B. Signature made without authority

❖ Alteration - makes a change; different from forgery because forgery does not include
altering but imitating
❖ Forgery - fraudulent imitation of a person’s signature; different from fraudulent
alteration of any of the material particular
The instrument is not useless because the holder may not be able to collect, he may be able to
collect from other parties (the instrument may be issued by Vince but it was forged but it was
negotiated from A to B to C to D to E to F to G); he cannot collect from the person whose
signature was forged.
● The only time will Vince be liable if he admits that his signature is genuine (Section 23)
● if he denied later on that it was forged, he is estopped

Is a forger liable on the instrument?

● An agent is not liable on the instrument unless he is estopped
● Assumed/trade name - is he liable? - Yes

MONDAY - July 17, 2023

Forgery
- Deceiving somebody

Section 125
- Time of payment - Due date

Material Alteration
- Changing any of the items in Section 1
- Section 1 deals with material details

Section 124
- Materially altered
- The effect is that it is avoided

Example: A maker issued a promissory note promising to pay the payee. When Danica (payee)
received it, she changed the amount Php 1M before she negotiated it to Simone. Let’s let Vince
pay Php 2M. Simone gave consent. The instrument is now passed to Jolyne but she does not
know that there was alteration. On the due date, Jolyne presents the instrument that has been
altered by Danica and consented by Simone. IT IS AVOIDED = Vince has no liability because
there is alteration. Can Jolyne recover from Vince? Yes but only up to the original tenor
(amount).

In this particular case, does Jolyne (holder in due course) have a right? Jolyne will give notice of
dishonor to all the parties of the instrument. - Simone (indorser), Danica (payee)

Notice of Dishonor
Presentment for Payment -> Dishonored -> Notice of dishonor

Can Jolyne recover from Danica? = Yes, Php 2M. Why will Danica be liable? The instrument
is avoided except as against a party who has himself

Can Jolyne recover from Simone? = Yes, she agreed/assented to the alteration. Subsequent
indorsers are liable because they are indorsers and they have warranties (Section 65)
- An indorser warrants that the instrument is genuine and it is what it appears to be (it is
what it is)
- Breach of warranty
- All indorsers are liable in the order in which they indorse?

Section 22
Can a minor indorse?
- Infant - minors
- Infant can indorse but they do not have a liability (Real defense)
- According to Obligations and Contracts, contracts entered into by minors are voidable

Section 198
- Published on March 4, 1911
- Took effect on June 2, 1911

Section 14, 15, 16

Section 14
- Lacks material details of Section 1

Example: A promissory note was issued by Vince to Danica. Vince left the amount blank. Vince
told Danica “You’re my classmate. You na bahala with the amount” Danica indorses it to
Hannah, the holder. On the due date, can Hannah collect from Vince?
- In accordance with the authority given
- In section 14, there are 2 kinds of instruments - instrument in lacking material particulars
- It is valid, Hannah may reinforce it as if it was filled up

According to Section 14, if the instrument is in the hands of the holder in due course, it may be
reinforced as if it was filled up (PERSONAL DEFENSE).

If however Hannah is not the holder in due course, there is no presumption that it is valid.
Therefore, Vince is not liable to Hannah. She can also collect from the person secondarily liable.
Another instrument found in Section 14. A signature on a blank paper.
- There was no intent when he signed the paper; had no intention to convert it to a
negotiable instrument (REAL DEFENSE)

Section 15
Incomplete instrument not delivered
- Not a valid contract in the hands of any holder
- REAL DEFENSE
- When an instrument is not complete (kulang amount)

Section 16
- Opposite of Section 14
- Section 16 says that the instrument is complete but undelivered goes into the holder in
due course
- Holder in due course cannot collect
- Can be revoked
- PERSONAL DEFENSE

MONDAY - July 24, 2023

LIABILITIES OF PARTIES

Section 60. Liability of Maker

- Primarily liable (absolutely liable on the instrument - Maker & Drawee (if he accepts, he
is liable)
- Until the drawee accepts it, he becomes liable
- Secondary liable (only liable when the persons primarily liable do not honor the
instrument)
- The moment he makes an instrument he admits the existence of the payee

Section 61. Liability of Drawer

- Drawer is secondarily liable
- Becomes liable only provided that 3 conditions are met
- Task of the holder to present the instrument to the drawee so that the drawee will accept
(ENGAGEMENT)
1.) On due presentment, the instrument will be due presented or paid according to its tenor
2.) If the instrument is dishonored, notice of dishonor must be given by the holder
3.) Necessary proceedings are duly taken
2 admissions of the Drawer:
- Existence of the payee
- Payee has the capacity to indorse

Section 62. Liability of Acceptor

Section 63. When a person deemed indorser

Section 64. Liability of Irregular Indorser

Section 65 & 66
- Warranties of a general indorser
- While it is true a qualified indorser is not liable, he becomes liable only if he commits
any of the warranties (Sec. 65)
- Under Sec. 65, these are the warranties of the qualified indorser and the persons
negotiating

Section 67
- Instrument payable by delivery = bearer instrument

Section 68
- Liable in the order in which they indorse starting with the party nearest to the holder

Section 69
- Is the agent liable on the instrument? = No. Only through 3 things
- Not ordinarily liable
1.) He incurs only liability under Sec 65
2.) An agent becomes liable as an indorser following Section 65 unless he discloses the name
of his principal; he is only acting as an agent; he is authorized
 THURSDAY - July 27, 2023

Presentment for Payment

● holder will enforce his right to get payment

● once it is paid, it will be distinguished (Sec. 119 & 120)

Notice of Dishonor
If it is a BOE, you have to present the instrument for acceptance
Is the drawee liable on the instrument?

● Yes, the moment he accepts (Sec. 143)

Is presentment for payment necessary to charge the maker?

● It is necessary to charge the drawer and indorsers

● Drawee when he accepts = primarily liable
● Maker = primarily liable
● To demand payment

If the instrument is payable on a special place - it is necessary to charge the maker (present for
payment)

The moment it is issued, you are liable

Section 74

● Must be exhibited to whom payment is demanded

71. 85. 86

Place of Payment - Section 73 and 75

When - if sunday, then on the succeeding business day
Section 86

● When you compute, you exclude the first day

● You start counting tomorrow and you include the nth day

76,77,78 = Primarily liable

Section 82

● under reasonable diligence

Section 84

● When it is dishonored
● the holder has an immediate right of recourse to those secondarily liable (indorsers)
● If it is a bill of exchange, the drawer is kasama

Section 88

● Payment is made with good faith

Section 89 & 81

● delay is excused when it is caused by fortuitous events

Section 79

● presentment for payment is not required when

ACCEPTANCE

● only applies to bills of exchange

● When the drawee accepts, he agrees
● May either be general or qualified

Can the drawee make a qualified acceptance? = YES

Qualified Acceptance = Sec. 141
General Acceptance = Sec. 140
May the holder reject a qualified acceptance?

● Yes
● Section 142

Will a qualified acceptance affect the negotiability of an instrument?

● No, just like qualified indorsement it will not render the instrument non-negotiable

Within what time should the drawee accept?

● After 24 hours after the presentment of acceptance

Demand for the return of the bill

- If presentment of acceptance is on a sunday, the drawee may reject it
- Suppose the drawee does not accept it because he is insolvent, his presentment for
acceptance is not excused.
SECTION 151 & SECTION 84

● Immediate right of recourse

● Holder can already proceed to persons secondarily liable

SATURDAY - August 5, 2023

If notice of dishonor is sent my mail, it must be deposited in the post office following the day of
dishonor