OKYO, VOLTIARE G. 4. It must be payable to order or to bearer.

5. Where the instrument is addressed to a

LAW ON NEGOTIABLE INSTRUMENTS drawee, he must be named or otherwise
Negotiable instrument – a document indicated therein with reasonable certainty.
guaranteeing the payment of a specific amount Incomplete instrument but delivered
of money, either on demand, or at a time, with • Where the instrument is wanting in any
payer usually named on the document. material particular, the person in possession
- A written contracts for the payment if thereof has a prima facie authority to complete
money; by its form, intended as a it by filling up the blanks therein.
substitute for money and intended to • A signature on a blank paper delivered by the
pass from hand to hand, to give the person making the signature in order that the
holder due course the right to hold the paper may be converted into a negotiable
same and collect the sum date. instrument operates as a prima facie authority
to fill it up as such for any amount.
Characteristics of negotiable instruments • In order, however, that any such instrument
a. negotiability – right to transferee to hold the when completed may be enforced against any
instrument and collect the sum due. person who became a party thereto prior to its
b. accumulation of secondary contracts – completion, it must be filled up strictly in
instrument is negotiated from person to person. accordance with the authority given and within
a reasonable time.
Common forms of negotiable instruments • But if any such instrument, after completion,
1. Bill of exchange is negotiated to a holder in due course, it is
• A bill of exchange is an unconditional valid and effectual for all purposes in his hands,
order in writing addressed by one person to and he may enforce it as if it had been filled up
another, signed by the person giving it, strictly in accordance with the authority given
requiring the person to whom it is addressed to and within a reasonable time.
pay on demand or at a fixed or determinable
future time a sum certain in money to order or Incomplete instrument not delivered
to bearer.(draft, trade acceptance, check) • Where an incomplete instrument has not
2. Promissory note been delivered, it will not, if completed and
• A negotiable promissory note is an negotiated without authority, be a valid
unconditional promise in writing made by one contract in the hands of any holder, as against
person to another, signed by the maker, any person whose signature was placed thereon
engaging to pay on demand or at a fixed or before delivery. [Section 15, Negotiable
determinable future time a sum certain in Instruments Law]
money to order or to bearer.(certificate of • In this sense, it gives a real defense, not just
deposit, bond, bank note) personal
3. Check
• A check is a bill of exchange drawn on Three types of transfers
a bank and payable on demand. 1. By assignment – Generally for non-negotiable
instruments. In assignment, the assignee is
Form of negotiable instruments merely placed in the position of the assignors
1. It must be in writing and signed by the maker and acquires the instrument subject to all the
or drawer. defenses that might have been set up against
2. It must contain an unconditional promise or the original payee.
order to pay a sum certain in money. 2. By operation of law – Such as by succession
3. It must be payable on demand, or at a fixed or insolvency.
or determinable future time. 3. By negotiation
 1. The maker of a negotiable instrument
Kinds of indorsement warrants that:
1. Special or in blank a. He will pay it according to its tenor;
2. Restrictive or qualified or conditional
Special indorsement b. The payee exists; and
• A special indorsement specifies the person to c. The payee has capacity to indorse.
whom, or to whose order, the instrument is to 2. The liability of the maker is primary and
be payable, and the indorsement of such unconditional. Neither can the maker escape
indorsee is necessary to the further negotiation liability by virtue of the non-benefit to him of
of the instrument the proceeds of the note since that is of no
indorsement in blank concern to the payee.
• An indorsement in blank specifies no
indorsee, and an instrument so indorsed is Liability of drawer
payable to bearer, and may be negotiated by • The drawer by drawing the instrument admits
delivery. the existence of the payee and his then capacity
Qualified indorsement to indorse; and engages that, on due
• A qualified indorsement constitutes the presentment, the instrument will be accepted
indorser a mere assignor of the title to the or paid, or both, according to its tenor, and that
instrument. if it be dishonored and the necessary
• Such an indorsement does not impair the proceedings on dishonor be duly taken, he will
negotiable character of the instrument. [Section pay the amount thereof to the holder or to any
38, Negotiable Instruments Law] subsequent indorser who may be compelled to
• The qualified indorser guarantees only the pay it. But the drawer may insert in the
genuineness of the instrument but does not instrument an express stipulation negativing or
guarantee its payment. He will be liable only of limiting his own liability to the holder.
the signature of the maker turns out to be a
forgery. He will not be liable if the maker Liability of acceptor
refuses to pay. • The acceptor, by accepting the instrument:
Conditional indorsement 1. Engages that he will pay it according
• Where an indorsement is conditional, the to the tenor of his acceptance (not according to
party required to pay the instrument may tenor of the bill accepted).
disregard the condition and make payment to 2. Admits:
the indorsee or his transferee whether the a. The existence of the drawer;
condition has been fulfilled or not. But any b. The genuineness of the drawer's
person to whom an instrument so indorsed is signature;
negotiated will hold the same, or the proceeds c. The capacity and authority of the
thereof, subject to the rights of the person drawer to draw the instrument; and
indorsing conditionally. d. The existence of the payee and his
then capacity to indorse.
Liability of the parties 3. Consequently, the acceptor is precluded
primarily liable from:
1. Maker a. Setting up the defense that the
2. Acceptor drawer is non-existent or fictitious;
Secondarily liable b. Claiming that the drawer's signature
1. Drawer is a forgery; and
2. Indorser c. Escaping the liability by alleging want
of consideration between him and the
Liability of maker drawer.
 BOUNCING CHECK LAW prejudice to any liability for violation of any
provision of the Revised Penal Code
Checks without sufficient funds
- Draws and issues of any check without Separability clause. - If any separable provision
sufficient funds knowing at the time he of this Act be declared unconstitutional, the
issued any check he does have sufficient remaining provisions shall continue to be in
funds or credit, the check will be force.
dishonored
- punished by imprisonment of not less
than thirty days but not more than one
(1) year or by a fine of not less than but
not more than double the amount of
the check which fine shall in no case
exceed Two Hundred Thousand Pesos,
or both such fine and imprisonment at
the discretion of the court.
-
Evidence of knowledge of insufficient funds.
- 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 holder thereof the
amount due thereon, or makes arrangements
for payment in full by the drawee of such check
within (5) banking days after receiving notice
that such check has not been paid by the
drawee.

Duty of drawee; rules of evidence

- when refusing to pay the same to the
holder thereof upon presentment,
attach the reason for drawee's dishonor
or refusal to pay the same provided that
there were no sufficient fund or in
credit with such drawee bank.

Credit construed.
- The word "credit" as used herein shall
be construed to mean an arrangement or
understanding with the bank for the payment of
such check.

Liability under the Revised Penal Code. -

Prosecution under this Act shall be without