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    Thursday, 8 August 2019 5:47 PM

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    Ian De Dios
    This document discusses negotiable instruments and their key characteristics. It covers common forms like promissory notes and bills of exchange. A negotiable instrument allows possession to imply ownership, enabling the holder to collect payment free from defenses between prior parties. Checks are not considered legal tender, and creditors can refuse them as payment. The purpose of negotiable instruments is to facilitate commercial transactions and the flow of credit through substituting for currency.

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    Thursday, 8 August 2019 5:47 PM

    Uploaded by

    Ian De Dios
    39 views6 pages
    This document discusses negotiable instruments and their key characteristics. It covers common forms like promissory notes and bills of exchange. A negotiable instrument allows possession to imply ownership, enabling the holder to collect payment free from defenses between prior parties. Checks are not considered legal tender, and creditors can refuse them as payment. The purpose of negotiable instruments is to facilitate commercial transactions and the flow of credit through substituting for currency.

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    This document discusses negotiable instruments and their key characteristics. It covers common forms like promissory notes and bills of exchange. A negotiable instrument allows possession to imply ownership, enabling the holder to collect payment free from defenses between prior parties. Checks are not considered legal tender, and creditors can refuse them as payment. The purpose of negotiable instruments is to facilitate commercial transactions and the flow of credit through substituting for currency.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    39 views6 pages

    Thursday, 8 August 2019 5:47 PM

    Uploaded by

    Ian De Dios
    This document discusses negotiable instruments and their key characteristics. It covers common forms like promissory notes and bills of exchange. A negotiable instrument allows possession to imply ownership, enabling the holder to collect payment free from defenses between prior parties. Checks are not considered legal tender, and creditors can refuse them as payment. The purpose of negotiable instruments is to facilitate commercial transactions and the flow of credit through substituting for currency.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 6

    Introduction

    Thursday, 8 August 2019 5:47 PM

    Introduction

    Forms of Negotiable Instruments


    1. Common Forms
    ○ Promissory Note, Bill of Exchange, Checks
    ○ Negotiable Instruments Law only deals with two kinds
    § Promissory Notes (issuer has promised to pay)
    § Bills of Exchange (issuer has ordered a third person to pay)
    2. Special Types
    ○ Promissory Notes
    § Certificates of deposit, bank notes, due bills, bonds and drafts
    ○ Bills of Exchange
    § Trade acceptances and banker's acceptances

    Theory of Negotiable Instruments


    - Rests upon the proposition that they appear to belong to the person
    having them in possession and to no one else
    - Holder, though without title, has capacity to give a title because he is
    the apparent owner

    Functions of Negotiable Instruments


    1. Substitute for money
    ○ Do not constitute legal tender (not money)
    § Used as substitute for money
    ○ Negotiability
    § Allows to pass freely from hand to hand
    § Take the place of money (free from all personal defenses: 57-58)
    ○ Valuable or worthless depending upon the financial ability of the
    parties
    ○ Purpose: place negotiable instruments on such footing that it would
    be freely accepted without question
    2. Medium of exchange for most commercial transactions
    ○ Checks at present constitute most commercial transactions
    ○ Increase the purchasing medium in circulation
    ○ Without them, more money (coins and bills) will be needed in
    circulation
    § Very difficult for the economy to prosper
    3. Medium of credit transactions
    Article 1249
    - The payment of debts in money shall be made in the currency
    stipulated, and if it is not possible to deliver such currency, then in
    the currency to which is legal tender in the Philippines.
    The delivery of promissory notes payable to order, or bills of exchange
    or other mercantile documents shall produce the effect of payment
    only when they have been cashed, or when through the fault of the
    creditor they have been impaired.

    Legal Tender
    - Currency that may be used for payment of debts and the creditor
    cannot refuse to accept

    Payment in Negotiable Instruments


    - Not considered legal tender
    ○ Creditor has the right to refuse acceptance of the documents as
    payment

    Rule on Payment in Check


    ○ Checks at present constitute most commercial transactions
    ○ Increase the purchasing medium in circulation
    ○ Without them, more money (coins and bills) will be needed in
    circulation
    § Very difficult for the economy to prosper
    3. Medium of credit transactions
    ○ Avails himself of his credit by executing his note to his creditor who
    indorses this to a third person
    ○ Allow men of undoubted credit to carry on a business enterprise
    upon their promissory notes, bills, and checks
    ○ Checks = Immediate Payment; Bill of Exchange and Promissory Note
    = circulation of credit

    History
    1. U.S. Uniform Negotiable Instruments Act of the United States of 1896
    ○ Patterned with slight modifications (PH Law)
    ○ Revise and codify the law merchant in the U.S. as there was much
    confusion and lack of uniformity
    ○ Copied from the English Bill of Exchange Act of 1882
    2. U.S. Uniform Commercial Code
    ○ Simplify and modernize the law of commercial transactions
    3. Act No. 2031
    ○ Enacted as Act No. 2031 on February 3, 1911
    ○ Took 90 days - took effect on June 2, 1911
    ○ Facilitate transactions in commercial paper and to promote free
    flow of credit
    4. Code of Commerce

    Application and Purpose of Negotiable Instruments Law


    1. Applies only to negotiable instruments
    ○ Or to those instruments which meet the requirements in Sec. 1
    ○ Designed to describe fully the law of negotiable instruments
    2. Any case not provided for by the Act shall be governed by the provisions of exis
    legislation or in default thereof, by the rules of the law merchant
    3. Law was enacted for the purpose of facilitating, not hindering or hampering tra

    Characteristics or Features of Negotiable Instruments


    1. Negotiability
    ○ Quality or attribute of a bill whereby it may pass from hand to hand simila
    money, so as to give the holder in due course the right to hold the instrum
    collect the sum payable for himself free from any infirmity in the instrume
    defect in the title
    ○ The rule that one can pass no better title to personal property than he him
    does not apply to negotiable instruments
    ○ When transferability is limited or restricted, the paper may be said to be n
    negotiable
    Payment in Negotiable Instruments
    - Not considered legal tender
    ○ Creditor has the right to refuse acceptance of the documents as
    payment

    Rule on Payment in Check


    - Check is not a legal tender
    ○ Whether ordinary or manager's
    ○ Exception

    sting

    ansactions

    ar to
    ment and
    ent or

    mself has,

    non-
    money, so as to give the holder in due course the right to hold the instrum
    collect the sum payable for himself free from any infirmity in the instrume
    defect in the title
    ○ The rule that one can pass no better title to personal property than he him
    does not apply to negotiable instruments
    ○ When transferability is limited or restricted, the paper may be said to be n
    negotiable
    ○ A bona fide holder, however free from personal defenses available to prio
    among themselves, is subject to real defenses that might have obtained b
    them
    2. Accumulation of secondary contracts
    ○ Transferred from one person to another
    ○ Once an instrument is used, additional parties can become involved
    ○ Can proceed not only against the maker but also against all transferors

    Theory of Negotiable Instruments


    - They appear to belong to the person having them in possession
    - By sending a negotiable instrument to the world, the maker is estopped from u
    against a bona fide holder who has received it from anyone in possession, a defe
    title
    - Holder, though without title, has capacity to give a title because he is the appar
    owner of the instrument

    Doubt resolved in favor of negotiability


    - Encourage the free circulation of the negotiable papers
    ment and
    ent or

    mself has,

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    or parties
    between

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    ect of

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