III. REQUISITES OF NEGOTIABILITY Flashcards
What are the requisites of a negotiable instrument?
Section 1, Form of Negotiable Instruments. — An instrument to be negotiable must conform to the following requirements:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a sum certain in money;
(c) Must be payable on demand, or at a fixed or determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty.
Negotiable Instruments Law
What must be considered in determining the negotiability of an instrument?
- (1) The whole instrument;
- (2) Only what appears on the face of the instrument; and
- (3) The provisions of the Negotiable Instruments Law especially Section 1 thereof which gives the requirements of negotiability
- Note: whether an instrument is negotiable or non-negotiable depends entirely on its form and content.
De Leon, 12.
Must the requisites a to e under Sec. 1 of the NIL be present in order for a promissory note to be negotiable?
No. The requirements under a, b, c, and d are necessary in order that a promissory note may be negotiable while all the sub sections from (a) to (e) are necessary in order that a bill of exchange be negotiable.
De Leon
What is the definition of a negotiable instrument?
A negotiable instrument is an instrument which possesses all the elements of negotiability provided in Section 1 of the Negotiable Instruments Law. [De Leon, 12]
What is the wisdom behind the formal requisites under Section 1 of the Negotiable Instruments Law?
The requisites enumerated in Section 1 are deemed essential for the security of commercial transactions as they enable one to tell at a glance whether or not an instrument is negotiable and accordingly, to gauge the risks involved in taking it as security. [De Leon, 12 citing Kauffman v. National Bank].
Are negotiable instruments payments in the sense that they may extinguish an obligation or debt?
No. All kidns of negotiable instruments are either promises or orders to pay money which meet the formal requirements set forth in the law.
It is a substitute for money.
[De Leon, 12]
Must the instrument be in writing and on a piece of paper?
While it must be in writing, it need not be on a piece of paper. The writing may be made upon leather, doth or any other substitute for paper as long as it is movable in nature. Such materials, however, are no longer used in the usual exercise of business. The usual way is to have the instrument written or printed in durable paper. [De Leon, 13]
Is there such a thing as an oral negotiable instrument?
No. See Sec. 1 NIL. One of the essential requisites is that it must be in writing.
What is the significance of the signature of in a negotiable instrument?
It signifies the signers intention to obligate himself for the payment. A signature may appear in any part of the negotiable instrument, whether at the top, middle or bottom or the margin. It is presumed valid, and imputation of invalidity must have evidence to support. [De Leon, 14]
Is the signature of the maker or drawer required to appear at a specific portion of the instrument?
No. Although the signature of the maker or drawer as a general rule is placed at the lower right hand corner of the instrument, it may appear in any part thereof whether at the top, middle or bottom or at the margin.
However, if the signature is so placed upon the instrument that it is not clear in what capacity the person intended to sign, he is deemed an indroser [Sec. 17(f)] and not a maker or drawer. [De Leon, 14]
What is the legal effect of a signature appearing in a negotiable instrument?
The signature is prima facie evidence of the signatory’s intention to be bound as maker or drawer. However, if the signature is so placed upon the instrument that it is not clear in what capacity the person intended to sign, he is deemed an indroser [Sec. 17(f)] and not a maker or drawer. [De Leon, 14]
