Negotiable Instruments Flashcards
The law that governs negotiable instruments in this jurisdiction is
Act No. 2031 otherwise known as the Negotiable Instruments Law.
When was the Act No. 2031 took effect?
June 2, 1911
The provisions of the NIL were copied from the
American Uniform Negotiable Instruments Law
The American Uniform Negotiable Instruments Law was based largely on the
Bills of Exchange Act of 1882
True or False: Decisions of
the courts in the United States and in England based on the American Uniform Negotiable Instruments Law and the Bills of Exchange Act of 1882 can be not be both applied in this jurisdiction.
False. Can be both applied in this jurisdiction.
What are the 2 main functions of negotiable instruments are:
- They serve as substitute for money.
- They serve as credit instruments.
True or False: The functions of negotiable instruments can also be considered proof of existence of a transaction because they may state the transaction that gives rise to the issuance of the instruments.
True
Functions of a negotiable instrument may be enumerated as follows:
- Substitute for money
- Medium of exchange
- Credit instrument which increases credit circulation
- Increases purchasing power
- Proof of transaction
Kinds of Negotiable Instruments
- Promissory Note
- Bill of Exchange
It is within the meaning of
this Act is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand, or at a fixed or determinable future time, a sum certain in money to order or to bearer.
Promissory Note (as defined under Sec. 184)
True or False: A note is drawn to the maker’s own order, it is not complete until indorsed by him.
True
It is is an unconditional order in writing addressed by one person to another, signed by the person giving it requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to order or to bearer.
Bill of Exchange
An instrument that involves banks is a _________________.
Certificate of Deposit.
It is a form of promissory note which is a written acknowledgment of a bank of its receipt of a certain sum with a promise to repay the same.
Certificate of deposit
A certificate of deposit is defined as a ____________________________ by a bank or banker of receipt of a sum of a money on deposit which the bank or banker promises to pay the depositor, to the order of the depositor, or to some person or his order, whereby the relation of the debtor and creditor between the bank and the depositor created.
Written acknowledgment
May also partake the nature of a promissory note
Bonds
True or False: A bond is defined as a certificate or evidence of a debt on which the issuing company or governmental body promises to pay the bondholder a specified amount of interest for a specified length of time, and to repay the loan on
the expiration date.
True
In other jurisdictions, a bill of exchange is commonly called
Draft
A bill of exchange can be:
- Inland bill
- Foreign bill
Is a bill which is, or on its face purports to be, both drawn and payable within the Philippines.
Inland Bill
Any other bill. Unless the contrary appears on the face of the value of the bill, the holder may it as an inland bill.
Foreign bill
True or False: A bill of itself does not operate as an assignment of the funds in the hands of the drawee available for the payment thereof, and the drawee is liable on the bill unless and until he accepts the same.
False. The drawee is not liable.
One that is payable at a fixed date.
Time Draft
One that is payable when the holder presents it for payment.
Sight or Demand Draft
A bill may also be used to which is used in contracts sale. In this type of bill, the seller as drawer order the buyer (as drawee) to pay a sum certain to the same seller (payee).
Trade Acceptance
It is time draft across the face of which the drawee bank has written the word accepted.
Banker’s Acceptance
True or False: If the seller does not trust the credit of the buyer or is not familiar with him, the seller may wish to require the bank of the buyer to accept the bill or draft.
True
The bank is normally an _______________________ that lends its credit to the buyer. The buyer, in return, will pay the bank commissions and other charges.
accommodation payor
What is the most common form of bill of exchange?
Check
Under what section Check is defined?
Sec. 185
It is a bill of exchange drawn on a bank payable on demand.
Check
True or False: In promissory note, there are 2 face parties and on the BOE, there is 3 parties.
False. 3 parties on its face.
______________ complete with all the requisites provided for in Section 1 of the Negotiable Instruments Law
Preparation and Signing
first delivery of the instrument to the payee (from maker to payee/bearer or from the drawer to the payee/bearer)
Issuance
transfer from one person to another so as to constitute the transferee a holder
Negotiation
Written assent of the drawee to the order.
Acceptance
Refusal to accept by the drawee.
Dishonor by non-acceptance
the instrument is shown to the maker or drawee/acceptor so that the said maker or drawee/accept or will pay.
Presentment for payment
refusal to pay by the maker or drawee/acceptor.
Dishonor by non-acceptance
Notice to the persons secondarily liable that the maker or the drawee/acceptor refused to pay or to accept the instrument.
Notice of dishonor
Which section are the requisites of negotiability are provided?
Section 1 of the NIL.
It is the most important provision of the NIL because the law does not apply if the instrument does not meet the requisites of the negotiability as provided herein.
Section 1 of the NIL
Section 1. Form of negotiable instruments.– An instrument to be negotiable must conform to the following requirements:
- In writing and signed by the maker or drawer
- Contain an unconditional promise or order to pay a certain in money
- Payable on demand or at a fixed or determinable future time.
- Must be payable to order or to bearer
- The instrument is addressed to a drawee, he must be named or otherwise indicated herein with reasonable certainty.
