Negotiation Flashcards
what are the modes of transfer?
there are three modes of transfer mainly (1) Assignment (2)Negotiation (3) By operation of law
when the mode used is assignment, what instrument is involved
it could be non-negotiable or negotiable instruments
when the mode used is negotiation, what instrument is involved
always a negotiable instrument
when the mode used is by operation of law, what instrument is involved?
it could be non-negotiable or negotiable instruments
how can non-negotiable instrument be transferred?
only by assignment or by operation of law. it can never be negotiation
define assignment
it refers to the mode of transfer from one person to another without the intention of constituting the transferee as a holder in due course since such transfer does not comply with the NIL
define negotiation
it refers to the mode of transfer from one person to another so as to constitute the transferee the holder thereof
when the transfer is by assignment, what is the basis of the parties’ rights and obligation
OBLICON and other special laws
when the transfer is by negotiation, what is the basis of the parties rights?
NIL
if you are asked why is there a need to know if the instrument is an order or bearer, what would be your answer?
for us to know how to validly negotiate
what if the instrument payable to order is not indorsed, what is the consequence?
the transfer is just mere assignment hence, the holder can never be a holder in due course.
define issue or issuance
the first delivery of the instrument, complete in form to a person who takes it as a holder
what are the steps observe din the issuance?
(1) mechanical act of writing the instrument completely and in accordance with section 1 of the NIL
(2) the delivery of the complete instrument by the maker or drawer with the intention of giving effect to it
define indorsement
is the act of signing at the back of a negotiable instrument and delivering the same to another person.
who are the parties to an indorsement?
(1) indorser
(2) indorsee
who indorses the instrument?
the indorser, however, an indorser could be the original payee of the instrument or the previous indorsee.
when can a drawer or maker becomes the indorser?
when they made themselves the payee of the instrument
how indorsement is made?
by simply affixing the signature or writing the name of the indorser on the instrument
where should the indorsement be made?
(1) on the instrument itself or at the back or dorsal portion
(2) on a separate sheet of paper attached to the instrument. (allonge)
is an indorsement part of the instrument?
no, that is why the indorsement need not to comply with section 1 of the NIL
what if the instrument is for 10,000, how much should the indorser negotiate to the indorsee? is there any exceptions?
as a general rule, the indorser must indorse the entire instrument. WHOLE AMOUNT-10K
there is an exception, According to section 32, if the instrument has been paid partially, the indorser need not indorse the whole amount, only the remaining balance
what is the effect if an indorser indorses the instrument not for its entire amount, assuming the instrument has not been paid partially or wholly
there is no valid negotiation. it is considered as an assignment
what if there are two or more indorsees, how should indorser indorse so as to considered a valid negotiation?
if there are two or more indorsee, the indorser must indorse JOINTLY. otherwise, it will be considered as assignment
what is the reason behind not allowing a transfer to two or more indorsees severally or severally?
because article 32 requires that the indorsement must be of the entire instrument
