Sections 1-23 Flashcards
What are the requirements for an instrument to be negotiable?
Under Section 1 of Act 2031, in order for an instrument to be negotiable:
1.) It must be in writing and signed by the maker and the drawer
2.) It must contain an unconditional promise or order to pay a certain amount in money
3.) It must be payable on demand or at a fixed or determinable future time
4.) It must be payable to order or to bearer
5.) If the instrument is addressed to the drawee, he must be named or otherwise indicated therein with reasonable certainty
When can you say that a negotiable instrument contains an order to pay a certain amount in money? Give example each.
If the sum payable is paid:
1.) With interest - Php 1,000 in 12% per annum
2.) Stated installments - Php 1,000 in stated installments: Php 500 in August 1, and Php 500 in August 2.
3.) Stated installments, with a provision that, upon default payment of any interest or of interest, the whole become due
4.) With exchange
5.) With costs of collection, or an attorney’s fee
When can you say that an instrument contains an unqualified promise or unqualified order? Give an example.
An instrument contains an unconditional promise or unqualified order if:
1.) There is an indication of a particular fund to which reimbursement is to be made
2.) There is a particular fund to be debited with the amount
3.) There is a transaction which gives rise to the imbursement
Example for this is “Pay 1,000. Please reimburse yourself from the rentals of the building.”
When can you say that an order or promise is conditional? Give an example.
When the instrument contains a promise or order to pay out of a particular fund.
Example for this is “Pay 1,000 out of the rentals of the building.”
When can you say that an instrument is payable at a determinable future time?
When the instrument is:
1.) At a fixed period after date or sight
2.) On or before a determinable future time specified therein;
3.) On or at a fixed period after the occurrence of a specified event which certain to happen, through the time of happening is uncertain
When is an instrument considered to be payable on demand?
An instrument is payable on demand when:
1.) It expressed to be payable on demand on sight or on presentation
2.) In which no time is expressed
3.) Where an instrument is issued, accepted, or indorsed when overdue, it is as regards to the person so issuing, accepting, or indorsing it, payable on demand
What is the difference between payable to order and payable to bearer?
In payable to order, the name of the payee is indicated with reasonable certainty.
In payable to bearer, it must be:
1.) Expressed to be so payable
2.) Payable to a person named therein or bearer
3.) When it is payable to the order of a fictitious or non-existing person, and such fact was known to the person making it so payable;
4.) When the name of the payee does not purport to be the name of any person
5.) When the only or last indorsement is an indorsement in blank
What is a holder in due course?
A holder in due course is a holder who has taken the instrument under the following conditions:
1.) That it is complete and regular upon its face
2.) That he became the holder of it before it was overdue, and without notice that it has been previously dishonored
3.) That he took it in good faith or for value
4.) That at the time it was negotiated to him, he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it.
Explain Section 14, 15, and 16 briefly. Give examples.
Section 14 governs those instruments that are incomplete but delivered. It does not apply to holder in due course. Example,
Section 15 governs those instruments that are neither complete or delivered. It applies to holder in due course.
Section 16 governs those instruments that are complete but undelivered. It does not apply to holder in due course.
What is a bill of exchange?
A bill of exchange 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.
What is a negotiable promissory note?
A negotiable promissory note 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. Where a note is drawn to the maker’s own order, it is not complete until indorsed by him.
