QuestionsQuestions (Act No. 2031)
It must (a) be in writing and signed by the maker/drawer; (b) contain an unconditional promise or order to pay a sum certain in money; (c) be payable on demand or at a fixed/determinable future time; (d) be payable to order or to bearer; and (e) if addressed to a drawee, the drawee must be named or otherwise indicated with reasonable certainty.
The sum remains “certain” if payable (a) with interest; (b) by stated installments; (c) by stated installments with a clause that upon default the whole becomes due; (d) with exchange at a fixed or current rate; or (e) with costs of collection or attorney’s fees if payment isn’t made at maturity.
It’s unconditional even if it indicates a particular fund for reimbursement or a particular account to be debited, or includes the transaction giving rise to the instrument. However, an order/promise to pay “out of a particular fund” is not unconditional.
An instrument payable upon a contingency is not negotiable, and the happening of the event does not cure the defect.
If the instrument orders/promises to do any act in addition to payment of money, it is not negotiable. But negotiability is not affected by provisions authorizing sale of collateral, confession of judgment for nonpayment at maturity, waiving benefits of laws for obligor protection, or giving the holder an election to require something in lieu of payment of money.
No. Validity/negotiability are not affected if it isn’t dated, doesn’t specify value, doesn’t specify place drawn/payable, bears a seal, or designates a particular kind of current money. However, statutes requiring stated consideration in certain cases are not altered.
When expressed to be payable on demand/at sight/on presentation, or when no time for payment is expressed. Also, if issued/accepted/indorsed when overdue, it’s payable on demand as to the person who issued/accepted/indorsed it.
Payable to order: drawn payable to the order of a specified person (payee must be named/indicated with reasonable certainty). Payable to bearer: expressed to be so payable; or payable to a person named therein or bearer; or payable to a fictitious person/person whose fact was known to the maker; or where name of payee doesn’t purport to be a person; or last indorsement is in blank.
It is avoided, except against a party who made/authorized/assented to the alteration and subsequent indorsers. If materially altered and in the hands of a holder in due course who is not a party to the alteration, the holder may enforce according to the instrument’s original tenor.
When the instrument is wanting in any material particular, the person in possession has prima facie authority to complete by filling blanks. Also, a signature on blank paper delivered for conversion into a negotiable instrument gives prima facie authority to fill it up as such for any amount. But enforcement against prior signers requires strict filling according to authority within a reasonable time.
An instrument is incomplete and revocable until delivery for the purpose of giving effect. As between immediate parties and as to remote parties (other than holders in due course), delivery must be by/under authority of the party making/drawing/accepting/indorsing and may be conditional/special purpose only. If in hands of a holder in due course, valid delivery by all parties prior to him is conclusively presumed; and if a signatory no longer possesses it, valid intentional delivery is presumed until contrary is proved.
A holder who took the instrument: complete and regular on its face; before overdue and without notice of prior dishonor (if dishonor occurred); in good faith and for value; and at negotiation had no notice of any infirmity or defect in title of the person negotiating it.
When obtained by fraud, duress, force/fear, or other unlawful means; or for an illegal consideration; or negotiated in breach of faith; or under circumstances amounting to fraud.
If the transferee receives notice of infirmity/defect before paying the full amount, he is a holder in due course only to the extent of the amount he has already paid.
Presentment must be (a) by the holder or authorized person; (b) at a reasonable hour on a business day; (c) at a proper place; and (d) to the person primarily liable or, if absent/inaccessible, to someone found at the place.
It is dishonored by nonpayment when duly presented and payment is refused or cannot be obtained; or when presentment is excused and the instrument is overdue and unpaid.
Generally, notice must be given to the drawer and each indorser. Any drawer/indorser who does not receive notice of dishonor is discharged.
Under Section 119, discharge occurs by payment in due course; intentional cancellation by holder; any act discharging a simple contract; payment by the party accommodated; or when principal debtor becomes holder at/after maturity in his own right. Under Section 120, a secondarily liable party is discharged by acts discharging the instrument; intentional cancellation of his signature; discharge of a prior party; valid tender of payment by a prior party; release of principal debtor unless recourse is expressly reserved; or agreement extending/postponing time without assent, unless recourse is expressly reserved.