Applicable laws governing checks: 3.

Represents title (whoever possesses

1. Negotiable instruments law it for a consideration will be paid in
2. The Book II, Code of Commerce the amount specified on the agreed
3. The Civil Code date in the immediate or in the
future.
Negotiable instruments law
Enactment: February 3, 1911 Holder
Effectivity: June 2, 1911 1. The authority to demand payment
and
Purpose and Function 2. The right to be paid
1. Substitute for money
2. Medium of exchange in commercial Maker
transactions 1. To obligation to pay or honor the
3. Medium of credit transactions other terms as found in the
instruments like date of maturity of
Requisites: the obligation to pay.
1. In writing and signed by the maker
or drawer Parts of Check
2. Must contain an unconditional a. account no
promise or order to pay a sum b. account name
certain in money c. check number
3. Must be payable on demand, or at a d. The date of issuance/ maturity
fixed or determinable future time. e. Name of the Payee or Creditor
4. Must be payable to order or to f. Amount payable or drawn in figures
bearer g. Amount payable in words
5. If addressed to a drawee, he must h. Drawee’s bank name and address
be named or otherwise indicated i. The signature of the drawer/issuer
therein with reasonable certainty. of the check

Examples: Parties to a Check

1. Promissory notes – could be 1. The Drawer/the issuer – the debtor
personal, commercial or investment and he is the one ordering to
type. Examples: Certificate of Drawee’s Bank to pay the payee
deposit, bond, and debenture. 2. The Drawee is a bank where the
2. Bills of exchange – depends on the drawer maintains the account and
type: Time period, objective and the one being ordered to pay the
territory. Examples: Draft, Time check.
draft and checks. 3. The payee – the person to whom the
drawee bank should give the
Negotiability of an instrument: amount of money as written in the
1. It represents value check.
2. It is freely or unconditionally
transferrable from one person or to Issuance of a check – is the completion of
another; and the check to make it available for use of the
drawer and eventually for other people for g. Electronic Check – found in the
the intended transaction or activity. computer in electronic format with
the same legal implications
When to present a check h. Money order – usually practiced in
Checks must be presented for payment the postal service and once the
within a reasonable time after its issuance, money order is received by the
otherwise, the drawer is discharged from intended recipient or payee, he can
liability. have it exchanged for cash
i. Ante/post-dated checks are those
Reasonable time – nature of instrument, checks issued on a particular date
usage of trade or business with respect to but the date as found in the check
such instruments, and the facts of the itself could be prior or to after the
particular case. date of actual issuance.
j. Defective checks are those like that
A check becomes stale after 6 months of a stale check or mutilated.
except manager’s, cashier’s, and treasurer’s k. Giant Checks
checks under the Clearing House Operations
Memorandum No. 96 Stale check – A check not presented before
the drawee bank for payment within the
Types of Checks: supposed six-month period from date of
a. Bearer check – payable to whoever issuance/maturity. It is not considered as an
is the holder and the payee is not invalid check but an irregular check.
named example if the check is
payable to cash. Legal effects:
b. Self-check – is that check payable to 1. The negotiability of the instrument
the drawer himself. ceases and not the obligation.
c. A traveler’s check – used by 2. The payee could not assert rights
travelers so that they do not need to out of the check.
bring in money while in transit and
like self-check, it is payable to the Clearing House – financial institution tasked
name of the drawer or issuer to facilitate the exchange, clearing, and
himself. effectivity of negotiable instruments.
d. Crossed check is one containing two
parallel lines in which the payee’s Malum Prohibitum – the mere commission
name is found and could not be of the act that the law prohibits, and not its
presented for payment other than character or effect that determines whether
the person whose name is written or not the provision has been violated; and
within the parallel lines. malice or criminal intent is completely
e. Official/banker’s check – guaranteed immaterial.
by the bank by a period of 1 year
f. Certified Check – official or banker’s
check