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NEGOTIN Study Guide

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18 views3 pages

NEGOTIN Study Guide

Uploaded by

christannaviktoria
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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NEGOTIN Study Guide 1

− May a person be liable on a negotiable instrument if his signature does not appear therein?
General rule: NO. (Sec. 18, 19, 20)
Exceptions: a) person signing in trade or assumed name
b) Principal
c) Forger (Sec. 23)

− What are the attributes of a negotiable instrument?


1. Accumulation of secondary contracts
2. Negotiability (Sec. 30)
a) if payable to bearer – it is negotiated by delivery (must be actual)
b) if payable to order – it is negotiated by indorsement completed by delivery

Requisites of a Valid indorsement (Sec. 31, 32)


I. It must be written on the instrument itself or upon a paper attached thereto
II. It must be of the entire instrument unless partially paid

Kinds of indorsements
a) Special – specifies the indorsee (Sec. 34)
b) Blank – specifies no indorsee (Sec. 34, 35)
c) Restrictive – does not affect negotiability unless further negotiation is prohibited
(Sec 36 par. a; Sec. 47)
d) Qualified – liability arises only in case of breach of warrantees (Sec. 65, 38)
See also Sec. 66 for warranties of general indorser
No effect on negotiability
e) Conditional – liability arises when condition happens (Sec. 39) but may be disregarded
No effect on negotiability

Notes:
a) A person indorsing specially a bearer instrument is liable as indorser (Sec 40)
b) All must indorse where an instrument is payable to the order of many payees (Sec. 41)
c) An instrument drawn or indorsed to a cashier of a corporation is payable to the corporation (Sec 42)
d) Where name is misspelled, indorse the instrument as therein described (Sec 43)
e) Generally, an agent who indorses has no personal liability (See 44, See Sections 19 and 20}
f) Negotiation is presumed effected before overdue and where the instrument is dated (Sec. 45 and 46)
g) The indorser whose indorsement is struck out and all subsequent endorsers are relieved from
liability. (Sec. 48)
h) Where an instrument is transferred without an indorsement, the transferee has the right to have an
indorsement (Sec 49)
i) Where an instrument is negotiated back to a prior party, he may reissue it but cannot enforce payment
against any intervening party (Sec 50)

* Who is a holder in due course? (Sec 52)


1. complete means compliant with the requisites in Sec 1
2. regular means no alteration; not torn or crampled
3. good faith means no notice of infirmity in the instrument or defect in the title of prior parties
4. notice means actual knowledge of defect or infirmity. Sec 56
5. Title is defective when obtained by fraud, force, unlawfully or for an illegal consideration (Sec 55)
6. It is presumed that every holder is a holder in due course. The burden is on the holder to prove that
he acquired the title as a holder in due course (Sec 59)

* What are the rights of a holder in due course? (Sec 51 and 57)
1. Right to sue
2. Free from any defect of title of prior parties
3. Free from defenses available to prior parties
4. Enforce payment for the full amount

* Kinds of defenses
1. Real defense - can be raised against any holder
2. Personal defense – can be raised only against a holder not in due course. A holder not in due course
is subject to all defenses (Sec 58)

Examples of real defenses:


a) Signature on a blank paper (Sec 14) cannot be enforced against ANY party
b) An incomplete & undelivered instrument is not a valid contract in the hands of ANY holder (Sec
15)
c) A minor who indorses has no liability (Sec 22)
d) Forged signature is wholly inoperative and ANY holder has no right to enforce payment unless
precluded from setting up (Sec 23); It also means fraudulent or unauthorized signature.

Examples of personal defenses


a) Insertion of a wrong date does not avoid the instrument in the hands of a holder in due course
(Sec 13)
b) An incomplete but delivered instrument is valid and effectual in the hands of a Holder in due course
and he may enforce it as if it had been filled up strictly in accordance with the authority
given and within a reasonable time (Sec 14)
c) Where the instrument that is complete but undelivered is in the hands of a holder in due course a
valid delivery is conclusively presumed. (Sec 16)
d) Absence or failure of consideration is a defense against a holder not in due course. (Sec 28)
There is a presumption of consideration in every instrument (Sec 24). A valuable
consideration supports a simple contract (Sec 25). Anyone who has given or received a valuable
consideration is a holder for value (Sec 26)
e) Material alteration is a fraudulent change of the date, sum payable, time or place of payment,
relations of parties and currency. (Sec 125). An instrument that is materially altered is avoided
except as against a party who altered it. A Holder in due course may enforce payment up to its
original tenor. (Sec. 124)

Liabilities of Parties
1. Maker is primarily liable on the promissory note and will pay it according to its tenor. (Sec 60)

2. Drawer is secondarily liable according to its tenor when the bill is dishonored and notice of dishonor
has been given. (Sec 61)
3. Drawee – Acceptor is liable according to the tenor of his acceptance. (Sec 62)
4. Indorsers:
Kinds
a) Regular
I. General (Sec 65) – liable in case of breach of their warranties
II. Qualified (Sec 66) – same as General
b) Irregular/Accomodation party – not a party to the instrument but is liable as an indorser
(Sec 64 and 29)

Note:

Indorsers are liable in the order in which they indorse unless they have agreed otherwise. (See 68)

When a person indorses a bearer instrument, he incurs the liability of an indorser. (Sec 67)

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