HANDOUT NO.

7N
Point of Distinction
As to value received by
the party
As to purpose
As to whether parol
evidence is allowed to
prove his liability
As to availability of the
defense of absence or
failure of consideration
As to reimbursement the accommodation party,
Accomodation Party
signs the instrument
without receiving value
lending his name to some
other person
can present parol
evidence
cannot avail of the
defense against a holder
not in due course
after paying the holder,
may sue for
reimbursement the
accommodated party
Regular Party
signs the instrument for
value
does not sign for that
purpose
cannot disclaim or limit his
personal liability as
appearing on the
instrument by parol
evidence
can avail of said defense
against a holder not in due
course
may not sue any
subsequent party for
reimbursement

Point of Distinction Negotiation Assignment

As to the governing law Negotiable Instruments Articles 1624-1635
Law (Act No. 2031) (Assignment of Credits) of
the Civil Code
As to the nature of the negotiable instrument ordinary contract
instrument
As to the nature of a holder under the A mere assignee
transferee purview of NIL
As to the defense it is HDC is only to real assignee is subject to both
subjected to defenses real and personal
defenses
As to the rights acquired HDC may acquire a better generally, assignee merely
thereat title than that of a prior steps into the shoes of the
party assignor
As to warranty involved general indorser warrants assignor does NOT
payment of the solvency of warrant the solvency of
prior parties prior parties unless
expressly stipulated or
insolvency is known to him
As to the requirements of indorser to be liable – assignor is liable even
presentment and notice of presentment of payment without notice of dishonor
dishonor to incur liability and notice of dishonor are
necessary

Source: Hector S. De Leon, The Law on Negotiable Instruments, 2000 edition

A. Villegas