Aireyca Glenn G.

Lanaban BSA-3
Business Law 103(MTF 7:15Pm- 8:15Pm)
1. What are the kinds of bill of exchange?

 Demand or Sight draft- This bill of exchange is payable on demand at sight, that is, when the
holder presents it for payment, or a stated time after sight.
 Time draft- the bill of exchange is payable at a definite future time or some future determinable
time.
 Inland bill of exchange- a bill which is drawn and payable within the same state
 Foreign bills of exchange- a bill drawn in one state or country and payable in another state or
country
 Trade acceptance- A draft or bill of exchange drawn by the seller on the purchaser of goods
and accepted by the latter by signing it as drawee.
 Bills in set- This is usually availed of in cases where a bill had to be sent to a distant place
through some conveyance.

2. What are the kinds of promissory note?

 Certificate of deposit. It is a written acknowledgment by a bank of the receipt of money received

or on deposit which the bank promises to pay to the depositor, or to him or his order, or to some
other person, or to him or his order, or to bearer, or to a specified person or bearer, on demand or
on a fixed date, often with interest.
 Bond. It is an evidence of indebtedness issued by a public or private corporation, promising to
pay a sum of money on a day certain in die future. Its negotiability is controlled by the same rules
governing promissory notes. It runs for a longer period of time than a promissory note and is
issued for debts of substantially larger amounts.
 Bank note. It is an instrument issued by a bank for circulation as money payable to bearer on
demand.
 Due bill. It is a promissory note which shows on its face an acknowledgment by a person of his
indebtedness to another. The word "due" is usually used.
 Mortgage note. Two kinds are: the chattel mortgage note and the real estate mortgage note. As
the name implies, the first is secured by personal property and the second, by real property. In
sale of a house, for example, the note secured by mortgage on the property, is for the unpaid
balance of the purchase price. The security contract, known as a mortgage, most frequently
provides that the mortgage can be foreclosed if the note is not paid when it is due.
  Title-retaining note. This type is secured by a conditional sales contract which ordinarily provides
that the title to the goods shall remain in the payee's name until the note is paid in full. It is used to
secure the purchase price of goods.
 Collateral note. It is used when the maker pledges securities (shares of stocks, bonds, and other
personal property) to the payee to secure the payment of the amount of the note. The securities
are usually placed with the holder as collateral security. Banks also use a device called "signature
note" for short-term unsecured loans or loans made without collaterals.
 Judgment note. This is a note to which a power of attorney is added enabling the payee to take
judgment against the maker without the formality of a trial if the note is not paid on its due date.
 Installment note. It is a note payable in specified or periodic installments at predetermined time
such as for payment of a refrigerator over a 12-month period.

3. When bill of exchange may be treated as promissory note?

Under Sec. 130 of the Law on Negotiable Instruments, the bill of exchange may be treated as
promissory note, when:

1. The drawer and the drawee are the same person, like a draft drawn by a bank on its branch, or by
a corporation on its treasurer, or by an agent on his principal by authority of the latter;
2. The drawee is a fictitious person, and;
3. The drawee has no capacity to contract.

4. Who are the parties in a promissory note?

1. Maker- the one who makes die promise and signs the instrument.
2. Payee- the party to whom the promise is made or the instrument is payable.
5. Who are the parties in a bill of exchange?
A bill of exchange requires in its inception at least three parties — the drawer, the drawee, and
the payee.
1. Drawer. The person who issues and draws the order bill is called the drawer. He gives
the order to pay money to a third party. He does not pay directly.
2. Drawee. The party upon whom the bill is drawn is called the drawee. He is the person to
whom the bill is addressed and who is ordered to pay. He becomes an acceptor when he
indicates a willingness to accept responsibility for the payment of the bill. (Sec. 62.) The
drawee is a bank in the case of a check.
 3. Payee. The party in whose favor the bill is originally drawn or is payable is called the
payee. Up to the time of acceptance by the drawee, the payee looks exclusively to the
drawer. Again, the payee, as in a promissory note, may be specifically designated, or
may be an office or title, or unspecified.
6. Enumerate the types of defective instrument.
1. Fraud. Ex. Brokers employed to buy stock represented that they bought the stock and received a
check therefor, but had not in fact bought. It was held that their title to the check was defective
because they obtained it by means of fraud.
2. Duress, or force or fear. Ex. Where A, by the use of violence and intimidation, forced P to
indorse a promissory note in favor of A.
3. Other unlawful means. Where the instrument has been stolen. It has been held that a person
who acquires an instrument by endorsement of a part thereof gets title by unlawful means since
the transfer is in contravention of the law.
4. Illegal consideration. A note given to stifle a criminal prosecution is invalid, or in consideration of
the payee killing a person.
5. Negotiation in breach of faith. Where the payee of a note negotiated it after receiving payment
from the maker; where the payee transfer the instrument in breach of agreement; where a note is
given in payment of goods to be delivered and the note is negotiated without delivery of the
goods; where a note held merely as collateral or security is negotiated.
6. Circumstances amounting to fraud. Where the payee of a note negotiated it after being told
that the maker intends to resist payment or that the transferor had no legal right to transfer.