 General Rule: The promise or order should not depend on a contingent event. If it is conditional, it is non-negotiable.

Exceptions:

a. indication of particular fund from which the acceptor disburses himself after payment
b. statement of the transaction which gives rise to the instrument. (Sec. 3 NIL)

o But an order or promise to pay out of a particular fund is not unconditional

SECTION 2.
Certainty as to sum; what constitutes. — The sum payable is a sum certain within the meaning of this Act, although it is to be paid —
(a) With interest; or
(b) By stated installments; or
(c) By stated installments, with a provision that upon default in payment of any installment or of interest the whole shall become due; or
(d) With exchange, whether at a fixed rate or at the current rate; or (e) With costs of collection or an attorney's fee, in case payment shall
not be made at maturity.

Stated installments, within the meaning of Section 2, means that:

(a) the interest of each installment, and
(b) the due date of each installment must be fixed in the instrument.

Section 3
When promise is unconditional. — An unqualified order or promise to pay is unconditional within the meaning of this Act, though coupled with
—
(a) An indication of a particular fund out of which reimbursement is to be made, or a particular account to be debited With the amount; or
(b) A statement of the transaction which gives rise to the instrument.
But an order or promise to pay out of a particular fund is not unconditional.

Indication of a particular fund out of which reimbursement is to be made.

An instrument which mentions a particular fund out of which reimbursement is to be made is negotiable because the order to pay is not rendered
conditional.
The drawee is not limited to the money in his hands belonging to the drawer. In other words, the fund indicated is not the direct source of
payment but only the source of reimbursement which is an act subsequent to the payment.
EXAMPLE: "Pay to the order of P PI,000.00 and reimburse yourself from the rentals of my house." The drawee may pay the amount out of any
fund. It is only the reimbursement that is to come from the rentals.
!!!! Indication of a particular fund out of which payment is to be made. An instrument payable out of a particular fund is non- negotiable
(Sec. 3, par. 2.) as it is not payable "in any event" because the amount to be paid is made to depend upon the adequacy or existence of the fund
designated.
(1) "I promise to pay P or order the sum of P10,000.00 out of my salary in the government," or "out of the proceeds of the sale of my
shares of stocks.“
(2) "Pay to bearer the sum of P10,000.00 out of the dividends which I may receive from X corporation."
In each of the above cases, the maker or drawee is limited to the fund indicated and is not supposed to pay if that fund should prove insufficient.
The note, however, is not made uncollectible. The right or contract must be resolved under ordinary contract law

Section 4
Determinable future time; what constitutes. — An instrument is payable at a determinable future time, within the meaning of this Act, which is
expressed to be payable —
(a) At a fixed period after date or sight; or
(b) On or before a fixed or determinable future time specified therein;
(c) On or at a fixed period after the occurrence of a specified event, which is certain to happen, though the time of happening be
uncertain. An instrument payable upon a contingency is not negotiable, and the happening of the event does not cure the defect
EXAMPLES:
(1) Payable at a fixed time.
"I promise to pay P or order the sum of P10,000.00 on September 10,2010." Here, the future date specified is a fixed time.
(2) Payable at a fixed period after date.
"Sixty (60) days after date, I promise to pay P or order the sum of P10,000.00." The date of maturity may be determined beforehand by
counting sixty (60) days from the date of its issuance. But an instrument payable "at the earliest possible time after date" is not payable at a
definite time.
(3) Payable at a fixed period after sight.
"Sixty (60) days after sight, pay to the order of P the sum of P10,000.00.“
After sight means after the instrument is seen by the drawee upon presentment for acceptance or accepted by the drawee. Hence, the date of
maturity may be determined beforehand by counting sixty (60) days from the date it is presented to the drawee.
(4) Payable on or before a fixed time.
(a) "On or before September 10,2010,1 promise to pay P or order P10,000.00.“
(5) Payable on or before a determinable future time.
6) Payable on the occurrence of a specified event.
"I promised to pay P or order the sum of P10,000.00 upon the death of his father."
The instrument is negotiable because the specified event, the death of the father of P, is absolutely certain to happen although the time of
happening or occurrence is not known or uncertain.
(7) Payable after the occurrence of a specified event.
 "Thirty (30) days after the death of his father, I promise to pay P or order the sum of P10,000.00.
But a bill or note payable several days before the occurrence of the specified event is not negotiable, since the date of maturity of the
instrument can only be ascertained after it has become overdue and, therefore, the time for payment is uncertain.

Section 5
Additional provisions not affecting negotiability. — An instrument which contains an order or promise to do any act in addition to the payment of
money is not negotiable. But the negotiable character of an instrument otherwise negotiable is not affected by a provision which:
(a) Authorizes the sale of collateral securities in case the instrument be not paid at maturity; or
 Here, the additional act is to be performed after the date of maturity when the instrument is no longer negotiable in the
full commercial sense. Until the date of maturity, the promise is to pay money only.
(b) Authorizes a confession of judgment if the instrument be not paid at maturity; or
 A confession of judgment enables the holder to obtain a judgment without the delay usually incident to a law suit, as it
eliminates the necessity of a trial. It is a written statement signed by the defendant, setting forth the basis of liability and
authorizing the entry of judgment thereon.
(c) Waives the benefit of any law intended for the advantage or protection of the obligor; or
(d) Gives the holder an election to require something to be done in lieu of payment of money. But nothing in this section shall validate
any provision or stipulation otherwise illegal.
 If the option is with the promissor, the instrument is non- negotiable because the holder cannot compel him to make payment in
money.

 Limitation on the provision, it cannot require something illegal.

 There are two kinds of judgements by confession:
a. cognovit actionem
b. relicta verificatione
 Confessions of judgement in the Philippines are void as against public policy.
 If the choice lies with the debtor, the instrument is rendered non-negotiable.