MODULE LAW ON NEGOTIABLE INSTRUMENTS

CHAPTER 6-WAIVER

Learning Objectives:

1. Define waiver.
2. Understand the concept of dispensation of notice.
3. Understand the effect of failure to give notice.

I. WAIVER

When may waiver of notice be given?

1. Before the time of giving notice has arrived; or

2. After the omission to give due notice. (Sec. 109)

What are the ways to give a waiver of notice?

It can either be:

1. Express; or
2. Implied (e.g. Payment by an indorser after he learns of the default of the maker
admission of liability after dishonor). (Sec. 109)

Who are affected by the waiver of notice?

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1. All parties (if embodied on the face of the instrument); or

2. Particular indorser (if written above the signature of such indorser) (Sec. 110)

II. DISPENSATION OF NOTICE

When is notice of dishonor not necessary?

1. Waiver of notice. (Sec. 109)

2. Waiver of protest. (Sec. 111)
3. When after due diligence, notice cannot be given. (Sec. 112)
4. Drawer in cases under Sec. 114
5. Indorser in cases under Sec. 115; and
6. Where due notice of dishonor by non‐ acceptance has been given (notice of
dishonor by non‐payment not necessary). (Sec. 116)

With regard to the drawer, when can a notice of dishonor be dispensed with?

1. When drawer and drawee is the same person

2. Drawee is fictitious or does not have the capacity to contract
3. Drawer is person to whom the instrument is presented for payment (he is the one
who dishonored the instrument)
4. Drawer has no right to expect or require that the drawee or acceptor will honor
the instrument.
5. Drawer has countermanded the payment (e.g. stop payment order) (Sec.114)

Juben issued to Y 2 post‐dated checks as security for pieces of jewelry to be

sold. Y negotiated the check to S. When Juben failed to sell the jewelry he
withdrew all his funds from the drawee bank. After dishonor, Juben contends that
the holder failed to give her a notice of dishonor. Is notice of dishonor
necessary?

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He was responsible for the dishonor of his checks, hence, there was no need to
serve him notice of dishonor. (State Investment House, Inc. v. CA, G.R. No. 101163,
Jan. 11, 1993)

With regard to the indorser, when is it not necessary to give a notice of dishonor?

Drawee is fictitious or has no capacity to contract, and indorser was aware of

these facts at the time he indorsed the instrument; Indorser is person to whom the
instrument is presented for payment; or

Instrument was made or accepted for his accommodation (Sec. 115)

III. EFFECT OF FAILURE TO GIVE NOTICE

What is the effect of omission of a previous holder to give notice of dishonor by

non‐ acceptance?

It does not prejudice the rights of a holder in due course subsequent to the
omission to present the instrument to the drawee for acceptance and notify the drawer
and indorsers if acceptance is refused. (Sec. 117)

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When should the notice be given?

1. GR: As soon as instrument was dishonored (Sec. 102) – Party is allowed one
entire day for the purpose of giving notice.
2. XPN: Delay is excused (Sec. 113)

Note: An instrument cannot be dishonored by non‐payment until after the maturity

Parties reside in the same place

1. Place of business – Before close of business hours on the day following

2. Residence – Before the usual hours of rest on the day following
3. By mail – Deposited in the post office in time to reach him in the usual course on
the day following (Sec. 103)

Parties reside in different places

1. By mail – Deposited in the post office in time to go by mail (actual departure in

the course of mail from the post office in which the notice was deposited) the day
following the day of dishonor.
2. If no mail – At a convenient hour (of the sender) on that day, by the next mail
thereafter.
 Other than by post office (e.g. personal messenger) – Within the time that
notice would have been received in due course of mail, if it has been
deposited in the post office within the time specified in (Sec. 104)
3. Time of notice to antecedent parties – Same time for giving notice that the holder
has after the dishonor (Sec. 107)

Note: Actual receipt of the party within the time specified by law is sufficient though not
sent in the places specified above. (Sec. 108)

What is the effect of failure to give notice of dishonor?

a. GR: Any person to whom such notice is not given is discharged, but he will still
be liable for breach of warranties pertaining to the instrument.

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b. XPN:
1. Waiver. (Sec. 109)
2. Notice is dispensed with. (Sec. 112)
3. Not necessary to drawer. (Sec. 114)
4. Not necessary to indorser. (Sec. 115)

What is the effect of lack of notice of dishonor on the instrument which is payable
in installments?

1. No acceleration clause – Failure to give notice of dishonor on a previous

installment does not discharge drawers and indorsers as to succeeding
installments.
2. With acceleration clause – It depends upon whether the clause is automatic or
optional.
a. Automatic – failure to give notice of dishonor as to a previous installment will
discharge the persons secondarily liable as to the succeeding installments;
b. Optional – if not exercised, the rule would be the same as if there is no
acceleration clause. If exercised, the rule would be the same as if the installment
contains an automatic acceleration clause. (Town Savings Bank v. CA, G.R. No.
106011, June 17, 1993)

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To know more information about CHAPTER 6 –WAIVER

PLEASE CLICK THE LINK: https://www.youtube.com/watch?v=ZLR01-BtK0g

To know more information about Chapter 6-Effect of Failure to Give Notice

PLEASE CLICK THE LINK: https://www.youtube.com/watch?v=5OrAPEhPuhQ

REFERENCE:

Law on Negotiable Instruments

Author: Hector S. De Leon
Hector S. De Leon, Jr.

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