MODULE LAW ON NEGOTIABLE INSTRUMENTS

CHAPTER 9-RULES GOVERNING ACCEPTANCE

Learning Objectives:

1. Understand the rules governing acceptance.

2. Understand presentment for acceptance.
3. Identify the time/place/manner of acceptance.
4. Discuss the effect of failure to make presentment.

I. RULES GOVERNING ACCEPTANCE

What is the effect of accepting an instrument with a qualified acceptance?

GR: When the holder takes a qualified acceptance the drawer and indorsers are
discharged from liability on the bill.
 XPN:

1. When they have expressly or impliedly

authorized the holder to take a

qualified acceptance, or

2. Subsequently assent thereto

3. Implied assent (when they did not

express their dissent to the holder

within a reasonable time when they

received a notice of qualified

acceptance). (Sec. 142)

When may an incomplete bill be accepted?

Acceptance may be made before the bill has been signed by the drawer or while
otherwise incomplete, or after it is overdue, or even after it has been dishonored by
non‐acceptance or non‐ payment. (Sec. 138)

What is the effect of the certification by the drawee bank?

Certification implies that the check is drawn upon sufficient funds in the hand of
the drawee, that they have been set apart for its satisfaction and that they shall be so
applied whenever the check is presented for payment. Where a check is certified by the
bank on which it is drawn, the certification is equivalent to acceptance (New Pacific
Timber v. Seneris, G.R. No. L‐41764, Dec. 19, 1980).

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II. PRESENTMENT FOR ACCEPTANCE

What is presentment for acceptance (PA)?

Production or exhibition of a bill of exchange to the drawee for his acceptance or

payment (also includes presentment for payment).

What are the rules as to PA?

1. GR: PA is not necessary to render any party to the bill liable. (par.2, Sec. 143)
2. XPN:
a. Payable after sight, or when it is necessary in order to fix the maturity of the
instrument
b. Expressly stipulated that it shall be presented for acceptance; or
c. Where the bill is drawn payable elsewhere than at the residence or place of
business of the drawee. (Sec. 143)

Note: The holder must either present it for acceptance or negotiate it within a
reasonable time, otherwise, the drawer and all indorsers are discharged. (Sec. 144)

III. TIME/PLACE/MANNER OF PRESENTMENT

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How must PA be made?

1. By or on behalf of the holder

2. At a reasonable hour on a business day
3. Before the bill is overdue; and
4. To the drawee or some person authorized to accept or refuse to accept on his
behalf. When:
a. Addressed to 2 or more drawees not partners – To all (except when one was
given authority)
b. Drawee is dead – To his personal representative
Note: Where drawee is dead, PA is not required.
c. Drawee is bankrupt or insolvent or has made an assignment for the benefit of
creditors – To him or to his trustee or assignee. (Sec. 145)

IV. EFFECT OF FAILURE TO MAKE PRESENTMENT

What is the effect of failure to make presentment?

Failure to make such presentment will discharge the drawer from liability or to the
extent of the loss caused by the delay (Republic of the Philippines vs. PNB, G.R. No. L‐
16106, December 30, 1961).

When may delay in making PA be excused?

Bill drawn payable elsewhere than at the place of business or the residence of
the drawee; and Holder has no time, with the exercise of reasonable diligence, to
present the bill for acceptance before presenting it for payment on the day that it falls
due. (Sec. 147)

When is presentment excused?

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 1. Drawee is dead, or has absconded, or is a fictitious person not having capacity to
contract by bill
2. After exercise of reasonable diligence, presentment cannot be made; or
3. Although presentment has been irregular, acceptance has been refused on some
other ground. (Sec. 148)

V. DISHONOR BY NON‐ACCEPTENCE

When is a bill dishonored by non‐acceptance?

1. When it is duly presented for acceptance and such an acceptance is refused or

cannot be obtained; or
2. When presentment for acceptance is excused, and the bill is not accepted. (Sec.
149)

What is the duty of the holder where bill is not accepted?

The person presenting it must treat the bill as dishonored by non‐acceptance or

he loses the right of recourse against the drawer and indorsers. (Sec. 150)

What are the rules when a bill is dishonored by non‐acceptance?

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 1. Right of recourse against all secondary party accrues to the holder
2. No presentment for payment is necessary since dishonor of the instrument by
non‐payment is to be expected

3. If the instrument is accepted after it has been dishonored by non‐acceptance

presentment for payment is necessary upon maturity; and
4. In case of non‐payment, holder must give the corresponding notice of dishonor;
otherwise, secondary parties are discharged

To know more information about CHAPTER 9-RULES OF GOVERNING

ACCPETANCE

PLEASE CLICK THE LINK: https://www.youtube.com/watch?v=_ELH7_1lZOU

To know more information about Chapter 9-Presentment for Acceptance

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REFERENCE:

Law on Negotiable Instruments

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

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