LAW ON NEGOTIABLE INSTRUMENT

INSTRUMENT – PATUNAY NA MAY CONTRACT, KATULAD NG NAPAG ARALAN DATI NA ANG

CONTRACT AY PWEDE MABUO VERBAL O IN WRITING, IN SOME CASE KAILANGAN NA IN
WRITING. AT YUNG ISANG HALIMBAWA NG INSTRUMENT ANG WRITTEN INSTRUMENT.

FUNCTIONS: (ONCE NA MAGING NEGOTIABLE ANG INSTRUMENT)

- SUBSTITUTE FOR MONEY

- MEDIUM OF EXCHANGE FOR MOST COMMERCIAL TRANSACTIONS
- MEDIUM OF CREDIT TRANSACTIONS

CHARACTERISTICS:

- NEGOTIABLITY
- ACCUMULATION OF SECONDARY CONTRACTS

FORMS:

- PROMISORY NOTES (MAKER) (UNCONDITIONAL PROMISE) (MUST BE A PROMISE TO

PAY)
- BILL OF EXCHANGE (DRAWER) (UNCONDITIONAL ORDER)

ANG GUMAGAWA NG PROMISORY NOTE AY MAKER, DAPAT NA SIGNED NG MAKER

OTHERWISE WALA O HINDI MABBIND SA PROMISORY NOTE KAPAG WALANG SIGNED.

NOTE: MAY PAYEE ON BOTH FORMS NEGOTIABLE INSTRUMENT

 BILL OF EXCHANGE PROMISORY NOTE

PROMISORY NOTE

- MAKER IS PEDRO SANTOS (SI PEDRO YUNG GUMAWA AT SYA YUNG NAG
PROPROMISE TO PAY) (MERON SYANG UNCONDITIONAL PROMISE)
- PAYEE IS JUAN DELA CRUZ
- DETERMINABLE FUTURE TIME KASI NAKA INDICATE ANG DAYS O DATE KUNG KAYLAN
BABAYARAN
- 2 PARTIES: MAKER AND THE PAYEE

BILL OF EXCHANGE

- PEDRO SANTOS IS THE DRAWER (UNCONDITIONAL ORDER DAHIL SA WORD NA “PAY

TO”)
- ORDER INSTRUMENT
- DETERMINABLE FUTURE TIME DIN SYA
- METROBANK IS THE DRAWEE BANK
- 3 PARTIES: DRAWER, PAYEE AND DRAWEE. PERO PWEDE PA MADAGDAGGAN

SUM CERTAIN IN MONEY

PAANO NAGIGING SUM CERTAIN IN MONEY? ALAM KUNG MAGKANO YUNG AMOUNT NA
BABAYARAN, KASI KUNG HINDI NATIN ALAM YUNG AMOUNT HINDI MAGIGING NEGOTIABLE
ANG ISANG INSTRUMENT.

1. NEGOTIABLE – HINDI SYA READILY AVAIBLE PERO PWEDE PARIN NAMAN MA

COMPUTE KAYA SUM CERTAIN IN MONEY PARIN SYA
2. NEGOTIABLE – ALTHOUGH HINDI VISIBLE KUNG MAGKANO ANG BABAYRAN PERO
PWEDE PA MATUOS
3. SUM CERTAIN IN MONEY PARIN. HINDI MAN NABANGIT ANG INTEREST RATE, DAHIL
MAY RULE UNDER CIVIL CODE NA KAPAG NABANGIT ANG INTEREST PERO HINDI
NABANGIT ANG INTEREST RATE, ANG GAGAMITIN AY PREVAILING LEGAL RATE, AS OF
NOW 6%. KAYA ANG MANGYAYARE AY MAGIGING 6% IN ANNUM.
4. SUM CERTAIN IN MONEY – KASI PINAPAKITA KUNG KAYLAN BABAYARAN AT ANG
AMOUNT. “ON OR BEFORE” AY WALANG EFFECT DAHIL ANG OPTION AY NASA
MAGBABAYAD O MAKER, WALA PROBLEM DOON.
5. HINDI BINANGIT KUNG KAYLANGAN KUNG KAYLAN BABAYARAN YUNG TWO
INSTALLMENT. KAYA IN THIS CASE IT IS NON-NEGOTIABLE, HINDI SUM CERTAIN IN
MONEY UNDER SECTION 2.

1. IN THIS CASE SUM CERTAIN IN MONEY PARIN ITO. “KAPAG NAGKAROON NG DEFAULT
KAYLANGAN NA BAYARAN LAHAT NG UTANG” THIS IS AN ACCELARATION CLAUSE”
DOES IS AFFECT THE NEGOTIABLITY OF AN INTRUMENT? “NO”.
 PERO KAPAG ACCELERATION SYA AT ANG OPTION IS THE HOLDER O YUNG
MANININGIL, HINDI YON PWEDE, IT WILL RENDER THE INTRUMENT NON
NEGOTIOBALE, PERO VALID PARIN IYON.
2. KAPAG DOLLAR NEGOTIOABLE PARIN YON, KASI PWEDE PARIN NAMAN INCONVERT
IN TO PHP PESOS
3. KAPAG NASA FOREIGN CURRENCY WALA NAMAN PROBLENA.

ORDER OR PROMISE TO PAY IS UNCONDITIONAL

PAANO MASASABI KUNG UNCONDITIONAL ANG PROMISE?

KAPAG MAY CONDITION PARA MAGBAYAD HINDI NA SYA NEGOTIABLE PERO VALID
CONTRACT PARIN YUN.

YUNG PAGBABAYAD SA KAHIT ANONG NEGOTIABLE INSTRUMENT DAPAT WALANG

CONDITION O UNCONDITIONAL, DAPAT MAGBABAYAD PARIN.

WORDS/PHRASES THAT INDICATE NEGOTIABLITY/NON-NEGOTIABILITY

NEGOTIABILITY PRHASES NON-NEGOTIABLE PHRASES

PARTICULAR FUND OUT OF WHICH REIMBURSEMENT IS TO BE MADE

1. BILL OF EXCHANGE. SABI “PAY TO THE ORDER OF 1K AND REIMBURSE YOPURSELF”

SA BILL OF EXCHANGE SI DRAWER HINDI SYA YUNG MAGBABAYAD, UUTUSAN NYA SI
DRAWEE NA MAGBAYAD KAY PAYEE”. PERO SA PROMISORY NOTE NA SYA MISMO
MAGBABAYAD
NEGOTIABLE PARIN

I PROMISE TO PAY TO THE ORDER OF 300K FOR GOODS RECEIVED YESTERDAY.

- BINANGAIT ANG REASON KUNG BAT MAGBABAYAD, IT DOESN’T AFFECT

NEGOTIABILITY

DETERMINABLE FUTURE TIME

EXAMPLE FOR LETTER C – I WILL PAY YOU WHEN THE EARTHQUACK HAPPEN. SO ALTHOUGH
HINDI PA CERTAIN KUNG KAYLAN MANGYAYARER YUNG EVENT NA YON PERO MANGYAYARE
PARIN TALAGA SYA.

I PROMISE TO PAY 1K IF YOU GRADUATED. I WILL YOU IF YOU GET SICK– SO MEANING YON
NG CONTAINGENCY
LAHAT NANG ADDITIONAL NA GAGAWIN NG DEBTOR KAPAG HINDI LANG SYA MAKABAYAD,
PARA LANG MAPROTEKTAHAN SI PAYEE O SI CREDITOR. KAHIT NA NAG EEXIST YUNG LAHAT
NANG YON AY NEGOTIOABLE PARIN.

PAANO KUNG MERONG DI NA OMMIT O NAILAGAY? ANO YUNG MGA OMMISSION NA HINDI
MAAPEKTUHAN YUNG NEGOTIABLITY NG INSTRUMENT?

SEAL – MAY MGA CERTAIN COUNTRIES KASI NA IBA YUNG PIRMA SA SEAL, O PARANG IBA
ANG EFFECT NYA. SA PH IT DOESN’T MATTER KAHIT SEAL O PIRMA.

SEC. 6 MGA OMISYON NA HINDI PARIN MAPROPROTEKTUHAN ANG NEGOTIABILITY NG

ISANG INSTRUMENT.
EX. I PROMISE TO PAY 10K TO P ON DEMAND – MEANING PAG NAG DEMAND YUNG HOLDER
AUTHOMATICALY OBLIGADO NA BAYARAN YON.

KAPAG WALANG NABANGIT NA TIME FOR PAYMENT, PAYABLE ON DEMAND PARIN YON.

KAPAH EXPRESSLY O KAHIT HINDI NABANGIT PAYABLE ON DEMAND PARIN SYA O KAPAG
MAY OVEDUE

KAILAN NAGIGING ORDER INSTRUMENT ANG ISANG NEGOTIABLE INSTRUMENT?

PARA MAGING ORDER INSTRUMENT ANG ISANG NEGOTIABLE INSTRUMENT, KAYLANGAN

EXPRESSLY NAKASULAT YUNG ON ORDER O TO THE ORDER OF.

EXAMPLE – PAY TO THE ORDER OF 10K

KAPAG HINDI PAYABLE TO THE ORDER OF THE PAYEE, KAILANGAN BANGGITIN PARIN ANG
PANGALAN NG PAYEE.