CHAPTER 2: CONSIDERATION
SEC 24: Presumption of Consideration
Every negotiable instrument is deemed
prima facie to have been issued for a valuable
consideration and every person whose signature
appears thereon to have become party.
SEC 25: Value, what constitutes
Value is any consideration sufficient to
support a simple contract.
Antecedent and pre-existing debt
constitutes value and is deemed whether the
instrument is payable on demand or at a future
time.
SEC 26: What constitutes holder for value
Where value has at any time been given
for the instrument, the holder is deemed a
holder for value in respect to all parties who
become such prior to that time.
Holder for value:
a. One who has given a valuable
consideration for the instrument issued
or negotiated.
b. Presumed to be the holder until contrary
appears.
SEC 27: When lien on instrument constitutes
holder for a value
Where holder has lien on the instrument
arising either from contract or by implication of
law, he is deemed holder to the extent of his lien.
Lien = collateral or security
a. Amount of instrument > debt secured
Pledgee is holder of value to the extent of his
lien.
He may collect the full amount and
deliver the surplus to pledgor.
b. Amount of instrument < debt secured
Pledgee is holder for value for the full
amount and may, therefore, recover all.
c. Party liable has defenses
If between pledgor and party liable there are
existing defenses
Pledgee can collect on the instrument only
to the extent of amount.
If it is real defense, pledgee can recover
nothing from the instrument
SEC 28: Effect of Want of Consideration
Absence of Consideration – total lack of any
valid consideration.
Failure of Consideration – failure or refusal of
the parties to comply with the consideration.
P failed to deliver the land, hence P
cannot recover from M.
Partial failure of Consideration
P delivered 2/3 portion of the land hence
he can recover 2/3 of the note.
SEC 29: Liability of Accommodation Party
Accommodation Note or Bill – loan of
one’s credit
Accommodation Party – who signed the
instrument as maker, drawer, acceptor, or
indorser without receiving value and for the
purpose of lending his name to another party.
= he expects that the accommodated
party will pay the bill
= He is classified according to the
accommodated party’s status
 Accommodated Party – one in whose
favor a person, without receiving a value, signs
the instrument and enabling said party to raise
money upon it.
Negotiation
Transfer of the negotiable instrument from
one person to another making the transferee the
holder.
If transferee is not the holder, then there is
no negotiation

Methods of Negotiation

1. Payable to order
Liability of Accommodation party to Holder Two steps are required:
Absence of consideration is not a
defense – accommodation is liable to holder a. Indorsement
even though the holder had no knowledge of his b. Delivery to the next holder
status.
However, if the supposed 2. Payable to bearer
accommodated stole the note from Mere delivery is enough
accommodation, then the latter is not liable to Note: delivery means transfer of possession
the holder (HWDC) either actual or constructive.
After payment to holder – the
accommodation may recover from Effect of Instrument by Drawee not Negotiation
accommodated, their relation is debtor and The payment of check or other bill by the
surety. drawee bank is not negotiation and does not
make the bank holder.
CHAPTER 3: NEGOTIATION
SEC 30: What constitutes Negotiation Effect of Delivery of order of Instrument
Methods of Transfer of Negotiable Instrument without indorsement
1. Issue Transfer is effected otherwise than by
negotiation when an order instrument is
First delivery of the instrument complete in delivered without indorsement.
form.
The life of negotiable instrument does not 1. Transfer operates as an ordinary
begin until is issued by the maker/drawer to the assignment
first holder. 2. Transferee does not become the holder
of the instrument
2. Negotiation 3. Assignee acquires the right to have the
indorsement. Hence, it will only
Operates to make the transferee of the
operates as negotiation as of the time
instrument the holder thereof.
the indorsement has actually made.
Ordinarily involves indorsement.
Assignment
3. Assignment
Transfer of title where assignee will only
Transfer of rights under contract. take the title or rights that the assignor has,
Non-negotiable instrument always subject to all defenses against his assignor.
constitutes an assignment.
Note: Non-negotiable instrument can only be But if it is paid in part, it may be indorsed
assigned or transferred. as to the residue.
Can there be negotiation to Payee?

1. If the instrument is first delivered to

payee, then he acquires the title by
issuance not negotiation.
2. If the first delivery is delivered to person
other than payee (ex. agent of the
maker/drawer) then the payee acquires
title by negotiation.
3. If after multiple negotiation the
instrument is delivered back to payee by SEC 33: Kinds of Indorsement
the last holder then there is negotiation.
1. As to methods
a. Special
SEC 31: How indorsement is made b. blank
It must be written on the instrument 2. Kind of title transferred
itself or upon a paper attached thereto. a. Restrictive
Signature without additional words, is b. Non-restrictive
sufficient indorsement. 3. Scope of liability of indorser
For it to be completed it must be a. Qualified
delivered b. Unqualified / general
4. As to presence or absence of limitations
Nature of Indorsement a. Conditional
It is not only a mode of transfer. It also b. Unconditional
involves new contract and an obligation on the 5. Other kinds
part of indorser. a. Joint
Implied warranty that the instrument b. Successive
will be duly paid according to the terms. c. Irregular / anomalous
d. Facultative
Note:
SEC 34: Special and Blank Indorsement
The use of word “assign” does not make
Special indorsement – the name of
the negotiation a mere assignment.
indorsee is stated
Blank indorsement – name of the
SEC 32: Indorsement must be in of entire
indorsee is not stated, hence, it is converted “to
instrument
bearer”
The indorsement must be the entire
If the note is originally “to bearer” it
instrument
can’t be converted “to order”
It is not negotiation if:
But if it is initially “to order” then it can
a. It purports to transfer a partial be converted “to bearer”
amount to indorsee or
b. It purports to transfer to 2 or more
indorsee severally
SEC 35: How blank indorsement converted to
special
By writing the signature of the indorser
in blank any contract consistent with the
character of indorsement
SEC 36: Restrictive Indorsement
Restricts or prohibits entirely the further
negotiation of the instrument or modifies the
rights of the holder or liabilities of indorser.
1. Limit right of indorsee
By restrictive, the indorser notifies all
prospective holders that the indorsee has only
the authority to deal with the instrument as
directed and indorsee has limited title.
2. Destroy the negotiability
Bars further negotiation to a holder in due
course.
3. There are 3 classes
a. Prohibits further negotiation
“Pay to A only “
b. Constitutes indorsee as the agent of
indorser
“Pay to A for collection”
c. Vest title in accordance for the
benefit of indorser or third party.
“Pay to A in trust for B”
Note: “Pay to A” is an indorsement but “pay to A
ONLY” is restrictive
SEC 37: Effect of Restrictive
It confers upon the indorsee right
a. To receive payment of the instrument
b. Bring an action thereon that the indoser
could bring
c. Transfer his rights
But all subsequent indorsee acquires only
the title of the first indorsee.
SEC 38: Qualified Indorsement
Constitutes indorser a mere assignor of
the title.
It may be made by adding to the
indorser’s signature the words “without
recourse” or any similar words.
Does not impair negotiability
Recourse – means a resort to a person
who is secondarily liable after the default of the
person primarily liable.
Purpose: transferring title without
guaranteeing the payment. Hence, indorser is
mere assignor.
Indorser’s liability is limited
GENERAL: Qualified indorser is secondarily liable
for breach of his warranties as indorser.
EXCEPTION: Such indorsement specifically
excludes such warranties
If the indorser dishonored the
instrument for other reason like insolvency, the
qualified indorser is not liable.
SEC 39: Conditional Indorsement
1. Absolute indorsement – no prior
conditions
2. Conditional indorsement –
Indorser imposes some other condition
to his liability or on the indorsee right to collect
the proceeds
Does not prohibit further negotiation
regardless whether the condition is fulfilled or
not.
However, if the condition appears on the
face of the note then it renders the instrument
as non-negotiable

Note: Different combinations of Indorsements is
possible
SEC 40: Indorsement of payable to bearer
Where instrument is payable to bearer,
is indorsed specially, it may nevertheless
negotiated by delivery, but the person indorsing
specially is liable as indorser only to such holders
as make title through instruments
SEC 41: Indorsement where payable to two or
more persons
GENERAL: Instrument payable to the order of
two or more payees or indorsees all must
indorse the instrument to make the transaction
negotiation.
EXCEPTION: One of them may indorse it if:
a. Payees or indorsee are partners; and
b. Payee or indorsee indorsing has
authority to indorse for others
Note: This section talks about join indorsement.
Severally indorsement is not allowed
SEC 42: Effect of Instrument drawn or indorsed
to a person as a cashier
Where instrument is drawn or indorsed
to a person as a cashier or other fiscal officer of
a bank or corporation, it is deemed prima facie
to be payable to the bank or corporation of
which he is such officer and may be negotiated
by either indorsement of the bank or
corporation or the indorsement of the officer.
SEC 43: Indorsement where name is misspelled
Where name of a payee or indorsee is
wrongfully designated or misspelled, he may
indorse the instrument as therein described
adding, if he thinks fit, his proper signature.
Note: The holder paying or giving value may
require the payee/indorsee to sign in both
names
SEC 44: Indorsement in Representative Capacity
Where any person is under obligation to
indorse in a representative capacity, he may
indorse in such terms as to negative personal
liability.
Note: Authority of the agent need not be in
writing
SEC 45: Time of Indorsement
Except where an instrument bears date
after the maturity of the instrument, every
negotiation is deemed prima facie to have been
effected before the instrument was overdue.
The one who alleges that the
indorsement was effected after maturity has the
burden of proof.
SEC 46: Place of Indorsement
GENERAL: It is to presumed prima facie to have
been made at the place where the instrument is
dated
EXCEPTION: Contrary appears
Note: He alleges otherwise has the burden of
proof
SEC 47: Continuation of Negotiable Character
GENERAL: An instrument negotiable in its origin
continue to be negotiable even it is overdue.
EXCEPTION: When it has been
a. Restrictively indorsed or
b. Discharged by payment or otherwise.
SEC 48: Striking out Indorsements
The holder may at any time strike out
any indorsement which is not necessary to his
title.
The indorser whose indorsement is
struck out, and all indorsers subsequent to him,
are thereby relieved from liability on the
instrument.
SEC 49: Transfer without Indorsement
Applies only to an instrument payable to
order
Contemplates where the payee or
indorsee delivers the instrument for value
without however indorsing it.
1. Transactions operates as an equitable
assignment and the transferee acquires
the instrument subject to defenses and
equities among prior parties
2. He cannot negotiate it
3. If transferor had legal title, transferee
acquires such title and the right to have
the indorsement of the transferor.
a. The transferee qualities to be an
holder after receiving the
indorsement and therefore will be
capable of negotiating the
instrument
b. Before indorsement, transferee is
not a holder
SEC 50: When prior party May Negotiate the
instrument
When instrument is negotiated back to a
prior party, he may negotiate the same.
But he is not entitled to enforce
payment thereof against any intervening party
to whom he was personally liable.
LIMITATION OF RENEGOTIAION
Prior party cannot further negotiate:
1. It is payable to the order of third person
and has been paid by drawer
2. When it was made or accepted by the
accommodation and has been paid by
the accommodated party
3. In other cases, where instrument is
discharge when acquired by prior party
CHAPTER 4: RIGHTS OF THE HOLDER
SEC 51: Right of Holder to sue; Payment
The holder may sure thereon in his own
name; and payment to him in due course
discharge the instrument.
CLASSES OF HOLDERS
1. Holders simply
2. Holder for value
3. Holders in due course
ORDINARY OR MERE HOLDER
Is a person who qualifies as holder but
does not meet all the qualifications to qualify as
holder in due course (Assignee or Transferee)
SEC 52: What Constitutes a Holder in Due
Course
A holder in due course is a holder who
has taken the instrument under the following
conditions
1. That it is complete and regular upon its
face
2. That he became the holder of it before it
was overdue, and without notice that it
had been previously dishonored, if such
was the fact
 3. That he took it in good faith and for value
4. That at the time it was negotiated to him
he had no notice of any infirmity in the
instrument or defect in the title of the
person negotiating it
Note: All 4 conditions must concur
Holder of non-negotiable instrument cannot
attain the status of holder in due course.
SEC 53: When a Person not Deemed Holder in
Due Course
When the instrument is payable on
demand is negotiated an unreasonable length of
time after its issue, the holder is not deemed
holder in due course.
SEC 54: Notice before Full amount Paid
Where transferee receives notice of any
infirmity in the instrument or defect in the title
of the person negotiating the same before he
had paid the dull amount agreed, he will be
deemed a holder in due course only to the extent
of amount paid by him.
SEC 55: When Title is Defective
The title of person who negotiates an
instrument is defective:
1. Acquisition
He obtained the instrument or any signature
thereto by fraud, duress, force, or other unlawful
means.
2. Negotiation
He negotiated it in breach pf faith or under
circumstance as amount to a fraud.
SEC 56: What constitutes A Notice of defect
To constitute a notice of infirmity in the
instrument or defect in the title of the person
negotiating the same.
The person to whom it is negotiated
must have:
a. Actual knowledge of the infirmity or
defect or
b. Knowledge of such facts that his action
in taking the instrument amounted to
bad faith
SEC 57: Right of Holder in Due Course
1. He may sue on the instrument in his own
name
2. He may receive payment and if the
payment in in due course, the
instrument is discharge
3. He holds the instrument free from any
defect of title of prior parties
4. He holds the instrument free from
defenses (personal defenses) available
to prior parties among themselves
5. He may enforce payment for the full
amount thereof against all parties liable
SEC 58: When subject to Original Defenses
In the hands of any holder (except HDC),
a negotiable instrument is subject to the same
defenses as if it were non-negotiable.
But a holder who derives his title
through HDC and who is not himself a party to
any fraud or illegality affecting the instrument
has all the rights of such former holder in respect
of all parties prior to the latter.
KINDS OF DEFENSES
1. Real defenses
Assertable against all parties both
immediate and remote including HDC or holders
through the latter.
Examples:
 a. Incapacity as far as the incapacitated
person is concerned
b. Illegality of contract declared by law,
except when the maker or drawer
himself is a party hence it will be
personal defense
c. Want of delivery of incomplete
instrument
d. Forgery
e. Want of authority, apparent and real
f. Duress amount to forgery as where
one takes the hands of another and
forces him at gunpoint to sign
g. Fraud in factum or fraud in esse
contractus (Sec 14)
h. Fraudulent alteration by holder
i. Prescription
j. Other infirmities appearing on the
face
k. Discharge at or after maturity
2. Personal defenses
Asserted only against ordinary holders
and not with HDC or holders with all the
rights of HDC
Examples:
a. Filling of wrong date
b. Filling up blanks not in accordance
with the authority given and within
reasonable time.
c. Want of delivery of complete
instrument
d. Absence or failure of consideration
e. Simple fraud or fraud in inducement
f. Acquisition of instrument by duress,
force, and fear
g. Acquisition by unlawful means
h. Acquisition for illegal consideration
i. Negotiation in breach of faith
j. Negotiation in cases amount to
fraud
k. Innocent alteration or spoliation
(sec 124-125)
l. Set-off between immediate parties
m. Discharge, renunciation or release
of payment before maturity
n. Discharge of party secondarily liable
by discharge of prior party
o. Want of authority of agent who has
apparent authority.
But if the principal can show that
agent has no authority then it is real
defense
RIGHTS OF HOLDER NOT IN DUE COURSE
1. He may sue the instrument in hid own
name
2. Receive payment and if the payment is
in due course, the instrument is
discharge
3. He is entitled to the instrument but
holds it subject to the same defenses as
if it were non-negotiable
4. He has all the right of HDC for whom
derives his title and he is not party of
illegality
SEC 59: Who is deemed Holder in Due Couse
Every holder is deemed prima facie to be
a holder in due course,
When it is shown that the title of any
person who has negotiated the instrument was
defective, then the burden of proof shifts to the
holder who must show that he is HDC or HDC in
subrogation
However, the second paragraph does
not apply in favor of a party who become bound
on the instrument prior to the acquisition of
defective title.
 CHAPTER 5: LIABILITIES OF PARTIES SEC 61: Liability of Drawer
SEC 60: Liability of Maker By merely signing his name on the bill as
Primary Liable: drawer, he admits the existence of the payee
and his then capacity to indorse it.
1. Maker of the PM
2. Acceptor of BOE
Liability of Drawer is Conditional
3. Certifier of a check
He does not promise to pay the bill
Secondary Liable: absolutely (He makes no warranty)
But he engages to pay after certain
1. Drawer of a Bill conditions are met:
2. Indorser of a note or Bill
1. The bill is presented for acceptance or
Not Liable: payment, as the case may be, to the
Drawee until he accepts the instrument drawee
in which case he becomes acceptor 2. The bill is dishonored by non-acceptance
DIFFERENCE BETWEEN PRIMARY AND or non- payment, and;
SECONDARY LIABILITY 3. Necessary proceedings of dishonor are
Primary Liable duly taken.
Are absolute required to pay the a. Notice of dishonor is given to drawer
instrument upon its maturity b. In case of foreign bills, protest is
Secondary Liable made followed by notice of protest
Face only the potential secondary
liability. Drawer may insert in the instrument an
They will pay the instrument only if after express stipulation negativing or limiting his own
certain conditions have been fulfilled: liability to holder.
SEC 62: Liability of Acceptor
a. After presentment to primary The acceptor by accepting the instrument
parties, they dishonor the engages that he will pay it according to the tenor
instrument of his acceptance and admits:
b. Taking undertakings required by law
after dishonor 1. The existence of the drawer, the
genuineness of his signature, and
capacity and authority to draw the
LIABILITY OF MAKER instrument
Applies for promissory note only 2. Existence of payee and his then capacity
He is primary liable and he is liable not to indorse
only to the payee but to any subsequent holder
entitled to the instrument at its maturity date Drawee is not liable before the acceptance
even the holder does not demand the payment of the note.
He remains fully liable despite the fact But after acceptance he will be primary liable
that the instrument is presented for payment the same as the maker of note.
unless prescription has run
Maker admits the existence of the payee W may accept the
instrument for only 8k. then he
and his then capacity to endorse
will only liable for that specific
amount.
SEC 63: When a Person deemed Indorser
Person placing his signature upon an
instrument otherwise than as maker, drawer, or
acceptor is deemed to be an indorser, unless he
clearly indicates by appropriate words his
intention to be bound in some other capacity
Person Liable as Guarantor or Surety
Person who indicates that he only
guarantees the instrument is subsidiarily liable
after the assets of the principal has been
exhausted
Person who signs and indicates the
intention to be surety is primarily and absolutely
liable with the principal.
SEC 64: liability of Irregular Indorser
Where a person, not otherwise a party
to an instrument, places thereon his signature in
blank before deliver, he is liable as indorser in
accordance with the following rules:
1. Payable to the order of third person –
liable to the payee and to all subsequent
parties
2. Payable to the order of the
maker/drawer or payable to bearer –
liable to all parties subsequent the
maker/drawer
3. If he signs for the accommodation of
payee, he is liable to all parties
subsequent the payee
SEC 65: Warranty; where negotiation by deliver,
etc.
Every person negotiating an instrument
by delivery or by a qualified indorsement
warrants:
1. Instrument is genuine and in all respect
what it purports to be;
2. He has a good title to it;
3. All prior parties had capacity to contract
4. He has no knowledge of any fact which
would impair the validity of the
instrument or render it valueless
But if it is negotiated by mere delivery, the
warranty extends in favor of no holder than the
immediate transferee.
Brokers and other persons negotiating
public or corporation securities other than notes
and bills do not warrant the capacity of prior
parties
SEC 66: Liability of General/Unqualified
Indorser
1. Same with the Sec 65 items 1-3
2. Warranty that the instrument is valid
and subsisting
Even the instrument turns out to be invalid,
general indorser is still liable
3. Warranty that the instrument will be
honored
In case the instrument is not paid due to
insolvency he is liable unlike with qualified
indorser
4. Warranty that the prior indorsement are
genuine
Hence, he is liable even the prior
indorsement is forged.
Sec 67: Liability of Indorser where Proper
Negotiable by Delivery
Where a person places his indorsement
in an instrument negotiable by delivery, he
incurs all the liabilities of an indorser
Note: This is “to bearer” where the indorser
indorse specially.
SEC 68: Order in which Indorsers are liable
Indorsers are liable prima facie in the
order in which they indorse, but evidence is
admissible to show that, as between or among
themselves, they have agreed otherwise.
Joint payees or joint indorsees who
indorsed are deemed to indorse jointly and
severally
Note: if the word “we” is used then it is joint
SEC 69: Liability of Agent or Broker
This section refers to instrument payable
to bearer, hence negotiable by delivery
a. Agent and broker who indorses by mere
delivery will incurs the liabilities in SEC
65
b. If he negotiates it by qualified
indorsement his warranties are Sec 65
c. If he negotiates it by general
indorsement then Sec 66
To escape the personal liability mentioned
above, he must disclose his principal and the fact
he is acting only as agent.
CHAPTER 6: PRESENTMENT OF PAYMENT
SEC 70: Effect of want of Demand on Principal
debtor
Presentment for Payment – b. Bill of Exchange
presentation of an instrument to the person
primarily liable for the purpose of demanding
and receiving payment
Presentment of Payment to person Primarily
liable
Presentment are not necessary to
charge the person primarily liable. Simply, the
holder can sue maker/acceptor as soon as the
date of payment has been passed and no
payment has been made, although no demand
has been made.
It is not also needed even the instrument
is payable at a special place
Presentment of Payment to person Secondarily
liable
It is necessary as they are undertaking to
pay only if the instrument is dishonored
If the presentment was not made to
person primarily liable then those people
secondary liable are discharge from their
responsibility, unless such presentment is
excused or dispensed,
SEC 71: Presentment where Instrument is not
Payable on Demand; and where payable on
demand
1. If the instrument is payable at fixed or
determinable future time
Presentment must be made on the date it
falls due without grace period.
Otherwise, the drawer and indorser will be
discharged from liability
Presentment before maturity is not effective
2. If the instrument is payable on demand
a. Promissory Note
Must be made within a reasonable time.
The burden is on the holder of the note,
to prove due and timely presentment
Presentment must be made within
reasonable time after last negotiation
Therefore the liability of the drawer and
indorser could continue for an indefinite time

SEC 72: What constitutes sufficient
Presentment
To be sufficient it must be made:
1. By the holder, or by some people
authorized to receive payment on his
behalf
2. Reasonable hour on a business day
3. At a proper place as herein defined
4. To the person primarily liable or if he is
absent or inaccessible, to any person
found at the place where the
presentment is made
Note: if the presentment does not comply with
any of the requirements, then it is as if there is
no presentment made
SEC 73: Place of Presentment
1. Where a place for payment is specified
in the instrument and it is there
presented
2. No place is specified:
a. But the address of the person to
make payment is given in the
instrument
b. And no address is given and the
instrument is presented at the usual
place of business or residence of
person to make payment
3. In any other case, if presented to the
person to make payment wherever he
can be found, or if presented at his last
known place of business or residence
SEC 74: Instrument must be exhibited
The instrument must be exhibited to the
person from whom payment is demanded and
when it is paid must be delivered up to the party
paying it
Manner of Presentment
Is the act of the holder of a negotiable
instrument of exhibiting, a note to the maker
and demanding payment or
Showing the bill to the drawee and
requesting its acceptance
Valid presentment requires personal
demand at the proper place, exhibiting the
instrument to the maker/drawer
Purpose of Presentment
1. To determine the genuineness of the
instrument, indorsement, and the right
of holder to receive payment
2. To enable him, upon payment, to take
possession of it to guard against a
lawsuit of subsequent holder.
Presentment without Exhibition
If the instrument is not exhibited, the
presentment would be ineffectual as the debtor
is entitled to see the instrument and demand the
surrender of it upon payment.
Unless the maker/drawer does not
require its exhibition
Note: The instrument however need not actually
be exhibited unless such exhibition is demanded
SEC 75: Presentment where instrument payable
at Bank
Presentment must be made during
banking hours
Unless the person to make payment has
no funds there to meet it any time during the
day, in which case presentment at any hour
before bank is closed on that day is sufficient
SEC 76: Presentment where Principal Debtor is
Dead
If the primarily liable is dead and no
place of payment is specified
Presentment must be made to his
personal representative, is such there be
But presentment may be discharge if
with the exercise of reasonable diligence, no
personal representative can be found.
Hence. The holder will give notice of
dishonor to the indorser
SEC 77: Presentment to Persons liable as
Partners
If the persons primarily responsible are
partners and no place of payment is specified
Presentment for payment may be made
to any one of them, even though there has been
dissolution in the firm.
SEC 78: Presentment to Joint Debtors
If the parties primarily liable are joint
debtors and no place of payment is specified, the
presentment must be made to all of them
SEC 79: Presentment not required to charge the
drawer
Where he has no right to expect or
require that the drawee or acceptor will pay the
instrument
There is also no presentment required if
the drawer and drawee is the same person
SEC 80: Presentment not Required to charge the
Indorser
Where the instrument was made or
accepted for his accommodation and he has no
reason to expect that the instrument will be paid
if presented
Note: This refers only to an indorser for whose
accommodation an instrument is made or
accepted.
Real reason is that the accommodated is
the real debtor and not the maker or acceptor.
SEC81: When delay in making Presentment is
Excused
When delay is caused by circumstances
beyond the control of the holder and not
imputable to his default, misconduct, or
negligence.
When the cause of delay ceases to
operate, presentment must be made with
reasonable digilence.
Note: Only the delay of making the presentment
is excused and not the making of presentment
itself.
If there is a typhoon the delay is excused
but after the typhoon, presentment must be
made with reasonable diligence
SEC 82: When Presentment may be Dispensed
with
Presentment of payment is dispensed
with:
1. Where after the exercise of reasonable
diligence presentment cannot be made
Reasonable diligence = active search
2. Where the drawee is a fictitious person
3. By waiver of presentment, express or
implied
SEC 83: When Instrument Dishonored by Non-
payment
1. It is duly presented for payment and
payment is refused or cannot be
obtained or
Ex. There is already dishonor where, on
presentment, the maker promises to pay 5 days
later.
2. Presentment is excused and the
instrument is overdue and unpaid
SEC 84: Liability of Secondarily Liable when
Instrument is Dishonored
Subject to the provision of this Act, when
the instrument is dishonored by no-payment, an
immediate right of recourse to all parties
secondarily liable thereon accrues to the holder.
Note: Immediate right of recourse against
secondary parties will accrue only after giving
notice of dishonor to them.
Immediate – because the holder may
immediately bring suit against the secondary
party even it is not brought to them first.
SEC 85: Time of Maturity SEC 88: What constitutes payment in Due
Every negotiable instrument is payable Course
at the time fixed therein without grace. When it is made at or after the maturity
If grace is provided it must be payable on of the instrument to the holder thereof in good
the last date of grace. faith and without notice that his title has defect
When it is payable on: Note: Payment made before the maturity does
not discharge the instrument
1. Sunday or Holiday

The instrument is payable on the next

succeeding business day.

2. Saturday

It shall be presented on next succeeding

business day.
It is for the benefit of debtor as the business
hours on Saturdays are only up to noontime.

3. On demand

It may be presented for payment before 12

noon on Saturday (if the entire day is not
holiday) or on Monday, at the option of the
holder

Ex. If it falls due on Friday wherein it is Holiday

the next business day is supposed to be
Saturday. However, apply the rules of Saturday
hence it will be Monday.

SEC 86: Time; How Computed

Exclude the day from which time is to
begin to run, and include the date of payment.
Ex. 10 days after Oct. 11, 2024 hence it is Oct. 12,
2024

SEC 87: Rule where Instrument Payable at Bank

It is equivalent to an order to the bank to
pay the same for the account of the principal
debtor thereon
Note: Applied only where instrument is payable
at a particular named bank