Law on Negotiable Instruments
2. Negotiable Instruments Law (Act No. 2031)
Chapter I. INTRODUCTION
1. The Negotiable Instrument
Written contract for the payment of money, by its form intended as substitute for money and intended to pass from hand to hand to give the HDC the right to hold the same and collect the sum due. Instruments are negotiable when they conform to all the requirements prescribed by the NIL (Act 2031, 03 February 1911). Although considered as medium for payment of obligations, negotiable instruments are not legal tender (Sec. 60, New Central Bank Act, R.A. 7653); Negotiable instruments shall produce the effect of payment only when they have been encashed or when through the fault of the creditor they have been impaired. (Art. 1249, CC) BUT a CHECK which has been cleared and credited to the account of the creditor shall be equivalent to a delivery to the creditor of cash. Negotiable Contains all the requisites of Sec. 1 of the NIL Transferred by negotiation HDC may have better rights than transferor Prior parties warrant payment Transferee has right of recourse against intermediate parties Non-negotiable Does not contain all the requisites of Sec. 1 of the NIL Transferred by assignment Transferee acquires rights only of his transferor Prior parties merely warrant legality of title Transferee has no right of recourse
o
TIP: It is advised that one memorizes the two most important provisions of the NIL : Sec. 1 (Forms of negotiable instruments) and Sec. 52 (What constitutes a holder in due course) MICHAEL A. OSMEÑA v. CITIBANK (2004)
The Negotiable Instruments Law was enacted for the purpose of facilitating, not hindering or hampering transactions in commercial paper. Thus, the said statute should not be tampered with haphazardly or lightly. Nor should it be brushed aside in order to meet the necessities in a single case.
3. Life of Instrument
1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
a
Negotiable
issue negotiation presentment for acceptance in certain bills
Chapter I. INTRODUCTION
1. The Negotiable Instrument
Written contract for the payment of money, by its form intended as substitute for money and intended to pass from hand to hand to give the HDC the right to hold the same and collect the sum due. Instruments are negotiable when they conform to all the requirements prescribed by the NIL (Act 2031, 03 February 1911). Although considered as medium for payment of obligations, negotiable instruments are not legal tender (Sec. 60, New Central Bank Act, R.A. 7653); Negotiable instruments shall produce the effect of payment only when they have been encashed or when through the fault of the creditor they have been impaired. (Art. 1249, CC) BUT a CHECK which has been cleared and credited to the account of the creditor shall be equivalent to a delivery to the creditor of cash. Negotiable Contains all the requisites of Sec. 1 of the NIL Transferred by negotiation HDC may have better rights than transferor Prior parties warrant payment Transferee has right of recourse against intermediate parties Non-negotiable Does not contain all the requisites of Sec. 1 of the NIL Transferred by assignment Transferee acquires rights only of his transferor Prior parties merely warrant legality of title Transferee has no right of recourse
o
TIP: It is advised that one memorizes the two most important provisions of the NIL : Sec. 1 (Forms of negotiable instruments) and Sec. 52 (What constitutes a holder in due course) MICHAEL A. OSMEÑA v. CITIBANK (2004)
The Negotiable Instruments Law was enacted for the purpose of facilitating, not hindering or hampering transactions in commercial paper. Thus, the said statute should not be tampered with haphazardly or lightly. Nor should it be brushed aside in order to meet the necessities in a single case.
3. Life of Instrument
1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
a
Negotiable
issue negotiation presentment for acceptance in certain bills