Nil Students
Nil Students
Nil Students
II. Discussions
1. Enumerate the requirements as to form and content of an instrument in order that
it will be negotiable under the law.
2. The drawee of a bill of exchange: dishonors or refuses to pay it. Will he be liable (a)
to payee; (b) to the drawer? Explain.
3. Is ante-dating or post-dating an instrument illegal? Explain and illustrate.
4. What is the effect of the insertion of a wrong date in an undated instrument by the
holder: (a) as to him? (b) With respect to a holder in due course?
5. May a person be held liable on an instrument although his signature does not
appear thereon? Explain.
6. In case of forged instruments, who are not allowed by law to set up the defense of
forgery, and are, therefore made liable to the holder?
7. When is a promise or order to pay unconditional? Give two examples of terms
appearing in an instrument which will not make the promise or order conditional.
8. Suppose an instrument contains a promise or order to do an act in addition to the
payment of money. Will it render the instrument non-negotiable? Explain.
9. When is an instrument payable to bearer? Give the reason why an instrument
payable to a fictitious person is treated as a bearer instrument.
10. Who are the original parties to a :
(a) Promissory note
(b) Bill of exchange
11. Is the sum payable certain although the instrument is to be paid with costs incurred
in collecting the same plus attorney’s fees? Why?
12. Will the doing of an act in addition to the payment of money, make and instrument
non-negotiable? Explain.
13. When is an instrument payable to order? To whose order may an instrument be
made payable?
14. Will the failure to name the payee affect the negotiability of an instrument? Explain.
15. Give the requisites in order that an agent who signs a negotiable instrument on
behalf of a principal may not be held personally liable to the payee or holder.
III. Problems
Explain or state briefly the rule or reason for your answers.
4. A promissory note signed by W with the amount and payee in blank, was stolen by
X who put the amount of P10,000 and his name as payee, and indorsed the note to
Y, then Y to Z. Has Z have the right to enforce against W? X? Y?
7. In the same problem, suppose the note is payable to bearer, and A indorses the
note to B who, in turn, delivers without indorsement to C who acted in good faith.
Give the rights of C.
9. “I promise to pay X P10,000 or if he wants a brand new six (6) cubic feet
refrigerator. Is the promissory note negotiable?
10. X obtains W’s signature for autograph purposes. Then X writes a negotiable
instrument over it and indorses it to Y, then Y to Z, then Z to A. Can the instrument
be enforced by against W?
11. W prepares a promissory note payable to order of X, his nephew, who steals the
same and indorses it to Y, then Y to Z, from Z to A who as unaware of the theft.
May A recover from W?
12. W, a retiree, issued a promissory note, to wit: “I promise to pay X or order the sum
of P50,000 out of the retirement pay which I will receive from the government”.
Actually, W will get more than P200,000 as retirement benefits. Is the note
negotiable?
13. “I promise to pay X or order P10,000 on or before September 20, 2012, following
the terms and conditions of the contract executed by W this date”. Is the note
negotiable?
14. W, maker, of a promissory note which reads. “I promise to pay X or order P50,000
after I sell my car”. The following day, W was able to sell his car. Is the note a
negotiable instrument?
II. Discussions
1. State the liability of an accommodation party on an instrument.
- Under Section 29, an accommodation party is liable on the instrument even in
the absence of consideration between him and the accommodated party even
though the holder of the instrument knew him to be only an accommodation
party.
2. Give the two (2) presumptions that under the law arise from the issue of a
negotiable instrument.
- Under section 24, every negotiable instrument is deemed (1) prima facie to have
been issued for a valuable consideration and (2) that every person whose
signature appears thereon has become a party thereto for value.
(b) Failure of consideration for the note – the maker is liable only to the extent
of consideration delivered to him known as partial failure of consideration
otherwise the payee could not recover if the consideration is not complied
with.
III. Problems
Explain or state briefly the rule or reasons for your answer.
1. X indorses and delivers to Y as security (pledge) for X’s debt in the amount of
P10,000, a promissory note for P12,000 issued by W in favor of X. How much
can Y collect from W.
II. Discussions
1. Give at least four (4) distinctions between negotiation and assignment.
NEGOTIATION ASSIGNMENT
Mode of Transfer Effected by delivery or Done by writing signed by
indorsement followed by the transferor
delivery.
Terms Negotiation refers only to Assignment refers
negotiable instruments. generally to ordinary
contracts
Title The transferee becomes a The assignee acquires all
holder in due course that the rights and all the
takes the instrument free defenses available against
from defect in the title of the assignor.
the transferor and subject
only to real defenses.
Liability Indorser is not liable Assignor is always liable
unless there be even if in the absence of
presentment and notice of notice of dishonor.
dishonor.
III. Problems
Explain or state briefly the rule or reasons for your answer.
1. X indorsed an instrument by W for P12,000 to Y, to wit: “Pay to Y or order
P10,000.” Is there a valid negotiation?
3. W, issued a promissory note in favor of X who indorsed the note as follows: “Pay
to Y”. May the note be negotiated by Y in the absence of words of negotiability,
to wit: “or order” or “to the order of”?
II. Discussions
1. What are the right of a holder in due course?
- Section 57 states the rights of holder in due course:
o holds the instrument free from any defect of title of prior parties
o free from defenses available to prior parties among themselves, and
o May enforce payment of the instrument for the full amount thereof
against all parties liable thereon.
- In Section 51, it is also stated that a holder in due course may sue in his own
name and payment to him in due course discharges the instrument.
3. When is the title of one who negotiates an instrument defective under the law?
- Under Section 55, the title who negotiates an instrument is defective when he
obtained the instrument or any signature thereto by:
o fraud
o duress
o force and fear
o other unlawful means
o illegal consideration
o he negotiates in breach of faith; or
o other circumstances as to amount to a fraud
III. Problems
Explain or state briefly the rule or reasons for your answer.
1. W, a maker of a promissory note; X, payee, increased the amount and indorsed
the note to Y, a holder in due course, and from Y to Z who had notice of the
fraud by X, and from Z to A who had also notice of the defect.
Decide the rights of Z with respect to W, X, and Y, and the rights of A with
respect to all prior parties.
(b) What is the rule if the breach of faith was instead committed by Y against
Z?
II. Discussions
1. Give the distinctions between a maker of a promissory note and the drawer of a
bill of exchange.
Drawer Maker
Issues a bill of exchange Issues a promissory note
Secondarily liable Primarily liable
Can limit his liability Cannot limit his liability
3. Give the principal distinction between a primarily liable party and a secondarily
liable party.
primarily liable party secondarily liable party
Absolutely and unconditionally Conditionally bound to pay the
required to pay by the terms of the instrument upon maturity
instrument upon maturity
4. What conditions must be complied with to make a general indorser liable under
an instrument?
- Under Section 66, a general indorser is liable when he engages on due
presentment of the instrument that it shall be accepted or paid or both
according to its tenor and that if it be dishonored and necessary proceedings are
duly taken, he will pay the amount thereof to the holder or to any subsequent
indorser who may be compelled to pay it.
III. Problems
Explain or state briefly the rule or reasons for your answer.
1. W, drawer, X, drawee of a bill of exchange payable to order of Y was indorsed
successively to, Z, A, and lastly, to B, the present holder. X publicly made it
known that he would not accept the bill. Learning this, B immediately tried to
recover from W. Decide.
2. Same problem above. Afer accepting the bill, X discovered that the signature of
Z was not genuine. X denies liability. Decide.
3. Same problem as (1). It was established that Z signed the instrument at the
instance y os not liableand for the benefit of A for the purpose of identifying Y,
the payee. For this reason, Z denies liability as an indorser. Decide.