Title II

Bills of Exchange

Chapter IX

FORM AND INTERPRETATION

Sec.126

Nature of Bill of Exchange:

A Bill of Exchange is a written document which is duly stamped and signed by the
drawer carrying an unconditional order which directs (not commands) a person
to pay a specific amount to a particular person or to the order of the particular person
or to the holder of the instrument. The following conditions need to be fulfilled:

The bill should be properly dated.

It must contain an order, i.e. the drawer of the instrument directs the drawee
to pay a certain sum to the payee.

Must be signed by the maker of the bill.

Bill must be accepted by the drawee.

Order to pay money only as well as the amount should be definite.

Delivering the bill to the payee is a must.

Bill of Exchange is made by the creditor. It is generally used in business to settle

debt between the parties.

Bill of Exchange vs. Promissory Note

a. Parties.
 There are three parties to a bill of exchange, namely, the drawer, the drawee
and the payee; while in a promissory note there are only two parties maker
and payee.

b. Nature of payment.

In a bill of exchange, there is an unconditional order to pay, while in a

promissory note there is an unconditional promise to pay.

c. Acceptance.

A bill of exchange requires an acceptance of the drawee before it is presented

for payment, while a promissory note does not require any acceptance since it
is signed by the persons who is liable to pay.

d. Liability.

The liability of the maker of a promissory note is primary and absolute, while
the liability of a drawer of bill of exchange is secondary and conditional. It is
only when the drawee fails to pay that the drawer would be liable as a surety.

e. Notice of dishonor.

In case of dishonor of bill of exchange either due to non-payment or non-

acceptance, notice must be given to all persons liable to pay. But in the case
of a promissory note, notice of dishonor to the maker is not necessary.

f. Makers position.

The drawer of a bill of exchange stands in immediate relationship with the

acceptor and not the payee. While in the case of a promissory note, the
maker stands in immediate relationship with the payee.

g. Nature of acceptance.

A promissory note can never be conditional, while a bill of exchange can be

accepted conditionally.

h. Copies.

A bill of exchange can be drawn in sets, but a promissory note cannot be

drawn in sets.

i. Payable to bearer.

A promissory note cannot be made payable to a bearer, while a bill of

exchange can be so drawn provided it is not payable to bearer on demand.
 j. Payable to maker.

In a promissory note, the maker cannot pay to himself. While in the case of a
bill of exchange, the drawer and the payee may be one person.

k. Protest.

Foreign bills must be protested for dishonor when such protest is required by
the law of the place where they are drawn. But no such protest is required in
the case of a promissory note.

Trade Acceptance

A bill of exchange drawn directly upon and accepted by an importer or purcha

ser, rather thana bank, and due at a specified future time.

Sec. 127

W, drawer, X drawee, Y, payee, and Z, indorsee and holder in due course. X

refuses to accept. Is X liable to Z? to W?

Answer:

X is not liable to Z but he is deemed liable to W. As to Z, as the holder in due

course, the mere issuance of the bill does not operate as an assignment of the
funds in the hands of the drawee. Hence, Z has no course of action against the
drawee but only against the drawer. But the X who refuses to accept may be
made liable to W.

Sec. 128

A bill of exchange drawn by W, is addressed in the alternative thus: to X or Y.

Is this valid? Why?

Answer:

No. A bill cannot be addressed to two or more drawees in alternative or in

succession. Such objection constitutes the existing difficulty in determining
the exact date of the dishonor of the bill in as much as it cannot be said that
the bill is dishonored until all of the drawees have dishonored it and if the
presentment takes place for a period covering several days when the last
dishonor is made.
Sec. 129

Foreign bill of exchange

a bill drawn in one state or country and payable in another state or country.

Inland bill of Exchange

a bill of exchange that is both drawn and made payable in the same country.

Sec. 130

When can a promissory note be treated like bill of exchange?

A: When the note is indorsed by the payee, it becomes just like a bill. In
which, the maker corresponds to the acceptor, the indorser, to the drawer, and the
indorsee, to the payee. Both the maker and the acceptor are primarily liable and both
the indorsee in the note and the payee in the bill are the holders. The holder is the
bearer of the instrument if the note is indorsed payable to bearer or if the bill is
originally payable to bearer.

When can a bill of exchange be treated like promissory note?

A: After the acceptance of such bill, the bill may be treated very similar like
that of a promissory note. The acceptance will be construed as an equivalent of a
promise to pay, and the position of the acceptor is that of a promisor, principal
debtor, or maker, while the drawer is in the position of first indorser or surety of the
acceptor.

Sec. 131

Referee in case of need

Referee in case of need is a person whose name is added in a bill of

exchange by the drawer or any indorser as a person to whom the holder may
depend in case of need. For instance, when the bill is dishonored by non-acceptance
or nonpayment the drawer or any indoser may approach the referee in case of need.
W, drawer, X drawee, Y, payee, and Z, indorsee and holder in due course. X refuses
to accept. Y inserted the name of R as the person to whom the holder may seek
payment in case of need. State the rights of R and Z.

Answer:

In this case, where the bill is dishonored by X, Z may apply to R for payment
but before doing so, he must first have the bill protested. But Z may also look
immediately to R, after due proceedings of dishonor have been taken by him.
On the part of R, he is not under obligation to pay the bill but he may subject
himself to liability to Z, depending on their agreement. If R pays, he may
recover the amount from Y, the person who has named him as a referee in
case of need.

Chapter X

Acceptance

Sec. 132

Meaning of Acceptance

- It is the signification by the drawee of his assent to the order of the drawer.
- An act by which the drawee manifests his consent to comply with the
request contained in the bill of exchange directed to him and it
contemplates an engagement or promise to pay

Object and effect of acceptance.

The drawee is not bound to be liable unless and until he accepts even if it is
shown that he has funds in his hands belonging to the drawer sufficient to
cover the bill. The object of acceptance then is to bind the drawee and make
him an actual party liable to the instrument.
The bill in effect becomes a note after acceptance. The drawee by then,
assumes liability of the maker and the drawer, that of the first indorser.

Formal requisites of acceptance

a.) It must be in writing,

b.) It must be signed by the drawee, and

c.) It must contain an express or implied promise to pay money.

Note: It is necessary that the acceptance be delivered or made known to the
holder.

Sec. 133

Holder entitled to acceptance on face of bill. - The holder of a bill presenting

the same for acceptance may require that the acceptance be written on the bill,
and, if such request is refused, may treat the bill as dishonored.

In this section, it is not essential or necessary that the acceptance be written

in the bill, the holder has the right to require the acceptance be made on the bill
itself. However, if the drawee refuses, the holder has the option to treat the bill as
dishonoured and go against the secondarily liable parties after giving notice of
dishonor.

Example:

A is the holder of the bill, he has the right to require acceptance be made on the bill
itself to B (drawee). However if B (drawee) refuses, A has the option to treat the bill
as dishonoured and go against secondarily liable parties after giving such notice of
dishonor, in such case Q (the drawer of the bill and all subsequent parties who are
secondarily liable.

Sec. 134

Acceptance by separate instrument. - Where an acceptance is written on a

paper other than the bill itself, it does not bind the acceptor except in favor of
a person to whom it is shown and who, on the faith thereof, receives the bill
for value.

Where the acceptance is written on a paper other than the bill itself, in order
to bind acceptor; it requires that:

1. The acceptance be shown to the person to whom the instrument is

negotiated;
2. Such person must take the bill for value on the faith of such acceptance.
Example:
A letter from the drawee bank to the drawer Z accepting the draft is not
binding in favour of one who never saw the letter or advanced money on the
faith thereof.
Nota Bene: Physical exhibition is absent in the above mentioned example
because of the non-acceptance of non-existing bill. It is believed that as long
as the holder knows of the acceptance and relies upon it, the acceptor must
be held to his acceptance although it was not actually shown to the holder.
Sec. 135

Promise to accept; when equivalent to acceptance. - An unconditional promise

in writing to accept a bill before it is drawn is deemed an actual acceptance in
favor of every person who, upon the faith thereof, receives the bill for value.

A promise to accept to any person who upon the faith thereof receives the bill
for value. In this section, the promise to accept a future non-existing bill must be
unconditional and in writing.

Example: Before a bill is drawn, Jen writes a letter to Joe asking him if he
would honor Quentins Draft for 100,000 to cover the purchase price of goods
Quentins wants to buy from Jen. Jen received a reply in positive response. In view
of this promise to accept on the part Joe, Jen sells the good to Quentin.

In the above mentioned case, Joe is liable to Jen as acceptor because his promise is
deemed an actual acceptance. But if Jen negotiates the bill to Yuan and Yuan neither
saw nor knew of Joes promise to accept, Joe is not liable to Yuan.

Sec. 136

Time allowed drawee to accept. - The drawee is allowed twenty-four hours

after presentment in which to decide whether or not he will accept the bill; the
acceptance, if given, dates as of the day of presentation.

The drawer has 24 hours after presentment to decide whether or not he will
accept the bill. If given, dates as of the day of presentation.

Note: The drawee bank is not entitled to 24 hours to decide whether or not to
pay a check since a check is presented for payment, not acceptance.

Sec. 137

Liability of drawee returning or destroying bill. - Where a drawee to whom a bill

is delivered for acceptance destroys the same, or refuses within twenty-four
hours after such delivery or within such other period as the holder may allow,
to return the bill accepted or non-accepted to the holder, he will be deemed to
have accepted the same.

There is a constructive acceptance:

a. Where the drawee to whom the bill is delivered for acceptance destroys it;
 b. Where the drawee refuses, within 24 hours after delivery or within such
period as is given to him, to return the bill accepted or non-accepted.

Nota Bene: there is no implied acceptance in Negotiable instruments

Law, which is acceptance inferred from any act or conduct of the drawee.

Nota Bene: An accidental destruction would not constitute acceptance

unless it must be wilfully done.

Sec. 138

Acceptance of incomplete bill. - A bill may be accepted before it has been

signed by the drawer, or while otherwise incomplete, or when it is overdue, or
after it has been dishonored by a previous refusal to accept, or by non-
payment. But when a bill payable after sight is dishonored by non-acceptance
and the drawee subsequently accepts it, the holder, in the absence of any
different agreement, is entitled to have the bill accepted as of the date of the
first presentment.

Under this section, acceptance may be:

1. made before the bill has been signed;

2. after it is overdue; and
3. even after it has been dishonoured by non-acceptance or non-payment.

Nota Bene: The instrument does not lose its negotiability by the mere
fact that it is overdue or it has been dishonoured.

Sec. 139

Kinds of acceptance. - An acceptance is either general or qualified. A general

acceptance assents without qualification to the order of the drawer. A qualified
acceptance in express terms varies the effect of the bill as drawn.

Sec. 140

What constitutes a general acceptance. - An acceptance to pay at a particular

place is a general acceptance unless it expressly states that the bill is to be
paid there only and not elsewhere.
Sec 141

Qualified acceptance- An acceptance is qualified which is:

a.) Conditional, that is to say, which makes payment by the acceptor

dependent on the fulfilment of a condition therein stated;
b.) Partial, that is to say, an aceeptance to pay part only of the amount for
which the bill is drawn;
c.) Local, that is to say, an acceptance to pay only at a particular place;
d.) Qualified as to time;
e.) The acceptance of some one or more of the drawees, but not of all.

To give an example of each, here is the following:

1. Conditional- Received from X Co. An order from Y to pay his note as soon
as proceeds of sale of hardware is available which I will do.\
2. Partial- A bill for 1,000.00 is accepted, thus: Accepted for 700.00 only
(see Section 32)
3. Local- see example under Section 140.
4. Qualified- A bill payable 30 days after date is accepted, thus: Accepted 60
days from date
5. As to drawee- A bill addressed to X, Y and Z is accepted by X and Y only.
(see Section 145[a]

Sec. 142

Rights of parties as to qualified acceptance- the holder may refuse to take a qualified
acceptance and if does not obtain an unqualified acceptance, he may treat the bill as
dishonored by non-acceptance. Where a qualified acceptance is taken, the drawer
and indorsers are discharged from liability on the bill, unless they have expressly or
impliedly authorized the holder to take a qualified acceptance or subsequently
assent thereto. When the drawer or an indorser receives notice of a qualified
acceptance, he must, within a reasonable time, express his dissent to the holder, or
he will be deemed to have assented thereto.

This tells us that a holder has a right to require a general or unqualified

acceptance and if a qualified acceptance has been made, he may refuse it and treat
the bill as dishonored by non-acceptance if he does not obtain an unqualified
acceptance. Accordingly, he must notify the drawer and the indorsers of the
dishonour.

The reson behind this is that the drawer and the indorsers engage that the bill will be
paid as drawn or indorsed by them and the effect of a qualified acceptance would be
to make a contract for them without their consent.
 Chapter XI

Presentment for Acceptance

Sec 143

When presentment for acceptance must be made- Presentment for acceptance must
be made:

a. Where the bill is payable after sight, or in any other case, where
presentment for acceptance is necessary in order to fix the maturity of the
instrument; or
b. Where the bill is expressly stipulates 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.

In no other case is presentment for acceptance necessary in order to render

any party to the bill liable.

Section 143 enumerates the cases when presentment for acceptance is

necessary.

For further understanding, examples will be given.

1. Bill payable after sight- a bill payable 30 days after sight. Its date of
maturity shall be computed 30 days from the date of its presentment. The
same is true with a bill payable so many days after demand.
2. Bill with express stipulation- this is self-explanatory. (according to the
book)
3. Bill payable elsewhere- a bill payable to P at P.N.B., Manila, drawn
against W residing and having his place of business in Quezon City.

Sec. 144

When failure to present releases drawer and indorser- Except as herein otherwise
provided, the holder of a bill which is required by the next presiding section to be
presented for acceptance must either present it for acceptance or negotiate it within
a reasonable time. If he failes to do so, the drawer and all indorsers are discharged.

The reason behind the three cases enumerated under Section 143 is that the drawer
and indorsers have a right in having the bills accepted immediately in order to
shorten the time of payment and thus put a limit to the period of their liability and
likewise to enable them to protect themselves by other means before it is too late, if
the bill is not accepted and paid within the time originally contemplated by them.
Sec. 145

Presentment; how made.- Presentment for acceptance must be made by or on

behalf of the holder at a reasonable hour, on a business day and before the bill is
overdue, to the drawee or some person authorized to accept or refuse acceptance
on his behalf:

a.) Where a bill is addressed to two or more drawees who are not partners,
presentment must be made to them all unless one has authority to accept
or refuse acceptance for all, in which case presentment may be made to
him only;
b.) Where the drawee is dead, presentment may be made to his personal
representative;
c.) Where the drawee has been adjudged a bankrupt or an insolvent or has
made an assignment for the benefit of the creditors, presentment may be
made to him or to his trustee or assignee.

Thus, when the provision of the law has not been made properly on how the
presentment made, it will of course be subject to the subsections (a), (b), and (c).

Sec. 146

On what days presentment may be made.- A bill may be presented for acceptance
on any day on which negotiable instruments may be presented for payment under
the provisions of Sections seventy-two and eight-five of this act. When Saturday is
not otherwise holiday, presentment for acceptance may be made before twelve
oclock noon on the day.

This provision focuses alone on the days when presentment may be made. The
usual days is that, presentment may be made during business days.

This however may confirm to sections 72 and 85 of this Code.

Sec. 147

Presentment where time is insufficient. - Where the holder of a bill drawn

payable elsewhere than at the place of business or the residence of the drawee
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, the
delay caused by presenting the bill for acceptance before presenting it for
payment is excused and does not discharge the drawers and indorsers.

This section refers to the delay in presentment. Hence, it holds that when a
delay in presentment for payment was caused by presenting the bill for acceptance
at a place other than the place where the bill is drawn payable, such delay is
excused.
Thus, the drawer and indorsers are not discharged in their liabilities.

Sec. 148. Where presentment is excused. - Presentment for acceptance is

excused and a bill may be treated as dishonored by non-acceptance in either
of the following cases:
(a) Where the drawee is dead, or has absconded, or is a fictitious person or
a person not having capacity to contract by bill.
(b) Where, after the exercise of reasonable diligence, presentment cannot
be made.
(c) Where, although presentment has been irregular, acceptance has been
refused on some other ground.

This section provides instances wherein presentment for acceptance is excused.

Such circumstances are as follows:
1. Where the drawee is dead, or has abandoned, fictitious or incapacitated to
contract.
2. Where after the exercise of reasonable diligence, presentment cannot be
made.
3. Acceptance has been refused on some other ground.

It should be noted that in this section, it is the presentment for acceptance is

excused.

Sec. 149. When dishonored by non-acceptance. - A bill is dishonored by non-

acceptance:
(a) When it is duly presented for acceptance and such an acceptance as is
prescribed by this Act is refused or cannot be obtained; or

(b) When presentment for acceptance is excused and the bill is not
accepted.

This section gives instances on how a bill is being dishonored for non-
acceptance. Such cases are the following:
1. When it is duly presented but refused to accept or cannot be obtained.
2. And when presentment for acceptance is excused and the bill is not accepted.

Sec. 150. Duty of holder where bill not accepted. - Where a bill is duly
presented for acceptance and is not accepted within the prescribed time, the
person presenting it must treat the bill as dishonored by nonacceptance or he
loses the right of recourse against the drawer and indorsers.
 It should be noted that if a bill is not accepted within twenty-four hours after
presentment, the person presenting it must treat the bill as dishonored.
Hence, he should take necessary action by giving the drawer or indorsers a notice of
dishonor to charge persons secondarily liable. Otherwise, failure to give notice will
discharge them from their liabilities.

Sec. 151. Rights of holder where bill not accepted. - When a bill is dishonored
by non-acceptance, an immediate right of recourse against the drawer and
indorsers accrues to the holder and no presentment for payment is necessary.

This section holds that when a bill is dishonored by non-acceptance, the

holder after giving notice to persons secondary liable, he may have an immediate
right of recourse against them without waiting for the date of maturity.

Chapter XII
PROTEST

Sec. 152. In what cases protest necessary. - Where a foreign bill appearing on
its face to be such is dishonored by nonacceptance, it must be duly protested
for nonacceptance, by nonacceptance is dishonored and where such a bill
which has not previously been dishonored by nonpayment, it must be duly
protested for nonpayment. If it is not so protested, the drawer and indorsers
are discharged. Where a bill does not appear on its face to be a foreign bill,
protest thereof in case of dishonor is unnecessary.

Protest as defined by various anotations, it is a formal instrument made by a notary

public certifying that the facts necessary to the dishonor of the instrument have taken
place.
Hence if it involves foreign bill, an instrument should be protested, if not persons
secondary liable is discharged.

Necessity of a protest:
1. It makes for uniformity in international transactions.
2. It furnishes authentic and satisfactory evidence of dishonor.

Sec. 153. Protest; how made. - The protest must be annexed to the bill or must
contain a copy thereof, and must be under the hand and seal of the notary
making it and must specify:
(a) The time and place of presentment;
(b) The fact that presentment was made and the manner thereof;
(c) The cause or reason for protesting the bill;
(d) The demand made and the answer given, if any, or the fact that the drawee
or acceptor could not be found.

This section gives the form and content of a protest.

A protest must contain the following:
1. Time and place of presentment
2. The fact that presentment was made and the manner therof
3. Cause or reason for protesting the bill, and
4. Demand made and answer given.

Moreover, the main purpose of a certificate of protest is to do away with the

necessity of proving the fact of presentment, demand, dishonor, and notice by
witnesses in court.

Sec. 154. Protest, by whom made. - Protest may be made by:

a) A notary public; or
b) By any respectable resident of the place where the bill is dishonored, in
the presence of two or more credible witnesses.

A protest can be made by a notary public, and if no notary public is obtained,

by any respectable resident of the place where the bill is dishonoured, in the
presence of two or more credible witness. However, protest made by a notary public
need not to have a witness.

Section 155
Notary public need not make the formal certificate of protest on the same day the
instrument is dishonored but the noting of the matter is required and it should include
the date of dishonor. For example, if a bill is dishonored on April 22, 2015, the bill
need not be protested on the said date but it must atleast be "duly noted".

Section 156
General Rule: A bill must be protested at the place where it has been dishonored.
Exception: If a bill is dishonored by non-acceptance it must be protested for non-
payment at the place where it is expressed to be payable where the place of the
business or residence of some person other than the drawee.
For example, the drawee resides in United States of America but the bill is payable
at the Philippine National Bank, Tuguegarao. The bill is presented for acceptance by
the payee to the drawee in United States of America but acceptance is refused. On
its maturity, the bill is presented for payment to the Philippine National Bank in
Tuguegarao but pay,ent is refused. The holder must protest that the bill for non-
payment in Tuguegarao and no further presentment for payment to or demand on,
the drawee is necessary.

Section 157
When a bill has already been protested for non-acceptance, protest for non-payment
is discretionary on the part of the holder. Note: under Section 151, presentment for
payment is not necessary after the bill has dishonored by non-acceptance.
Section 158
Protest for better security- one made by the holder of a bill after it has been accepted
but before it matures, against the drawers and indorsers, where the acceptor has
been adjudged a bankrupt or an insolvent, or has made an assignment for the
benefit of creditors. Note: Protest is purely optional and its omission will not affect the
holder's remedy against the drawer and indorsers.

Section 159
Delay in notice or protesting 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, the bill must be noted or
protested with reasonable diligence.

Section 160
Loss or wrong detention of a bill will not excuse protest, the reason is that, any of the
cases does not affect the contract of the parties and a protest may be made on a
copy or written particulars thereof.
Protest and notice of dishonor distinguished:

1. Protest- as a rule, in case of dishonor of a foreign bill appearing on its face to

be such Notice of dishonor- any negotiable instrument other than a foreign bill
2. Protest- always written Notice of dishonor- oral or written
3. Protest- includes presentment, notice of dishonor and all the steps
accompanying dishonor Notice of dishonor- limited only to notice
4. Protest- made either by notary public or by any respectable resident in the
presence of the witnesses Notice of dishonor- by a party or agent
5. Protest- as a rule, made at the place where the bill is dishonored Notice of
dishonor- place of dishonor is essential
6. Protest- made on the day of dishonor Notice of dishonor- giving of notice is
made within the time prescribed

Section 161

Acceptance for honor- an undertaking by a stranger to a bill after protest for the
benefit of any party liable thereon, or for the honor of the person for whose account
the bill is drawn which acceptance inures also to the benefit of all parties subsequent
to the person for whose honor it is accepted, and conditioned to pay the bill when it
becomes due if the original drawee does not pay it. - another name is "acceptance
supra protest" since previous protest for non-acceptance or for better security is
necessary.
Purpose of an acceptance for honor is to preserve the credit of the parties to the
instrument or some party to it for whose honor the acceptance is made.

Note: where a bill is accepted for honor, consideration is presumed and the
presumption is that the acceptor has funds or money of the party for whose
honor he accepts.

Requisites of acceptance for honor:

1. The bill must have been protested for dish or by non-acceptance or for better
security

2. The acceptor for honor must be a person not a party already liable thereon or that
is a stranger to the bill

3. The bill must not be overdue at the time of the acceptance for honor

4. Acceptance for honor must be with the consent of the holder of the instrument

As a rule, no one but the drawee may accept, except the acceptor for honor who
must not be party already liable on the bill. The consent of the holder is required
because his right is suspended until the maturity of the bill.

Sec. 162

Acceptance for honor; how made. - An acceptance for honor supra protest must be
in writing and indicate that it is an acceptance for honor and must be signed by the
acceptor for honor.

FORMAL REQUISITES OF ACCEPTANCE FOR HONOR:

1. The acceptance for honor must be in writing

2. Must indicate that it is an acceptance for honor
3. Must be signed by the acceptor for honor
4. Must contain an express or implied promise to pay money
5. The acceptance bill for honor must be delivered to the holder.

Sec. 163
When deemed to be an acceptance for honor of the drawer. - Where an acceptance
for honor does not expressly state for whose honor it is made, it is deemed to be an
acceptance for the honor of the drawer.

Without specifying the person for whose honor it is made is deemed to be an

acceptance for the honor of the DRAWER.

Acceptance of the honor of the drawer will discharge the most parties to the
bill.

Sec. 164

Liability of the acceptor for honor. - The acceptor for honor is liable to the holder and
to all parties to the bill subsequent to the party for whose honor he has accepted.

LIABILITY OF THE ACCEPTOR FOR HONOR

1. To the holder
2. To all parties subsequent to the party

Sec. 165

Agreement of acceptor for honor. - The acceptor for honor, by such acceptance,
engages that he will, on due presentment, pay the bill according to the terms of his
acceptance provided it shall not have been paid by the drawee and provided also
that is shall have been duly presented for payment and protested for non-payment
and notice of dishonor given to him.

AGREEMENT OF ACCEPTOR FOR HONOR

The undertaking of the acceptor for honor is not an absolute engagement to

pay at all events, but ONLY COLLATERAL AND CONDITIONAL ENGAGEMENT to
pay, if drawee does not.

Sec. 166

Maturity of bill payable after sight; accepted for honor. - Where a bill payable after
sight is accepted for honor, its maturity is calculated from the date of the noting for
non-acceptance and not from the date of the acceptance for honor.

The maturity of a bill payable after sight is calculated from the date of the
noting for the acceptance.

Sec. 167
Protest of bill accepted for honor, and so forth. - Where a dishonored bill has been
accepted for honor supra protest or contains a referee in case of need, it must be
protested for non-payment before it is presented for payment to the acceptor for
honor or referee in case of need.

Sec. 168

PRESENTMENT FOR PAYMENT TO ACCEPTOR FOR HONOR

1. If it is to be presented in the place where the protest for non-payment was

made, it must be presented not later than the day following its maturity
2. If it is to be presented in some other place than the place where it was
protested, then it must be forwarded within the time specified in Section 104

Section 104. Where parties reside in different places.

Where the person giving and the person to receive notice reside in
different places, the notice must be given within the following times:
a. If sent by mail, it must be deposited in the post office in time to go
by mail the day following the day of dishonour, or if there be no mail
at a convenient hour on that day, by the next mail thereafter
b. If given otherwise than through the post office, then within the time
that notice would have been received in due course of mail, if it has
been deposited in the post office within the time specified in the last
subdivision.

Section 169

This Section talks about when delay in making presentment is excused. Applying
sec.81 of Law on Negotiable Instruments it should be noted that only the delay in
making of presentment is excused not the making of the presentment itself. When
the delay is caused by circumstances beyond the control of the holder and not
imputable to his default, misconduct or negligence, the delay in making presentment
for payment is excused. And presentment must be made with reasonable diligence.

Section 170

Dishonor of bill by acceptor for honor must be protested for non-payment. There are
3 protests on said bill; 1 st protest for dishonour by non-acceptance or for better
security. 2nd, protest for non-payment by the drawee in order to hold the acceptor for
honor liable; and last protest for non-payment by the acceptor for honor in order to
hold the drawer and indorsers whose liabilities have not yet become fixed because of
the acceptance for honor.

Section 171
Payment for honor is payment made by a person, whether a party to the bill or not,
after it has been protested for non-payment, for the benefit of any party liable
thereon or for the benefit of the person for whose account it was drawn. Another
term, payment supra protest because prior protest for non-payment is required. It is
not applicable to promissory notes. And under this section, payment for honor may
be made by a party to the bill or by a stranger. Hence, it may be made by the drawee
after he has refused to accept the bill.it has been held that the drawer of check which
has been dishonored and protested has a right to intervene and pay it to protest his
honor. Note, the purpose and function of payment for honor may be availed of when
the holder knowing that the bill has already been dishonored for non-payment, does
not want to indorse the bill and incur the iabilities of an indorser specified under sec.
66 or of one negotiating by mere delivery under sec.65

Section 172 and 173 are the requisites of valid payment for honor.

Section 172

The payment for honor supra protest in order to operate and not as mere voluntary
payment, must be attested by a notarial act of honor which may be appended to the
protest or form an extension to it.

Section 173

States that, the declaration made must in notarial act by the payer for honor or by his
agent in behalf declaring his intention to pay the bill for honor and for whose honor
he pays.

Requisites of valid payment for honor:

1. The bill has been dishonored by non-payment;

2. It has been protested for non-payment;
3. Payment supra protest is made by any person, even a party;
4. The payment is attested by a notarial act of honor which must be appended to
the protest or form an extension to it and;
5. Notarial act must be based on the declaration made by the payer for honor or
his agent of his intention to pay the bill and for whose honor he pays.

And when the aforementioned formalities are not followed, the payment will
operate as a mere voluntary payment and the payer acquires no right to full
reimbursement against the party for whose honor he pays.

Section 174
Preference of parties offering to pay for honor, in payment for honor, the person
whose payment will discharge the greatest number of parties to the bill is given the
preference. The rule is different in acceptance for honor.

Section 175

Effect on subsequent parties where bill is paid for honor. - Where a bill has
been paid for honor, all parties subsequent to the party for whose honor it is paid are
discharged but the payer for honor is subrogated for, and succeeds to, both the
rights and duties of the holder as regards the party for whose honor he pays and all
parties liable to the latter.

Effects where bill is paid for honor:

1. All parties subsequent to the party for whose honor it is paid are
discharged
2. Payer for honor is subrogated for and succeeds both the rights and
duties of the holder as regards the party for whose honor he pays and
all parties liable to the latter

Nota Bete: If the payment is made for the honor of all parties to the bill, the
payer for honor may have recourse against them all.

Section 176

Where holder refuses to receive payment supra protest. If holder refuses to

receive payment, he loses his right of recourse against any party who would have
been discharged by the payment for honor.

Effects of holders refusal to receive

In payment for honor, the holder cannot refuse the payment. If he refuses, he
then cannot recover from the parties who would have been discharged had he
accepted the same.

Section 177

Rights of payer for honor. Upon payment, payer for honor is entitled both the bill
itself and the protest. This is to enable him to enforce his rights against the parties
who are liable to him under Section 175.

Payment for honor distinguished from Acceptance for honor:

 Payment for honor Acceptance for honor

Protest must be for non- For non-acceptance or for

payment better security
The bill is overdue It must not be overdue

The consent of the holder is The consent of the holder is

not required nor can the
holder refuse
The acceptor is secondarily
liable
A notarial act of honor is
necessary
There can only be one payer
for honor
The effect of payment for
honor are those provided for
in Sections 175 and 177
required
The acceptor is primarily liable
It is not necessary
Ther may be several acceptors
for honor
The effects of acceptance for
honor are those provided for in
Sections 164 and 165

Chapter XV

Bill in Set

Section 178

Bills in set constitute one bill. - Where a bill is drawn in a set, each part of the set
being numbered and containing a reference to the other parts, the whole of the parts
constitutes one bill.

Nota Bene:

BILL IN SET is one composed of various parts, each part being numbered, and
containing a reference to the other parts, all of which parts constitute one bill

PURPOSE OF BILL IN SET

Bills in set are for the purpose of increasing the probability of the bill
reaching its destination
For this reason, each part is sent by different conveyances
To avoid the difficulties which would arise in case of loss or miscarriage
on the way of the bill

Section 179
Right of holders where different parts are negotiated. - Where two or more parts
of a set are negotiated to different holders in due course, the holder whose title first
accrues is, as between such holders, the true owner of the bill. But nothing in this
section affects the right of a person who, in due course, accepts or pays the parts
first presented to him.

Section 180

Liability of holder who indorses two or more parts of a set to different persons.
- Where the holder of a set indorses two or more parts to different persons he is
liable on every such part, and every indorser subsequent to him is liable on the part
he has himself indorsed, as if such parts were separate bills.

Section 181

Acceptance of bill drawn in sets. - The acceptance may be written on any part and
it must be written on one part only. If the drawee accepts more than one part and
such accepted parts negotiated to different holders in due course, he is liable on
every such part as if it were a separate bill.

Nota Bene: Drawee must accept only one part of a bill drawn in a set and the
acceptance may be written on any part

Section 182

Payment by acceptor of bills drawn in sets. - When the acceptor of a bill drawn in
a set pays it without requiring the part bearing his acceptance to be delivered up to
him, and the part at maturity is outstanding in the hands of a holder in due course, he
is liable to the holder thereon.

Section 183

Effect of discharging one of a set. - Except as herein otherwise provided, where

any one part of a bill drawn in a set is discharged by payment or otherwise, the
whole bill is discharged.

EFFECT OF DISCHARGE ON ONE PART:

 Subject to the exceptions in Section 180, 181, and 182, if one part is
discharged, the whole bill is discharged
The reason is that the bill constitutes only one bill
Thus, suppose that in the illustration, X the acceptor pays the first part
which he accepted.
The second and third parts are also discharged