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CHAPTER 2 CONSIDERATION

Define Consideration: an inducement to a contract, that is, the cause, price or impelling
influence which induces a contracting party to enter into the
contract.

Sec. 24 NIL 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 a party
thereto for value.

NOTE: The presumption is prima facie. It may therefore be rebutted or disproved by evidence to
the contrary.

Sec 25 NIL Value, what constitutes

Value is any consideration sufficient to support a simple contract. An antecedent or pre-existing
debt constitutes value; and is deemed such whether the instrument is payable on demand or at
future time.

Adequacy of Consideration: need not be adequate; sufficient it is a valuable one.

HOLDER FOR VALUE

Sec 26 NIL 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.

WHERE A HOLDER HAS LIEN ON INSTRUMENT (Sec. 27)

One who has taken a negotiable instrument as collateral security for a debt has a lien on the
instrument.

1. If the amount of the instrument is more than the debt secured by such instrument, the pledge is
a holder for value to the extent of his lien. He can collect the full value and apply the same to the
payment of the debt; but he must deliver the surplus to the pledger. Art 2118, NCC

2. If, between the pledger and the party liable on the instrument, there are existing defenses, then
the pledgee can collect on the instrument only to the extent of the amount of the debt.

3. If the amount of the instrument is less than or the same as the debt secured by such instrument,
the pledgee is a holder for value for the full amount and may, therefore recover all.

4. If the defenses of the party liable on the instrument are real defenses, then the pledgee can
recover nothing upon the instrument.
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Meaning of WITHOUT RECEIVING VALUE THEREFOR

Xxx only means that NO VALUE has been received for the negotiable instrument xxx (Clark vs.
Sellner, 42 Phil 384)