1.

Pio Baretto vs CA, 360 scra 127 (2001)

2. Roman catholic vs IAC, 191 scra 411 (1990)
3. Traders Royal Bank vs CA 29 scra 15 (1997)
4. Inciong vs CA, 257 scra 578 (1996)
5. G.R. No. 97753 August 10, 1992 CALTEX (PHILIPPINES), INC., petitioner, vs. COURT OF
APPEALS and SECURITY BANK AND TRUST COMPANY
6. G.R. No. 148864 August 21, 2003 SPOUSES EDUARDO B. EVANGELISTA and EPIFANIA
C. EVANGELISTA, Petitioners, vs. MERCATOR FINANCE CORP., LYDIA P. SALAZAR,
LAMEC'S** REALTY AND DEVELOPMENT CORP.
7. G.R. No. 111190 June 27, 1995 LORETO D. DE LA VICTORIA, as City Fiscal of Mandaue
City and in his personal capacity as garnishee, petitioner, vs.HON. JOSE P. BURGOS,
Presiding Judge, RTC, Br. XVII, Cebu City, and RAUL H. SESBREÑO, respondents.
8. G.R. No. 88866 February 18, 1991 METROPOLITAN BANK & TRUST
COMPANY, petitioner,
vs. COURT OF APPEALS, GOLDEN SAVINGS & LOAN ASSOCIATION, INC., LUCIA
CASTILLO, MAGNO CASTILLO and GLORIA CASTILLO, respondents.
9. G.R. No. L-49188 January 30, 1990 PHILIPPINE AIRLINES, INC., petitioner,
vs. HON. COURT OF APPEALS, HON. JUDGE RICARDO D. GALANO, Court of First
Instance of Manila, Branch XIII, JAIME K. DEL ROSARIO, Deputy Sheriff, Court of First
Instance, Manila, and AMELIA TAN, respondents.
10. G.R. No. L-2516 September 25, 1950 ANG TEK LIAN, petitioner, vs. THE COURT OF
APPEALS, respondent.

1) What are the requirements to make an instrument negotiable?

ANSWER:
An instrument to be negotiable must conform to the following requirements:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a sum certain in money;
(c) Must be payable on demand, or at a fixed or determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee, he must be named or otherwise
indicated therein with reasonable certainty.

2) Define, differentiate and give at least 3 kinds of the following:

ANSWERS:
a. Promissory Note;
A negotiable promissory note is an unconditional promise in writing made by one
person to another, signed by the maker, engaging to pay on demand, or at a fixed
or determinable future time, a sum certain in money to order or to bearer.
Example:
1. Certificate of Deposit
2. Bonds
3. Debentures

b. Bill of Exchange;
A negotiable bill of exchange is an unconditional order in writing addressed by
one person to another, signed by the person giving it, requiring the person to
whom it is addressed to pay on demand or at a fixed or determinable future time a
sum certain in money to order or to bearer.
Example:
1. Draft or Time Deposit
2. Check
3. Banker’s or Trade Acceptance

c. Check
A bill of exchange drawn in a bank payable on demand.
Example:
1. Manager’ check
 2. Certified check
3. Stale check

DISTINGUISHMENT

PN BOE
Unconditional Promise to pay Unconditional order to pay
As to number of parties 2 Original Parties (Maker & 3 Parties (Drawer, Drawee and
Payee) \payee)
As to liability of Parties Maker is primary Liable Acceptor-\primary liable
No secondary liable Indorser-secondary liable
As to number of presentment Only 1 presentment 2 Presentments
needed (Presentment for Payment) (Presentment for acceptance
and Payment
CHEQUE BOE
Always drawn against a bank or a banker May or may be drawn against the banks or
banker
Always payable on demand Maybe payable on demand or at affixed or
determinable future time.
Presentment for acceptance is not required Presentment of acceptance is required in
GR: Needs presentment for acceptance for certain cases
verification if individual
XPN:
With the case that if it is drawn by a bank to
another bank
Drawer must have funds in the hands of the Drawer not need have funds with the drawee
drawee
Must be presented for payment within When payable on demand, it must be presented
reasonable time after issue for payment within a reasonable time after the
last negotiation.
Death of the drawer of the cheque revokes the Death of the drawer does not revoke the
bank’s authority to pay drawee s authority to pay

3) Sometime in 2019, some businessmen named ARTHUR, BARNY and CRISTOF with an
advertising starting capital totalling only P300,000.00 ask you to help organize a business
firm. Subject to legal limitations, they have future plans to invite alien investors who are
agreeable to rendering financial assistance by way of direct investments and/or loans.
Because you are a branded financial adviser, your professional assistance is solicited on
the following various questions that may arise. The Allied Bank of Tuguegarao is willing
to lend the sum of P500,000.00 payable in 5 years with interest at 12% per annum,
secured only by a surety bond. Prepare the promissory note for said loan, complete in
every aspect to make it negotiable.

P 500,000.00 January 1, 2019

Tuguegarao City,Cagayan

For value received, I/We promise to pay Allied Bank of Tugugarao or order the
sum of P 500,000.00 with interest at the annual rate of 12% per annum payable in
five (5) instalments, with the first instalments payable on December 31, 2019 and
the other instalments thereafter.

(Sgd.) Arthur
(Sgd.) Barny
(Sgd.) Cristof
4) State whether the following instruments are negotiable or non-negotiable.
State also the reason in a brief but comprehensive manner.

a. Certificate of deposit issued by banks, payable to the depositor or his order or to

bearer
ANSWER:
It is a negotiable instrument, because it is an acknowledgement in writing
by the bank of the amount of deposit with a promise to repay the same to the
depositor or bearer thereof at a specific time,

b. Trade acceptance
ANSWER:
It is a negotiable instrument, because it is form of Bills of Exchange that is
drawn by the seller on the buyer of goods and accepted by the latter.

c. Bonds in the nature of promissory note

ANSWER:
It is a negotiable instrument, because it is a form of Promissory Note and
it is an evidenced of indebtedness issued by a corporation which promises to pay a
sum of money at a specified time in the future.

d. Drafts
ANSWER:
It is a negotiable instrument, used synonymously with bill of exchange
although it normally refers to a bill of exchange used in documentary exchange.

e. Letter of credit
ANSWER:
It is not a Negotiable instrument because it is not for a sum certain in
money and is not payable to order or to bearer but is issued in the name of a
specific person and is generally conditional.

f. Warehouse receipt
ANSWER:
It is not a Negotiable instrument, because their subject matter is things or
goods, and not a sum certain in money as required by Section 1 of the NIL.
g. Postal money order
ANSWER:
It is not negotiable instrument, for it is governed by Postal Rules and
regulations and because of the condition appearing at the back thereof, thereby
making the order conditional, contrary to Section 1, NIL.

h. Treasury warrants
ANSWER:
It is not negotiable instrument ,for it is being payable out of a particular
fund which may or may not exist, making the order not unconditional.

i. Trust receipts
ANSWER:
It is not negotiable instrument, for it is conditional upon resale of the
goods.

j. Bill of lading
ANSWER:
It is not negotiable instrument, for it is issued to the shipper and does not
enable him to give any title to a transferee and it lacks the most important
 and characteristic element of negotiability. It may not give to a transferee
a better title than that possess by the transferor.

k. Non-negotiable credits
ANSWER:
It is not negotiable instrument, for it does not meet the requirement laid
down to qualify an instrument as a negotiable one and it is a form or letter
sent by seller to a buyer, stating that a certain amount has been credited to
the buyer’s account.

l. Sales invoices
ANSWER:
It is not negotiable instrument, for it is just used during the course of
transaction, it is only a document made by the seller and is issued to the
buyer so as to authorize a sale.

5) A document dated July 15, 2009 that reads: “Pay to Princess or order the sum of
P5000.00 five days after her pet, Sparquita, dies. Signed Honeybelle”. Is the instrument
negotiable? Why?
ANSWER:
It is negotiable because it is payable after occurrence of a specified event, which
is the death of the pet, that is absolutely certain to happen although the time of
happening or occurrence is not known or uncertain. Article 1193 of the Civil
Code.

6) Reynaldo issued a check for P5M which he sued to pay Segundo for killing his political
enemy. Is the instrument negotiable? Why?
ANSWER:
The instrument is negotiable, regardless of the purpose it was made, It is not one
to terminate the negotiability of public instrument because it is a separate action
against the drawer which cannot be said to impair the right of the person in due
course.

7) Caritan Sur, Tuguegarao City, Cagayan

September 24, 2019
P 2,500.00
I promise to pay James Reidyna or order the sum of P 2,500.00
(sgd) Danielito Patilla
ANSWER:
The Promissory Note is negotiable as it complies with Sec 1, NIL.

8) Centro, Amulung East, Cagayan

October 22, 2019

For value received, I promise to pay Liza Seguerra or order the sum of P 10,000.00 in
five (5) instalments, with the first instalments payable on December 1, 2019 and the other
instalments on or before the 1st day of the succedding months.

(sgd) Quinito Aqo

ANSWER:
The promissory note is not negotiable instrument. It does not comply with all the
requirements under Sec. 1, NIL. It does not constitute a sum certain in money
because the amount payable on each instalment is not clearly stated.

9) Can a bill of exchange or promissory note qualify as a negotiable instrument if:

a. It is not dated
ANSWER:
 Yes. The date in a bill or note is not necessary for it to be negotiable. Date
is not a material particular required by Sec. 1, NIL, for the negotiability of
an instrument.

b. The day and the month is given but not the year
ANSWER:
No. the year is not stated. The time for payment is not determinable.

c. Payable to cash
ANSWER:
Yes. Sec. 9 [d], NIL, makes the instrument payable to bearer because the
name of the payee does not purport to be the name of any person.

d. It names 2 alternative drawees

ANSWER:
No. unless the drawees are addressed jointly whether they are partners or
not.

10) Which of the following stipulations or features of a promissory note (PN) affect or do not
affect its negotiability, assuming that the PN is otherwise negotiable? Indicate your
answer by writing the paragraph number of the stipulation feature of the PN. As shown
below and your corresponding answer, either “Affected” or “Not affected”. Explain
a. The date of the PN is February 31, 2019
ANSWER:
Paragraph 1- negotiability is “NOT AFFECTED”. The date is not one of
the requirements for negotiability.

b. The PN bears interest payable on the last day of each calendar quarter at a rate
equal to twenty five percent (25%).
ANSWER:
Paragraph 2- negotiability is “NOT AFFECTED”. The interest is to be
computed at a particular time and is determinable. It does not make the
sum uncertain or the promise conditional.

c. The PN gives the maker the option to make payment either in money or in
quantity of palay of equivalent value.
ANSWER:
Paragraph 3- negotiability is “AFFECTED”. Giving the maker the option
reners the promise conditional.

d. PN gives the holder the option either to require payment in money or to require
the maker to serve as the bodyguard or escort of the holder for 30 days.
ANSWER:
Paragraph 4- negotiability is “NOT AFFECTED”. Giving the option to the
holder does not make the promise conditional.

11) Ana, Bea and Cris signed a promissory note in favor of Xyron stating: “We promise to
pay Xyron on December 31, 2019 the sum of P5000.00”. when the note fell due, Xyron
sued Ana and Bea who put up the defense the Xyron should have impleaded Cris. Is the
defense valid? Why?
ANSWER:
No. the liability of Ana, Bea, and Cris under the promissory note is joint. Such
being the case, Cris is not an indispensable party. The fact that Xyron did not
implead Cris will not prevent Xyron from collecting the proportionate share of
Ana and Bea in the payment of the loan.

12) Priscilla makes a promissory note for P5000.00 but leaves the name of the payee in blank
because she wanted to verify its correct spelling first. She mindlessly left the note on top
 of her desk at the end of the workday. When she returned the following morning, the PN
was missing. It turned up later when Fidel presented it to Priscilla for payment. Before
Fidel, Trishelle who turned to have flitched the note from Priscilla’s office, had endorsed
the note after inserting her own name in the blank space as the payee. Priscilla
dishonoured thPare note, contending that she did not authorize its completion and
delivery. But Fidel said he had no participation in or knowledge about the alteration of
the note and therefore enjoys the right of a holder in due course.
a. Who is correct? Why?
ANSWER:
Priscilla is correct, because the instrument is incomplete and undelivered.
It did not create any contract that would bind Priscilla to an obligation to
pay the amount thereof. However, indorsers after the forgery are still
liable to the holder by virtue of their warrants.

b. What is a holder in due course?

ANSWER:
A holder in due course is a holder who has taken the instrument under the
following conditions
i. That it is complete and regular upon its face.
ii. That he became the holder of it before it was overdue, and
without any notice that it had been previously dishonoured,
if such was the fact.
iii. That he took it in good faith and for value.
iv. 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.

c. Is the instrument valid?

ANSWER:
It is not valid because the law is specific that the instrument is not a valid
contract in the hands of any holder if it has not been delivered against any
person whose signature was placed thereon before delivery.

d. What are the different instances of forgery under Negotiable instruments law?
ANSWER:
i. Signature is forged.
ii. Signature is made without the authority of the person whose
signature it purports to be.

e. What are the effects of forgery?

ANSWER:
A forged signature, whether it be that of the drawer, maker, payee, or any
other party, is wholly inoperative and no one can gain title to the
instrument through such forged signature against parties prior to the
forgery.

13) A check for P100,000.00 was drawn against drawee bank and made payable to Alpha
Marketing or order. The check was deposited with payee’s account at BPO Bank which
then sent the check for clearing to drawee bank. Drawee bank refused to honor the check
on the ground that the serial number had been altered. Alpha marketing sued drawee
bank.
a. Is it proper for the drawee bank to dishonored the check for the reason that it had
been altered? Explain
ANSWER:
No. Alteration of the serial number does not affect the negotiability of a
check.

b. What is material alteration?

 ANSWER:
A material alteration is any alteration that changes:
a. The date
b. The sum payable, either for principal or interest
c. The time or place of payment
d. The number or the relations of the parties
e. The medium or currency in which the payment is to be made\
f. Or which adds a place for payment where no place for payment is
specified, or any other changes or addition which alters the effect
of the instrument in any respect is a material alteration.

c. Is alteration of serial number a material alteration?

ANSWER:
No. because the alteration of the serial number of a check did not change
the relationship between the parties nor the effect of the instrument.

14) Bingo was in desperate need of money to pay his debt to Paquito, a loan shark. Paquito
threated to take Bingo’s life and wife if he failed to pay. Bingo and Paquito when to see
Senora Santibanez, Bingo’s rich ex girlfriend and he asked if she could sign a promissory
note in his favor in the amount of P100,000.00 to pay Paquito. Fearing that Paquito
would kills Bingo, her first love, Senora acceded to the request. She affixed her signature
in a piece of paper with the assurance of Bingo that he will just fill it up later. Bingo then
filled up the blank paper making a promissory note of P200,000.00. He then endorsed
and delivered the same to Paquito, who accepted the note as a payment for the debt.
a. What is the nature of the promissory note executed by Senora?
ANSWER:
Incomplete and delivered

b. Is Paquito a holder in due course?

ANSWER:
Paquito is not a holder in due course because he was aware of the infirmity
of the instrument.

c. What defense/s can Senora set up against Paquito?

ANSWER:
Senora Santibanez can raise the personal defense of breach of trust against
Paquito that Bingo’s authority to fill up the amount of the promissory note
was limited only to P100,000.

15) Anita succeeded in making Ben affix his signature on a check without his knowing that it
was a check. At the time of signing, the check was complete in all respects. Anita
intended to cash the check the following morning but that night, it was stolen by Carlo
who succeeded in negotiating the same to Danica, a holder in due course. Danica cashed
the check the following morning. Ben refused to have the amount of the check deducted
from his bank deposit.
a. Who may properly be charged with the amount of the check? Reason.
ANSWER:
Anita. Because there is a fraud in the execution or fraud in factum, where
a person has signed an instrument which was in fact a negotiable one, but
was deceived as to the character of the instrument and without knowledge.

b. What is the nature of the instrument?

ANSWER:
Complete and delivered

16) Aika signed a blank check which she inadvertently left on her desk at Pengue Ruyu
office. The same was later stolen by Bentong who filled in the amount of P22,500.00 and
a fictitious name as payee. Bentong then endorse the check in the payee’s name and
 passed the check to Camille. Thereafter, Camille passed to Darwin; then Darwin to
Erwan and Erwan to Francielle.
a. Can Francielle enforce the instrument against Aika? Explain
ANSWER:
No. An incomplete instrument which has not been delivered, it will not if
completed and negotiated without authority, be a valid contract in the
hands of any holder, as against any person whose signature was placed
thereon.

b. Suppose Francielle is a holder in due course, what will be your answer? Explain.
ANSWER:
Still No, for the same reason as indicated above. The law says “in the
hands of any holder”, meaning whether a holder in due course or not.

c. Can Francielle enforce the instrument against Bentong? Why?

ANSWER:
Yes, Francielle can enforce the said instrument, an undelivered incomplete
instrument is not valid only against any parties prior to the delivery.
However, a holder in due course may enforce it against all parties
subsequent to the delivery. Bentong is a party subsequent to the delivery,
hence, Francille may enforce payment against him.

d. Can Francielle enforce the instrument against Camille? Why?

ABSWER:
Yes. Francille may enforce the instrument against all parties subsequent to
the delivery.

17) Alberto executed a promissory note for P5000.00 payable to the order of Badette for the
purchase of a certain merchandise from Badette. Only one half of the merchandise was
delivered; but Badette nonetheless indorse the promissory note to Cardo for value. Prior
to maturity, Cardo indorsed the note at a discount to Dalisay, who had knowledge of
Badette’s partial failure to deliver the merchandise.
a. Can Dalisay recover the full amount of the promissory note? Why?
b. If instead of being indorsed to Dalisay, the promissory note was reacquired by
Badette. Can Badette hold Dalisay on her promissory note? On what extent?
Why?
Answers
a) No, since Dalisay is not a holder in due course as he had notice of the
defect of the instrument and he had knowledge of Badette’s partial failure
to deliver which constitute a breach of faith therefore Dalisay received
notice of defect under Section 56 of NIL
b) No. Under Sec. 50, NIL, where an instrument is negotiated back to a prior
party, such party may reissue and further negotiate the same but he is not
entitled to enforce payment thereof against any intervening party to whom
he was personally liable.
18) Without receiving value for the purpose of lending his name, Arnold makes a note of
P5000.00 payable to the order of Bernard who negotiates it to Carl, the latter knowing the
Arnold is not a party for value
a. May Carl recover from Arnold if the latter interposes the defense of absence or
failure of consideration? Reason?
b. Supposing Arnold received P300.00 for lending his name, will it alter the result of
the case? Why?
c. Supposing Arnold pays without objection the said P5000.00 may he recover what
he paid from Bernard?
ANSWERS:
a. Yes. Carl can recover from Arnold even if he interpose the defense of absence
or failure of consideration Arnold is liable on the instrument to the holder for
value as an accommodation party who lends his name.
 b. No. Even if he receives value or payment for lending his name to the
accommodated party, he is still an accommodation party who is liable on the
instrument.
c. Yes. He has the right to recover from Bernard the accommodated party since
their relationship is principal-surety.

19) Andok likes to buy the Ford car of Badong for P700,000.00 but Andok only has
P200,000.00 and so he asks for a loan of P500,000.00 from Cliff. Before giving
P500,000.00 to Andok, Cliff required Daniel and Esang to sign jointly and severally the
promissory note for P500,000.00 in favor of Cliff, which Daniel and Esang did.

Upon failure of Andok to pay P500,000.00, Cliff sued Daniel and Esang. In answering
the complaint, Daniel and Esang stated that they never received a single centavo from the
P500,000.00 which Cliff loaned to Andok and that they signed the note just to help
Andok get the loan from Cliff and this is true.
a. Will you absolve Daniel and Esang from the complaint of Cliff? Why?
b. Who is an accommodation party? Define
c. What are the rights of an accommodation party against:
i. Accommodated party
ii. Co-accommodation party
Answer:
a) No. Daniel and Esang are accommodation parties. Sec. 29 clearly mandates the
accommodation parties liable on the instrument to a holder for value
notwithstanding such holder at the time of taking the instrument knew him to be
only an accommodation party in whatever capacity he signed the instrument,
whether primarily or secondarily. This means that absence of consideration
between accommodation party and accommodated party does not of itself
constitute a valid defense against a holder a holder for value.
b) An accommodation party is one who has signed the instrument (a) as a maker,
drawer, acceptor or indorser, (b) without receiving value for the signature, (c) for
the purpose of lending his name to some other person.
c) Rights of an accommodation party against:
i. Accommodated party
1. Right to revoke accommodation by cancellation or by notice to
those interested at any time before the instrument has been
negotiated for value.
2.Right to reimburse after making payment to the holder.
ii. Co-accommodation party
1.Right to contribution from other solidary accommodation party.

20) Fernando forged the name of Danica, manager of a Trading company, as the drawer of a
check. The Bank of the Philippine Islands, the drawee bank, did not detect the forgery
and paid the amount.
a. May the bank charge the amount paid against the account of the alleged drawer?
Why?
b. What is the effect of a forged document?
Answer:
a. No. Under Sec. 23, NIL, a forged is wholly inoperative. The forgery cuts-off the right
of all subsequent parties as against parties prior to the forgery. Hence, a drawee bank who
has paid a check on which a signature has been forged cannot charge the drawer’s
account for the amount of said check.
b. Forged document
21) Josefa loaned Maria some money and to evidence her indebtedness, Maria executed and
delivered to Josefa a promissory note payable to her order. Josefa indorsed the note to
Pablita. Berta fraudulently obtained the note from Pablita and indorsed it to Julia by
forging Pablita’s signature. Julia indorsed the note to Camille.
 a. May Camille enforce the said promissory note against Maria and Josefa? Why?
b. May Camille go against Pablo? Why?
c. May Camille enforce said note against Julia? Why?
d. Against whom can Julia have the right to recourse? Why?
e. May Pablo recover from either Maria or Josefa? Why?
Answer:
a. No. Forgery cuts-off the right of all subsequent parties as against parties prior to the
forgery. Camille even if a holder in due course cannot enforce the instrument against Josesa and
Maria as they are parties prior to the forgery.

22) What are the liabilities/ warranties of the following:

a. Maker (Sec. 60, NIL)
I. engages that he will pay it according to its tenor.
II. admits the existence of the payee and his then capacity to endorse.

b. Acceptor – the acceptor by accepting the instrument engages that he will pay it
according to the tenor of his acceptance and admits (Sec.62,NIL) :
i. The existence of the drawer, the genuineness of his signature, and
his capacity and authority to draw the instrument.
ii. The existence of the payee and his then capacity to indorse.

c. Drawee – has no liability to the holder under an instrument until and after it has
been accepted by such drawee.

d. Drawer (Sec. 61, NIL)

I. admits the existence of the payee and his then capacity to indorse.
II. engages that on due presentment the instrument will be accepted
or paid, or both according to its tenor, and that if it be dishonoured,
and the necessary preceedings on this honor be duly taken, he will
pay the amount thereof to the holder, or to any subsequent endorser
who may be compelled to pay it.
III. may insert in the instrument and express stipulation negativing or
limiting his own liability to the holder.

e. General Indorser – every indorser who indorses without qualification warrants

to all subsequent holder in due course (Sec. 66,NIL):
I. The matters and things mentioned in subdivisions (a), (b) and (c) of the
next preceding section;
II. That the instrument is, at the time of his indorsemnet, valid and subsisting.

And, in addition, he engages that, on due presentment, it shall be accepted

or paid, or both, as the case maybe, according to its tenor, and that if it be
dishonoured and the necessary proceedings on dishonour be duly taken, he
will pay the amount thereof to the holder or to any subsequent indorser
who may be compelled to pay it.

i. That the instrument is genuine and in all respects what it purports

to be.
ii. That he has good title to it.
iii. That all prior parties had capacity to contract.
iv. That the instrument is, at the time of his indorsement, valid and
subsisting
v. Engages that on due presentment the instrument will be accepted
or paid or both, according to its tenor, and that if it be dishonoured
and the necessary proceedings on dishonour be duly taken, he will
 pay the amount thereof to the holder or to any subsequent indorser
who may be compelled to pay it.

f. Qualified indorser
I. That the instrument is genuine and in all respects what it purports
to be.
II. That he has good title to it.
III. That all prior parties had capacity to contract.
IV. That he has no knowledge of any fact which would impair the
validity of the instrument or render its valueless

23) Ada delivers a bearer instrument to Beth. Beth indorses it to Cath. Cath later indorses it in
blank to Deb. Elle steals the instrument from Deb and forged the signature of Deb. She
successfully negotiated it to Faye, who acquires the instrument in good faith and for
value.
a. If, for any reason, the drawee bank refuses to honor the check can Faye enforce he
instrument against the drawer? Why?
b. In case of the dishonour of the check by the both drawee and drawer, can Faye
hold Beth, Cath and Deb liable solidarily on the instrument? Why?
ANSWERS:
a) Yes. s

24) Ana makes a promissory note payable to bearer and delivers it to Beth. In turn, Beth
negotiates it by mere delivery to Cris who endorses it specially to Dan. Dan negotiates it
by special indorsement to Ella who negotiates it to Faye by mere delivery. Ana did not
pay. To whom Beth, Cris, Dan and Ella liable? Explain your answer.

25) Who is a holder not in due course?

- a holder not in due course is a holder who did not took the instrument under the
following conditions given by the Negotiable Instrument Law

26) What are the rights of a holder in due course?

a. He may sue on the instrument on his own name.
b. He may receive payment and if the payment is in due course the instrument is
discharged.
c. He holds the instrument free from any defect of title of prior parties.
d. He holds the instrument free from defences available to prior parties among
themselves.
e. He may enforce payment of the instrument for the full amount thereof against all
parties liable thereon.

27) What are different classes of defenses? Give 5 examples each.

a. Personal or equitable defences- are acts or circumstances leading to the issuance
of the instrument rather than to the instrument itself. Available only against that
person or subsequent holder who stance in privity with (holder not in due course)
e.g.1.) Insertion of wrong date
2.)Absence or failure of considerations
3.) Fraud on in inducement
4.)Want of delivery of complete instrument
5.)Want of authority to complete instrument
b. Legal, real or absolute defense – are those attached to the instrument itself and
can be used against payment of a negotiable instrument to a holder, including a holder in
due course or a person who has the rights of a holder in due course.
e.g.1.) Want of delivery of incomplete documents.
2.)Forgery
3.)Discharge at or after maturity
 4.)Fraudulent alteration by holder
5.)Fraud in factum

28) What are the requirements for a valid presentment in case of:
a. Promissory note
Presentment for payment, to be sufficient, must be made;
1) By the holder, or by some person authorized to receive payment on
his behalf
2) At a reasonable hour on a business day
3) At a proper place as herein defined
4) To the person primary liable on the instrument, or if he is absent or
in accessible, to any person found at the place where the
presentment is made
b. Bill of Exchange
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:
1) Where a bill is a 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.
2) Where the drawee is dead, presentment may be made to his
personal representative
3) Where the drawee has been adjudge 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 asignee

Presentment for payment, to be sufficient, must be made;

1) By the holder, or by some person authorized to receive payment on
his behalf
2) At a reasonable hour on a business day
3) At a proper place as herein defined
4) To the person primary liable on the instrument, or if he is absent or
in accessible, to any person found at the place where the
presentment is made

29) What is Dishonor and notice of dishonor? Differentiate

Notice of Dishonor is bringing, either verbally or by writing, to the knowledge of the
drawer or indorser of an instrument, the fact that a specified negotiable instrument, upon
proper proceedings taken, has not been accepted or has not been paid and that the party
notified is expected to pay it while Dishonour is to fail to do what is required by a promise
or contract.

30) Distinguish a crossed check from cancelled check

Crossed Check – is no more a bearer check where anyone can negotiate and get payment
across the counter. In case of a crossed check the payee is free to make further
indorsement while Cancelled Check is a check that has been paid or cleared by the bank
it was drawn on after it has been deposited or cashed.

31) Differentiate the effects of following:

a. Incomplete but delivered
1. Authority to fill up the blanks
2. Authority to put any amount
3. Right against party prior to completion
 4. Right of holder in due course

b. Complete and delivered

A contract arises.

c. Incomplete and undelivered

Where an incomplete instrument has not been delivered it will not, if completed
and negotiated without authority, be a valid contract in the hands of any holder, as
against any person whose signature was placed thereon before delivery.
1. Defense even against a holder in due course
2. Defense available to parties prior to delivery

d. Complete but undelivered

Every contract on negotiable instrument even if it is completely written is in
complete and revocable until its delivery for the purpose of giving it effect.

32) What is a foreign bill? Explain its effects

- They are chief means by which settlements are made in international trade.
Is a payment drawn up in one country that is payable in another country.

33) Can forgery in a check be justified? In what cases, if any?

Yes

34) What is a crossed check? What is its purpose?

-it is a check that can only be deposited in a bank account and cannot be cashed over a
bank’s counter. Checked marked with two parallel lines drawn diagonally across its face
with or without the words ‘&Co.’ or ‘not negotiable’ between the lines.
-the purpose of crossing the check is to instruct the collecting or paying bank to ensure
payment of the check by crediting the check amount to the account of the payee of the
check.

35) What is a Protest? Purposes if any?

Answer: 1. By protest is meant the formal instrument executed by a notary public or

other competent person certifying that the facts necessary to the dishonour of the
instrument by non-acceptance or non-payment have taken place. Briefly, it is a formal,
notarized notice of dishonor.
2. Protest means the formal declaration of the fact of non-payment executed by
the proper person, usually a notary public.

Purpose
The main purpose of the certificate of protest is to do away with the necessity of
proving the fact of presentment, demand, non-payment, and notice of dishonour by
witnesses in court. However, the certificate of protest is merely prima facie evidence of
the facts therein stated. They may be disproved by competent evidence to the contrary.