Negotiable Instruments

The negotiable instrument law states that an instrument when it is transferred from one person to another in such manner as to constitute the transferee as the holder thereof. If payable to order, it is negotiated by the endorsement of the holder and completed by delivery If payable to bearer, it is negotiated by mere delivery, but it may, if desired, be endorsed.

Requisites for negotiability It must be in writing and signed by the maker or drawer It must be payable on demand or at future determinable time It must be payable to order or bearer It must contain no conditions If it is addressed to a drawee, the name of the drawee must be indicated with certainty Endorsement must be in the name appearing on the instrument

Kinds of Endorsement 1. Special endorsement- specifies the name of the person to whom, or to whose order, the instrument is made payable. ex. Pay to Mary Jan Moldero or order By Cristina Lagman

2. Blank endorsement- specifies no endorsee, done by merely affixing ones signature on the instrument without adding anything. ex. (signed) Cristina Lagman

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3. Restrictive endorsement- prevents the further negotiation of the instrument. a. When the endorsement prohibits the further negotiation of the instrument ex. Pay to Mary Ann Manaois and to no one else (Sgd.) Katherine Belandres b. When endorsement makes the endorsee the agent of the endorser Ex. Pay to Mary Ann Manaois for collection only (Sgd.) Katherine Belandres

c. When the endorsement bestows the title to the endorsee in trust for or to the account of another person. Ex. Pay to Mary Ann Manaois in trust for or to the account of another person. Effect of restrictive endorsementa. To receive payment of the instrument b. To bring action thereon that the endorser could bring c. To transfer his rights as such endorser, where the form of the endorsement authorizes him to do so.

4. Qualified endorsement- it constitute the endorser a mere assignor of the instrument by adding to the endorsers signature the word without recourse. This would restrains, limits or qualifies the endorser in any manner different from what the law imports as his true liability, deductible from the nature of instruments. Ex. Pay to Mary Ann Manaois without recourse (Sgd.) Katherine Belandres

5. Conditional endorsement- under this, the person required to pay the instrument may disregard the condition and make payment to the endorser or his transferee whether the condition is fulfilled or not. Ex. Suppose Kristen Francisco, the payee of an order note for P10,000 payable on demand endorses the instrument as follows: Pay to Elizabeth Laman if she goes to US before November 30, 2012 (SGd.) Kristen Francisco

Other rules on endorsement 1. Endorsement of instrument payable to bearer- further negotiated by delivery and the individual endorsing is liable as endorser to only such holder as make title to his endorsement 2. Endorsement where payable to 2 or more persons- all must endorse unless the person endorsing has authority to endorse for the others