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NON-NEGOTIABLE INSTUMENTS
Report by Jesily Darla Mae G. Gutierrez
WHAT IS A
COMMERCIAL
PAPER?
1. Written promises or
obligations
2. Arise out of
commercial
transactions
Considerations:
3. Requirements of
negotiability
FORMAL REQUIREMENTS
REQUIREMENTS OF NI
MUST BE IN
WRITING
There is no such
thing as an ORAL
NI.
ACCEPTED RULE:
Negotiability/Non-
negotiability is
determined from the
face of the instrument.
MUST BE SIGNED
BY
MAKER/DRAWEE
SIGNATURE- prima
facie evidence of intention
to be bound; A
manifestation of intention
SIGNEE - obligates
himself for payment.
MAKER person
issuing PN
DRAWER person
issuing BofE
Must contain an
unconditional promise
or order
Must contain pay to the
order of.
UNCONDITIONAL
PROMISE PN
UNCONDITIONAL
ORDER BofE
ORDER TO PAY OR PROMISE TO PAY
ORDER TO PAY
PROMISE TO PAY
Rationale: Money is
one standard of valu in
actual business.
Money = Legal
Tender
PAYABLE ON DEMAND, FIXED OR
DETERMINATE FUTURE TIME
Payable on Demand
Holder is ENTITLED TO
PAYMENT
IMMEDIATELY UPON
DEMAND.
PAYABLE TO ORDER OR BEARER
Bearer/Order of Bearer
Specified Persons/Bearer
Cash/Order of Cash
Bills of
Exchange
Promissory
Notes
Cheques
Treasury Bills
~ merely a simply contract in writing and evidence of
such intangible rights or may have been created by
assent of parties.
NON-NEGOTIABLE INSTRUMENT
Money Orders
Postal Orders
Fixed Deposit
Receipts
Share Certificates
Letters of Credit
DISTINGUISHING NI WITH NON-NI
NEGOTIABLE INSTRUMENT NON-NEGOTIABLE INTRUMENT
Garcia v. Llamas (Note not a negotiable instrument. The notes was made
payable to a specific person rather than to bearer or to order-- a requisite.)
Philippine Ed. Co. v Soriano (Postal orders are not negotiable instruments
because in establishing and operating a postal money order system, the gov't is
merely exercising a governmental power).
ORDER INSTRUMENT
vs.
BEARER INSTRUMENT
ORDER INSTRUMENT
An instrument that is payable to a specified
person or entity
The words pay to or pay to the order of
would make it order instrument but not
negotiable.
In order to be negotiable, it needs to be
endorsed because the Negotiable Instruments
Law requires that the instrument must be
payable to order or to bearer
An example of order instruments would be a check because on
its face the check states Pay to the order of and then who
ever draws the check would write in the name of the person or
entity entitled to receive payment by the presentment of this
instrument.
Order paper instrument include
registered bonds, checks, bills of
exchange (a kind of check without
interest) and promissory notes (a
written promise to pay). With a bearer
paper the name of the owner is not on
the document such as a bearer bond.
BEARER INSTRUMENT
A person who is in possession of an instrument that is payable to
bearer is the holder thereof. Hence, where the instrument is a
bearer instrument, the person in possession can demand
payment from the person who are liable thereon.
The words Pay to Bearer or Pay to the order or Bearer it is
bearer paper or a bearer instrument.
A good example of a bearer instrument is a 10 dollar
bill, because it is a negotiable instrument, but whoever has
the 10 dollar bill in his possession can present the instrument
for payment.