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The Law on Negotiable Instruments by Hector S. De Leon: A Comprehensive and Authoritative Source on Bills, Notes, and Checks | PDF


The Law on Negotiable Instruments by Hector S. De Leon: A Comprehensive Guide




Introduction




Negotiable instruments are written contracts that represent money or property and can be transferred from one person to another by delivery or indorsement. They are widely used in commerce and finance as a convenient and secure way of making payments, extending credit, and settling debts.




the law on negotiable instrument by hector s de leon zip



The Negotiable Instruments Law (NIL) is a Philippine law that was enacted in 1911 as Act No. 2031. It is based on the Uniform Negotiable Instruments Act of the United States, which in turn was derived from the English Bill of Exchange Act of 1882. The NIL provides the rules and principles that govern the creation, validity, negotiation, presentment, dishonor, and discharge of negotiable instruments.


Hector S. De Leon is a Filipino lawyer, author, and educator who has written several books on commercial law, including "The Law on Negotiable Instruments". He is also a former dean and professor of law at the University of the East and San Beda College. His book is considered as one of the authoritative and comprehensive sources on the subject of negotiable instruments in the Philippines.


Types of Negotiable Instruments




The NIL recognizes four types of negotiable instruments: bills of exchange, promissory notes, checks, and other negotiable instruments.


Bills of exchange




A 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.


A bill of exchange has three parties: the drawer, who issues the order; the drawee, who is ordered to pay; and the payee, who is entitled to receive payment. A bill of exchange may also be accepted by the drawee or by another person on his behalf, in which case the acceptor becomes primarily liable for its payment.


Promissory notes




A 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.


A promissory note has two parties: the maker, who promises to pay; and the payee, who is entitled to receive payment. A promissory note may also be indorsed by the payee or by another person, in which case the indorser becomes secondarily liable for its payment.


Checks




A check is a bill of exchange drawn on a bank payable on demand. It is a special type of bill of exchange that can be used as a substitute for cash or as a means of transferring funds.


A check has three parties: the drawer, who issues the order; the drawee bank, who is ordered to pay; and the payee, who is entitled to receive payment. A check may also be accepted by the drawee bank or by another person on its behalf, in which case the acceptor becomes primarily liable for its payment. A check may also be indorsed by the payee or by another person, in which case the indorser becomes secondarily liable for its payment.


Other negotiable instruments




The NIL also recognizes other negotiable instruments that are not bills of exchange, promissory notes, or checks, but that conform to the definition and requisites of a negotiable instrument under Section 1 of the law. Examples of such instruments are certificates of deposit, treasury warrants, bank notes, and bonds.


Characteristics of Negotiable Instruments




Negotiable instruments have four main characteristics: negotiability, transferability, liability of parties, and defenses and equities.


Negotiability




Negotiability is the quality of a negotiable instrument that enables it to be transferred from one person to another according to the rules of the NIL. A negotiable instrument must contain certain words or expressions that indicate its negotiability, such as "to order" or "to bearer". A negotiable instrument must also be payable on demand or at a fixed or determinable future time, and must be payable in money.


Transferability




Transferability is the ability of a negotiable instrument to be transferred from one person to another by negotiation or by assignment. Negotiation is the transfer of a negotiable instrument in such manner that the transferee becomes a holder. A holder is a person who is in possession of a negotiable instrument that is payable either to himself or to bearer. Assignment is the transfer of a non-negotiable instrument or of a negotiable instrument in such manner that the transferee does not become a holder.


Liability of parties




Liability of parties is the obligation of the parties to a negotiable instrument to pay it according to its terms and conditions. The liability of parties may be primary or secondary. Primary liability is the direct and unconditional obligation of a party to pay a negotiable instrument upon its maturity. Secondary liability is the contingent and subsidiary obligation of a party to pay a negotiable instrument upon its dishonor by the party primarily liable.


Defenses and equities




Defenses and equities are the reasons or grounds that may be invoked by a party to a negotiable instrument to avoid or reduce his liability. Defenses and equities may be real or personal. Real defenses are those that are available against any holder of a negotiable instrument, whether in due course or not. Personal defenses are those that are available only against holders who are not holders in due course. A holder in due course is a holder who has taken a negotiable instrument under certain conditions that protect him from defects in title or prior claims.


Negotiation of Negotiable Instruments




Negotiation is the transfer of a negotiable instrument in such manner that the transferee becomes a holder. Negotiation may be effected by indorsement and delivery or by delivery alone.


Modes of negotiation




The mode of negotiation depends on whether the negotiable instrument is payable to order or to bearer. A negotiable instrument payable to order can be negotiated only by indorsement and delivery. An indorsement is the signature, usually on the back of the instrument, of the person who transfers it with or without additional words specifying the person to whom or to whose order it is to be payable. A delivery is the transfer of possession, actual or constructive, from one person to another. A negotiable instrument payable to bearer can be negotiated by delivery alone.


Indorsement




Indorsement




An indorsement may be blank or special, restrictive or qualified, conditional or unconditional. A blank indorsement specifies no indorsee and makes the instrument payable to bearer. A special indorsement specifies an indorsee and makes the instrument payable to order. A restrictive indorsement prohibits further negotiation of the instrument or confers a right only to receive payment. A qualified indorsement limits the liability of the indorser or waives his right to notice of dishonor. A conditional indorsement makes the payment of the instrument subject to a condition or event.


Delivery




A delivery is the transfer of possession, actual or constructive, from one person to another. Delivery is essential to complete a negotiation and to make the transferee a holder. Delivery may be voluntary or involuntary. Voluntary delivery is made with the consent and intention of the transferor to transfer title and possession of the instrument. Involuntary delivery is made without such consent and intention, such as by theft, fraud, or mistake.


Rights of a holder




A holder is a person who is in possession of a negotiable instrument that is payable either to himself or to bearer. A holder has the right to receive payment of the instrument according to its terms and conditions, to enforce payment against all parties liable on the instrument, to negotiate the instrument further subject to its form and indorsements, and to hold the instrument free from any defect of title or prior claim, if he is a holder in due course.


Presentment and Dishonor of Negotiable Instruments




Presentment is the act of exhibiting a negotiable instrument to a person for acceptance or payment. Dishonor is the refusal or failure of such person to accept or pay the instrument according to its terms and conditions.


Presentment for acceptance




Presentment for acceptance is the act of exhibiting a bill of exchange to the drawee or acceptor for his acceptance. Acceptance is the signification by the drawee or acceptor of his assent to the order of the drawer. Presentment for acceptance is necessary only for certain bills of exchange that are payable after sight, that expressly stipulate presentment for acceptance, that are drawn payable elsewhere than at the residence or place of business of the drawee, or that are accompanied by documents that need to be delivered upon acceptance.


Presentment for payment




Presentment for payment is the act of exhibiting a negotiable instrument to the party primarily liable for its payment. Presentment for payment is necessary in order to charge the parties secondarily liable on the instrument, such as drawers and indorsers. Presentment for payment must be made on or after the maturity date of the instrument, at a reasonable hour and place, by a person entitled to receive payment, and in a proper manner.


Dishonor by non-acceptance




Dishonor by non-acceptance is the refusal or failure of the drawee or acceptor to accept a bill of exchange within 24 hours after presentment for acceptance. Dishonor by non-acceptance may be express or implied. Express dishonor occurs when the drawee or acceptor clearly indicates his refusal to accept. Implied dishonor occurs when presentment for acceptance cannot be made due to various reasons, such as absence or incapacity of the drawee or acceptor, closure or insolvency of his business, partial or qualified acceptance, etc.


Dishonor by non-payment




Dishonor by non-payment




Dishonor by non-payment is the refusal or failure of the party primarily liable to pay a negotiable instrument within 24 hours after presentment for payment. Dishonor by non-payment may be express or implied. Express dishonor occurs when the party primarily liable clearly indicates his refusal to pay. Implied dishonor occurs when presentment for payment cannot be made due to various reasons, such as absence or incapacity of the party primarily liable, closure or insolvency of his business, loss or destruction of the instrument, etc.


Notice of dishonor




Notice of dishonor is the communication by a holder or an agent to a party secondarily liable on a negotiable instrument that the instrument has been dishonored by non-acceptance or non-payment. Notice of dishonor is necessary in order to charge the parties secondarily liable on the instrument, such as drawers and indorsers. Notice of dishonor must be given within a reasonable time after dishonor, in a reasonable manner and form, and to all parties entitled to receive it.


Discharge of Negotiable Instruments




Discharge is the termination or extinction of the obligation arising from a negotiable instrument. Discharge may affect the instrument itself or the parties liable on it.


Payment in due course




Payment in due course is the payment made at or after the maturity date of a negotiable instrument to the holder thereof in good faith and without notice of any defect in his title. Payment in due course discharges the instrument itself and all parties liable on it.


Cancellation




Cancellation is the intentional destruction of a negotiable instrument by the holder or his agent with the consent of all parties liable on it. Cancellation discharges the instrument itself and all parties liable on it.


Renunciation




Renunciation is the voluntary surrender or waiver of a right by a party to a negotiable instrument. Renunciation may be express or implied. Express renunciation occurs when a party declares in writing that he renounces his right against any other party. Implied renunciation occurs when a party delivers up the instrument to the person primarily liable on it. Renunciation discharges only the party who renounces and those who are subsequent to him.


Material alteration




Material alteration is the unauthorized change in a negotiable instrument that affects its terms and conditions. Material alteration may be intentional or accidental. Intentional alteration occurs when a party fraudulently alters the instrument for his benefit or for the detriment of another party. Accidental alteration occurs when a party innocently alters the instrument due to mistake or negligence. Material alteration discharges only those parties who are not privy to or consent to the alteration.


Other modes of discharge




The NIL also recognizes other modes of discharge that are not specific to negotiable instruments but are applicable to contracts in general. These include novation, merger, compromise, prescription, bankruptcy, etc.


Conclusion




Negotiable instruments are vital tools for facilitating commercial transactions and promoting economic development. The Negotiable Instruments Law provides a clear and uniform framework for regulating negotiable instruments and protecting the rights and interests of their parties. The Law on Negotiable Instruments by Hector S. De Leon is a valuable resource for anyone who wants to learn more about this fascinating and complex subject.


FAQs




  • What is the difference between a negotiable instrument and a non-negotiable instrument?



A negotiable instrument is one that meets the requirements of Section 1 of the NIL and can be transferred from one person to another by negotiation. A non-negotiable instrument is one that does not meet those requirements and can be transferred only by assignment.


  • What are the essential requisites of a negotiable instrument?



  • What are the essential requisites of a negotiable instrument?



The essential requisites of a negotiable instrument are: (a) it must be in writing and signed by the maker or drawer; (b) it must contain an unconditional promise or order to pay a sum certain in money; (c) it must be payable on demand or at a fixed or determinable future time; (d) it 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.


  • What are the effects of crossing a check?



Crossing a check is the act of drawing two parallel lines across the face of the check, with or without additional words between them. Crossing a check has the following effects: (a) it directs the drawee bank to pay the check only to a bank or to a specified bank; (b) it serves as a warning to the holder that the check has been issued for a special purpose and that he must inquire into it before negotiating it; and (c) it protects the drawer and the true owner of the check from loss or theft by preventing its payment to an unauthorized person.


  • What are the remedies of a holder in case of dishonor of a negotiable instrument?



The remedies of a holder in case of dishonor of a negotiable instrument are: (a) to sue the party primarily liable for payment; (b) to sue any party secondarily liable who has been duly notified of dishonor; (c) to sue any party who has indorsed the instrument without qualification; and (d) to sue any party who has guaranteed payment or collection of the instrument.


  • How can I download the book "The Law on Negotiable Instruments by Hector S. De Leon"?



You can download the book "The Law on Negotiable Instruments by Hector S. De Leon" from various online sources, such as Scribd, Academia, or Goodreads. However, you may need to register an account, pay a fee, or comply with other terms and conditions before you can access the full text of the book. Alternatively, you can buy a hard copy of the book from bookstores or online retailers.


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