What is the effect of lack of notice of dishonor on the instrument which is payable in installments?

1. No acceleration clause – Failure to give notice of dishonor on a previous installment does not discharge drawers and indorsers as to succeeding installments.

2. With acceleration clause – It depends upon whether the clause is automatic or optional.

a. Automatic – failure to give notice of dishonor as to a previous installment will discharge the persons secondarily liable as to the succeeding installments;

b. Optional – if not exercised, the rule would be the same as if there is no acceleration clause. If exercised, the rule would be the same as if the installment contains an automatic acceleration clause. (Town Savings Bank v. CA, G.R. No. 106011, June 17, 1993)