REQUISITES AS TO A NEGOTIABLE NOTE
1. It must be in writing and signed by the maker
2. It must contain an unconditional promise to pay a sum certain in money
3. It must be payable on demand, or at a fixed or determinable future time
4. It must be payable to order or to bearer
REQUISITES AS TO A NEGOTIABLE BILL
1. It must be in writing and signed by the maker
2. It must contain an unconditional order to pay a sum certain in money
3. It must be payable on demand, or at a fixed or determinable future time
4. It must be payable to order or to bearer
5. The drawee must be named or otherwise indicated therein with reasonable certainty
THE INSTRUMENT MUST BE IN WRITING
> There must be a writing of some kind, for if the instrument were not in writing, there would be nothing to be negotiated or passed from hand to hand
THE INSTRUMENT MUST BE SIGNED BY THE MAKER OR DRAWER
> Full name must be written
> At least the surname should appear and generally, the signature usually is by writing the signer’s name
> But, where the name is not signed, the holder must prove that what is written is intended as a signature of the person sought to be charged
> Commonly, it is found in the lower part of the instrument. It could also be signed anywhere as long as the maker or drawer acknowledges the signature to be his own.
IF A BILL, IT MUST CONTAIN AN ORDER TO PAY
• It is an instrument demanding right
• Any words which are equivalent to order or which show the drawer’s will that the money should be paid, are sufficient to make the instrument a bill of exchange
AN INSTRUMENT WITH AN EFFECT OF MERE AUTHORITY TO PAY
> It is not negotiable because it is not an order to pay
> “I hereby authorize you to pay P1000 to Pedro Cruz”
EFFECT OF MERE REQUEST TO PAY
> The instrument is not negotiable as it is not an order to pay but a mere request to pay
> “Please to let the bearer have P70 and place to my account and you will oblige”
EFFECT OF MERE WORDS OF CIVILITY
> The mere fact that it contains words of civility or courtesy doesn’t make it non-negotiable
WHERE INSTRUMENT IS A NOTE, IT MUST CONTAIN A PROMISE TO PAY
1. It is enough that words of equivalent meaning are used
2. The promise is implied from promissory words contained in the instrument
THE PROMISE OR ORDER TO PAY MUST BE UNCONDITIONAL
> It must not be subject to a condition
> It must be unconditional and absolute
SUM PAYABLE MUST BE DEFINITE AND CERTAIN
> The amount of money to be paid must be determinable by inspection and must be stated plainly on the face of the instrument, and like the denomination of money, must be started in the body of the instrument
SUM MUST BE PAYABLE IN MONEY ONLY
> Money is the one standard of value in actual business or more stable standard of value
> Legal tender—that kind of money which the law compels the creditor to accept in payment of his debt when tendered by the debtor in the right amount
> But if authorized by law or consent of creditor, cash may be substituted by other means, or may be check
> Instrument need not be payable in legal tender
INSTRUMENT MUST SPECIFY DENOMINATION
> Instruments should express the specific denomination of money when it is payable in the money of a foreign country in order that the courts may be able to ascertain its equivalent value; otherwise, it is non-negotiable
PAYABLE ON DEMAND OR ON A FIXED OR DETERMINABLE FUTURE TIME
> On demand
> At a fixed or determinable future time
WHERE NO YEAR IS SPECIFIED
> Neither payable on demand or on a fixed or determinable future time
> Time of payment is not determinable as the year is not stated
THE INSTRUMENT MUST BE PAYABLE TO ORDER OR TO BEARER
> An instrument is not negotiable unless made payable to a person or his order or bearer or unless words of the similar or equivalent import are used such as assigns or assignees or holder
WHERE PAYABLE TO THE ORDER OF BEARER
> Also negotiable
> This was held to be payable to order
> The payee of such an instrument is the bearer and it can only be negotiated by his indorsement
WHERE PAYABLE TO A CERTAIN PERSON
> Where the instrument is payable to a specified person, it’s not payable to order
> Payable to a certain person or his agent
> Where payable to “bearer B”
THE DRAWEE MUST BE NAMED
> Requirement that refers only to bills of exchange
> Drawee’s name may be omitted and be filled in under implied authority like any other blank
> An acceptance may supply the omission of the designation
IMPORTANCE OF FORMALITIES
> Essential for the security of the mercantile transactions
> Distinguish the negotiable instrument from the ordinary non-transferrable written contract
NECESSITY OF COMPLIANCE WITH PROVISIONS
> Where the instrument doesn’t conform with the requirements laid down in Section 1, then it is not governed by NIL
DETERMINATION OF NEGOTIABILITY
> By the provisions of the NIL, particularly Section 1 thereof
> By considering the whole of the instrument
> By what appears on the face of the instrument and not elsewhere
