NEGOTIABLE INSTRUMENT Written contracts for the payment of money; by its form, intended as a substitute for money and intended to pass from hand to hand, to give the holder in due course the right to hold the same and collect the sum due. CHARACTERISTICS OF NEGOTIABLE INSTRUMENTS 1. Negotiability - right of transferee to hold the instrument and collect the sum due 2. Accumulation of secondary contracts - instrument is negotiated from person to person PROMISSORY NOTE (Sec. 184) An unconditional promise to pay in writing made by one person to another, signed by the maker, engaging to pay on demand or a fixed determinable future time a sum certain in money to order or bearer. When the note is drawn to maker's own order, it is not complete until indorsed by him. BILL OF EXCHANGE (Sec. 185) 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. CHECK (Sec. 185) A bill of exchange drawn on a bank and payable on demand. Manager's check One drawn by the bank's manager upon the bank itself; and it is similar to a cashier's check both as to effect and use. [International Corporate Bank v Gueco 351 SCRA 516 (2001) BPI Family Savings Bank v Manikan, 395 SCRA 373 (2003)] By its peculiar character and general use in commerce, a manager's check is regarded substantially to be as good as the money it represents.Consequently, when a bank allows the delivery of a manager's check to a person who is not Directly charged with the collection of its tax liabilities, such bank must be deemed to have assumed the risk of a possible misuse thereof, as it appears to have fallen short of the diligence expected from it. It may still, however, pursue an action against the person responsible or who may have unjustly benefited. Pabugais vs. Sahijwani, 423 SCRA 596 (2004) Generally, a manager's check is not legal tender and the creditor may accept or refuse it. But, payment by check may be accepted as valid if no prompt objection is made. Crossed check Though the NIL is silent as to crossed checks, courts can take judicial cognizance of the practice that a check crossed with two parallel lines in the upper left hand corner means that it can only be deposited and not converted to cash. The effects of a crossed check thus relate to the mode of payment - meaning that the drawer intends it to be only for deposit by the rightful person, the named payee. Bataan Cigar vs. CA A holder of crossed-checks is not obliged to inquire, when he acquires them, as to purpose for which the checks were issued. A payee who further negotiates cross-checks that he accepted from someone cannot be considered a holder in good faith (and thus not a HIDC) is not applicable to this case. Here, when the payee acquired the checks, he duly deposited them in his bank account, and therefore, the purpose behind the crossing was satisfied by the payee.
- Fall '15
- Cheque, Promissory note, Negotiable instrument, holder