Summary of negotiable instruments.Full description
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Notes on Law on Negotiable Instruments
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NOTICE OF DISHONOR Sections 89-119 89-119 of the Negotiable Instruents !a"
Notice of Dishonor #Definition$
To bring either %erball& or b& "riting' to the (no"le)ge of the )ra"er or in)orser of an instruent' the fact that a s*ecifie) s* ecifie) NI' u*on *ro*er *rocee)ings ta(en' has not been acce*te) or has not been *ai)' an) that the *art& notifie) is e+*ecte) to *a& it notice given by the holder or his agent to a party or parties secondarily liable that the instrument was dishonored by non-acceptance non-acceptance by the drawee of a bill, or by non-payment by the acceptor of a bill or by nonpayment by a maker of a note.
NOTE, notice gi%en b& a notar& *ublic is calle) .ROTEST
/hen NOTICE is NECESSR0
Sec. 89. To whom notice of dishonor must be given. –
Ecept as herein otherwise provided, when a negotiable instrument has been dishonored by non-acceptance or non-payment, notice of dishonor must be given to the drawer and each indorser, and any drawer or indorser to whom such notice is not given is discharged. #ENER! R2!E, 32ST be gi%en to )ra"er an) to each in)orser' an) an& )ra"er or in)orser to "ho such notice is not gi%en is )ischarge) E4CE.TIONS, Sections 159' 111' 116' 117' 11' 11 an) 11:$
Sec; 89 is the general rule an) the sae )oes not a**l& in the follo"ing,
/hen there has been "ai%er of notice #Sec; 159$< /hen there has been "ai%er of *rotest #Sec; 111$< /hen notice is )is*ense) "ith #Sec; 116$<
/hen notice nee) not be gi%en to )ra"er #Sec; 117$< /hen notice nee) not be gi%en to in)orser #Sec; 11$< /hen notice of non-*a&ent "here acce*te) refuse) #Sec; 11$<
/hen *rior hol)er oitte) to gi%e notice an) the NI is in the han)s of a subse=uent hol)er in )ue course #Sec; 11:$;
E+a*le borro"e) one& fro C' but C )oes not trust ; C then suggests for to as( > to e+ecute a *roissor& note "ith C; > agrees; C then transferre) the instruent to D; D then goes to for *a&ent but is alrea)& ban(ru*t; D then notifies C but he is also ban(ru*t; D then goes after > "ho argues that he is )ischarge) for he "as not gi%en a notice of )ishonor; Is > correct? No; /hen he signe) as an accoo)ation a(er' he becae *riaril& liable on the instruent an) thus' he is not entitle) to notice of )ishonor;
NOTE, lthough the in)orser to "ho notice is not gi%en is )ischarge)' he is still liable for breach of "arranties *ertaining to the instruent; The hol)er is not re=uire) to notif& !! the in)orsers; The loss of a note )oes not e+cuse co*liance "ith Sec; 89;
!hen instrument considered to be dishonored n instruent is )ishonore), #1$ if it is not acce*te) "hen *resente) for acce*tance< or #6$ if it is not *ai) "hen *resente) for *a&ent at aturit&< or #@$ If *resentent is e+cuse) or "ai%e) an) the instruent is *ast )ue an) un*ai);
Requisites 1; i%en b& hol)er or his agent' or b& an& *art& "ho a& be co*elle) b& the hol)er to *a& #sec; 95$ 6; i%en to secon)ar& *art& or his agent #sec; 9:$ @; i%en "ithin the *erio)s *ro%i)e) b& la" #sec 156$ 7; i%en at the *ro*er *lace #secs; 15@ A 157$
.arties Entitle) to Notice
Onl& the )ra"er an) in)orsers or their agents are entitle) to notice of )ishonor;
In case of non-acce*tance of a bill- to *ersons secon)aril& liable' nael&' the )ra"er an) in)orsers as the case a& be; In case of non-*a&ent #both bill an) note$ B in)orsers;
ccoo)ation in)orsers are inclu)e)
oint a(er' though a suret&' is not an in)orser an) is *riaril& liable an)' therefore' not entitle) to notice of )ishonor; E%en an accoo)ation a(er is not entitle) to notice;
"yco Sales #orporation v. $% &inance #orporation '(99() t the re=uest of F' R cor*oration #assignor$ grante) 4 )iscounting *ri%ileges "hich R ha) "ith E cor*oration #assignee$; 4 issue) a *ost)ate) chec( *a&able to R "hich' follo"ing the )iscounting *rocess' in)orse) the chec( in fa%or of E; Thereafter' E issue) a chec( *a&able to R "hich in)orse) it in fa%or of 4; 4 then a)e use of an) negotiate) the chec(;
cco*an&ing the e+change of chec(s "as a )ee) of assignent e+ecute) b& R in fa%or of E "ith the conforit& of 4; 2n)er the sai) )ee)' subect of the )iscounting "as the aforecite) chec(; t the bac( thereof' "as a suret&shi* agreeent "hereb& F uncon)itionall& guarantee) to E the full' faithful an) *ro*t *a&ent an) )ischarge of an& an) all in)ebte)ness of R;
The chec(' ho"e%er "as )ishonore) b& the )ra"ee-ban( u*on *resentent for *a&ent; E ie)iatel& re*orte) the atter to F "ho thereu*on issue) a substitute chec( in fa%or of E "hich "as again )ishonore); Des*ite re*eate) )ean)s' R an) F faile) to settle the obligations "ith E' thus *ro*ting the latter to institute an action in court; For its )efense' R argues aong others' that it "as actuall& )ischarge) of its liabilit& o%er the substitute chec( "hen E faile) to gi%e its notice of )ishonor;
Issue, Is the assignor liable to its assignee for its )ishonore) chec(s?
Hel), 0es; n assignent of cre)it )one onerousl& has an effect siilar to that of a sale; If there be an& breach of the "arranties *ro%i)e) in rt; 168' the assignor-%en)or shoul) be hel) ans"erable therefor; E is actuall& enforcing the )ee) of assignent an) the chec( co%ere) thereb& is erel& an inci)ental or collateral atter; This *articular chec( erel& e%i)ence) the cre)it "hich "as actuall& assigne) to E; R is being hel) liable for both chec(s;
It is onl& "hat is re*resente) b& the sai) chec(s that R is being as(e) to *a&; s long as cre)it reains outstan)ing' it shall continue to be liable to E as its assignor; The )ishonor of an assigne) chec( si*l& stresses its liabilit& an) the failure to gi%e notice of )ishonor "ill not )ischarge R fro such liabilit&; This is because the cause of action stes fro the breach of "arranties ebo)ie) in the )ee) of assignent an) not fro the )ishonoring of the chec( alone;
ullas %s .N>
*reasury warrants were indorsed by +ullas and ope. *hese were presented for encashment by "$. Subse/uently, these were dishonored by the 0nsular *reasurer. $ecause of the dishonor, "$ applied +ullas1 deposit in the "$ for payment of the warrant.
0s the application of the deposit of +ullas properly enforced2
"o.
notice of )ishonor is necessar& to charge an in)orser A that the right of action against hi )oes not accrue until the notice is gi%en; s a general rule' a ban( has a right of set off of the )e*osits in its han)s for the *a&ent of an& in)ebte)ness to it on the *art of a )e*ositor; Ho"e%er' *rior to the ailing of notice of )ishonor A "ithout a"aiting an& action b& ullas' the ban( a)e use of the one& stan)ing in his account to a(e goo) for the treasur& "arrant; ullas "as erel& an in)orser A notice shoul) actuall& ha%e been gi%en to hi in or)er that he ight *rotect his interests;
cceleration Clause
If clause is o*tional to the hol)er,
The bringing of an action against the a(er an) in)orsers constitutes a %ali) e+ercise of o*tion an) a %ali) notice of )ishonor
If clause is autoatic,
Notice of )ishonor ust be gi%en at once Not sufficient to gi%e it u*on coenceent of action
Section 9 an) 9 NI!
For an) Contents
Sec. 93. When notice sufficient .
% written notice need not be signed, and an insufficient written notice may be supplemented and validated by verbal communication. % misdescription of the instrument does not vitiate the notice unless the party to whom the notice is given is in fact misled thereby.
Sec. 94. Form of notice. –
*he notice may be in writing or merely oral and may be given in any terms which sufficiently identify the instrument and indicate that it has been dishonored by nonacceptance or nonpayment. 0t may in all cases be given by delivering it personally or through the mails.
5"6*E7 The "or) a& in this section has been construe) to ean ust;$
For of Notice
Notice of )ishonor a& be in "riting or erel& oral; Notice a& thus be gi%en b& tele*hone' *ro%i)e) it be clearl& sho"n that the *art& notifie) "as reall& counicate) "ith' that is full& i)entifie) as the *art& at the recei%ing en) of the line; Notice a& also be sent b& telegra*h;
Notice ust be in a language that "ill infor the a))resse) *art& that the instruent has been )ul& *resente) #Ca*os$
#ontents of the notice /hether "ritten or oral' the notice ust set forth, #1$ The i)entit& of the instruent< #6$ The fact that it has been )ishonore) b& nonacce*tance or non-*a&ent< an) #@$ stateent that the *art& gi%ing notice inten)s to loo( to the *art& a))resse) for *a&ent;
3o)es of )eli%er&
.ersonal ser%ice There ust be actual *ersonal ser%ice' or n or)inar& intelligent an) )iligent effort to a(e *ersonal ser%ice
Through the ails
Through the tele*hone .art& to be notifie) ust be full& i)entifie) as the *art& at the recei%ing en) of the line #Ca*os$
/hen notice is still sufficient #Section 9$
ENER! R2!E, Defect in notice shall not in%ali)ate it;
Section 9 conte*lates the follo"ing cases,
!ac( of signature or insufficienc& Failure to state in the notice of )ishonor the )ate of a(ing an) aturit& of a note' an) the nae of the *a&ee )oes not in%ali)ate the notice;
3is)escri*tion of instruent Neither )oes is)escri*tion of the instruent' such as' as to the aount' or the )ate' or the naes of the *arties' or the )ate of aturit&' or other )efect %itiates the notice unless it islea)s the *art& to "ho it is sent;
!ac( of stateent of recourse to in)orser notice of )ishonor nee) not state that the sen)er loo(s to the in)orser for *a&ent' "here it a& be inferre) that the in)orsee loo(s to the in)orser' an) no other inference coul) reasonabl& be )ra"n fro the notice;
