A Instrumentos de evaluación

own right.

Short version (for memorization): 1. Payment by principal debtor

3. Intentional cancellation if instrument by holder 4. Any act which discharges a contract

5. Reacquisition by principal debtor in his own right.

Note: While the various causes of discharging a simple contract such as payment, condonation, etc. will operate to discharge the instrument as between the immediate parties, they will NOT in the hands of a HOLDER IN DUE COURSE.

What is discharge of an instrument? It is the release of all parties, whether primary or secondary, from the obligation on the instrument. NOTE: It renders the instrument non-negotiable. When may a persons secondarily

liable on the instrument be discharged?

Section 120:

1. By any act which discharges the instrument 2. By the intentional cancellation of his signature

by the holder

3. By the discharge of a prior party

4. By a valid tender or payment made by a prior party

5. By a release of the principal debtor unless the holder's right of recourse against the party secondarily liable is expressly reserved

6. By any agreement binding upon the holder to extend the time of payment or to postpone the holder's right to enforce the instrument unless made with the assent of the party secondarily liable or unless the right of recourse against such party is expressly reserved.

In summary:

1.Any act which discharges the instrument 2.Intentional cancellation of signature 3.Discharge of prior party by act of holder 4.Valid tender of payment

5.Release of the principal debtor by act of holder 6.Extension of time of payment

May a party reserve his right of

For example:

M (maker) – P (payee) – indorsed to A – B – C (present holder).

C releases M – automatically, all subsequent parties are discharged. Pero kung C released M, but expressly reserved his right against P, A and B, they are not discharged.

Pero, ang effect ng reservation ni C ay implied reservation ng mga subsequent parties of their right of against the PRINCIPAL DEBTOR.

Kaya, sina P, A, B pwede ding i-held liable si M. What are the rights of the party who

discharges instrument? Section 121:

Where the instrument is paid by a party

secondarily liable thereon, it is not discharged; but the party so paying it is remitted to his former rights as regard all prior parties, and he may strike out his own and all subsequent indorsements and again negotiate the instrument, except:

1.Where it is payable to the order of a third person and has been paid by the drawer; and 2.Where it was made or accepted for

accommodation and has been paid by the party accommodated.

What is the meaning of the first part of Section 121: “Where the

instrument is paid by a party

secondarily liable thereon, it is not discharged x x x”?

Payment at or after maturity by a party secondarily liable does not discharge the instrument. It only cancels his own liability and that of parties subsequent to him.

Example:

R is a drawer of a bill addressed to W, the drawee, and payable to the order of P. The bill is accepted by W and indorsed by P, A, B and C.

R – P – A – B – C

but it discharges HIM, B and C, kasi yung dalawa are whom

he is personally liable with. What is the meaning of the this part

(Section121): but the party so paying it is remitted to his former rights as regard all prior parties, and he may strike out his own and all

subsequent indorsements and again negotiate the instrument, except:

1. Where it is payable to the order of a third person and has been paid by the drawer; and

2. Where it was made or accepted for accommodation and has been paid by the party accommodated?

Based on the above example: A is remitted

(released from) to his former rights as regards all prior parties na sina P and R, and pwede niyang istrike-out yung indorsement niya kina B and C and pwede niya i-RENEGOTIATE ang instrument (kasi siya ang nagbayad).

Pero kung si R ang nagbayad ng instrument, hindi allowed yung previous statement kasi the

exceptions will apply kung siya ang DRAWER and ACCOMMODATED PARTY (Eh di ba sa example, R is the drawer? Kaya di pwede).

What are the effects if the holder

renounces the instrument? Section 122:

The holder may expressly renounce his rights against any party to the instrument before, at, or after its maturity.

An absolute and unconditional renunciation of his rights against the principal debtor made at or after the maturity of the instrument

discharges the instrument.

But a renunciation does not affect the rights of a holder in due course without notice. A renunciation must be in writing unless the instrument is delivered up to the person primarily liable thereon.

Give example of this: But a

renunciation does not affect the rights of a holder in due course without notice.

M – P – A – B – C – D Si D ang present holder.

D renounces his right against M, automatically, discharged ang mga kasunod na parties: M, P, A, B, C

M – P – A – B – C – D - - - - E

If D negotiates the instrument to E, a holder in due course without notice, E can still enforce the instrument.

When may an instrument be

renounced? In favor of secondary party – BEFORE, DURING, AFTER maturity In favor of principal debtor – DURING and AFTER maturity.

What are other things that should be

remembered in Section 122? Renunciation must be made unconditionally and absolutely. Renunciation is a personal defense.

What is the rule on cancellations if it is cancelled or made unintentionally? Who has the burden of proof?

Section 123:

A cancellation made unintentionally or under a mistake or without the authority of the holder, is inoperative but where an instrument or any signature thereon appears to have been

cancelled, the burden of proof lies on the party who alleges that the cancellation was made unintentionally or under a mistake or without authority.

INOPERATIVE kapag:

a. Made unintentionally

b. By mistake or through fraud c. Without authority

What is the effect of alteration? Section 124:

Where a negotiable instrument is materially altered without the assent of all parties liable thereon, it is avoided, except as against a party who has himself made, authorized, or assented to the alteration and subsequent indorsers.

But when an instrument has been materially altered and is in the hands of a holder in due course not a party to the alteration, he may enforce payment thereof according to its original

tenor. What is the effect if alterations are

done by:

- The party/holder?

Generally, the effect of material alteration by the HOLDER will discharge the instrument and all prior parties. Pero NOT discharged ang:

1. party who has himself made

2. party who authorized, or assented to the alteration

3. indorsers who indorsed subsequent to the alteration

Example:

M makes a promissory note for 3,000.00 payable to P or order. P negotiates it to A. A indorsed it to B for 8,000.00 pero nagpaalam siya kay P. B indorsed it to C, then to D.

Halimbawa, D is not a holder in due course. Since di siya holder in due course, hindi siya pwedeng maningil kay M, kahit pa 3,000 (original tenor) ang sisingilin niya.

Kay A siya pwedeng maningil ng 8,000 kasi he is the party who made the alteration.

Pwede ring maningil si D kay P kasi he authorized or assented to the alteration.

Pati na rin sina B and C kasi sila ang mga subsequent indorsers.

What is the effect if alterations are done by a

- Stranger?

Kapag ang alteration ay done by a stranger SPOLIATION ang tawag.

What is the right of the holder in due course against parties who made the alteration?

Pwede siyang maningil sa maker (M) in its original tenor and against prior parties in its altered tenor. Example:

Pwedeng maningil si D kay M pero 3,000.00 lang. Pwede rin siyang maningil kina P, A, B, C ng 8,000.00 if M dishonored the note.

What constitutes a material

alteration? Section 125:

Any alteration which changes: 1. The date;

2. The sum payable, either for principal or interest;

3. The time or place of payment:

4. The number or the relations of the parties; 5. The medium or currency in which payment is

to be made;

6. Or which adds a place of payment where no place of payment is specified, or any other change or addition which alters the effect of the instrument in any respect, is a material alteration.

Define Bill of Exchange. Section 126:

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.

Distinguish Bill of Exchange from Promissory Note.

SEE PAGE 1.

When is promissory note treated like

a BOE? Kapag na-indorse.

When is BOE treated like a

promissory note? Kapag it is accepted.

Kaya, certified check is practically a promissory note kasi the bank is the maker.

What are the different types of bills

of exchange? 1. Draft 2. Trade Acceptance 3. Banker's Acceptance

Bill of Exchange Promissory Note 1. The instrument must contain an “unconditional promise” to pay. 1.The instrument must contain an “unconditional order” made by one person to another to pay it. 2. Parties (3): drawer, drawee, payee or bearer 2.Parties (2): Maker and payee or bearer 3. The issuer: drawer

is only secondarily liable

3.The issuer: maker is primarily liable

4. A bill drawn payable to the drawer’s own order is complete without

indorsement,

provided it has been accepted by the drawee.

4.It is not complete until indorsed by the maker.

5. Presentment is

necessary 5.Presentment is not necessary 6. A bill payable on

demand must be presented for payment within reasonable time from its last negotiation

6.A note payable on demand must be presented for payment within reasonable time from its issue.

4. Check Define draft, Trade Acceptance and

Banker’s Acceptance? Draft - This is the common term of a bill of exchange and used synonymously. A bank draft is a bill of exchange drawn by a bank, issued at the solicitation of a stranger who purchases and pays therefor.

Trade acceptance - A draft or bill of exchange drawn by the seller on the buyer of goods sold and accepted by such purchaser of goods. It is payable to order and with certain maturity. Banker's acceptance - A draft or bill of exchange of which the acceptor is a bank or banker engaged generally in the business of granting banker's acceptance credit. Chiefly used for international trade financing.

Are bills considered “assignment of funds” if it is in the hands of the drawee?

Section 127:

A bill of itself does not operate as an assignment of the funds in the hands of the drawee available for the payment thereof, and the drawee is not liable on the bill unless and until he accepts the same. [Section 127]

What are the statuses of the drawee: a. prior to acceptance or

b. payment/after payment?