1. Brief History of Negotiable Instruments Law
The law on negotiable instruments was then embedded in the English common law and was codified in England in 1882 where it was known as the Bills of Exchange Act.
In the United States, the codification of the Negotiable Instruments Law is found in the California Code of 1372. It was only in 1895 that the uniformity of these laws in the US was promoted at the request of the American bar Association.
2. History of Negotiable Instruments Law in the Philippines
The Negotiable Instruments Law of the Philippines was patterned after the draft approved by the Commissioners on Uniform State Laws in the United States. It was enacted as Act No. 2031 on February 3, 1911 and took effect ninety days after its publication in the Official Gazette of the Philippine Islands. Which was on March 4, 1911, and therefore, the Act took effect on June 2, 1911.
3. What are negotiable instruments and its examples?
A negotiable instrument is a written contract for the payment of money, by its form intended as 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.
There are three kinds of negotiable instruments, namely:
a. promissory note – an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand, or at a fixed or determinable future time, a sum certain in money to order or to bearer.
b. bill of exchange – 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.
c. check – a bill of exchange drawn on a bank payable on demand.
e.g. Personal check, manager’s/cashier’s check, memorandum check, crossed check
4. Functions and uses of negotiable instruments:
Negotiable Instrument operates as a substitute for money; as a means of creating and transferring credit; facilitates the sale of goods; increases the purchasing medium in circulation.
5. Instruments that are negotiable but not covered by the Negotiable Instruments Law:
Instruments which are negotiable but not covered by the Negotiable Instruments Law are document of title, letter of credit, certificate of stock, pawn ticket, treasury warrant, and postal money order.
6. What is a legal tender?
A legal tender is that which a debtor may compel a creditor to accept in payment of a debt.
Only notes and coins issued by the Banko Sentral ng Pilipinas are considered legal tender. Checks are not considered legal tender, but a check that has been cleared and credited to the account of the creditor shall be equivalent to delivery to the creditor of cash in an amount equal to the amount credited to his account.
Act. No. 2031
Section 1. Form of negotiable instruments. – An instrument to be negotiable must conform to the following requirements:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a sum certain in money;
(c) Must be payable on demand, or at a fixed or determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty.