2012 June 15.Bills of Exchange
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Transcript of 2012 June 15.Bills of Exchange
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BILLS OF EXCHANGE
Law 114
Law on Negotiable Instruments
Atty. Froilyn P. Doyaoen-Pagayatan
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A. Form and Interpretation
1. Bill of Exchange, Defined (Sec. 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 asum certain in money to order or to bearer.
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A. Form and Interpretation
2. Bill of Exchange vs. Promissory Note:a. As to contents
b. As to number of parties
c. As to liability of drawer and maker
d. Necessity of indorsement if payable to drawers/makers
order
e. Necessity of presentment for acceptance
d. Period for presentment for payment for bill or note
payable on demand
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A. Form and Interpretation
3. Other Types of Bill of Exchange:a. Foreign bill of exchange drawn in one state or country
and payable in another state or country; distinguished
from an inland bill of exchange
b. Bank draft is a bill of exchange drawn by a bankagainst its branch or another bank
Illustration:
To: Citibank Valero
Pay on demand to the order of Bobby Buchoy the amount ofPhp50,000.00.
Mr. Timothy Yap (Sgd.)
Branch Manager
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A. Form and Interpretation
3. Other Types of Bill of Exchange:c. Trade acceptance is a draft or bill of exchange with a
definite date of maturity drawn by the seller on the
purchaser of goods and accepted by the latter by
signing it as drawee. The purpose of the tradeacceptance is to enable the seller to raise money on it
before it is due through indorsement and discount.
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A. Form and Interpretation
3. Other Types of Bill of Exchange:c. Trade acceptance (cont.)
Illustration:
To: Mr. Floyd Mayweather (Buyer)
(Accepted, payment at BPI, Ayala)
Pay to the order of Mr. Manny Pacquiao on 30 June
2012 the amount of Php1,000,000.00.
The transaction giving rise to this instrument is purchase
of goods by the acceptor from the drawer.
Mr. Bradley (Sgd.)
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A. Form and Interpretation
4. Status of Drawee Prior to Acceptance (Sec. 127):A drawee is a mere stranger to the bill drawn on him, until
he accepts the same.
The drawee who refuses to accept the bill of exchange
may be liable to the drawer.
5. Bill Addressed to Several Drawees (Sec. 128): 12
A bill may be addressed to two or more drawees, jointly.
A bill cannot be addressed to two or more drawees in thealternative or in succession. The reason for this is it
becomes difficult to determine the exact date of dishonor of
the bill.
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B. Acceptance
1. Acceptance, Defined (Sec. 132):Acceptance is the signification by the drawee of his
agreement to the order of drawer.
Acceptance should be in writing and signed by the drawee.
Acceptance is usually made by writing across the face ofthe bill the word Accepted with the date of acceptance
and the signature of the drawee.
If the holder requires that acceptance be written on the bill
and the drawee refuses, the holder may treat the bill asdishonored (Sec. 133).
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B. Acceptance
2. Types of Acceptance:a. Acceptance by writing on the bill (Sec. 133)
b. Acceptance by writing on separate instrument (Sec. 134) in
order to bind the acceptor, i) the acceptance must be shown to
the person to whom the instrument is negotiated, ii) such person
must take the bill for value on the faith of such acceptance
c. Unconditional promise to accept (Sec. 135) an unconditional
promise in writing to accept a bill before it is drawn is deemed an
actual acceptance in favor of any person who, upon the faith of
the promise, receives the bill for value.d. Constructive acceptance (Sec. 137) if the drawee destroys a
bill delivered for acceptance or refuses to return it within 24
hours, the bill will be deemed accepted.
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B. Acceptance
3. Period to Accept (Sec. 136):The drawee has a period of 24 hours after presentment to
decide whether or not to accept the bill.
However, acceptance, once given, dates as of the day of
presentment.
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B. Acceptance
4. Incomplete Bill (Sec. 138):A bill may be accepted in the following cases;
a. before it has been signed by the drawer
b. while still incomplete in other respects
c. when it is overdue
d. after it has been dishonored by a previous refusal to
accept or non=payment.
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B. Acceptance
5. Kinds of Acceptance (Sec. 139):a. General acceptance agrees without qualification to the
order of the drawer
b. Qualified acceptance varies in express terms the effect
of the bill as drawn, such as an acceptance which is:i. conditional;
ii. partial;
iii. local, or sets payment only at a particular place;
iv.qualified as to time;
v. the acceptance of only one or more of the drawees,
but not all
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B. Acceptance
6. Rights of Parties if Qualified Acceptance (Sec. 142):a. Holder may refuse to take a qualified acceptance and
may treat the bill as dishonored by non-acceptance
b. Drawer and indorsers if a qualified acceptance is taken
by a holder, the drawer and indorsers are discharged,except if:
i. they express authorized the holder to take a qualified
acceptance;
ii. subsequently assent to a qualified acceptance.Upon notice of a qualified acceptance, the drawer and
indorser must express their dissent, otherwise, they will be
deemed to have assented to the qualified acceptance.
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C. Presentment for Acceptance
1. When Presentment for Acceptance Must be Made (Sec.143):
a. Where the bill is payable after sight, or in any other case,
where presentment for acceptance is necessary in order to
fix the maturity of the instrument; orb. Where the bill expressly stipulates that it shall be
presented for acceptance;
c. Where the bill is drawn payable elsewhere than at the
residence or place of business of the drawee.
* Presentment for acceptance is the production or exhibition
of a bill of exchange to the drawee for his acceptance or
payment.
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C. Presentment for Acceptance
2. When Presentment for Acceptance Not Necessary:a. In the case of bills payable on demand or on sight; or
b. In the case of bills payable at a fixed time after its date;
c. In the case of bills payable upon other certain event.
However, presentment for payment is necessary in order tocharge the drawer and indorsers.
3. Failure to Present for Acceptance (Sec. 144):
The bills required in Section 143 to be presented for
acceptance must be presented for acceptance ornegotiated within a reasonable time. Failure to do so shall
result in the discharge of the drawer and all indorsers.
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C. Presentment for Acceptance
4. How Presentment is Made (Sec. 145):a. Presentment must be made by or on behalf of holder;
b. Presentment must be made at a reasonable hour;
c. Presentment must be made on a business day;
d. Presentment must be made before the bill is overdue;
e. Presentment must be made to the drawee or some person
authorized to accept or refuse acceptance on his behalf.
* Where the bill is addressed to 2 or more drawees who are
not partners, presentment must be made to them all, unlessone has authority to accept or refuse acceptance for all.
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C. Presentment for Acceptance
4. How Presentment is Made (Sec. 145) (cont.): Where the drawee is dead, presentment may be made to
his personal representative.
Where the drawee has been adjudged a bankrupt or an
insolvent or has made an assignment for the benefit ofcreditors, presentment may be made to him or to his
trustee or assignee.
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C. Presentment for Acceptance
5. Where Presentment is Excused (Sec. 148):a. Where the drawee is dead, or has absconded, or is a
fictitious person or a person not having capacity to
contract by bill.
b. Where, after the exercise of reasonable diligence,presentment cannot be made.
c. Where, although presentment has been irregular,
acceptance has been refused on some other ground.
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C. Presentment for Acceptance
6. When a Bill is Dishonored by Non-acceptance (Sec. 149):a. When it is duly presented for acceptance, and such an
acceptance as is prescribed by this Act is refused or
cannot be obtained; or
b. When presentment for acceptance is excused and the billis not accepted.