NEGO MIDTERMS SAMPLEX 1

1. A. (2) Acceptor for honor

2. (10) No. Jun cannot require the drawee bank to return to him to 30 000.

The drawee bank is relieved from liability on account of the drawer’s negligence. Even if it has been Jun’s usual practice to
sign blank checks, instructing his secretary to fill them as payment of his obligations, still, the risk of his secretary using these
checks for her own benefit is something which Jun could have foreseen.

The bank has the right to presume the regularity of the check, when the defect is not apparent upon its face. Therefore, in the
absence of proof of negligence on the part of the bank, it cannot be held liable.

*Sir’s note: Sec. 14

3. (6) No. the bank should not comply with the order of Pancho to recredit his account. This is because it was not Pancho’s
signature that was forged. What was forged was the indorser’s signature. Gerard’s recourse is against Bong and the acceptor
bank. This is because the acceptor admits the existence of the payee, and the genuineness of his client’s signature.

*note: forgery, effect; bank did not comply with the order of the drawer

4. (8) Isobel can set up the defense of vicions force, which is a real defense which is a defense which can be set up even against
a holder in due course. This is because Isobel affixed her signature on a piece of paper on account of her fear of losing her
cousin (?? Bad handwriting)

She can also set up the defense of fraud in inducement (note: ?) because Pete cannot be regarded as innocent because of
the fact that he went with Brad to Isobel. Therefore, he must have known that Isobel only intended to pay 10 000. Pete,
therefore, is not a holder in due course since he did not take the instrument in good faith. Therefore, fraud in inducement (note:
?) can be set up against him even if it is only a personal defense.

5. (9) PN is correct in dishonoring the promissory note. In the case at bar, there was an incomplete and undelivered instrument.
Such instrument cannot pass title to any holder even in the hands of a holder in due course.

Therefore, the defense of XP, having no participation or knowledge about the pilferage and alteration is untenable.

6. (7) Yes, Lito is liable to pay Billy under the Shelter Rule. This rule provides that if the holder acquired the title to the instrument
from a holder in due course, (note: and not a party to the fraud or illegality) then he has a good title to it as a holder in due
course.

In the case at bar, Billy, although he had knowledge of the infirmity, acquired the instrument from D, a holder in due course
since he had no knowledge of the infirmity of the instrument. However, Lito is only liable to pay 20 000 as it is the only
authorized amount.

7. (9) Lyric Bank is liable to Marlon for the proceeds of the 1. Which he placed in the money market. This is because Lyric Bank
had been negligent in ascertaining its client’s identity. Lyric Bank, on the other hand, can proceed against Yamaha because
Yamaha guarantees “all prior endorsements and/or lack of endorsement” as stamped on the check. Yamaha then may
proceed against its depositor, Ingrid.
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1. A. (2)
(a) Principal
(b) Usage of trade name
(c) Persons under Sec 15 (Incomplete & undelivered)
(d) Drawee-Acceptor

B. (3) The holder is not deemed holder in due course when the instrument is payable on demand is negotiated on an
unreasonable length f time after its issue because the rationale behind the payable on demand is for the benefit of the payee
which he can demand payment any time from maker/drawer; if it is negotiated on an unreasonable length of time, it loses its
function that it is payable on demand.

2. (8)
Oct 8, 2019

I promise to pay to Julia or to order of TV set of 10 000 with interest of 6% per annum, to be paid on or before Oct 8, 2021.
WITH COSTS OF COLLECTION OR ATTORNEY’S FEE IN CASE PAYMENT SHALL NOT BE MADE AT MATURITY

(Sgd.) Gerald

3. (10) No, the action will not prosper against Cheng to recover half of the amount paid by Kenneth See to Ang Pogi Co.

In accommodation party, the parties w/c are the co-makers are jointly and severally liable to the holder of the instrument. This,
the holder may ask for full payment to any of the accommodation parties, which is generally same w/ surety. However, the
party who made payment may only ask for reimbursement if:

a. He made payment by judicial demand

In this case, there is no showing that Kenneth made payment by virtue of judicial demand or that Bob is insolvent, thus his
proper recourse is to demand payment from Bob.

4. (8) Yes. Crisostomo may still proceed against Richard for the note. Under the NIL, the holder of the note is presumed to be a
holder in due course. And the person who is alleging that the holder is not a holder in due course has the burden of proof. The
allegation that Crisostomo is not a holder in due course because Juanito did not indorse the note is of no moment because the
note may be indorsed in blank or by special. In this case, Juanito indorsed the note to Crisostomo in blank, thus, mere delivery
is sufficient.

Since Crisostomo is a holder in due course, he is free from personal defenses, that in this case, the lack of consideration.
Hence, Crisostomo may proceed against Richard for the note.

5. (8) TH is a holder in due course. The promissory note is complete and regular on its face among other requirements of Sec 52.
The note being not dated, no place of payment & no consideration is of no moment because under the NIL, the
aforementioned will not invalidate the instrument, because they are not required under Sec 1 of the NIL for the validity. Thus,
the note will be dated on August 1, 2019 when the payee acknowledged the note, the place of payment will be in the
residence of MK, where he signed the note, and the consideration, even though not stated, does not mean that there is no
consideration following the Civil Code. Thus, TH has the right & protection under the NIL of a holder in due course.

6. (10) Y has the right to enforce payment against M even though there is no date for payment stated on the note, it is still
negotiable because it is payable on demand, upon the presentment of the note for payment.

On the ground of illegality of the consideration, Y is not subject to personal defenses because he is a holder in due course.
Under the NIL, there is a presumption that every holder is a holder in due course. Being a holder in due course, Y is free from
personal defense, like in this case, the illegality of consideration. Hence. Y can enforce payment against M.
NEGO MIDTERMS SAMPLEX 3

1. A. (5) No, the instrument is not negotiable. It lacks a requirement under Sec 1 of the NIL. The requirement lacking is that it
should be payable to bearer or order. In the case at bar, it is payable solely to J which made it a non-negotiable instrument.

B. (3) A holder ceases to be a holder in due course when an instrument payable on demand is issued after an unreasonable
length of time for the reason of it becoming overdue. One of the conditions to be taken by a holder is the fact that he became a
holder before it was overdue, thus he will lack one of the conditions required.

Besides, even if when payable on demand, the overdue of an instrument is relative as to the nature of the business, value of
the negotiable instrument, and other factors, it would be questionable, even to a layman, as to why the instrument was not
negotiated immediately.

2. (10)
Sept 10, 2017
I, Ferdinand Aquino, promises to pay Emilio Magsaysay or to his order, the sum of 50 000, to be paid on 5 installments, 10
000 each installment, on every 1st of a month starting January 1st of 2018 until May 1, 2018.

This note came from the debt I owe Emilio Magsaysay, as payment for his services in renovating my house last August 15,
2017.

In case of any costs or even attorney’s fees, if in default, I shall bear both expenses.

Sgd. Ferdinand Aquino

3. A. (8) Yes, Y has the right to enforce payment against P. The non-statement of the date does not affect the negotiability of the
instrument. It can be considered as payable upon sight which means that it shall be payable upon presentment of the holder.

Neither is the negotiability affected with the illegality of consideration the NIL states the form required for an instrument to be
negotiable, particularly in Sec 1. It cannot be found there that the consideration needs to be valid for the instrument to be
negotiable, hence, the illegality of the consideration is immaterial to the negotiability.

B. (5) It will not change my answer upon the negotiability of the note. However, it can be said that Y now cannot be a holder in
due course. As I have mentioned earlier, the requisites given in Sec 1 of the NIL are the ones to be considered if an instrument
is negotiable or not. This list is exclusive. Therefore, knowledge of Y in the defect of the title of the person negotiating it or of
the infirmity of the note does not affect the negotiability of an instrument as they are immaterial

(*note: but the question is, can Y collect, not whether PN is negotiable)

4. (6) All finance is correct. Sec 52 of the NIL states that a holder in due course is a holder who took an instrument under the ff
conditions:
a. That it is complete and regular on its face
b. That he became the holder of it before it became overdue, without notice of it being previously dishonored, if such was the
fact;
c. That he took it in good faith and for value;
d. That at the time it was negotiated to him, he had no notice of any infirmity on the instrument or defect on the title of the
person negotiating it.

All finance took the instrument under the above conditions which makes it a holder in due course, thus only real defenses can
be raised on him. personal defenses cannot be used against him.

5. (9) Fae can collect the amount of 66 500.

In case of ambiguity as such in the case at bar, the NIL lays out the rules to be followed in interpreting instruments.

For written portions over printed ones, the former prevails, thus Fae is the payee.

For ambiguity on the amount between words and numbers, the former prevails. However, there is an exception. If the words
are the ones ambiguous, the numbers shall prevail. Hence, 66 500 is correct.

For the rule between the solidarity of the obligation of the makers, if it contains the words “I” or “I/We”, it shall be construed as
a solidary obligation.