Negotiable Instruments Law

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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.

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Section 1. Form of negotiable instruments.

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Sec. 2. What constitutes certainty as to sum.

The sum payable is a sum certain within the meaning of this Act, although it is to be paid:

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(a) with interest; or

(b) by stated installments; or

(c) by stated installments, with a provision that, upon default in payment of any installment or of interest, the whole shall become due; or

(d) with exchange, whether at a fixed rate or at the current rate; or

(e) with costs of collection or an attorney's fee, in case payment shall not be made at maturity.

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Sec. 5. Additional provisions not affecting negotiability. - An instrument which contains an order or promise to do any act in addition to the payment of money is not negotiable. But the negotiable character of an instrument otherwise negotiable is not affected by a provision which:

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(a) authorizes the sale of collateral securities in case the instrument be not paid at maturity; or

(b) authorizes a confession of judgment if the instrument be not paid at maturity; or

(c) waives the benefit of any law intended for the advantage or protection of the obligor; or

(d) gives the HOLDER an election to require something to be done in lieu of payment of money.

But nothing in this section shall validate any provision or stipulation otherwise illegal.

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Sec. 36. When indorsement restrictive.

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An indorsement is restrictive which either:

(a) Prohibits the further negotiation of the instrument; or

(b) Constitutes the indorsee the agent of the indorser; or

(c) Vests the title in the indorsee in trust for or to the use of some other persons.

But the mere absence of words implying power to negotiate does not make an indorsement restrictive.

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Sec. 37. Effect of restrictive indorsement; rights of indorsee. - A restrictive indorsement confers upon the indorsee the right:

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(a) to receive payment of the instrument;

(b) to bring any action thereon that the indorser could bring;

(c) to transfer his rights as such indorsee, where the form of the indorsement AUTHORIZES him to do so.

But all subsequent indorsees acquire only the title of the first indorsee under the restrictive indorsement.

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Sec. 52. What constitutes a holder in due course.

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A holder in due course is a holder who has taken the instrument under the following conditions:

(a) That it is complete and regular upon its face;

(b) That he became the holder of it before it was overdue, and without notice that it has been 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 in the instrument or defect in the title of the person negotiating it.

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Sec. 57. Rights of holder in due course.

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A holder in due course holds the instrument free from any DEFECT OF TITLE of prior parties,
and free from DEFENSES available to prior parties among themselves,
and may ENFORCE PAYMENT of the instrument for the full amount thereof against all parties liable thereon.

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Sec. 60. Liability of maker.

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The maker of a negotiable instrument, by making it, engages that he will pay it according to its TENOR, and admits the EXISTENCE of the payee and his then CAPACITY to indorse.

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Sec. 61. Liability of drawer.

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The drawer by drawing the instrument admits the EXISTENCE of the payee and his then CAPACITY to indorse; and engages that, on DUE PRESENTMENT, the instrument will be accepted or paid, or both, according to its tenor, and that if it be DISHONORED and the NECESSARY PROCEEDINGS on dishonor be duly taken, he will pay the amount thereof to the holder or to any subsequent indorser who may be compelled to pay it.

But the drawer may insert in the instrument an express stipulation negativing or limiting his own liability to the holder.

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Sec. 62. Liability of acceptor.

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The acceptor, by accepting the instrument, engages that he will pay it according to the TENOR OF HIS ACCEPTANCE and admits:

(a) The EXISTENCE of the drawer, the GENUINENESS of his signature, and his CAPACITY and authority to draw the instrument; and

(b) The EXISTENCE of the payee and his then CAPACITY to indorse.

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Sec. 65. Warranty where negotiation by delivery and so forth.

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Every person negotiating an instrument by DELIVERYor by a QUALIFIED INDORSEMENT warrants:

(a) That the instrument is genuine and in all respects what it purports to be;

(b) That he has a good title to it;

(c) That all prior parties had capacity to contract;

(d) That he has no knowledge of any fact which would impair the validity of the instrument or render it valueless.

But when the negotiation is by delivery only, the warranty extends in favor of no holder other than the IMMEDIATE TRANSFEREE.

The provisions of subdivision (c) of this section do not apply to a person negotiating public or corporation securities other than bills and notes.

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Sec. 66. Liability of general indorser. - Every indorser who indorses without qualification, warrants to all subsequent holders in due course:

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(a) The matters and things mentioned in subdivisions (a), (b), and (c) of the next preceding section; and
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[(a) That the instrument is genuine and in all respects what it purports to be;

(b) That he has a good title to it;

(c) That all prior parties had capacity to contract;]
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(b) That the instrument is, at the time of his indorsement, valid and subsisting;

And, in addition, he engages that, on due presentment, it shall be accepted or paid, or both, as the case may be, according to its TENOR, and that if it be dishonored and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it.

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Sec. 72. What constitutes a sufficient presentment.

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Presentment for payment, to be sufficient, must be made:

(a) By the holder, or by some person authorized to receive payment on his behalf;

(b) At a reasonable hour on a business day;

(c) At a proper place as herein defined;

(d) To the person primarily liable on the instrument, or if he is absent or inaccessible, to any person found at the place where the presentment is made.

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Sec. 88. What constitutes payment in due course.

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Payment is made in due course when it is made AT OR AFTER the maturity of the payment to the HOLDER thereof in GOOD FAIRH and WITHOUT NOTICE that his title is defective.

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Sec. 119. Instrument; how discharged.

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A negotiable instrument is discharged:

(a) By payment in due course by or on behalf of the principal debtor;

(b) By payment in due course by the party accommodated, where the instrument is made or accepted for his accommodation;

(c) By the intentional cancellation thereof by the holder;

(d) By any other act which will discharge a simple contract for the payment of money;

(e) When the principal debtor becomes the holder of the instrument at or after maturity in his own right.