1. What is a negotiable promissory note?
ANSWER:
When we say negotiable promissory note, it is a type of negotiable instrument wherein it is
made by the maker or the debtor wherein he or she stated in the notes by means of writing the terms
and conditions of where and when does this particular note will be paid by a sum of a certain amount to
creditor or the holder of the note. It is a negotiable instrument because the holder of the note can use
this as a cash or it is good as cash and therefore it can be transferred to another party.
2. What is negotiable bill of exchange?
ANSWER:
Bill of exchange somehow has a same characteristic as to the negotiable promissory note
wherein their main form is that they are written by the maker in case of promissory note and by the
drawee in case of bill of exchange. Bill of exchange is a kind of negotiable instrument that is authorized
meaning it is signed and issued by the drawer to drawee wherein there is a certain amount or fixed
amount that shall be paid to anyone who hold the instrument when the maturity period comes.
3. Roberto issued a bill of exchange for P20,000.00 pay to the order of Pedro naming Wilfredo as
drawee. Ferdie stole the instrument and forged Pedro's signature naming himself as the
indorsee. Ferdie indorsed the instrument to Brenda, and Brenda indorsed it to Cristina. Assume
that Cristina is not a holder in due course. Can Cristina collect from Wilfredo, the drawee of the
bill? Explain your answer.
ANSWER:
Cristina cannot collect from the drawee - Wilfredo the amount of P20,000 because of unlawful
act made by the Ferdie who in turns stole the instrument to Pedro and subsequently act and named
himself as the indorsee of the said bill. She will be unable to collect the bill because before releasing the
fund, the bill will be subject to inspection and subsequently found that the bill is forged. Be guided that
she is not a holder in due course which means she cannot take the paper free from any defense against
it.
4. Suppose in the preceding scenario, Cristina is a holder in due course, can she collect from
Wilfredo? Explain your answer.
ANSWER:
Christina can collect from the drawee – Wilfredo the amount indicated in the paper because she
is now a holder in due course. It means that she can freely take the paper which is also free from any
defense. The main problem here is that the paper comes from unlawful act which is subject for
investigation but the main answer for the question is yes, she can collect it from Wilfredo because she
becomes the ultimate holder of the instrument in due course.
5. Suppose in the case mentioned in no. 3. Brenda did not indorse the bill but instead decided to
collect on it. Who is the party liable from whom she can collect? Justify your answer.
ANSWER:
The party that is liable to pay Brenda is no other than Ferdie because he is the one who
benefitted from the asset of Brenda by issuing the defect bill of exchange. Wilfredo is out of equation
because he is only liable to Pedro because Pedro is the one who deprived from receiving an amount in
exchange for the bill. However, Brenda is able to collect from Wilfredo because she is the ultimate
holder of the Bill of exchange so she is able to collect from it.
6. Mario made a note which says: "I promise to pay Philip or his order the amount of P15,000.00
on April 30, 2022. In case I am not able to pay, I am delivering to him a necklace which he can
sell to answer for the note." Is the note negotiable? Explain your answer.
ANSWER:
The note is not negotiable. From the very essence of the definition of the negotiable instrument,
one of the requirements is that it should be an unconditional promise to may a certain amount of
money. In this case, the promissory note cannot be qualified as negotiable note because the terms is
that the maker shall pay P15,000 and there is a condition that if the maker do not pay, he will deliver a
necklace which is not a money and also this case is conditional in terms of collateral which is the
necklace.
7. There are two promissory notes. The first reads: "I promise to pay Juan or order the sum of
P10,000.00 thirty days after the death of his father" The second reads: "I bind myself to pay
James or order the sum of P10,000.00 thirty days after the death of his father." One is said to
be negotiable and the other is not, which one is negotiable and which is not? Explain your
answer
ANSWER:
The note that is negotiable is the first note which reads: "I promise to pay Juan or order the sum
of P10,000.00 thirty days after the death of his father". It is negotiable because the first note is
pertaining to a promise to pay Juan. One of the criteria to become a negotiable instrument is that, it
should be an unconditional promise to pay debtor. The second note is pertaining to binding himself to
pay only James. It is not negotiable because the debtor is binding himself to pay to James only.
8. The promissory note was made by Miguel. It reads: "I promise to pay to the order of Pacifico
P25,000.00 on sight." Pacifico then indorses the note to Alfred wherein he wrote: "Pay to
Alfred if he becomes an engineer." Is the note negotiable? Why?
ANSWER:
The promissory note made by Miguel to Pacifico is a negotiable note because it has no condition
as to the payment of Miguel to Pacifico and this note can be transferred to anyone because it says that
he will pay Pacifico or the order of Pacifico and therefore it is certain that it is a negotiable instrument.
However, the endorsement of pacific to Alfred is not a negotiable one because it has a condition as to
the payment which is he will be paid when he became an engineer and if he don’t become engineer, he
will not be paid and that’s unfair and conditional so it is not a negotiable instrument.
9. Suppose in the previous case, Alfred presented the note to Miguel. Is Miguel liable to pay
Alfred? Explain.
ANSWER:
Yes. Miguel is not liable to pay Alfred because the note is not a negotiable instrument therefore
it cannot be transferred to anyone and the note can be discharged. However, Miguel is still liable to pay
Pacifico but not Alfred in this case.
10. How do you negotiate an order instrument and a bearer instrument? Explain your answer.
ANSWER:
In an order instrument, it is a kind of negotiable instrument wherein the certain amount of
money can be transferred directly in the name of the individual that will be paid to. On the other hand,
the bearer instrument is the opposite of the order instrument wherein it has no designated individual to
which the payment of the instrument can be made.