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DAY 4

Transfer v. Negotiation v. Assignment

Transfer is the broader concept.

Negotiation – the transferee has the POTENTIAL to acquire a better right or title than his
transferor. The transferee will not be subject to the defenses set up by prior parties. (see Puget
Bank v. Washington Paving Co.) Negotiation is a species of transfer.

Assignment – the assignee merely “STEPS INTO THE SHOES” of the assignor and cannot have a
better right than the latter. The assignee is open to all the defenses available against the assignor.

Things to establish:
1. That the instrument is negotiable.
-if it complies with the requisites.

Effect of Acceleration Clauses


GR: Does not destroy negotiability.
EX: If at the option of the holder and he has control over the happening of the condition.

PBB v. Sps. Rodriguez


-expansion of the “fictitious payee rule.”
DAY 5

What must be certain in a negotiable instrument?


1. the obligation/promise
2. the sum
3. the date of maturity
4. the parties
5. its negotiability

This certainty makes a negotiable instrument a good substitute for money.

Sec. 5

DAY 6
Bedrock/hierarchy/layers of negotiable instruments
1. Establish requisites
2. Negotiation
3. Holder in due course

Delivery must be accompanied by an intent to transfer (Sec. 16)

An issuance can be a negotiation.

Definition of terms (Sec. 191)

Payee is too close to the maker preventing him from being a holder in due course.

A holder does not necessarily mean a holder in due course.

Transfer of title is the characteristic of assignment that is found in negotiation.

Accumulation of secondary contracts


Indorsement is a contract in itself. Happens when the negotiable instrument passes from one
person to another and so on.

Indorsing a bearer instrument – added layer of security. Endorser assumes greater liability.

Once a bearer instrument, always a bearer instrument.


DAY 7
Conditions to be fulfilled in case of any indorsement:
1. Presentment
2. Dishonor
3. Notice of dishonor

A negotiable instrument is truly unconditional or absolute.

Transfer of a negotiable instrument which has a restriction as to its further negotiation would be
merely an assignment.

Clearing endorsement – in forwarding negotiable instruments for collection, bankcs customarily


use the indorsement “Prior indorsements and/or lack of indorsements guaranteed.”

Presentment – when the negotiable instrument is presented by the holder to the drawee.

Sec. 49 is an equitable assignment.

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