Law on Negotiable Instruments

Section 80-85

by: Camille Joy M. Velisano

SECTION 80: Where presentment not required to charge the

indorser

• Where the instrument was made or accepted for his accommodation and he has no reason to expect that the instrument will be paid if presented

• Example: Dianne makes a note for accommodation of Jenny, payee. Jenny indorses to Divine, Divine to Kathleen, Kathleen to Brum, Brum to Andy. Andy need not make presentment for payment to Dianne, in order to charge Jenny, indorser. The reason is that as Jenny did not give value to Dianne, Jenny has no reason to expect that the note will be paid upon presentment. But Divine, Kathleen and Brum are discharged as no presentment has been made.

SECTION 81: WHEN DELAY IN MAKING PRESENTMENT IS

EXCUSED• When the delay is caused by circumstances beyond the control of the holder and not imputable to his default, misconduct or negligence.

• When the cause of delay ceases to operate, presentment must be made with reasonable diligence.

• Excusable circumstances- those events which could not be foreseen or which though foreseen, are inevitable.

• Excuses for delay:• Overwhelming calamity• Malignant disease• Interruption of trade negotiations by

political circumstances• War between maker’s and holder’s

countries• Suspension of commercial intercourse

by public enemy• Occupation of country where parties

reside or where instrument is payable• Public and positive interdictions and

prohibitions of state• Impracticability of finding maker or his

place of residence

SECTION 82: WHEN PRESENTMENT FOR PAYMENT IS EXCUSED• Where after the exercise of

reasonable diligence, presentment cannot be made;

• Where the drawee is a fictitious person;

• By waiver of presentment, express or implied

Reasonable diligence exercisedReasonable diligence implies active search. In other words, the holder must take all steps likely to discover the whereabouts of the party whom presentment is to be made.

Where drawee is ficititious Reason for not requiring presentment – There is no one to whom presentment is to be made.

Implied waiver may be manifested by any language or conduct or agreement between the parties reasonably calculated to leas the holder to believe that presentment is waived or to mislead or prevent him from treating the bill as he otherwise would.

SECTION 83: WHEN INSTRUMENT DISHONORED BY NON-PAYMENT

• It is duly presented for payment and payment is refused or cannot be obtained; or

• Presentment is excused and the instrument is overdue and unpaid

• When payment refused, etc- requisites:

1. The instrument must be duly presented for payment; and

2. Payment is either effused or cannot be obtained.

Example: Joanna holder makes presentment for payment to Gotib, acceptor and Gotib refuses to pay or Joanna cannot obtain payment as although Gotib is willing, he has no money to pay or he fails to pay on the date of maturity but promises to pay 5 days later.

When presentment excused- requisites:

• Presentment for payment must be excused

• The instrument be overdue; andIt is unpaid

Example: Supposes that presentment is waived and the bill is due on March 1,2014. The bill is deemed dishonored when on March 2, 2014, it is not paid even i f the holder did not make presentment. But if presentment is not excused, the bill is not dishonored by the mere fact that the bill is overdue and unpaid.

SECTION 84: LIABILITY OF PERSON SECONDARILY LIABLE

• When the instrument is dishonored by non-payment, an immediate right of recourse to all parties secondarily liable thereon accrues to the holder.

• The persons secondarily liable on the instrument cease to be secondarily liable after dishonor of the instrument by non-payment. They become principal debtors and their liability is the same as the original obligors.

SECTION 85:TIME OF MATURITY• Rule: Every negotiable instrument is

payable at the time fixed therein without grace.

• Payment where instrument payable at a fixed time

• Example: If the instrument is payable on June 16, 2014, presentment must be made on that date and no grace is to be granted.

• Q: When should presentment be made if June 16, 2014 falls on a Sunday or a holiday?

• A: It is payable on Monday or the succeeding business day. Presentment therefore must be made on that succeeding business day.

• Rule where the instrument is falling due or becoming payable on a Saturday

• Must be presented for payment on the next succeeding business day except that instruments payable on demand may, at the option of the holder, be presented for payment 12 o’clock noon on Saturday when that entire day is not a holiday.

• Falling due on a Saturday, meaning -- When an instrument is payable on a Saturday, it is said to be falling due on a Saturday

• Becoming payable on a Saturday

Example: Where a bill is payable on June 16, 2014, a Friday and if it is a holiday, the bill is said to have become payable on a Saturday

• When presentment is to be made where the instrument falls due on a Saturday or becomes payable on a Saturday

• Where the instrument is payable on a fixed determinable future time –

The presentment must be made on the next succeeding business day

• Where the instrument is payable on demand

The presentment must be made on Saturday, June 17, 2014 before 12 noon or on Monday June 19, 2014, at the option of the holder

 

THANK YOU