Negotiable Instruments Law [Sec. 1-23]

I. FORM AND INTERPRETATION

Section 1. Form of negotiable instruments. – 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.

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:

(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.

Sec. 3. When promise is unconditional. – An unqualified order or promise to pay is unconditional within the meaning of this Act though coupled with:

(a) An indication of a particular fund out of which reimbursement is to be made or a particular account to be debited with the amount; or

(b) A statement of the transaction which gives rise to the instrument.

But an order or promise to pay out of a particular fund is not unconditional.

Sec. 4. Determinable future time; what constitutes. – An instrument is payable at a determinable future time, within the meaning of this Act, which is expressed to be payable:

(a) At a fixed period after date or sight; or

(b) On or before a fixed or determinable future time specified therein; or

(c) On or at a fixed period after the occurrence of a specified event which is certain to happen, though the time of happening be uncertain.

An instrument payable upon a contingency is not negotiable, and the happening of the event does not cure the defect.

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:

(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.

Sec. 6. Omissions; seal; particular money. – The validity and negotiable character of an instrument are not affected by the fact that:

(a) it is not dated; or

(b) does not specify the value given, or that any value had been given therefor; or

(c) does not specify the place where it is drawn or the place where it is payable; or

(d) bears a seal; or

(e) designates a particular kind of current money in which payment is to be made.

But nothing in this section shall alter or repeal any statute requiring in certain cases the nature of the consideration to be stated in the instrument.

Sec. 7. When payable on demand. – An instrument is payable on
demand:

(a) When it is so expressed to be payable on demand, or at sight, or on presentation; or

(b) In which no time for payment is expressed.

Where an instrument is issued, accepted, or indorsed when overdue, it is, as regards the person so issuing, accepting, or indorsing it, payable on demand.

Sec. 8. When payable to order. – The instrument is payable to order where it is drawn payable to the order of a specified person or to him or his order. It may be drawn payable to the order of:

(a) A payee who is not maker, drawer, or drawee; or

(b) The drawer or maker; or

(c) The drawee; or

(d) Two or more payees jointly; or

(e) One or some of several payees; or

(f) The holder of an office for the time being.

Where the instrument is payable to order, the payee must be named or otherwise indicated therein with reasonable certainty.

Sec. 9. When payable to bearer. – The instrument is payable to
bearer:

(a) When it is expressed to be so payable; or

(b) When it is payable to a person named therein or bearer; or

(c) When it is payable to the order of a fictitious or non-existing person, and such fact was known to the person making it so payable; or

(d) When the name of the payee does not purport to be the name of any
person; or

(e) When the only or last indorsement is an indorsement in blank.

Sec. 10. Terms, when sufficient. – The instrument need not follow the language of this Act, but any terms are sufficient which clearly indicate an intention to conform to the requirements hereof.

Sec. 11. Date, presumption as to. – Where the instrument or an acceptance or any indorsement thereon is dated, such date is deemed prima facie to be the true date of the making, drawing, acceptance, or indorsement, as the case may be.

Sec. 12. Ante-dated and post-dated. – The instrument is not invalid for the reason only that it is ante-dated or post-dated, provided this is not done for an illegal or fraudulent purpose. The person to whom an instrument so dated is delivered acquires the title thereto as of the date of delivery.

Sec. 13. When date may be inserted. – Where an instrument expressed to be payable at a fixed period after date is issued undated, or where the acceptance of an instrument payable at a fixed period after sight is undated, any holder may insert therein the true date of issue or acceptance, and the instrument shall be payable accordingly. The insertion of a wrong date does not avoid the instrument in the hands of a subsequent holder in due course; but as to him, the date so inserted is to be regarded as the true date.

Sec. 14. Blanks; when may be filled. – Where the instrument is wanting in any material particular, the person in possession thereof has a prima facie authority to complete it by filling up the blanks therein. And a signature on a blank paper delivered by the person making the signature in order that the paper may be converted into a negotiable instrument operates as a prima facie authority to fill it up as such for any amount. In order, however, that any such instrument when completed may be enforced against any person who became a party thereto prior to its completion, it must be filled up strictly in accordance with the authority given and within a reasonable time. But if any such instrument, after completion, is negotiated to a holder in due course, it is valid and effectual for all purposes in his hands, and he may enforce it as if it had been filled up strictly in accordance with the authority given and within a reasonable time.

Sec. 15. Incomplete instrument not delivered. – Where an incomplete instrument has not been delivered, it will not, if completed and negotiated without authority, be a valid contract in the hands of any holder, as against any person whose signature was placed thereon before delivery.

Sec. 16. Delivery; when effectual; when presumed. – Every contract on a negotiable instrument is incomplete and revocable until delivery of the instrument for the purpose of giving effect thereto. As between immediate parties and as regards a remote party other than a holder in due course, the delivery, in order to be effectual, must be made either by or under the authority of the party making, drawing, accepting, or indorsing, as the case may be; and, in such case, the delivery may be shown to have been conditional, or for a special purpose only, and not for the purpose of transferring the property in the instrument. But where the instrument is in the hands of a holder in due course, a valid delivery thereof by all parties prior to him so as to make them liable to him is conclusively presumed. And where the instrument is no longer in the possession of a party whose signature appears thereon, a valid and intentional delivery by him is presumed until the contrary is proved.

Sec. 17. Construction where instrument is ambiguous. – Where the language of the instrument is ambiguous or there are omissions therein, the following rules of construction apply:

(a) Where the sum payable is expressed in words and also in figures and there is a discrepancy between the two, the sum denoted by the words is the sum payable; but if the words are ambiguous or uncertain, reference may be had to the figures to fix the amount;

(b) Where the instrument provides for the payment of interest, without specifying the date from which interest is to run, the interest runs from the date of the instrument, and if the instrument is undated, from the issue thereof;

(c) Where the instrument is not dated, it will be considered to be dated as of the time it was issued;

(d) Where there is a conflict between the written and printed provisions of the instrument, the written provisions prevail;

(e) Where the instrument is so ambiguous that there is doubt whether it is a bill or note, the holder may treat it as either at his election;

(f) Where a signature is so placed upon the instrument that it is not clear in what capacity the person making the same intended to sign, he is to be deemed an indorser;

(g) Where an instrument containing the word “I promise to pay” is signed by two or more persons, they are deemed to be jointly and severally liable thereon.

Sec. 18. Liability of person signing in trade or assumed name. – No person is liable on the instrument whose signature does not appear thereon, except as herein otherwise expressly provided. But one who signs in a trade or assumed name will be liable to the same extent as if he had signed in his own name.

Sec. 19. Signature by agent; authority; how shown. – The signature of any party may be made by a duly authorized agent. No particular form of appointment is necessary for this purpose; and the authority of the agent may be established as in other cases of agency.

Sec. 20. Liability of person signing as agent, and so forth. – Where the instrument contains or a person adds to his signature words indicating that he signs for or on behalf of a principal or in a representative capacity, he is not liable on the instrument if he was duly authorized; but the mere addition of words describing him as an agent, or as filling a representative character, without disclosing his principal, does not exempt him from personal liability.

Sec. 21. Signature by procuration; effect of. – A signature by “procuration” operates as notice that the agent has but a limited authority to sign, and the principal is bound only in case the agent in so signing acted within the actual limits of his authority.

Sec. 22. Effect of indorsement by infant or corporation.- The indorsement or assignment of the instrument by a corporation or by an infant passes the property therein, notwithstanding that from want of capacity, the corporation or infant may incur no liability thereon.

Sec. 23. Forged signature; effect of. – When a signature is forged or made without the authority of the person whose signature it purports to be, it is wholly inoperative, and no right to retain the instrument, or to give a discharge therefor, or to enforce payment thereof against any party thereto, can be acquired through or under such signature, unless the party against whom it is sought to enforce such right is precluded from setting up the forgery or want of authority.

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Negotiable Instruments Law [Sec. 24-29]

II. CONSIDERATION

Sec. 24. Presumption of consideration. – Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration; and every person whose signature appears thereon to have become a party thereto for value.

Sec. 25. Value, what constitutes. — Value is any consideration sufficient to support a simple contract. An antecedent or pre-existing debt constitutes value; and is deemed such whether the instrument is payable on demand or at a future time.

Sec. 26. What constitutes holder for value. – Where value has at any time been given for the instrument, the holder is deemed a holder for value in respect to all parties who become such prior to that time.
Sec. 27. When lien on instrument constitutes holder for value. — Where the holder has a lien on the instrument arising either from contract or by implication of law, he is deemed a holder for value to the extent of his lien.

Sec. 28. Effect of want of consideration. – Absence or failure of consideration is a matter of defense as against any person not a holder in due course; and partial failure of consideration is a defense pro tanto, whether the failure is an ascertained and liquidated amount or otherwise.

Sec. 29. Liability of accommodation party. – An accommodation party is one who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person. Such a person is liable on the instrument to a holder for value, notwithstanding such holder, at the time of taking the instrument, knew him to be only an accommodation party.

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Negotiable Instruments Law [Sec. 30-50]

III. NEGOTIATION

Sec. 30. What constitutes negotiation. – An instrument is negotiated when it is transferred from one person to another in such manner as to constitute the transferee the holder thereof. If payable to bearer, it is negotiated by delivery; if payable to order, it is negotiated by the indorsement of the holder and completed by delivery.

Sec. 31. Indorsement; how made. – The indorsement must be written on the instrument itself or upon a paper attached thereto. The signature of the indorser, without additional words, is a sufficient indorsement.

Sec. 32. Indorsement must be of entire instrument. – The indorsement must be an indorsement of the entire instrument. An indorsement which purports to transfer to the indorsee a part only of the amount payable, or which purports to transfer the instrument to two or more indorsees severally, does not operate as a negotiation of the instrument. But where the instrument has been paid in part, it may be indorsed as to the residue.

Sec. 33. Kinds of indorsement. – An indorsement may be either special or in blank; and it may also be either restrictive or qualified or conditional.

Sec. 34. Special indorsement; indorsement in blank. – A special indorsement specifies the person to whom, or to whose order, the instrument is to be payable, and the indorsement of such indorsee is necessary to the further negotiation of the instrument. An indorsement in blank specifies no indorsee, and an instrument so indorsed is payable to bearer, and may be negotiated by delivery.

Sec. 35. Blank indorsement; how changed to special indorsement. – The holder may convert a blank indorsement into a special indorsement by writing over the signature of the indorser in blank any contract consistent with the character of the indorsement.

Sec. 36. When indorsement restrictive. – 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.

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

(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.

Sec. 38. Qualified indorsement. – A qualified indorsement constitutes the indorser a mere assignor of the title to the instrument. It may be made by adding to the indorser’s signature the words “without recourse” or any words of similar import. Such an indorsement does not impair the negotiable character of the instrument.

Sec. 39. Conditional indorsement. – Where an indorsement is conditional, the party required to pay the instrument may disregard the condition and make payment to the indorsee or his transferee whether the condition has been fulfilled or not. But any person to whom an instrument so indorsed is negotiated will hold the same, or the proceeds thereof, subject to the rights of the person indorsing conditionally.

Sec. 40. Indorsement of instrument payable to bearer. – Where an instrument, payable to bearer, is indorsed specially, it may nevertheless be further negotiated by delivery; but the person indorsing specially is liable as indorser to only such holders as make title through his indorsement.

Sec. 41. Indorsement where payable to two or more persons. – Where an instrument is payable to the order of two or more payees or indorsees who are not partners, all must indorse unless the one indorsing has authority to indorse for the others.

Sec. 42. Effect of instrument drawn or indorsed to a person as
cashier. – Where an instrument is drawn or indorsed to a person as “cashier” or other fiscal officer of a bank or corporation, it is deemed prima facie to be payable to the bank or corporation of which he is such officer, and may be negotiated by either the indorsement of the bank or corporation or the indorsement of the officer.

Sec. 43. Indorsement where name is misspelled, and so forth. – Where the name of a payee or indorsee is wrongly designated or misspelled, he may indorse the instrument as therein described adding, if he thinks fit, his proper signature.

Sec. 44. Indorsement in representative capacity. – Where any person is under obligation to indorse in a representative capacity, he may indorse in such terms as to negative personal liability.

Sec. 45. Time of indorsement; presumption. – Except where an indorsement bears date after the maturity of the instrument, every negotiation is deemed prima facie to have been effected before the instrument was overdue.

Sec. 46. Place of indorsement; presumption. – Except where the contrary appears, every indorsement is presumed prima facie to have been made at the place where the instrument is dated.

Sec. 47. Continuation of negotiable character. – An instrument negotiable in its origin continues to be negotiable until it has been restrictively indorsed or discharged by payment or otherwise.

Sec. 48. Striking out indorsement. – The holder may at any time strike out any indorsement which is not necessary to his title. The indorser whose indorsement is struck out, and all indorsers subsequent to him, are thereby relieved from liability on the instrument.

Sec. 49. Transfer without indorsement; effect of. – Where the holder of an instrument payable to his order transfers it for value without indorsing it, the transfer vests in the transferee such title as the transferor had therein, and the transferee acquires in addition, the right to have the indorsement of the transferor. But for the purpose of determining whether the transferee is a holder in due course, the negotiation takes effect as of the time when the indorsement is actually made.

Sec. 50. When prior party may negotiate instrument. – Where an instrument is negotiated back to a prior party, such party may, subject to the provisions of this Act, reissue and further negotiable the same. But he is not entitled to enforce payment thereof against any intervening party to whom he was personally liable.

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Negotiable Instruments Law [Sec. 51-59]

IV. RIGHTS OF THE HOLDER

Sec. 51. Right of holder to sue; payment. – The holder of a negotiable instrument may to sue thereon in his own name; and payment to him in due course discharges the instrument.

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

Sec. 53. When person not deemed holder in due course. – Where an instrument payable on demand is negotiated on an unreasonable length of time after its issue, the holder is not deemed a holder in due course.

Sec. 54. Notice before full amount is paid. – Where the transferee receives notice of any infirmity in the instrument or defect in the title of the person negotiating the same before he has paid the full amount agreed to be paid therefor, he will be deemed a holder in due course only to the extent of the amount therefore paid by him.

Sec. 55. When title defective. – The title of a person who negotiates an instrument is defective within the meaning of this Act when he obtained the instrument, or any signature thereto, by fraud, duress, or force and fear, or other unlawful means, or for an illegal consideration, or when he negotiates it in breach of faith, or under such circumstances as amount to a fraud.

Sec. 56. What constitutes notice of defect. – To constitutes notice of an infirmity in the instrument or defect in the title of the person negotiating the same, the person to whom it is negotiated must have had actual knowledge of the infirmity or defect, or knowledge of such facts that his action in taking the instrument amounted to bad faith.

Sec. 57. Rights of holder in due course. – 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.

Sec. 58. When subject to original defense. – In the hands of any holder other than a holder in due course, a negotiable instrument is subject to the same defenses as if it were non-negotiable. But a holder who derives his title through a holder in due course, and who is not himself a party to any fraud or illegality affecting the instrument, has all the rights of such former holder in respect of all parties prior to the latter.

Sec. 59. Who is deemed holder in due course. – Every holder is deemed prima facie to be a holder in due course; but when it is shown that the title of any person who has negotiated the instrument was defective, the burden is on the holder to prove that he or some person under whom he claims acquired the title as holder in due course. But the last-mentioned rule does not apply in favor of a party who became bound on the instrument prior to the acquisition of such defective title.

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Negotiable Instruments Law [Sec. 60-69]

V. LIABILITIES OF PARTIES

Sec. 60. Liability of maker. – 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.

Sec. 61. Liability of drawer. – 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.

Sec. 62. Liability of acceptor. – 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.

Sec. 63. When a person deemed indorser. – A person placing his signature upon an instrument otherwise than as maker, drawer, or acceptor, is deemed to be indorser unless he clearly indicates by appropriate words his intention to be bound in some other capacity.

Sec. 64. Liability of irregular indorser. – Where a person, not otherwise a party to an instrument, places thereon his signature in blank before delivery, he is liable as indorser, in accordance with the following rules:

(a) If the instrument is payable to the order of a third person, he is liable to the payee and to all subsequent parties.

(b) If the instrument is payable to the order of the maker or drawer, or is payable to bearer, he is liable to all parties subsequent to the maker or drawer.

(c) If he signs for the accommodation of the payee, he is liable to all parties subsequent to the payee.

Sec. 65. Warranty where negotiation by delivery and so forth. — Every person negotiating an instrument by delivery or 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.

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

(a) The matters and things mentioned in subdivisions (a), (b), and (c) of the next preceding section; and

(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.

Sec. 67. Liability of indorser where paper negotiable by delivery. — Where a person places his indorsement on an instrument negotiable by delivery, he incurs all the liability of an indorser.

Sec. 68. Order in which indorsers are liable. – As respect one another, indorsers are liable prima facie in the order in which they indorse; but evidence is admissible to show that, as between or among themselves, they have agreed otherwise. Joint payees or joint indorsees who indorse are deemed to indorse jointly and severally.

Sec. 69. Liability of an agent or broker. – Where a broker or other agent negotiates an instrument without indorsement, he incurs all the liabilities prescribed by Section Sixty-five of this Act, unless he discloses the name of his principal and the fact that he is acting only as agent.

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Negotiable Instruments Law [Sec. 70-88]

VI. PRESENTATION FOR PAYMENT

Sec. 70. Effect of want of demand on principal debtor. – Presentment for payment is not necessary in order to charge the person primarily liable on the instrument; but if the instrument is, by its terms, payable at a special place, and he is able and willing to pay it there at maturity, such ability and willingness are equivalent to a tender of payment upon his part. But except as herein otherwise provided, presentment for payment is necessary in order to charge the drawer and indorsers.

Sec. 71. Presentment where instrument is not payable on demand and where payable on demand. – Where the instrument is not payable on demand, presentment must be made on the day it falls due. Where it is payable on demand, presentment must be made within a reasonable time after its issue, except that in the case of a bill of exchange, presentment for payment will be sufficient if made within a reasonable time after the last negotiation thereof.

Sec. 72. What constitutes a sufficient presentment. – 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.

Sec. 73. Place of presentment. – Presentment for payment is made at the proper place:

(a) Where a place of payment is specified in the instrument and it is there presented;

(b) Where no place of payment is specified but the address of the person to make payment is given in the instrument and it is there presented;

(c) Where no place of payment is specified and no address is given and the instrument is presented at the usual place of business or residence of the person to make payment;

(d) In any other case if presented to the person to make payment wherever he can be found, or if presented at his last known place of business or residence.

Sec. 74. Instrument must be exhibited. – The instrument must be exhibited to the person from whom payment is demanded, and when it is paid, must be delivered up to the party paying it.

Sec. 75. Presentment where instrument payable at bank. – Where the instrument is payable at a bank, presentment for payment must be made during banking hours, unless the person to make payment has no funds there to meet it at any time during the day, in which case presentment at any hour before the bank is closed on that day is sufficient.

Sec. 76. Presentment where principal debtor is dead. – Where the person primarily liable on the instrument is dead and no place of payment is specified, presentment for payment must be made to his personal representative, if such there be, and if, with the exercise of reasonable diligence, he can be found.

Sec. 77. Presentment to persons liable as partners. – Where the persons primarily liable on the instrument are liable as partners and no place of payment is specified, presentment for payment may be made to any one of them, even though there has been a dissolution of the firm.

Sec. 78. Presentment to joint debtors. – Where there are several persons, not partners, primarily liable on the instrument and no place of payment is specified, presentment must be made to them all.

Sec. 79. When presentment not required to charge the drawer. – Presentment for payment is not required in order to charge the drawer where he has no right to expect or require that the drawee or acceptor will pay the instrument.

Sec. 80. When presentment not required to charge the indorser. – Presentment is not required in order to charge an 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.

Sec. 81. When delay in making presentment is excused. – Delay in making presentment for payment 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.

Sec. 82. When presentment for payment is excused. – Presentment for payment is excused:

(a) Where, after the exercise of reasonable diligence, presentment, as required by this Act, cannot be made;

(b) Where the drawee is a fictitious person;

(c) By waiver of presentment, express or implied.

Sec. 83. When instrument dishonored by non-payment. – The instrument is dishonored by non-payment when:

(a) It is duly presented for payment and payment is refused or cannot be obtained; or

(b) Presentment is excused and the instrument is overdue and unpaid.

Sec. 84. Liability of person secondarily liable, when instrument dishonored. – Subject to the provisions of this Act, when the instrument is dishonored by non-payment, an immediate right of recourse to all parties secondarily liable thereon accrues to the holder.

Sec. 85. Time of maturity. – Every negotiable instrument is payable at the time fixed therein without grace. When the day of maturity falls upon Sunday or a holiday, the instruments falling due or becoming payable on Saturday are to 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 before twelve o’clock noon on Saturday when that entire day is not a holiday.

Sec. 86. Time; how computed. – When the instrument is payable at a fixed period after date, after sight, or after that happening of a specified event, the time of payment is determined by excluding the day from which the time is to begin to run, and by including the date of payment.

Sec. 87. Rule where instrument payable at bank. – Where the instrument is made payable at a bank, it is equivalent to an order to the bank to pay the same for the account of the principal debtor thereon.

Sec. 88. What constitutes payment in due course. – Payment is made in due course when it is made at or after the maturity of the payment to the holder thereof in good faith and without notice that his title is defective.

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Negotiable Instruments Law [Sec. 89-118]

VII. NOTICE OF DISHONOR

Sec. 89. To whom notice of dishonor must be given. – Except as herein otherwise provided, when a negotiable instrument has been dishonored by non-acceptance or non-payment, notice of dishonor must be given to the drawer and to each indorser, and any drawer or indorser to whom such notice is not given is discharged.

Sec. 90. By whom given. – The notice may be given by or on behalf of the holder, or by or on behalf of any party to the instrument who might be compelled to pay it to the holder, and who, upon taking it up, would have a right to reimbursement from the party to whom the notice is given.

Sec. 91. Notice given by agent. – Notice of dishonor may be given by any agent either in his own name or in the name of any party entitled to given notice, whether that party be his principal or not.

Sec. 92. Effect of notice on behalf of holder. – Where notice is given by or on behalf of the holder, it inures to the benefit of all subsequent holders and all prior parties who have a right of recourse against the party to whom it is given.

Sec. 93. Effect where notice is given by party entitled thereto. – Where notice is given by or on behalf of a party entitled to give notice, it inures to the benefit of the holder and all parties subsequent to the party to whom notice is given.

Sec. 94. When agent may give notice. – Where the instrument has been dishonored in the hands of an agent, he may either himself give notice to the parties liable thereon, or he may give notice to his principal. If he gives notice to his principal, he must do so within the same time as if he were the holder, and the principal, upon the receipt of such notice, has himself the same time for giving notice as if the agent had been an independent holder.

Sec. 95. When notice sufficient. – A written notice need not be signed and an insufficient written notice may be supplemented and validated by verbal communication. A misdescription of the instrument does not vitiate the notice unless the party to whom the notice is given is in fact misled thereby.

Sec. 96. Form of notice. – The notice may be in writing or merely oral and may be given in any terms which sufficiently identify the instrument, and indicate that it has been dishonored by non-acceptance or non-payment. It may in all cases be given by delivering it personally or through the mails.

Sec. 97. To whom notice may be given. – Notice of dishonor may be given either to the party himself or to his agent in that behalf.

Sec. 98. Notice where party is dead. – When any party is dead and his death is known to the party giving notice, the notice must be given to a personal representative, if there be one, and if with reasonable diligence, he can be found. If there be no personal representative, notice may be sent to the last residence or last place of business of the deceased.

Sec. 99. Notice to partners. – Where the parties to be notified are partners, notice to any one partner is notice to the firm, even though there has been a dissolution.

Sec. 100. Notice to persons jointly liable. – Notice to joint persons who are not partners must be given to each of them unless one of them has authority to receive such notice for the others.

Sec. 101. Notice to bankrupt. – Where a party has been adjudged a bankrupt or an insolvent, or has made an assignment for the benefit of creditors, notice may be given either to the party himself or to his trustee or assignee.

Sec. 102. Time within which notice must be given. – Notice may be given as soon as the instrument is dishonored and, unless delay is excused as hereinafter provided, must be given within the time fixed by this Act.

Sec. 103. Where parties reside in same place. – Where the person giving and the person to receive notice reside in the same place, notice must be given within the following times:

(a) If given at the place of business of the person to receive notice, it must be given before the close of business hours on the day following.

(b) If given at his residence, it must be given before the usual hours of rest on the day following.

(c) If sent by mail, it must be deposited in the post office in time to reach him in usual course on the day following.

Sec. 104. Where parties reside in different places. – Where the person giving and the person to receive notice reside in different places, the notice must be given within the following times:

(a) If sent by mail, it must be deposited in the post office in time to go by mail the day following the day of dishonor, or if there be no mail at a convenient hour on last day, by the next mail thereafter.

(b) If given otherwise than through the post office, then within the time that notice would have been received in due course of mail, if it had been deposited in the post office within the time specified in the last subdivision.

Sec. 105. When sender deemed to have given due notice. – Where notice of dishonor is duly addressed and deposited in the post office, the sender is deemed to have given due notice, notwithstanding any miscarriage in the mails.

Sec. 106. Deposit in post office; what constitutes. – Notice is deemed to have been deposited in the post-office when deposited in any branch post office or in any letter box under the control of the post-office department.

Sec. 107. Notice to subsequent party; time of. – Where a party receives notice of dishonor, he has, after the receipt of such notice, the same time for giving notice to antecedent parties that the holder has after the dishonor.

Sec. 108. Where notice must be sent. – Where a party has added an address to his signature, notice of dishonor must be sent to that address; but if he has not given such address, then the notice must be sent as follows:

(a) Either to the post-office nearest to his place of residence or to the post-office where he is accustomed to receive his letters; or

(b) If he lives in one place and has his place of business in another, notice may be sent to either place; or

(c) If he is sojourning in another place, notice may be sent to the place where he is so sojourning.

But where the notice is actually received by the party within the time specified in this Act, it will be sufficient, though not sent in accordance with the requirement of this section.

Sec. 109. Waiver of notice. – Notice of dishonor may be waived either before the time of giving notice has arrived or after the omission to give due notice, and the waiver may be expressed or implied.

Sec. 110. Whom affected by waiver. – Where the waiver is embodied in the instrument itself, it is binding upon all parties; but, where it is written above the signature of an indorser, it binds him only.

Sec. 111. Waiver of protest. – A waiver of protest, whether in the case of a foreign bill of exchange or other negotiable instrument, is deemed to be a waiver not only of a formal protest but also of presentment and notice of dishonor.

Sec. 112. When notice is dispensed with. – Notice of dishonor is dispensed with when, after the exercise of reasonable diligence, it cannot be given to or does not reach the parties sought to be charged.

Sec. 113. Delay in giving notice; how excused. – Delay in giving notice of dishonor 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, notice must be given with reasonable diligence.

Sec. 114. When notice need not be given to drawer. – Notice of dishonor is not required to be given to the drawer in either of the following cases:

(a) Where the drawer and drawee are the same person;

(b) When the drawee is fictitious person or a person not having capacity to contract;

(c) When the drawer is the person to whom the instrument is presented for payment;

(d) Where the drawer has no right to expect or require that the drawee or acceptor will honor the instrument;

(e) Where the drawer has countermanded payment.

Sec. 115. When notice need not be given to indorser. — Notice of dishonor is not required to be given to an indorser in either of the following cases:

(a) When the drawee is a fictitious person or person not having capacity to contract, and the indorser was aware of that fact at the time he indorsed the instrument;

(b) Where the indorser is the person to whom the instrument is presented for payment;

(c) Where the instrument was made or accepted for his accommodation.

Sec. 116. Notice of non-payment where acceptance refused. – Where due notice of dishonor by non-acceptance has been given, notice of a subsequent dishonor by non-payment is not necessary unless in the meantime the instrument has been accepted.

Sec. 117. Effect of omission to give notice of non-acceptance. – An omission to give notice of dishonor by non-acceptance does not prejudice the rights of a holder in due course subsequent to the omission.

Sec. 118. When protest need not be made; when must be made. – Where any negotiable instrument has been dishonored, it may be protested for non-acceptance or non-payment, as the case may be; but protest is not required except in the case of foreign bills of exchange.

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