Indicate and explain whether the promissory note is negotiable or non-negotiable.
I promise to pay A or bearer Php100,000.00 from my inheritance which I will get after the death of my father. (2%)
I promise to pay A or bearer Php100,000 plus the interest rate of ninety (90) – day treasury bills. (2%)
I promise to pay A or bearer the sum of Php100,000 if A passes the 2012 bar exams. (2%)
I promise to pay A or bearer the sum of Php100.000 on or before December 30, 2012. (2%)
I promise to pay A or bearer the sum of Php100,000. (2%)
Suggested answer only. Not an official answer and not legal advice.
Notes (d) and (e) are negotiable, while notes (a), (b), and (c) are non-negotiable.
Under Section 1 of the Negotiable Instruments Law (Act No. 2031), an instrument must contain an unconditional promise to pay a sum certain in money, payable on demand or at a fixed or determinable time. Under Section 3, payment out of a particular fund is conditional, and under Section 4, a promise subject to a contingency is non-negotiable.
Here, note (a) is non-negotiable because it is payable from a particular fund; note (b) is non-negotiable because the T-bill interest rate renders the sum uncertain; note (c) is non-negotiable as it is conditional on passing the bar; while notes (d) and (e) are negotiable as (d) is payable on or before a fixed date and (e) is payable on demand.
Therefore, notes (d) and (e) are negotiable, whereas notes (a), (b), and (c) are non-negotiable.
This is not an official scoring system and carries no weight with the Supreme Court or any bar review provider. It measures how much of the suggested answer's wording your response covers, not whether your reasoning is correct. For practice only.
Quick check
Which of the following promissory notes complies with the requisites of negotiability under Section 1 of Act 2031?
An instrument payable to bearer on or before a fixed date contains an unconditional promise to pay a sum certain.
Why is a promissory note payable out of a expected inheritance non-negotiable under Section 3 of Act 2031?
Section 3 of the Negotiable Instruments Law specifies that an order or promise to pay out of a particular fund is conditional.
What is the legal effect of promising to pay an interest rate based on fluctuating ninety-day treasury bills without a fixed rate formula?
Fluctuating interest rates without a fixed formula render the sum uncertain, destroying negotiability under Section 2.
Is a promissory note payable upon the condition that the payee passes the bar examination negotiable?
Under Section 4 of Act 2031, an instrument payable upon a contingency is non-negotiable even if the event happens.
Which statute sets the formal requisites for negotiability of promissory notes and checks in the Philippines?
Act Number 2031 is the Negotiable Instruments Law of the Philippines.
Learn more about these topics
1. Requisites of Negotiability
Under Section 1 of the Negotiable Instruments Law (Act Number 2031), an instrument must be in writing and signed by the maker or drawer, contain an unconditional promise or order to pay a sum certain in money, be payable on demand or at a fixed or determinable future time, and be payable to order or to bearer. Failure to satisfy any of these mandatory statutory requisites deprives the instrument of negotiability under Philippine commercial law.
2. Unconditional Promise Rule
Under Section 3 and Section 4 of Act Number 2031, an order or promise to pay out of a particular fund, or subject to a contingency, is conditional and renders the instrument non-negotiable. An instrument payable upon an event that may or may not happen is non-negotiable even if the event actually occurs later. Payment from a specific inheritance or conditioned upon passing a bar examination creates a conditional promise that destroys negotiability.
3. Sum Certain Requirement
Under Section 2 of Act Number 2031, the sum payable is certain if it is a sum face value with interest or by stated installments. However, promising to pay an interest rate tied to fluctuating market benchmarks, such as ninety-day treasury bills without a fixed rate formula, renders the sum uncertain at the time of execution. Uncertainty in the principal or interest payable invalidates negotiability under the Negotiable Instruments Law.