2014 Mercantile Law, Q28

Does designating payment in a foreign currency like US Dollars affect the negotiability of a promissory note?

• ANo, because Section 6(e) of Act 2031 explicitly allows designating a particular kind of current money
• BYes, because all negotiable instruments issued in the Philippines must be payable exclusively in Philippine Pesos
• CYes, unless the drawee bank obtains prior written authorization from the Bangko Sentral ng Pilipinas
• DNo, provided the instrument is co-signed by two corporate officers resident in Metro Manila

Section 6(e) provides that designating a particular kind of current money does not affect negotiability.

What is the legal effect on negotiability if a promissory note promises to pay out of a specific bank account?

• AThe promise becomes conditional under Section 3, rendering the promissory note non-negotiable
• BThe instrument remains fully negotiable because indicating a bank account is a mere account debit instruction
• CThe note is automatically converted into a demand check payable by the drawee commercial bank
• DThe maker becomes strictly liable for criminal estafa under the Revised Penal Code

A promise to pay out of a particular fund makes the promise conditional and destroys negotiability.

Under Section 5 of Act 2031, what happens when a note contains a promise to perform an act in addition to paying money?

• AThe instrument becomes non-negotiable because an additional non-monetary promise violates Section 5
• BThe note remains negotiable provided the additional non-monetary act is performed within thirty days
• CThe additional promise is treated as a valid secondary guaranty enforceable by any holder in due course
• DThe instrument is automatically rendered void per se for violating public policy guidelines

Section 5 provides that an instrument containing a promise to do an act in addition to money is non-negotiable.