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Negotiable Instruments

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THE NEGOTIABLE INSTRUMENT LAW SECTION . 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 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.

Acts in addition to payment of money

A negotiable instrument must be payable in “a sum certain in money.”

(1) General Rule. – As a general rule, the instrument is non-negotiable if it contains a promise or order to do any act in addition to the payment of money. (par. 1.) The prohibition is based on the fact that while one could be indorsed, the other would have to be assigned. (see Sec. 30)
EXAMPLES:
“I promise to pay or order P1,000.00 and to deliver a horse.” (2) Exceptions. – The law, however, gives exceptions (Sec. 5 [a to d.] to the general rule. a. Sale of collateral securities.
EXAMPLE:
“I promise to pay P or order the sum of P10,000.00 on November 25,2004 secured by a ring I delivered to him by way of pledge and which he could seek should I fail to pay him at maturity.”

Here, the additional act is to be performed after the date of maturity when the instrument is no longer negotiable in the full commercial sense. (see Sec. 2[e].) Until the date of maturity, the promise is to pay money only.

b. Confession of judgement. – It is a

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