The theory of negotiable instruments


The theory of negotiable instruments, and of their currency from hand to hand, rests upon the proposition that they appear to belong to the person having them in possession and to no one else. By sending a negotiable instrument into the world, the maker is estopped from arguing, as against a bona fide holder who has received it from anyone in possession, a defect of title. The holder, though without title, has capacity to give a title because he is the apparent owner of the instrument.

The principle of negotiability is in the instrument's having a circulating credit and its being transferable by indorsement and delivery, or by delivery merely.

It is the law that, where a person in good faith, without notice, for an adequate consideration, and in due course of business, receives money or negotiable securities, he takes the money or securities free from infirmities of title or any question as to the vendor's right to dispose of them, and the true owner may look only to the thief or converter of the money or securities.

And if the defendant admits the execution of the note in suit, but denies that the holder is the owner thereof by purchase before maturity, and alleges want of consideration, the burden of proving such allegations is on the defendant.

One of the most significant aspects of commercial paper is that it is negotiable, which means that it can be freely transferred from one party to another, either through endorsement or delivery. The terms commercial paper and negotiable instrument can be used interchangeably. Since commercial paper constitutes PERSONAL PROPERTY, it is transferable by sale or gift and can be loaned, lost, stolen, and taxed.
The discussion above is based on De Leon and De Leon, Jr.'s (2010) book on Act No. 2031. Their books are available in fine bookstores nationwide. SOURCE: De Leon and De Leon, Jr. (2010). The Philippine Negotiable Instruments Law. Atty. Hector S. De Leon and Atty. Hector M. De Leon, Jr. 978-971-23-6523-2. Rex Book Store. https://www.rexestore.com/negotiable-instrument-law-books/977-the-philippine-negotiable-instruments-law-revised-edition.html

OTHER SOURCES: Commercial Paper - Types Of Commercial Paper, Negotiability, Endorsements, Liability Of Parties, Secondary Liability, Holders. https://law.jrank.org/pages/5422/Commercial-Paper.html. Commercial Paper - Types Of Commercial Paper, Negotiability, Endorsements, Liability Of Parties, Secondary Liability, Holders

Hatch v. National Bank, 147 N.Y. 184, 41 N.E. 403; Everston v. National Bank of Newport, 66 N.Y. 18, 23 Am. Rep. 9; Manhattan Sav. Inst. v. N.Y. Nat. Bank, 170 N.Y. 58, 62 N.E. 1079, 88 Am. St. Rep. 640. Clark V. Skeen, 61 Kan. 526

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