I.
(10%)
R issued a check for P1M which he used to pay S for killing his political enemy.
(a) Can the check be considered a negotiable instrument?
(b) Does S have a cause of action against R in case of dishonor by the drawee bank?
(c) If S negotiated the check to T, who accepted it in good faith and for value, may R be held secondarily liable by T?
Reason briefly in (a), (b) and (c).
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2 comments:
I.
a.
The check can be considered a negotiable instrument. A check is negotiable if the following requirements are present:
1. It is in writing;
2. It is signed by the drawer;
3. It contains an unconditional order to pay a sum certain in money;
4. It is payable on demand, or at a fixed or determinable future time;
5. It is payable to order or bearer;
6. Drawee is named or otherwise indicated therein with reasonable certainty.
b.
S does not have a cause of action against R in case of dishonor of the check by the drawee bank because of the illegality of the consideration. Illegality of consideration is available as personal defense between immediate parties.
c.
Yes. T is presumed to be a holder in due course. The illegality of consideration cannot be set up by R as a defense against T. A holder in due course may enforce payment of the instrument for the full amount thereof against all parties liable thereon.
1. Yes. A check can be considered a negotiable instrument if it has all the requisites of a negotiable instrument found in the Negotiable Instruments Law.
2. In case the drawee bank dishonors the check, S has a cause of action against R. By drawing a check, R warrants that it will be paid or accepted or both, by the drawee bank, and if it be dishonored, he will pay the amount to the holder or any indorser who may be compelled to pay it.
3. R is liable to T but not secondarily liable. According to the law, if the drawee bank accepts a check, it is primarily liable; when the check is dishonored, it is S, the indorser to T, who becomes liable. Only if S is unable to pay may T proceed against R.
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