LAW 3

NEGOTIABLE INSTRUMENTS LAW

QUESTIONS:

1. What are the requirements to make an instrument negotiable?

2. What is the test to determine whether an instrument is negotiable or not?

3. PROBLEM: Ailen bought a motor car payable in installments from Automotive Company for P250,000.00. She made a down payment of P50,000.00 and executed apropmissory note for the balance. The company subsequently indorsed the note to Reliable Finance Corporation which financed the purchase. The promissory note reads:

"For value received, I propmise to pay Automotive Company or order at its office in Legaspi City, the sum of P200,000.00 with interest at twelve (12%) percent per annum, payable in equal installments of P20,000.00 monthly for ten (10) months starting October 21, 1991.

Manila, September 21, 2007.

(Sgd.) Ailen

Pay to the order of reliable Finance Corp.

Automotive Company

By: (Sgd.) Manager"

Because Ailen defaulted in the payment of her installments, Reliable Financde Corporation initiated a case against her for a sum of money. Perla argued that the promissory note is merely an assignment of credit, a non-negotiable instrument open to all defenses available to the assignor and therefore, Reliable Finance Corporation is not a holder in due course.

Is the promissory note a mere assignment of credit or a negotiable instrument?