Lawmaker proposes expansion of The Negotiable Instruments law

MARINDUQUE Rep. Lord Allan Jay Velasco has proposed the expansion of the coverage of Act No. 2031 otherwise known as “The Negotiable Instruments Law” to include new provisions under Section 185 on Promissory Notes and Checks.

Velasco (Lone District, Marinduque) filed House Bill 6331 to expand Act No. 2031, which he said has yet to encounter any significant changes or amendments despite the various changes in commercial practices not only in the Philippines but worldwide.

Velasco said an instance of such changes in practice is the prevalence of the use of crossed checks in commerce.

“Ironically, the prevailing law on such instruments is bereft of any provision pertaining to the application of crossing checks. In fact, perusal of Act 2031 would not yield any detection of the term crossed checks,” Velasco said.

Velasco said despite this problem, numerous case laws that have been furnished by the Supreme Court maintaining the application of these instruments in commercial transactions and the consequent rights and liabilities available to the parties involved.

“The bill seeks to provide the practice of issuing crossed checks a firm legal basis in its application,” Velasco said.

Under Section 185 of Act No. 2031, a check is defined as a bill of exchange drawn on a bank payable on demand.

Velasco proposed the insertions of Sections 185-A, 185-B and 185-C.

Section 185-A or the definition of general and special crossing of checks reads as: “Where the cheque bears across its face an addition of the words and Company or any abbreviation thereof between two parallel transverse lines; either with or without the words “not negotiable”; or two parallel transverse lines simply either with or without the words “not negotiable,” that addition constitutes a crossing, and the cheque is crossed generally.

Section 185-A also states where a cheque bears across its face an addition of the name of a banker either with or without the words “not negotiable,” that addition constitutes a crossing, and the cheque is crossed specially and to that banker.

Section 185-B or crossing a material part of cheque is also inserted which provides that a crossing authorized by the proposed Act is a material part of the cheque and it shall be unlawful for any person to obliterate or, except as authorized by the proposed act, to add to or alter the crossing.

Section 185-C, the effect of crossing on holder, is likewise added which is defined as where a person takes a crossed cheque, he shall not have and shall not be capable of giving of better title to the cheque than that which the person from whom he took it had.

It also has the following effects: (a) the check may not be encashed but only deposited in a bank; (b) the check may be negotiated only once to one who has an account in the bank; and (c) the act of crossing a check serves as a warning to the holder thereof that the
check has been issued for a definite purpose so that the holder must inquire if he has received the check pursuant to that purpose.

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