Chapter VIII - DISCHARGE OF N.I.

Acts which Discharges a simple contract for payment of money. Obligations are extinguished by: PLCC/CN

Acts which Discharges a simple contract for payment of money. Obligations are extinguished by: PLCC/CN • Payment or performance; • Loss of the thing due; • Condonation or remission of debt; • Confusion or merger of the rights of creditor and debtor; • Compensation; and • Novation. Other causes of extinguishment of obligations: ARP • Annulment; • Rescission; • Prescription.

Effect of alteration of instrument: (Sec. 124 NIL)

Effect of alteration of instrument: (Sec. 124 NIL) Where a NI is materially altered WITHOUT the assent of all parties liable thereon, it is rendered void. • However, it does not discharge the instrument as against: a. The party who made the alteration; b. The party who authorized or assented to the alteration; and c. Indorsers who indorsed subsequent to the alteration.

Effects to a HIDC not a party to the alteration:

Effects to a HIDC not a party to the alteration: • He may enforce payment according to its original tenor.

Exceptions to the right to negotiate:

Exceptions to the right to negotiate: a. Where a BofE payable to the order of a third person is paid by the drawer upon maturity of the instrument. b. Where the instrument is paid on due date by the accommodated party. Having been paid by the Principal Debtor, the instrument is discharged.

Instrument; How discharged: (Sec. 119 NIL) DAC/DH

Instrument; How discharged: (Sec. 119 NIL) DAC/DH i. Payment in due course by or on behalf of principal DEBTOR. ii. Payment in due course by the party ACCOMODATED where party is made/accepted for accommodation. iii. Intentional CANCELLATION by holder. iv. Any other act which DISCHARGES a simple contract for payment of money. v. Principal debtor becomes the HOLDER of the instrument at or after the maturity in his own right.

Renunciation by holder: (Sec. 122 NIL)

Renunciation by holder: (Sec. 122 NIL) The holder may expressly renounce his rights against any party to the instrument before, at, or after its maturity. • The express renunciation by the holder must be ABSOLUTE and UNCONDITIONAL. • The renunciation in favor of the Principal Debtor AT or AFTER the maturity of the instrument discharges the instrument. • Persons secondarily liable are likewise discharged from liability. • A renunciation must be in WRITING unless delivered personally to the person primarily liable thereon.

Right of party who discharges instrument: (Sec. 121 NIL)

Right of party who discharges instrument: (Sec. 121 NIL) Payment made by a party secondarily liable will not discharge the instrument. The party so paying will have the following status and rights: a. He will be remitted to his former rights as regard all prior parties; b. He may strike out his own and all subsequent indorsements; and c. He may again negotiate the instrument.

What constitutes a MATERIAL ALTERATION: (Sec. 125 NIL)

What constitutes a MATERIAL ALTERATION: (Sec. 125 NIL) Any alteration which changes: DSTN/CAC a. The DATE; b. The SUM payable, either for principal or interest; c. The TIME or place of placement; d. The NUMBER or the relations of the parties; e. The medium or CURENCY in which payment is to be made; or which ADDS a place where no place of payment is specified; or any other CHANGE or addition which alters the effect of the instrument in any respect.

When cancellation INOPERATIVE: (Sec. 123 NIL)

When cancellation INOPERATIVE: (Sec. 123 NIL) Cancellation is inoperative if made: UMW a. Unintentionally; b. By MISTAKE or through fraud; and c. WITHOUT authority of the holder. Cancellation is presumed to be intentional; hence, the burden is on the holder claiming its ineffectiveness to overcome the presumption by contrary evidence.

When persons secondarily liable on the instrument are discharged: (Sec. 120 NIL) ACD/VRA

When persons secondarily liable on the instrument are discharged: (Sec. 120 NIL) ACD/VRA i. Any ACT which discharges the instrument. ii. Intentional CANCELLATION of signature by the holder. iii. DISCHARGE of prior party. iv. VALID tender of payment made by prior party. v. RELEASE of Principal Debtor, unless holder's right of recourse against the party secondarily liable is expressly reserved. vi. Any AGREEMENT binding upon holder to extend time of payment, or to postpone the holder's right to enforce the instrument, unless made with the assent of the party secondarily liable, or unless the right of recourse against such party is expressly reserved.