2014 (Commercial Law) Bar Exam Questions: Question 2

[Answer / discuss the question below. Or see 2014 bar exam Commercial Law Instructions; 2014 Commercial Law essay and multiple choice Questions: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28 and 29; See also 2014 Bar Exam: Information, Discussions, Tips, Questions and Results]

II.

Bong bought 300 bags of rice from Ben for P300,000.00. As payment, Bong indorsed to Ben a Bank of the Philippine Islands (BPI) check issued by Baby in the amount of P300,000.00. Upon presentment for payment, the BPI check was dishonored because Baby’s account from which it was drawn has been closed. To replace the dishonored check, Bong indorsed a crossed Development Bank of the Philippines (DBP) check issued also by Baby for P300,000.00. Again, the check was dishonored because of insufficient funds. Ben sued Bong and Baby on the dishonored BPI check. Bong interposed the defense that the BPI check was discharged by novation when Ben accepted the crossed DBP check as replacement for the BPI check. Bong cited Section 119 of the Negotiable Instruments Law which provides that a negotiable instrument is discharged “by any other act which will discharge a simple contract for the payment of money.” Is Bong correct? (4%)

5 comments

  1. a creditor’s possession of evidence of debt is proof that the instrument has not been discharged. besides no novation when the first and second obligation is not incompatible with each other.

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  2. As to whether Sec. 119 has application in the facts, a negative assent is held.

    Sec. 119 applies only if the obligation is paid by the debtor himself so as to discharge him from his obligation. However, such payment must be characterized by valid tender .

    Herein facts do explicity state that it is wanting of the valid tender of payment because a check, thougha negotiable instrument is not valid tender.

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