PAYMENT FOR HONOR(SECTIONS 171-177)

PAYMENT FOR HONOR

It is a payment made by a person, whether a party to the bill or not, after it has been protested for non- payment, for the benefit of any party liable thereon or for the benefit of the person for whose account it was drawn.

Payment supra protest- because prior protest for non-payment is required.

PURPOSE: Payment for honor may be availed of when the holder does not want to indorse the bill and thereby incur the liabilities of an indorser or of one negotiating by mere delivery.

WHO MAY MAKE PAYMENT FOR HONOR.

Where a bill has been protested for non-

payment, any person may intervene and pay it supra protest for the honor of any person liable thereon or for the honor of the person for whose account it was drawn. (Sec. 171)

REQUISITES AND FORMALITIES FOR A VALID PAYMENT FOR HONOR

1. The bill has been dishonored by non- payment. (Sec.83);

2. It has been protested for non-payment. (Sec. 171);

3. Payment supra protest is made by any person, even a party thereto;

4. The payment is attested by a notarial act of honor which must be appended to the protest or form an extension of it.(Sec. 172); and

5. The notarial act must be based on the declaration made by the payer for honor or his agent of his intention to pay the bill for honor and for whose honor he pays. (Sec. 173)

If the formalities are not followed, the payment will operate as a mere voluntary agreement and the payer acquires thereby has no right to full reimbursement against the party for whose honor he pays.

PREFERENCE OF PARTIES OFFERING TO PAY FOR HONOR

Where two or more persons offer to pay a bill for honor of different parties, the person whose payment will discharge most parties to the bill is to be given preference.

Example:

R draws a bill payable to P or order with W, as the drawee, and A, B, C, D, as successive indorsers, and E as holder. W does not pay and E has duly protested non-payment.

If T offers to pay supra protest for the honor of C while S, for A, S is to be preferred as his payment will discharge B, C, and D whereas payment by T will discharge only D.

EFFECTS WHERE BILL IS PAID FOR HONOR (SEC. 175)1. All parties subsequent to the party for

whose honor it is paid are discharged; and2. The payer for honor is subrogated for, and

succeeds to, both the rights and duties of the holder as regards the party whose honor he pays and all parties liable to the latter.

If the payment is made for the honor of all parties to the bill, the payer for honor may have recourse against all of them.

Example:

A draws a bill payable to B or order with X, as the drawee. The bill is successively indorsed to C, D, E and F, holder. X does not pay and F has duly protested non-payment. Y pays for the honor of C.

1. D and E are parties subsequent to C, for whose honor the payment is made, are discharged; and

2. Y, payer for honor, acquires the rights of F, holder,a s against C, and A, B and X, parties who are liable to C.

EFFECT OF HOLDER’S REFUSAL TO RECEIVE PAYMENT

Where the holder of a bill to receive payment supra protest, he loses his right of recourse against any party who would have been discharged by such payment.

RIGHTS OF PAYER FOR HONOR

The payer for honor, on paying to the holder

the amount of the bill and the notarial expenses incidental to its dishonor, is entitled to receive both the bill itself and the protest. (Sec. 177)

PAYMENT FOR HONOR AND ACCEPTANCE FOR HONOR, DISTINGUISHED

PAYMENT FOR HONOR ACCEPTANCE FOR HONOR

Protest must be for NON-PAYMENT Protest must be for NON-ACCEPTANCE or FOR BETTER

SECURITY

Bill is OVERDUE Bill must NOT BE OVERDUE

CONSENT of the holder is NOT REQUIRED nor can the holder

REFUSE

CONSENT of the holder is REQUIRED

Acceptor is SECONDARILY LIABLE Acceptor is PRIMARILY LIABLE

Notarial Act of Honor is NECESSARY

It is not necessary

ONLY ONE payer for honor May be SEVERAL acceptors for honor

Effects of payment found in Sections 175 and 177

Effects of payment found in Sections 164 and 165