Notice of Dishonor After Partial Payment on a Bounced Cheque
Philippine Legal Framework, Procedure, and Jurisprudence
Key point in one sentence: Even if the drawer makes—or the payee accepts—any partial payment, a written Notice of Dishonor (ND) must still reach the drawer; without it, civil actions on the cheque and criminal prosecution under Batas Pambansa Blg. 22 (BP 22) or estafa cannot prosper.
1. Governing Sources of Law
| Source | Core provisions on notice | Relevance to partial payment |
|---|---|---|
| Negotiable Instruments Law (NIL, Act No. 2031, 1911) | §§ 89-97 (notice), § 84 (when protest required), § 96 (effect of part payment) | Still requires notice to hold drawers/indorsers liable even if holder collects part of the amount. |
| Batas Pambansa Blg. 22 (Bouncing Checks Law, 1979) | § 2: Written notice, five-banking-day “grace period” to make full payment and avert criminal liability. | Partial payment within the 5-day window does not bar prosecution; after conviction it may mitigate penalties. |
| Revised Penal Code, Art. 315 § 2(d) (estafa by post-dated or dishonored cheque) | Demand for payment indispensable element. | Payment of the full amount before demand negates deceit; partial payment only lessens recoverable damages. |
| Civil Code of the Philippines (Arts. 1232-1253, esp. Arts. 1245-1247) | Payment extinguishes an obligation only if complete and delivered to the proper person. | Payee may accept a partial payment without waiving the balance; may imply novation only if expressly agreed. |
| BSP & DOJ Guidelines • Central Bank Circular No. 537-86 • DOJ Circular No. 22-2000 |
Standard wording of ND; acceptable modes of service (personal or registered mail). | No exemption for partial settlement. |
2. What Constitutes a Valid Notice of Dishonor
Form: always written (letters, telegrams, electronic mail when coupled with proof of receipt), signed by the holder/agent, stating:
- Description of the cheque (bank, number, date, amount);
- Date and reason for dishonor (e.g., “Drawn Against Insufficient Funds” or “Account Closed”);
- Clear demand for full payment within five (5) banking days from receipt (BP 22) or “forthwith” (NIL/estafa).
Service:
- Personal delivery with the addressee’s signed acknowledgment; or
- Registered mail to the last known address. The registry return card + Postmaster’s certification constitute prima facie proof.
Proof in litigation: holder bears the burden. Courts strictly require the registry receipts, return card, or the drawer’s signed acknowledgment; affidavits alone are insufficient.
3. The Role of Partial Payment in Different Phases
| When partial payment occurs | Effect on criminal liability under BP 22 | Effect on civil liability under NIL/Civil Code | Comments |
|---|---|---|---|
| Before ND is sent | ND still mandatory; drawer must pay balance in full within 5 banking days after ND to avoid prosecution. | Holder may sue for remaining amount; NIL § 96 says notice is still required for remaining claim. | No waiver unless payee expressly waives ND or novates obligation. |
| Within 5-day period after ND | Liability persists because payment must be complete. Partial payment is merely a mitigating circumstance for fine and imprisonment (People v. Lim, G.R. 190834, 14 Jan 2015). | Reduces recoverable amount, interest, and costs. | Courts often order subsidiary imprisonment only for the unpaid balance. |
| After 5-day period but before filing of information/complaint | Does not extinguish offense (People v. Culiat, G.R. 196815, 11 Dec 2013). | Same as above. | Prosecutor still files if other elements exist. |
| After filing / during trial | Court may still convict; but may impose fine only (no jail) if drawer shows good-faith effort and pays remainder before judgment (Administrative Circular 12-2000). | Payment stops running of legal interest pro tanto; may affect award of damages. | Full payment before arraignment sometimes leads to dismissal for mootness in estafa, not in BP 22. |
| After conviction | Does not erase conviction; however, RA 10951 allows conversion of jail term to fine based on unpaid balance. | Judgment on the civil aspect is satisfied only upon full payment. | Executive clemency possible when full restitution shown. |
4. Selected Supreme Court Rulings
| Case | G.R. No. & Date | Doctrine relevant to partial payment |
|---|---|---|
| People v. Canlas | L-69871, 19 May 1987 | Payment must be full within 5 days; partial payment only mitigates penalty. |
| Lozano v. Martinez | G.R. 63419, 18 Dec 1986 | Upheld BP 22; emphasized indispensability of written ND. |
| Tan v. People | G.R. 173637, 5 Dec 2012 | Acceptance of staggered payments after ND does not bar prosecution absent express waiver. |
| Lim v. People | G.R. 190834, 14 Jan 2015 | Even 98 % payment within the grace period does not satisfy BP 22; demand is for the entire amount. |
| PNB v. Court of Appeals (F.F. Cruz) | G.R. 121718, 30 Jan 1998 | Holder who accepts partial payment may still sue indorsers for deficiency, provided timely ND is proven. |
| People v. Malabanan | G.R. 142834, 15 Oct 2002 | Where ND is defective, conviction cannot stand even if drawer later made no payment. |
5. Drafting & Serving the Notice: Practice Tips
- Send the ND immediately after receiving the bank’s advice of dishonor to avoid prescription issues (BP 22 prescribes in 4 years from issuance of cheque).
- Attach proof of the bank’s dishonor (e.g., debit memo, stamp on original cheque).
- Use clear, non-ambiguous language: demand “the total amount of ₱ ___ representing the face value of your cheque plus bank penalties,” not “please settle as soon as possible.”
- Track deadlines: note the exact date of drawer’s receipt; five banking days excludes weekends and bank holidays.
- If you accept partial payment, (a) issue a receipt expressly reserving your right to collect the balance; (b) still require full payment within the 5-day window; (c) do not return the cheque unless you intend to waive the balance.
6. Civil Litigation After a Partial Payment
Cause of action: collection of sum of money based on the instrument and/or unjust enrichment.
Where to file:
- Small Claims Court up to ₱ 1 million (A.M. 08-8-7-SC, as amended);
- Regular First-Level Court (MTC) up to ₱ 2 million;
- RTC over ₱ 2 million.
Prescription: ten (10) years for written contracts (Civil Code Art. 1144).
Defenses available to drawer: defective ND, vitiated consent, absence of consideration, discharge (if holder unreasonably delays presentment and drawer is prejudiced), or novation by acceptance of instalment plan.
7. Checklist for Counsel or Credit Officers
| ✅ | Step |
|---|---|
| Obtain bank’s written advice of dishonor. | |
| Draft ND quoting cheque details & full amount due. | |
| Serve ND personally or by registered mail (keep registry receipt & return card). | |
| Calendar drawer’s 5-banking-day grace period—count from actual receipt. | |
| If only partial payment received, decide whether to: (a) accept with reservation; (b) refuse and note default. | |
| Prepare proof bundle (cheque, bank notice, ND, registry slips, partial-payment receipts) for civil suit or criminal complaint. | |
| File: • BP 22 complaint-affidavit with prosecutor; or • Collection/estafa action in proper court. |
8. Sample Notice of Dishonor / Demand Letter
(illustrative; adjust facts and amounts)
Date: 15 July 2025 To: Juan Dela Cruz, 123 Mabini St., Malate, Manila
Dear Mr. Dela Cruz:
The Philippine National Bank has returned Cheque No. 001234 dated 30 June 2025 in the amount of Nine Hundred Thousand Pesos (₱ 900,000.00) for the reason “DAIF – Drawn Against Insufficient Funds.”
Pursuant to Section 2 of Batas Pambansa Blg. 22, you are hereby demanded to pay IN FULL the face value of said cheque, plus bank charges of ₱ 2,000.00, within five (5) banking days from your receipt of this notice, or not later than 24 July 2025.
Failure to comply shall constrain us to institute appropriate civil and criminal actions without further notice, at your cost and prejudice. Partial payment will not suspend such actions.
Please make payment at our office, duly acknowledged with an official receipt.
Very truly yours, Maria Santos Credit Manager, ABC Supplies Corp.
9. Conclusion
- Notice of Dishonor is non-negotiable. Whether under the NIL, BP 22, or estafa, it is the linchpin that perfects both civil and criminal remedies.
- Partial payment is never a cure-all. It can temper penalties or reduce monetary awards, but it cannot replace the requirement of full settlement within statutory periods.
- For payees, accepting partial payments is compatible with continuing or future prosecution only if the ND is preserved and rights are expressly reserved.
- For drawers, the safest course remains full restitution within five banking days upon receiving written notice; anything less invites litigation and a criminal record.
This article is for informational purposes only and is not a substitute for personalized legal advice. For specific situations, consult a Philippine lawyer.