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471. Exchange, in commerce, is the paying or receiving money in one place for an equivalent sum in another, by means of drafts, or bills of exchange.
472. A Bill of EXCHANGE is a written order, to some person at a distance, to pay a certain sum, at an appointed time, to another person, or to his order.
The maker or drawer of a bill is the person who signs it.
The buyer, taker, or remitter of a bill is the person in whose favor it is drawn.
The drawee of a bill is the person on whom it is drawn, who is also called the acceptor, after he has accepted it.
The indorser of a bill is the person who indorses it.
The holder or possessor of a bill is the person in whose legal possession it may be at any time.
473. Most mercantile payments are made in bills of exchange, since it is generally more convenient to discharge debts by means of them than by cash remittances. For example, suppose A, of Boston, is creditor to B, of Baltimore, $100; and C, of Boston, is debtor to D, of Baltimore, $ 100; both these debts may be discharged by means of one bill. Thus, A draws for this sum on B, and sells his bill to C, who remits it to D, and the latter receives the amount, when due, from B. Here, by a transfer of claims, the Boston debtor pays the Boston creditor, and the Baltimore debtor the Baltimore creditor; and no money is sent from one place to the other. The same would take place if D, of Baltimore, drew on C, of Boston, and sold his bill to B, of Baltimore, who should send it to A, of Boston ; the effect, in either case, being merely a transfer of debt and credit.
Bills of exchange pass from hand to hand, until due, like any other circulating medium.
474. The terms of a bill vary according to the agreement between parties, or the custom of countries. Some bills are drawn at sight; others, at a certain number of days, or months, after sight or after date ; and some, at usance, which is the customary or usual term between different places.
DAYS OF GRACE. Days of grace are a certain number of days granted the acceptor for paying the bill, after the term of a bill has expired. The usual time allowed in this country is three days.
NOTE 1. – In some States three days of grace are allowed on all bills of exchange payable at sight, or at a future day certain; but in other States' sight drafts are excepted, as in New York, Pennsylvania, New Jersey, Maryland, Virginia, Missouri, Illinois, Michigan, Connecticut, Rhode Island, Delaware, &c.
No days of grace are allowed on bills written payable on demand, or which have no time of payment expressed in them.
NOTE 2. In reckoning when a bill, payable after date, becomes due, the day on which it is dated is not included; and if it be a bill payable after sight, the day of presentment is not included. When the term is expressed in months, calendar months are understood; and when a month is shorter than the preceding, it is a rule not to go in the computation into a third month.
Thus, if a bill be dated the 28th, 29th, 30th, or 31st of January, and payable one month after date, the term expires on the last day of February, to which the days of grace must, of course, be added; and therefore the bill becomes due on the 3d of March.
475. An indorsement of a bill is the act by which the holder of it transfers his right to another. It is usually made on the back of the bill, and must be in writing.
476. Bills payable to order are transferred only by indorsement and delivery, but bills payable to bearer are transferred by either mode. On transfer by delivery, the person making it ceases to be a party to the bill ; but on a transfer by indorsement, he is to all intents and purposes chargeable as a new drawer.
477. An indorsement may take place any time after the bill is issued, even after the day of payment has elapsed.
NOTE. — An indorsement may be restrictive, giving authority to the indorsee to receive the money for the indorser, but not to transfer the bill to another. The indorsement for a part of the money only is not valid, except with regard to him who makes it. The drawer and acceptor are not bound by it. After the payment of a part, however, a bill may be indorsed over for the residue. The indorsement is said to be in blank, when the indorser simply writes his name upon the back of the bill to make it transferable by delivery; and is said to be special, when the indorser directs the money to be paid to some particular person, or to his order. If the indorser would avoid all liability, he must qualify his indorsement by the words, “ without recourse,” or by others of the same import.
ACCEPTING BILLS. 478. An acceptance is an engagement to pay a bill according to the tenor of the acceptance, which may be either absolute or qualified.
479. An absolute acceptance is an engagement to pay a bill according to its request, which is commonly done by the drawee writing his name at the bottom, or across the body of the bill, with the word accepted.
480. A qualified acceptance is when a bill is accepted conditionally. But the holder is not obliged to receive a conditional or partial acceptance. He may act as if an acceptance had been entirely refused.
NOTE. — When a bill is drawn for the account of a third person, and is accepted as such, and he fails without making provision for its payment, the acceptor must discharge the bill, and can have no recourse against the drawer. When a holder, at his own risk, takes a conditional or partial acceptance, he must give inmediate notice to all other parties to the bill, or he can have no resort to them in default of payment.
All bills payable at sight, or at a day certain, or on demand, should be presented within a reasonable time, or the holder may, from his default, be the loser.
481. The holder of a bill, when acceptance or payment has been refused, should give regular and immediate notice to all the parties to whom he intends to resort for payment; since, if a loss should be incurred, on account of unnecessary delay, by the failure of any of the parties, he would be obliged to bear the loss. Such a notice of non-acceptance or non-payment, when made by a public officer called a notary or notary public, or by any other legal mode, is called a protest.
482. When the parties to a bill, which the drawee has failed to accept or pay, live in different countries, a protest is indispensably necessary, as this instrument is admitted in foreign countries as legal proof of the fact of the refusal, and that the holder intends to recover any damages which he may sustain in consequence.
483. In case of non-payment, when the parties to a bill live in the same country, it is not necessary, although frequently
practised, that there should be a regular protest by a public notary. But a notice simply of non-payment is sufficient to entitle the holder to claim interest.
484. The damages incurred by non-acceptance and non-payment of a foreign bill, besides interest commencing from the day of demand, consist usually of the exchange or re-exchange, commission, and postage, together with the expenses of protest and interest. The damages of protested bills in general, however, are regulated in a great measure by the local laws and usages of the different States and countries.
LIABILITIES OF THE PARTIES.
485. The drawer, acceptor, and each and every indorser of a bill, are liable to the payment of it; and though the holder can have but one satisfaction, yet, till such satisfaction is actually had, he may sue any of them, or all of them, either at the same time or in succession, and obtain judgment against them all, till satisfaction be made.
486. Nothing will discharge an indorser from his engagement, but the absolute payment of the money ; not even a judgment recovered against the drawer, or any previous indorser, or any execution against any of them, unless the money be paid in consequence.
NOTE. - When acceptance is refused, and the bill is returned by protest, an action may be commenced immediately against the drawer, though the regular time of payment be not arrived. His debt, in such a case, is considered as contracted the moment the bill is drawn.
In order, however, to make the indorsers liable, it is proper that the holder should present the bill for payment on the day it becomes due.
PAR OF ExcHANGE.
487. The intrinsic par of exchange is the value the coins of one country have, when compared with those of another, with respect both to weight and fineness.
488. The commercial par of exchange is the value the coins of one country sell for in the markets of another; and is therefore not a fixed, but a variable value.
COURSE OF Exchange.
489. The course of exchange is the variable price of the money of one country, which is paid for a fixed sum of money of another country.
490. The fluctuations of exchange are occasioned by various circumstances, both political and commercial, but in general bills rise or fall in their prices, like any other salable articles, according to the relation existing for the time being between the demand and the supply.
491. The limits within which the fluctuations of exchange range, correspond with the cost of making remittances in cash. Therefore, in the time of peace, exchange seldom remains long unfavorable to any country.
When unfavorable, it has a tendency to correct itself, by giving an unusual stimulus to exportation, and by throwing obstacles in the way of importation ; and when favorable, it produces the same effect, by restricting exportation and facilitating importation.
492. An INLAND Bill of exchange, or draft, is one of which the drawer and drawee are residents of different parts of the same country.
Inland bills are seldom bought or sold at the precise sum specified upon their face, but, according to the course of exchange, are subject to a discount, or command a premium.
493. To compute inland exchange.
Ex. 1. What is the value of the following bill of exchange or draft, at $ per cent. premium?
Ans. $ 2563.20. $ 2560.
New York, April 14, 1857. At sight, pay to Dura Wadsworth, or order, two thousand five hundred and sixty dollars, value received, and charge the same to the account of
CAMERON, BASHFORD, & Co. To Messrs. LAWRENCE & AsPINWALL, Merchants, Boston.
$ 2560 X 1.00}=$ 2 5 6 3.2 0.