CHAPTER XX ON THE LAW OF CREDIT, BILLS AND NOTES Preliminary Remarks It has already been stated in a former part of this work, that the author was selected by the Law Digest Commissioners to prepare the National Digest of the Law of Credit, Bills and Notes for the guidance of the Courts of Law, in contemplation of the fusion of Law and Equity which was afterwards effected by the Supreme Court of Judicature Act As all the Courts were henceforth to administer both Law and Equity, it was necessary to combine both the rules of Law and Equity relating to Credit, Bills and Notes Most of the usual treatises on Bills of Exchange are merely collections of Common Law cases relating to them, and they take very slight notice of the cases in Equity. But the number of cases in Equity is very little, if at all, less than those in Common Law. Moreover, the rules of Equity relating to Credit conflict in several important points with the rules of Common Law: and the Act provides that in all cases where the rules of Equity conflict with those of Common Law, the rules of Equity shall prevail The author's Digest was therefore a complete exposition of the principles both of Law and Equity relating to Credit, Bills and Notes. But the commissioners discontinued the work, so that it was never published officially: but the author included several important portions of it in the third edition of this work Since then the Bills of Exchange Act of 1882 has been passed, which is entitled "An Act to Codify the Law relating to Bills of Exchange." It might perhaps be supposed from the title that it was a codification of the whole Law relating to Bills and Notes. But such an idea is an entire delusion. Omitting wholly obsolete cases which may have been reversed, and are otherwise useless, it may be estimated that there are at least 3,000 cases in Law and Equity which ought to be included in any Act which has any pretensions to be called a code of "the Law" on the subject The Bill upon which the Act was founded contained references to exactly 106 cases: and though perhaps some of these might be considered as representative cases, yet it is a matter of certainty that it does not contain one-tenth part of the whole Law Nor does it contain any exposition of scientific principles; and only a very few references to cases in Equity. In fact it is nothing more than a series of dogmatic rules on a very small part of the subject, and is perfectly inadequate as a practical code It would be utterly impossible to give a complete code of the Law of Bills and Notes in this work, as it would require a treatise considerably larger than than the work itself The line we have endeavoured to draw is this: There are certain legal doctrines and cases which are absolutely indispensable for a banker to be familiar with in his daily business, any one of which may occur in practice at any instant. There are other doctrines and cases which are only necessary to be known, when the banker is unhappily drawn into legal proceedings; in these cases he will be in the hands of, and be guided by, his solicitor and counsel We have endeavoured to give a selection of those doctrines. and cases only which are comprised under the former of these divisions In endeavouring however to draw this line, we are sure that every one conversant with the subject must be aware of the difficulty of selecting out of the great mass of cases and decisions, those only which are fundamental, and passing over those which are only of secondary importance In the present chapter the results of our own work on the Digest and the Bills of Exchange Act, 1882, are incorporated. Those clauses which are taken from the Act are distinguished by an asterisk Definitions and General Principles On the Origin and Nature of Credit or Debt 1. 1. When one person "borrows" money, or buys goods from another "on credit" an Obligation, or Contract, is created between these two persons, consisting of two parts (a) A Right to Demand payment is created in the person of the lender or seller (b) A Duty to pay is created in the person of the borrower or buyer 2. The lender or seller's Right to Demand payment is termed a Credit and the borrower's or buyer's Duty to pay is termed a Debt 3. But in law and common usage the Right to demand payment is also called a Debt 4. The word Debt is, therefore, used indiscriminately to mean the Right to demand as well as the Duty to pay: and it must always be observed from the context of the passage in which sense it is used 5. Hence Credit or Debt in Legal, Commercial, and Economical language, means a Right of Action against a person for a sum of money 6. Such a Right, Credit, or Debt is a Chose-in-action, and is included under the term Goods and Chattels Sheppard. A grand Abridgment of the Common and Statute Law of England. 1675. p. 329. Ford & Sheldon's Case, 12 Co. Rep., 2. Ryal v. Rowles, 1 Ves., sen., 348. Stephen's Blackstone, Vol. I., ch. 5 7. A creation or declaration of trust of a Debt, or Chose-inaction, may be made by mere words, without writing, and when once made is irrevocable, except by consent of all parties Nab v. Nab, 10 Mod., 404. Fordyce v. Williams, 3 Bro., C. C., 577. Ardern v. Rowney, 5 Esp., 255. Bayley v. Boulcott, 4 Russ., 345. Benbow v. Townsend, 1 My. & K., 506. Crabb v. Crabb, 1 My. & K., 511. Kilpin v. Kilpin, 1 My. & K., 520. Boyd v. Emerson, 2 A. & E., 184. Tibbits v. George, 5 A. & E., 107. Macfadden v. Jenkyns, 1 Hare, 458. Hawkins v. Gardiner, 2 Sm. & Gif., 441. Peckham v. Taylor, 31 Beav., 250 8. The person who owes the money is termed the Debtor: the person to whom it is owed is termed the Creditor, and sometimes the Debtee On the Transfer of a Credit, or Debt 2. 1. A Credit, Debt, or Chose-in-action may be transferred orally by the Creditor to another person with the consent of the Debtor: a trust is then created in the person of the Debtor, and the transferee may sue him in his own name Bracton, Lib. iii., c. 2., s. 13. Tatlock v. Harris, 3 T. R., 174. 2. If a debtor creates an Obligation assignable or transferable to bearer, such an Obligation may be sold or transferred; whether it is in the form of a simple Contract or a Deed: and the assignee, or bearer, may sue the Debtor in his own name Three Priests' Case, Y. B., 41 Edw. III. (1368), 27. Baker v. Brook, Dyer, 65, 1. Maund v. Gregory, 7 Co. Rep., 28b. Gerard Hinton's v. Bowden, Hetl., 80. Shelden v. Hentley, 2 Show., 1601. Williams "Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any Debt, or other legal Chose-in-action, of which express notice in writing shall have been given to the Debtor, Trustee, or other person from whom the assignor would have been entitled to receive or claim such Debt, or Chose-in-action, shall be, and be deemed to be effectual in law (subject to all equities which would have been entitled to priority over the right of the assignee if this Act had not passed) to pass and transfer the legal right to such Debt, or Chose-in-action, from the date of such notice, and all legal and other remedies for the same, and the power to give a good discharge for the same, without the concurrence of the assignor "Provided always that if the Debtor, Trustee, or other person liable in respect of such Debt, or Chose-in-action, shall have had notice that such assignment is disputed by the assignor, or any one claiming under him; or of any other opposing or conflicting claims to such Debt, or Chose-in-action, he shall be entitled if he think fit, to call upon the several persons making claim thereto, to interplead concerning the same; or he may if he think fit pay VOL. II. I I the same into the High Court of Justice, under and in conformity with the provisions of the Acts for the relief of trustees" 36 & 37 Vict. (1873), ch. 66, s. 25, § 6 Generally in all matters in which there is any conflict or variance between the Rules of Equity and the Rules of the Common Law with reference to the same matter, the rules of Equity shall prevail 36 & 37 Vict. (1873), ch. 66, s. 25, § 11 Definition of Instruments of Credit or Debt 3. 1. Any written record of a fact is termed an Instrument. Any written evidence of a Debt is termed an Instrument of Credit or of Debt 2. A written contract by which one person is bound to pay (1) a certain sum of money; (2) to a certain person; (3) at a certain time; is termed an Obligation, or Security for Money, or a Valuable Security 24 & 25 Vict. (1861), c. 96, s. 1 3. A written Order from one person to another who owes, or appears to owe, him money as a Debtor, directing him to pay absolutely and at all events (1) a certain sum of money; (2) to a certain person; (3) at a certain time; is, in modern language termed a Bill of Exchange, or, shortly, a Bill 4. A written Promise made by one person to pay absolutely and at all events (1) a certain sum of money; (2) to a certain person; (3) at a certain time; is in modern language termed a Promissory Note, or, shortly, a Note 5. A written Order addressed by one person to another, who holds a fund not as his own property, but merely as the Agent, Bailee, Trustee, or Servant of the writer, to pay a sum of money, is termed a Draft, or Order for the payment of money Row v. Dawson, 1 Ves., sen., 331 6. A mere acknowledgment of a debt, not containing any promise to pay, is usually termed an IO U 7. A Bill, Note, or IO U is always a chose-in-action, that is, it operates as a charge, or Credit, against the person of the Debtor 8. A Draft, or Order, is always a chose-in-possession, and it operates as a charge, or Credit, against the fund Row v. Dawson, 1 Ves., sen., 331 |