VOL. II.

No. 8.

A bill of exchange is an open order or letter of request addressed by one person to another, directing him to pay to a third person, or to his order or to bearer, a certain sum of money absolutely and at all events; or it may be made payable to the drawer himself. The person writing the bill is called the "drawer." The one to whom it is directed, the "drawee," and the one to whom it is made payable, the "payee." The drawee becomes liable for the payment of the bill by accepting it, and is then called the "acceptor." If a bill is payable to a person's order, it is transferred by indorsement, the one transferring it being termed the "indorser," and the one receiving it the "indorsee." But a bill payable to bearer is transferred merely by delivery. When any person acquires actual or constructive possession of the bill, and has a legal right to enforce its payment, he is called

for the time being, the "holder." Bills are distinguished as "inland" and "foreign." An inland bill is one in which the drawer and drawee reside in the same State or country; a foreign bill one in which they reside in different States or countries; for this purpose the States of this country are regarded as foreign to one another. Important consequences

result from this distinction.

Bills of exchange, as well as promissory notes, are usually drawn payable to some person's order, or to bearer, and when so drawn have the important quality of negotiability, which enables them to pass freely from hand to hand serving substantially the purpose of currency. They are termed negotiable because a transfer of them by delivery or by indorsement, when indorsement is necessary, transfers the full legal title to the paper to the purchaser, who can enforce payment by suit

in his own name; and if he be a purchaser in good faith for value before the maturity of the paper, he holds it free from defenses which might have been urged between the original parties, or, as it is commonly expressed, the paper is not subject to "equities." In the case of instruments which are not negotiable, but only assignable, the assignee merely takes the position of the assignor, and defenses available against the assignor at the time of assignment, or before notice thereof, may be urged against the assignee, though he be a purchaser in good faith for value. Thus, a bill or note not drawn payable to order or bearer, or an ordinary bond or contract is merely assignable, not negotiable. common law, an assignee must sue in the name of the assignor, and, though under modern laws he is often permitted to sue in his own name, yet in other respects the substantial distinctions between assignable and negotiable instruments still exist. The peculiar modes of transferring negotiable paper and the formalities incident thereto, are not required in cases of assignment. A negotiable bill or note does not cease to be negotiable, even by being dishonored, and may be transferred after maturity in the same way as before, and the same formalities must be observed to bind indorsers. (Leavitt vs. Putnam, 3 N. Y., 494.)

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The general principles relating to bills. of exchange will be considered under separate heads.

I. THE FORM AND REQUISITES OF A BILL OF EXCHANGE.

A valid negotiable bill must have the following requisites:

(1.) It must be for the payment of money only. An instrument payable in wares and merchandise, or in work and services, would not be sufficient, though it might

be valid as a special contract; so if it direct the payment of money and also the delivery of goods, or some similar act. But the authorities are in conflict upon the question whether a bill made payable in "current bank-bills" or "in currency," etc., is properly drawn within this rule. It is generally held that such paper is not negotiable; but in a number of the States paper is held negotiable which is payable in current funds of the particular State, or even in bank bills of other States there current. (Pardee vs. Fish, 60 N. Y., 265; White vs. Richmond, 16 Ohio, 5; Black vs. Ward, 27 Mich., 193.) Sometimes paper made payable merely "in currency" is held negotiable. gotiable. (Butler vs. Paine, 8 Minn., 324.) Since paper currency declared to be legal tender by United States laws has become the common circulating medium of this country, the phrase "in current funds" or similar expressions, has been, in some cases, held to refer to such currency, so that commercial paper so drawn is negotiable. (Pardee vs. Fish, supra; contra, Huse vs. Hamblin, 29 Iowa, 501.)

(2.) The bill must be payable absolutely and at all events. The payment, therefore, must not depend upon an uncertain contingency, as "when A shall marry," or "when a certain sale is made." Nor must the sum be payable out of a particular fund, since payment then becomes conditioned upon the sufficiency of that fund, which may prove inadequate; as when payment is to be made out of the proceeds of ore to be sold, or out of rents, etc. (Worden vs. Dodge, 4 Denio, 159; Nunez vs. Dautel, 19 Wall., 560; Munger vs. Shannon, 61 N. Y., 251.) But payment may be based upon a contingent event which is certain to happen, as "when" (or 'after') "A shall die," or may be limited upon an alternative, one branch of which fixes a certain time or event, as

when the sum is payable "on or before a certain day," or "in a year or sooner if made out of a certain sale." (Mattison vs. Marks, 31 Mich., 421; Ernst vs. Steckman, 74 Penn. St.. 13; but see Stults vs. Silva, 119 Mass., 137.) Some American decisions, also hold it sufficient to use language indicating that payment is intended within a reasonable time, as to pay "when convenient," or "as soon as collected" from certain accounts. Works vs. Hershey, 35 Iowa, 340; Ubsdell vs. Cunningham, 22 Mo., 124; Crooker vs. Holmes, 65 Maine, 195.) But language not embodying any condition may generally be added to a bill or note, without affecting its negotiability, as by stating for what it is given in payment. (Collins vs. Bradbury, 64 Me., 37.) So, if a particular fund is mentioned in a bill merely to indicate that the drawee is to reimburse himself therefrom, or to show to what account payment should be charged, it will not vitiate the bill. (Redman vs. Adams, 51 Me., 429; Corbett vs. Clark. 45 Wis., 403.) An equitable assignment of a particular fund for reimbursement must be carefully distinguished. (Munger vs. Shannon, 61 N. Y., 251.)

(3.) The instrument must be drawn payable to "order" or "bearer." Unless these words be used, or other language clearly indicating that the paper is intended to be negotiable, it is not negotiable, though, if it have the other requisites as herein defined, it is still deemed a bill of exchange. (Arnold vs. Sprague, 34 Vt., 402.) Such a bill would be transferable by assignment even before maturity and equitable defenses would not be excluded. It would be entitled to days of grace and consideration would be presumed as in the case of negotiable bills.

(4.) The instrument must be delivered. If a bill is not issued, but remains in the

drawer's hands, it is a nullity. If he dies before delivery, it cannot be delivered by his executor or administrator, unless advances had been made on the faith of a delivery. The bill takes effect only upon its delivery whatever be its date. But there may be constructive as well as actual delivery. Depositing a bill in the post-office with the payee's consent has been held a sufficient delivery (Daniel, Neg. Insts., Sec. 63.) If a bill or note be never delivered, but being lost or stolen without the owner's negligence, thus get into circulation, even an honest purchaser for value gets no title. (Burson vs. Huntington, 21 Mich., 415.) But there are cases to the contrary. (Shipley vs. Carroll, 45 Ill., 285; Clark vs. Johnson, 54 Id., 296.) As to the rule when blanks are filled up after the loss or theft, see Sedgwich vs. McKim, 53 N. Y., 315; Baxendale vs. Bennett, L. R., 3 Q. B. D., 525.

A bill of exchange need not be drawn in any particular form if it have the above requisites. The drawer's signature may be in any part, if written to authorize and direct the payment; as, e. g., “I, A. B., request you to pay, etc.," but should regularly be written at the end. A date is not essential, though usually written. The sum payable is usually expressed in figures in the margin, as well as written in words in the body of the instrument, but the words must control if there be any discrepancy. The time of payment may be variously expressed, as "at sight," "sight" meaning acceptance, or a specified time "after sight" or "after date," or "on demand;" if no time be mentioned, the bill is payable on demand. The place of payment is often mentioned, though this is not necessary; frequently a bank or banking house is specified as the place selected. The words "value received" are commonly inserted, but are not essential; nor need

it be said that the payment is to be charged to the drawer's or other person's account, though this is often done. A bill is sometimes attested by a witness, though this also is not required at common law. Foreign bills are usually drawn in several parts (usually three or four) called a set, so as to avoid loss or miscarriage in transmission to other countries; they are sent by different conveyances, but all the parts constitute but one bill, and one of them being paid, the others are void; each part states in effect that it is to be paid in case the others remain unpaid.

Commonly the drawer, drawee and payee are distinct parties. But the drawer may insert his own name as payee, and if the bill be negotiable, transfer it by endorsement or delivery. So the drawer may draw the bill upon himself payable to his own order, or to the order of some third person, the bill then being in legal effect a promissory note. A bill should regularly state the names of all the parties correctly. But sometimes the payee is designated by a fictitious name, and in such case if the bill is negotiated to a bona fide holder ignorant of this fact, he may recover thereon, it is generally held, as on a bill payable to bearer; the drawer is clearly liable and also an acceptor knowing the name to be fictitious, and perhaps, also, an acceptor not having such knowledge. (Phillips vs. Thurn, L. R. 1 C. P., 463; Lane vs. Krekle, 22 Iowa, 404.) So a bill may be issued with unfilled blanks left for the payee's name, the date, sum payable, time of payment, rate of interest, etc., and if one or more such blanks be left, they may be filled by an authorized agent or bona fide holder.

The same parties are capable of making a valid bill of exchange as are capable of making other instruments. But the bill of a party who is incompetent to contract, as

an infant, a married woman by common law, an insane person, etc., is void even in the hands of an innocent holder for value. (See Clark vs. Pease, 41 N. H., 507.) But the bill of a married woman is often valid under modern statutes, as when made in her separate business, or relating to her separate property, etc.

II. ACCEPTANCE; PRESENTMENT FOR ACCEPT

ANCE.

In order that the drawee may be liable upon the bill, he must accept it, and he then becomes the principal debtor, while the drawer and indorsers virtually become sureties for the payment. Bills payable a certain time "after sight," or "after demand," must be presented for acceptance so as to fix the time of payment. Those payable on a day certain, or a certain number of days "after date," need not be presented for acceptance, but only for payment on the day fixed. But it is usual and best to present them for acceptance, since if the drawee accepts, the holder thereby acquires the assurance of his liability; and if he does not accept, immediate steps may be taken by protest and notice to charge the drawer and indorsers. An agent for collection, however, should in all cases present such a bill for acceptance, and will be liable to his principal for negli

20 Wend., 321.) Bills payable on demand need not be presented for acceptance but only for payment. In regard to bills. "payable at sight," the rules differ in different States. They are by some laws deprived of days of grace, and are only presented for payment, being regarded as due on demand. The doubt at common law upon this subject has been removed in a number of the States by statute. (Walsh vs. Dart, 12 Wis., 635; Nash vs. Martin, E. D., Smith, 505; 2 N. Y. Rev.