CHAPTER XII. Bills and Notes

Bills and Notes

HISTORY.--By the term "negotiable paper," we ordinarily mean promissory notes, bills of exchange and checks. The law governing negotiable paper originated among the customs of merchants on the continent of Europe. It was gradually introduced into England, and its principles grudgingly recognized by the common law judges. There is no branch of law where the desirability of uniformity is greater, as these documents pass from hand to hand like money, and travel from one State to another. Naturally, our first serious attempt at uniform legislation was made in this branch of law, and in the year 1896, the Commissioners for Uniform Laws prepared and recommended for passage the Uniform Negotiable Instruments Law. To-day, every State, except Georgia, has passed the Act, as well as the District of Columbia, Alaska, Porto Rico and the Philippines. For convenience in this chapter, we shall hereafter refer to this Negotiable Instruments Act as the N. I. L.

FORMS OF NEGOTIABLE INSTRUMENTS.--It is essential to carry in mind the customary form of the negotiable instruments we have just mentioned. A promissory note is defined by the N. I. L. as follows: "A negotiable promissory note within the meaning of this act is an unconditional promise in writing made by one person to another signed by the maker engaging to pay on demand, or at a fixed or determinable future time, a sum certain in money to order or to bearer."

A bill of exchange is defined by the N. I. L. as follows: "A bill of exchange is an unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to order or to bearer."

A check is defined by N. I. L. as "a bill of exchange drawn on a bank payable on demand."

Other documents may be negotiable in form, such as the ordinary bearer corporation bonds, liberty bonds, certificates of stock, and bills of lading. The principles discussed in this chapter would apply, ordinarily, to these documents, and are discussed more in detail in the chapters devoted to them which we have already considered.

WHAT IS NEGOTIABILITY?--Negotiability has been defined as that quality whereby a bill, note, or check, passes freely from hand to hand like currency. In fact, all of these documents are substitutes for currency, and so far as is practicable, it is desirable that they should pass as freely as currency. Negotiability applies only to this branch of the law, while assignability applies to ordinary cases of contract law.

Before the words "pay to" the time when the draft is due should be inserted--as "at sight" or "30 days after date"]

ILLUSTRATIONS.--To illustrate the difference between the two: Jones worked for the Baltimore & Ohio Railroad Co. He presented his bill of $100 to the proper official, and a check was issued by the railroad payable to the order of Jones for that amount. Jones took the check, indorsed it, and with it paid his grocery bill. The grocery man deposited the check in his bank, and was notified shortly thereafter that payment had been stopped on the check by the Baltimore & Ohio. They claimed a fraud had been committed, that Jones was overpaid $50, and, therefore, they refused to honor the check. The grocery man, having taken this check in the usual course of business, is what we term a "holder in due course." The N.I.L. defines a holder in due course as: