Section 52. "a Holder in Due Course Is a Holder Who Has Taken the

instrument under the following conditions: (1) That it is complete and regular upon its face; (2) That he became the holder of it before it was overdue, and without notice that it had been previously dishonored, if such was the fact; (3) That he took it in good faith and for value; (4) That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it."

A holder in due course, then, would be entitled to collect the full $100 from the Baltimore & Ohio. This check is governed by the law of negotiability with the result which we have just indicated. Now change the facts a trifle. Jones presented his bill to the same officer of the Baltimore & Ohio as before. The officer says that checks are made out regularly on the first of the month. It was the fifteenth, and Jones did not feel able to wait until the first of the next month. He went to a friend and told him of his claim against the Baltimore & Ohio, and said: "I will assign this claim to you for $95, and then you can present the assignment, which I will draw up and sign, to the Baltimore & Ohio on the first of the month, and get the $100." His friend agrees and advances the money. When he presents the written assignment to the proper officer on the first of the month, he is told that the railroad has discovered that Jones' claim was really good for only $50, and that is all they will pay. Although his assignment reads for $100, he can collect only $50. This illustration is governed by the law of assignability, which applies to practically all contracts, apart from commercial paper. Under the rules of assignability, a person can assign no better claim than he has, or, as is sometimes said, the assignee stands in the shoes of the assignor. Jones really had a claim of only $50 against the Baltimore & Ohio, although he claimed it was $100. He could assign no more than he really had. These two illustrations show the great difference in the result of the application of the two principles, negotiability and assignability.

THE FORMAL REQUIREMENTS OF NEGOTIABLE PAPER.--There are certain formalities which all negotiable paper must have. It must be in writing, and signed by the proper person. No form of writing is specified in the Act, and lead pencil, or even slate pencil, is as good as ink, except that in the two latter cases the ease with which these forms of writing may be altered makes them most undesirable for use. But there is no law requiring the use of ink.

MUST CONTAIN A PROMISE.--Every negotiable instrument must contain words of negotiability. These words are, "to order," "to bearer," "to holder" or their equivalent. "I promise to pay John Jones, $100," and signed "John Smith," is a promissory note, but not a negotiable promissory note, because it lacks the words to "order" or "bearer," and is a document which would, therefore, pass by the law of assignability rather than the law of negotiability. In taking negotiable paper, therefore, it is always important to see whether these words are present. If they are not, the holder will lose the peculiar advantage and rights which the holder in due course acquires by the law of negotiability. A promissory note must contain a promise and a bill of exchange must contain an unconditional order. An I.O.U. for $100 signed "John Jones" is not a promissory note, because there is no promise contained in such a document.

UNCONDITIONAL PROMISE.--All negotiable documents must be payable without reference to any contingency. A note reads: "I promise to pay to the order of John Jones $100 when I attain my twenty-second birthday" and is signed by John Jones, now twenty-one. That is not a good note because the person may not live to be twenty-two. Even if he lives to become twenty-two the note is still non-negotiable, for when it was made the contingency existed. A bill of exchange, regular in form, but adding the expression, "If the Republicans win the next congressional election," is not negotiable. The one exception, as it might appear at first sight, is a negotiable document reading: "I promise to pay to the order of William White six months after death," etc. Such a promise is not contingent. Death will arrive at some time, although it may be uncertain just when. In the other illustrations the republicans might not win the congressional election, and the person might not become twenty-two. Again, all commercial paper must be made payable in money. "I promise to pay to the order of John Jones $100 worth of tobacco," is not negotiable. "I promise to pay to the order of John Jones $100 and fifty pounds of tobacco" is not negotiable. In both cases, the medium of payment is something other than money.

INCEPTION OF THE INSTRUMENT AS AN OBLIGATION.--In our discussion of contracts, we made the statement that a legal intention to make a contract was necessary. The same is true in commercial paper. A man must intend legally to issue a negotiable instrument in order to be liable on one as maker or drawer. Thus, in the case of Walker v. Ebert, 29 Wis. 94, the defendant, a German, unable to read and write English, was induced by the payee to sign an instrument, in the form of a promissory note, relying on the false statement that it was a contract appointing the defendant agent to sell a patent right. It was held that the defendant was not liable. The instrument, though complete in form, was not the defendant's note and the plaintiff acquired nothing by his purchase of the paper.

ILLUSTRATION.--We must contrast this with another situation. Suppose I hand you a paper with a promissory note printed on it, complete in every detail except your signature. I ask you to sign it. You sign the paper, without reading it over or knowing what it is, and give it back to me. I then transfer it to a person who takes it for value, in good faith, etc., or who is, in other words, a holder in due course. The question is, are you liable on such a document? The answer is, "Of course, you are." You may say, "I did not intend to sign a promissory note." The law answers you by saying, "You were careless in signing something which you did not read over, and one is presumed to intend the consequences of his own careless acts." Our German was in a different situation. He was not careless. He could not read English and was obliged to rely upon someone to tell him what the document was, and, granting that he used due care in selecting a responsible person to explain to him the nature of the document, he had done all the law required. Had he been imposed upon, on several previous occasions, by the same person who told him what the document was, and in spite of that, had relied on him to explain this document, then, undoubtedly, the court would have held otherwise and he would have been liable on the ground that he must have intended the consequences of his negligent acts, he being deemed negligent when he trusts a person who had not only misrepresented things to him but had actually defrauded him several times.

DELIVERY.--A note found among the maker's papers, after his death, imposes no obligation either upon him or upon his estate. In other words, in addition to the intentional signing of the document, to complete its validity, there must also have been what we call delivery. This is a passing out of the possession of the maker or drawer, of the document, into the hands of some third party. Delivery may be made in three ways: (1) By intention; (2) By fraud; (3) By negligence.

A VALID DELIVERY NECESSARY.--I hand you my promissory note and you take it. That, of course, is an intentional delivery. You tell me that you have a fine watch which I decide to buy, and I give you my promissory note in payment. Afterwards, upon examining the watch, I find that it is worthless and entirely different from your description. You have secured the note from me in that case by fraud, or there is, as we say, a delivery procured by fraud. I am sitting on a bench in Central Park, and I take out of my pocket a completed promissory note and look at it and place it upon the bench. When I leave I forget it and it stays there until someone comes along and picks it up. That is a delivery by negligence. All these forms of delivery are valid, making the documents good, some in the hands of all parties, others in the hands of the holder in due course only. The N. I. L. is so clear upon this matter that reference must be made to sections 15 and 16. For this reason both of these sections are reproduced here in full: