Section 28. "absence or Failure of Consideration Is a Matter of Defence

as against a person not a holder in due course."

So, we see, that in the general law of contracts, consideration is absolutely essential to a binding contract but in the law of negotiable paper, consideration is not absolutely essential except when you are dealing with the immediate parties. An illustration will explain this. I wish to make you a present on your next birthday which is January 12. To-day, September 15, I give you my promissory note due on your birthday for $50. This is to be my present to you. You take the note and then hold it until your birthday arrives and I do not pay it. Then you sue me on the note. You cannot recover anything because there was no consideration for the note and the absence of consideration is a perfectly good defence between you and me, whom the law calls the immediate parties. But, suppose, instead of doing this, you had kept the note about six weeks and then had taken it to your bank and asked them if they would discount the note for you and they had done so, taking it in absolutely good faith. They know me to be a responsible party, so they are willing to accept my promissory note. They knew you and they presumed that you had taken the note for a valuable consideration although, as a matter of fact, it was a gift to you. Under the circumstances, the bank is a holder in due course and when the note becomes due, if I do not pay, the bank will sue me and will collect from me because, as the Act says, "the failure of consideration is a matter of defence as against any person not a holder in due course." But the bank is a holder in due course.

ACCEPTANCE OF BILLS OF EXCHANGE.--The holder of a bill of exchange will take it, soon after receiving it, to the drawee, the person upon whom it is drawn, for his acceptance. The drawee will accept it by writing across the face of it "Accepted," signing his name and perhaps adding "Payable at the First National Bank." A form of bill of exchange, duly accepted, will be found elsewhere in this chapter. The Act provides that the acceptance must be in writing and signed, either on the document itself or on a separate piece of paper attached to the document. As soon as the drawee accepts the bill, he then becomes known, not as the drawee but as the acceptor and he is the party primarily liable on the bill, that is, he assumes responsibility for its payment. The holder has a right to demand an acceptance for the full amount of the bill and may refuse to take an acceptance for a less amount. It is not always possible for the drawee to know whether he has sufficient funds to justify an acceptance, and so the Act gives him twenty-four hours within which to make up his mind. During that time the holder is obliged to wait without taking any further action. Just as a conditional promise to pay money is not a good promissory note, just so a conditional acceptance is not looked upon as an acceptance which a party is obliged to take. There are, however, occasionally times when a person is willing to take a conditional acceptance. For example, I hold a bill of exchange for $1,000. There are three or four indorsers upon it and I take it to the drawee to have him accept. He will not accept for more than $500. Now I feel that the drawer and all of the indorsers are financially irresponsible and I would rather have the acceptance of the drawee for $500 than nothing. I am willing to take it. The question comes up as to the effect of this upon the other parties, the drawer and the indorsers. The Act covers that fully and it is important that it be kept in mind: