endorsement of the payee's name followed by delivery of the instrument to the transferee, who is then known as the endorsee and to whom the instrument is then payable. If the instrument is payable to bearer, or some indefinite expression is used as "Pay to Cash," the instrument is transferred by mere delivery and the ownership vests in any lawful holder. (§ 60.) An ordinary contract or agreement, on the contrary, can only be transferred by formal assignment, and possession alone gives no title.

§ 261. (b) Rights Transferred.

When a negotiable instrument, complete and regular on its face, is transferred to a third party who takes it in good faith and for a valuable consideration and before maturity of the instrument, such third party is entitled, in accordance with its terms, to payment of the full amount of money called for by such instrument, and this regardless of any agreements between the original parties, whether written or verbal, or any defenses that would be effective as to an ordinary contract. (§ 90.) Under these conditions the position of the transferee as to and his interest in the instrument may be very different from that of the transferrer.5

For instance, stock is purchased on the representation that the issuing company is prosperous and the stock valuable, the purchaser giving his note in payment therefor. Before the note matures he finds that he has been deceived, the company which issued the stock being practically insolvent and the securities of no value. The consideration for which the note was given has therefore failed.

Under such circumstances the purchaser may refuse payment of his note on the ground of this failure of consideration and the defense is sufficient if the note is still in the hands of

G. N. Bank v. Bingham, 118 N. Y. 349 (1890).

the party to whom it was given. The note is then as valueless as the stock.

If, however, before its maturity the note was transferred to a third party who takes it in the ordinary course of business and without knowledge of the failure of consideration, the peculiar nature of negotiable paper comes into play, and, as to him, the failure of consideration is no defense. In his hands. the note is valid and he can compel the drawer to pay the full amount called for by the note regardless of the hardship thereby inflicted. (§ 96.)

This absolute value in the hands of an innocent third party, in most cases entirely independent of the conditions. under which the instrument was given, is peculiar to negotiable

instruments.

§ 262. Requisites of Negotiable Instruments.

"Negotiable paper must carry its full history upon its face." In other words, the note, draft or check goes out with all its conditions expressed upon the instrument. No agreements between the original parties are of any effect as to a third party unless they are written in or are attached to the instrument itself.

The language of a negotiable instrument is immaterial and any terms are sufficient which indicate its purpose with reasonable clearness. It must, however, conform to certain general requirements of the law. These are as follows:

(a) It must be in writing. If printed or If printed or partially printed and partially written, the requirements of the statutes are satisfied. (§ 20.)

(b) It must be signed by the maker or drawer, as the case may be. (§ 20.) The name may be written in ink or pencil, be indicated by marks, or be even printed but in this latter case it is not self-proving as is the written signature.

• Breneman v. Furniss, 90 Pa. St. 186 (1879).

7 Daniel Neg. Insts., § 30.

Attestation of signature is not necessary save in the case of a signature indicated by marks, in which case for convenience in proving it should be witnessed.8

(c) Its undertaking must be the payment of money. (§ 20.) This requirement is, however, somewhat modified in some of the states, either by statute provision or by decisions of the courts. Thus in New York certain warehouse receipts are held to be negotiable paper; in Wisconsin warehouse receipts, bills of lading and railroad receipts are negotiable unless otherwise marked, and in Georgia certain instruments, though payable in goods, are by special enactment declared negotiable.

(d) No undertaking beyond the payment of money must. be required. This does not, however, prevent the inclusion of provisions-unless in violation of the statute law or policy of the state which (1) authorize the sale of collateral security in case the instrument is not paid at maturity, or (2) authorize a confession of judgment if interest is not paid at maturity, or (3) waive the benefit of any law intended for the advantage or protection of the obligor, or (4) give the holder an election to require something else than money, as goods or land or labor.10 (§ 24.)

(e) The amount must be certain. (§ 20.) In any case where the amount of the instrument is not specified with exactness or so expressed that it can be definitely determined. the instrument is not negotiable. This does not preclude provisions requiring the payment of interest or exchange, for the amount of these can be definitely ascertained; nor for collection and attorneys' fees in case of non-payment at maturity, nor for payment by instalment. (§ 21.) In some states, however, provisions for attorneys' fees are void11 but do not

8 See $264.

Perry v. Bigelow, 128 Mass. 129 (1880). 10 Hodges v. Shuler, 22 N. Y. 114 (1860).

11 Levens v. Briggs, 21 Oregon 333 (1891).

affect the negotiability of the instrument in which they are found.

(f) The undertaking must be unconditional. (§ 20.) If a note, the promise to pay must be absolute. If a draft or check, the order must be unqualified. If in any case conditions are inserted which render it uncertain whether the instrument will be finally paid, the negotiability of the instrument is destroyed. This does not preclude an indication of the particular fund from which payment is to be made, or the account to be debited, unless it is so precise as to limit the payment to that particular fund or account;12 nor a statement of the transaction which gives rise to the instrument,13 as none of these affect the unconditional nature of the order. (§ 22.) If, however, the order or promise is to pay out of a particular fund, or in case goods are delivered, or if some event occurs, the instrument loses its unconditional character and is no longer negotiable. 14

(g) It must be payable at a determinable time. (§ 20.) This does not preclude a provision that upon default in payment of any instalment or of interest the whole shall become due. (§ 21.) If no time is expressed, the instrument is payable on demand,15 but if some time is fixed, a time that will certainly come is requisite. The exact time or date of payment may be stated or may be indicated, or payment may be required on or at a fixed time before or after some specified future event, if this event be of such a nature that it must certainly happen, as "sixty days after my death."16 If, however, the specified time of payment is one which may never arrive, as "sixty days after my marriage," the instrument is non-nego

12 Redman v. Adams, 51 Me. 433 (1863); Schmittler v. Simon, 101 N. Y. 554 (1886); Munger v. Shannon, 61 N. Y. 251 (1874).

18 Mott v. Havana Nat. Bank, 22 Hun (N. Y.) 354 (1880); Bank v. Bowman Spring, 50 App. Div. (N. Y.) 66 (1900).

14 Nat. Sav. Bank v. Cable, 48 Atl. Rep. (Conn.) 428 (1901).

15 Messmore v. Morrison, 172 Pa. St. 300 (1896); Hall v. Toby, 110 Pa. St. 318 (1885).

16 Cartwright v. Gray, 127 N. Y. 92 (1891).

tiable and the happening of the event does not cure the defect.17

(h) The instrument must be payable either to the order of some specified person or to bearer. (§ 20.) If the instrument is made payable "to Holder," "to Order" or to some indefinite term or fictitious name, it is held to be payable to bearer. (§ 28.) If no definite payee is named or indicated with reasonable certainty, the instrument is fatally defective. If the instrument is payable to some specified person but not to his order or to bearer, it is not negotiable.18

(i) In case of a draft or check, the drawee must be indicated with reasonable certainty. (§ 20.) So long as the party intended can be discovered from the description or indications of the instrument, the conditions of this requirement are fulfilled.

(j) The instrument must be delivered.

§ 263. Delivery.

The contract of a negotiable instrument is incomplete and revocable as to immediate parties until the instrument is delivered for the purpose of giving effect thereto by or under authority of the maker, drawer, acceptor or endorser, as the case may be. But whenever the instrument is in the hands of a holder in due course, a valid delivery is conclusively presumed. (35) Under this provision, a note or draft, if it be complete, is valid in the hands of an innocent third party, even though it were stolen or obtained by fraud from the original parties.

The possession of an instrument is always prima facie evidence of title19 and a valid and intentional delivery by all parties whose names appear thereon is presumed until the

17 Duffield v. Johnson, 96 N. Y. 369 (1884); First Nat. Bk. v. Alton, 60 Conn. 402 (1891).

18 Maule v. Crawford, 14 Hun 193 (1878); Backus v. Danforth, 10 Conn. 297 (1834).

19 Newcombe v. Fox, 1 App. Div. (N. Y.) 389 (1896).