COMMERCIAL PAPER. CHAPTER I. GENERAL PRINCIPLES AND DEFINITIONS. 1. Commercial paper-includes what. 2. Negotiable instruments. 3. Bills of exchange-Foreign-Inland. 4. Bills of exchange-Parties. 5. Acceptance-Acceptance supra protest. 6. Presentment for acceptance-Dishonor-Protest and notice. 7. Promissory notes. 8. Checks. 9. Bank-notes. 10. Letters of credit. 11. Certificates of deposit-Due-bills. 12. Corporation bonds-Coupons. 13. Transfer-Indorsement. H. Holder-"Bona fide holder for value." 15. Consideration-Accommodation. 16. Maturity-Grace. 17. Presentment for payment-Payment. §1. Commercial Paper is rather a popular than a technical expression, often used, however, both in statutes and in decisions of courts to designate those simple forms of contract long recognized in the world's commerce and governed by the law merchant. This lex mercatoria or common law of merchants is of more universal authority than the common law of England. It applies, in general, to bills of exchange, promissory notes, checks, bank-bills and letters of credit. And in more recent times its principles have been extended, in part at least, to other evidence of indebtedness, such as due-bills, certificates of deposit and corporation bonds. § 2. Negotiable Instruments. These instruments may be negotiable in the legal sense of the term or non-negotiable. A To the latter class belong those which by reason of their form or character possess only the quality of transferability incident to all simple contracts. Negotiable instruments, on the other hand, may be so transferred as to give the assignee greater rights than the assignor himself possesses. In such case the paper becomes in the assignee's hands a valid obligation for what it purports on its face to be, although it may have been without consideration or subject to other defense as regards the payee or intermediate holders. § 3. Bill of Exchange-Foreign or Inland.-A bill of exchange is an unconditional order for the payment of a certain sum of money by the person addressed in it, to the person in whose favor it is drawn.1 An order may have all the force 1 Bill of exchange defined. BLACKSTONE.—"An open letter of request from one man to another desiring him to pay a sum named therein to a third person on his account," 2 Com. 466. KENT. "A written order or request by one person to another for the payment of money at a specified time absolutely and at all events," 3 Kent Com. 74. BYLES.-"An unconditional written order from A. to B., directing B. to pay C. a sum certain of money therein named," Byles on Bills 1. CHITTY. "An open letter of request from and order by one person on another to pay a sum of money therein mentioned to a third person on his account," Chitty on Bills 1. PARSONS.-"A written order for the payment of money," 1 Parsons on Bills and Notes 52. CHALMERS.-"An unconditional order in writing for the payment of a sum of money absolutely and at all events," Chalm. Dig. of Law of Bills, Art. 1. EDWARDS-"An open letter directing the person to whom it is addressed to pay the sum therein specified to a third person named in the instrument on account of the writer or person by whom it is drawn," 1 Edw. on Bills, & 1. DANIEL.-"An open letter addressed by one person to a second, directing him in effect to pay absolutely and at all events a certain sum of money therein named to a third person or to any other to whom that third person may order it to be paid; or it may be payable to bearer or to the drawer himself," 1 Daniel on Negot. Instruments 35. BOUVIER. "A written ofder from one person to another directing the person to whom it is addressed to pay to a third person a certain sum of money therein named," Law Dict. CALIFORNIA CIVIL CODE.-"An instrument, negotiable in form, by which one, who is called the drawer, requests another called she drawee, to pay a specified sum of money," Sec. 3171. ENGLISH BILLS OF EXCHANGE ACT, 1882.-"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 or to the order of a specified person, or to bearer," Sec. 3. of a bill of exchange as between the immediate parties to it without being recognized by the law merchant as a negotiable bill. This often occurs through additions or restrictions contained in the instrument, directing it to be paid out of a particular fund or in a particular currency or on some contingency. These and other irregularities in form will be considered hereafter.1 Bills of exchange are either foreign or inland. Inland bills are drawn and payable in Great Britain (by English law) or (by American law) in the State whose jurisdiction is invoked. If the bill is either drawn or payable in another State or country, it is a foreign bill. The United States are in this respect foreign to one another, and a bill drawn in one State payable in another is a foreign bill.3 1 Bill of exchange-Form. Exchange for £1,000. NEW YORK, May 1st, 1884. Six months after date of this first of exchange (second and third unpaid) pay to the order of John Byles one thousand pounds, value received. HENRY GEORGE. Bills of exchange, especially inland bills, are often drawn in one part instead of triplicates. In this case the words italicized in the bill are of course omitted. $1,000. NEW YORK, May 1st, 1884. Ten days after sight pay to Mr. John Byles, or order, one thousand dollars, value received. Payable at the First National Bank of Philadelphia. To MESSRS, BROWN & SONS, PHILADELPHIA. HENRY GEORGE. To these words are frequently added in the body of the bill directions as to place of payment and account to be charged, e. g. "payable at the Westminster Bank," "charge the same to my account,' charge to account of A. B." 99 66 Byles 397; Chitty 14; 1 Daniel 8; 1 Edwards & 8; 1 Parsons 55; Story on Bills 465; 2 Blackstone Com. 466. Buckner v. Finley, 2 Pet. 586 (1829); Dickens v. Bent, 10 Ib. 572; Bank of United States v. Daniel, 12 Ib. 32; Phoenix Bank v. Hussey, 12 Pick. 483; Ocean Nat. Bank v. Williams, 102 Mass. 141 (1869). "We are all clearly of the opinion that bills drawn in one of these States upon persons living in any other of them partake of the character of foreign bills and ought so to be treated. For all national purposes embraced by the federal constitution the States and the citizens thereof are one, united under the same sovereign authority and governed by the same laws. In all other respects the States are necessarily foreign to, and independent of each other," Washington, J., in Buckner v. Finley, supra. § 4. Bill of Exchange-Parties.-The person by whom a bill is drawn is called the drawer; the person on whom it is drawn, the drawee; the person in whose favor it is drawn, the payee. These are not necessarily three distinct persons. A man may draw a bill on himself or make it payable to himself. The drawee becomes an acceptor if he accepts the bill. The payee becomes an indorser if he transfers the bill by indorsement. One who is not a party to the bill as drawer, drawee or payee may make himself liable upon it as a guarantor or as a surety, or may accept it "for the honor" of another party and become an acceptor supra protest. In foreign law the guarantor of a bill is known as aval. The bill itself may suggest persons to whom application shall be made on the drawee's refusal, i. e. "in case of need" or "au besoin." § 5. Acceptance-Acceptance Supra Protest.—The acceptance of a bill of exchange is the drawee's agreement to pay it when it falls due.1 An agreement on the part of a stranger to pay the bill at maturity, if the drawee does not, is called an acceptance for honor or an acceptance supra protest.2 The simplest and most common form of acceptance is by the word "accepted" written across the face of the bill over the acceptor's signature. A promise to accept often binds the promissor as an actual acceptance. § 6. Presentment for Acceptance-Dishonor-Protest and Notice. The holder of a bill may, and in some cases must, present it to the drawee for acceptance. The time and manner of presentment are regulated in most countries and in many of the United States by statute. On the drawee's 1Byles 187; Chitty 318; 1 Parsons 281; 1 Edwards ? 606; Gallagher v. Nichols, 60 N. Y. 438 (1875); Ray v. Faulkner, 73 Ill. 469 (1874). "An engagement to pay the bill in money when due," Bouvier Law Dict., in loco. "A promise to pay it according to its terms," Beasley, C. J., in Bonnell v. Mawha, 8 Vr. 200. 2 Form of acceptance supra protest. "Accepted supra protest for the honor of A. B. and will be paid at my office if regularly presented when due. JOHN JONES." "Accepted S. P., JOHN JONES." "Accepted under protest for the honor of A. B. and will be paid for his account if refused when due and regularly protested. JOHN JONES." refusal to accept, the bill should be presented to parties designated "au besoin." When acceptance is refused, protest must be made in case of foreign bills, and in the case of all bills notice of dishonor must be given to the other parties who are liable to the holder upon the bill. Protest is a formal notarial certificate attesting the dishonor of a bill. It should be annexed to the original bill or a copy of it, and should state the time, place and manner of presentment, to whom it was made, what answer was received, and for whom and against whom the bill is protested.1 The protest may also contain a notarial certificate of the notice of dishonor given to the parties entitled to such notice. Notice of dishonor is in general necessary, and want of it will discharge other parties from further liability. In some of the United States the notary's certificate of notice of dishonor is itself statutory evidence of the facts stated in it. The certificate should state particularly the time, place and manner of giving the notice. The notice should identify Byles 262; Benj. Chalm. Dig. Art. 176; Sprague v. Fletcher, 8 Oregon 367; Walker V. Turner, 2 Gratt. 534. "A notarial act made for want of payment of a promissory note, or for want of acceptance or payment of a bill of exchange, by a notary public, in which it is declared that all parties to such instruments will be held responsible to the holder for all damages, exchanges, re exchanges, etc.," Bouvier Law Dict. "Protest in a more popular sense includes all steps after the dishonor of negotiable paper necessary to charge a party to it," Milligan, J., in Ocoee Bank v. Hughes, 2 Coldw. 52 (1865). Form of protest for non-acceptance. UNITED STATES OF AMERICA, COUNTY OF HUDSON, } 88. Whereupon, I, the said On the first day of December, A. D. 1884, at the request of A. B. [holder's name], I, Charles Henry, a notary public of the State of New Jersey duly commissioned and sworn, did present the original bill of exchange hereto annexed, (or of which a copy is hereto annexed,) to C. D. [name of drawee], at his place of business in Jersey City and demanded acceptance, who refused to accept the same. notary, at the request aforesaid did protest and by these presents do solemnly and publicly protest, as well against the drawer and indorsers of the said bill as against all others whom it may concern for exchange, re-exchange and all costs, damages and interest already incurred and to be hereafter incurred for want of acceptance of the same. Thus done and protested at Jersey City, in the county aforesaid, in the presence of John Doe and Richard Doe, witnesses. {L. s. In testimonium veritatis. CHARLES HENRY, |