Law of Business Paper and Securities

7/27/2019 Law of Business Paper and Securities.

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THE LIBRARYOFTHE UNIVERSITYOF CALIFORNIALOS ANGELESSCHOOL OF LAW

GIFT OFRollin I!. Perkins

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THE

LAW OF BUSINESS PAPERAND

SECURITIESA Treatment of the Uniform Negotiable Instruments Act for

the Lawyer, the Student and the Business Man, With Ex-planations of the Law and Citations to Decisions

Interpreting the Act and Others UponWhich Its Provisions Were BasedTOGETHER WITH

A Brief Synopsis of the Law of Collections and of the ActsGoverning Bills of Lading, Warehouse Receipts

and the Transfer of Certificates of Stock.

By CHARLES F. DOLLE(Of the Cincinnati Bar)

1920T. H. FLOOD & COMPANY

PublishersChicago, Illinois


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Copyright 1920By

CHARLES F. DOLLE.


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0>> PREFACE.I have sought, in the following pages, to set out in conciseform a simple and, as far as the nature of the subjects would

permit, a non-technical treatment of the Uniform Acts whichgovern our business instruments. Men occupied in businessand in finance ma}' find it interesting and useful.The book is offered to business men and to young men get-

ting an education in business and in the law, and to lawyerstoo, although the members of the bar already have at theirdisposal technical works upon the same subjects written byeminent authors.Perhaps I should have resisted more strongly, and even

declined altogether, the request of the publishers to addressthis volume to lawyers as well as to business men and to youngmen getting a business education and an education in the law,if I had not read a statement by the author of a treatise on thelaw of commercial paper that his three large volumes on thissubject might never have been written if the Uniform Nego-tiable Instruments Law had been enacted before their publi-cation. This is a tribute to the authors of the Act whichsurely justifies the unselfish labor spent by them in reducing toa few pages the law of more than ten thousand cases.

I shall not hope that the specialist, or even the maturelawyer, will find of much benefit the explanations I haveoffered at each section of the Act. These may be unnecessaryto his understanding of the law. But he will find in themmany cross-references that will help him to visualize at onetime all of its provisions (some in widely separated sections),upon any question into which he may be inquiring, and if hewill read the book he may not find it uninteresting.For the student and the business man without training inthe law, the explanations will be an aid. They will help him

to better understand the Act, although I frankly confess thatit has sometimes seemed futile and quite unnecessary to try toexplain its already clearly expressed provisions. He will findthese explanations stated in a narrative-expository style thatis designed to hold his interest and in language more simplethan is customarily used in the treatment of technical subjects.For study use the book will present fcAver difficulties and dis-tractions than are commonly met with when the subjects arepursued by the case method, or in a book wholly designed formen already learned in the law.

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iv PREFACEThe plan of the book, its arrangement and its scope are

stated in the historical and introductory chapters at the be-ginning of each of the two main Divisions of the UniformNegotiable Instruments Law, and it will be profitable to readthese before engaging upon the study of the sections of theAct which follow them.The Uniform Negotiable Instruments Law which forms themain subject of the book, is now effective in all of the States.The book is therefore adaptable to all, such changes as have

been made by any of them being shown by marginal refer-ences and given in full in the Appendix. A merely synopticaltreatment of the other subjects is given, it is not offered asanything more.

Charles F. Dolle.Cincinnati, April 17, 1920.


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CONTENTS.PageTHE UNIFORM NEGOTIABLE INSTRUMENTS LAW.

INTRODUCTORY AND HISTORICAL 1TITLE I.

NEGOTIABLE INSTRUMENTS IN GENERAL.SUBDIVISION I. FORM AND INTERPRETATION 14

II. CONSIDERATION 62III. NEGOTIATION 71IV. RIGHTS OP THE HOLDER 93V. LIABILITIES OF PARTIES 109

VI. PRESENTMENT FOR PAYMENT 124VIL NOTICE OF DISHONOR 150

VIII. DISCHARGE OF NEGOTIABLE INSTRUMENTS 176TITLE II.

BILLS OF EXCHANGE.SUBDIVISION I. FORM AND INTERPRETATION 205

II. ACCEPTANCE 212III. PRESENTMENT FOR ACCEPTANCE 228rV. PROTEST 239V. ACCEPTANCE FOR HONOR 250VL PAYMENT FOR HONOR 258

VIL BILLS IN A SET 265TITLE III.

PROMISSORY NOTES AND CHECKS.SUBDIVISION I. PROMISSORY NOTES AND CHECKS DE-FINED, ETC 270

TITLE IV.GENERAL PROVISIONS.

SUBDIVISION I. TITLE OP ACT AND DEFINITIONS 299SYNOPSIS OP THE LAW GOVERNING THE COLLECTION OFCHECKS AND OTHER INSTRUMENTS 300QUASI-NEGOTIABLE INSTRUMENTS 304EXPLANATIONS OF THE UNIFORM BILLS OP LADING ACT. . . 305EXPLANATIONS OF THE UNIFORM WAREHOUSE RECEIPTACT 318DIGEST OP THE LAW OP TRANSFER OP CERTIFICATES OFSTOCK 336

APPENDIX.Wherein will be found such changes in the Uniform NegotiableInstruments Law as have been made in some of the states 365INDEX 394


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HISTORICALAND

INTRODUCTORY.If there is one branch of the law with which the lawyer

and the business man ought to make himself familiar itis that upon the subject of commercial paper. To knowall the law is not the province of any man, not even thelawyer, but every man ought to be familiar with the ruleswhich govern the use of his business instruments andthe rights and duties of the parties upon this kind ofpaper. We are all called upon to si{ni our names topromissory notes, bills of exchange and checks, andit is very much worth while to know by what. laws ourrights and our duties in respect to these are fixed. Whenwe know where we stand in regard to the negotiableinstruioents which we sign and give out or which we re-ceive in the course of our trade transactions we enjoy asense of security which it is agreeable to feel, and thisDook is intended to be an aid to that useful knowledge.Every negotiable promissory note, check, or draft,

which we issue or indorse is really a promise to performan obligation to the person to whom we give it and to allothprs to whom it may be assigned. Commercial paperis the medium by which we settle most of our businesstransactions and the fundamental principles upon whichits negotiable character rests are alike all over the world.It is by reason of its negotiability that it has come to beso extensively used in place of actual money as the meansof settling our business obligations.


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2 THE NEGOTIABLE INSTRUMENTS LAWMeaning of Negotiability means not only that thenegotiability. note, check, or bill of exchange which weissue may be assigned by one person to another bydelivery or indorsement, but it also means that thetransferee who becomes the holder of the instrumentso transferred will take it free from defenses avail-able to the original and to prior parties among them-selves, may sue upon it in his own name, and that hisrights, and the rights and obligations of all partieswhose names are upon the instrument, will be deter-mined and enforced according to the well establishedrules of the Law Merchant. The Law Merchant is abranch of the Common Law comprising all those princi-ples and rulefj of mercantile transactions, not alone con-cerning commercial paper, but the equally well estab-lished rules of Factorage, Brokerage and, in part, of In-surance, which have been in immemorial use and havethereby become universally established and recognizedas binding custom and, by sanction of the courts, ob-tained the force of law.The unwritten customs of merchantsChancellor j^^^^ ^^^^ defined by Chancellor Kent inKent s definition -^of the law his "Commentaries" on the law, quotingmerchant. from Lord Mansfield, as *'a system of lawwhich does not rest essentially on the positive institutionsand local customs of any particular country, but consistsof certain principles of equity and usages of trade, whichg-eneral convenience and a common sense of justice haveestablished to regulate the dealings of merchants andmariners in all the commercial countries of the civilizedworld."

Writers agree that the earliest history of the customsof merchants is obscure. The use of Bills of Exchange,^hich had their commercial origin in this branch of the


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HISTORICAL AND INTRODUCTORY 3law, and were the lirst form of commercial paper to be^ . . , , used, caunot be traced to its beginning,Origin and earlyhistory of Bills but perhaps bills are oi such antiquityof Exchange. ^^.^^ ^j^^^ ^^^j.^ ^j.g^ introduced by thatmerchant said to be mentioned by Isocrates (400 J3. C.)who came to Athens with cargoes of corn and gavean order upon a banker in a town upon the Euxine withwhom he had a credit. It is said of Cicero, tnree hundredyears later, that he paid the tuition of his son at Athensby an order from a merchant in Rome drawn upon hisdebtor in the Greek city and perhaps we may believe thatin his time ^100 B. C.) bills of exchange, the earliest formof commercial paper, first came into use as a means ofmaking credits available for the payment of the obliga-tions of merchants and traders residing in different dis-tant cities. It would indeed be interesting to know theirvery first use, but however and whenever that may havebeen the idea proved too good to be lost and, accordingly,at the end of the twelfth century they were well estab-lished among the merchants of Italy. Then, as now andalways, convenience and safety in the transportation andtransfer of money inspired their use. Bills later camelo be used in France nnd from thence were introducedinto England where their earliest recorded use, so far asmay he found in the reports of early cases, is in one de-cided in 1603. They were not at that time employed inEngland by merchants in theij- domestic transactions,but their use seems to liave been confined to foreignbills drawn by or on foreign merchants. Later, billsdrav>Ti by domestic merchants and finally, still later,bills dra-wn by or upon persons not merchants or traderscame to be governed by the already well understood andwell established rules of the customs of merchants uponwhich all negotiable instruments codes, and all decisions.


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4 THE NEGOTIABLE INSTRUMENTS LAWupon the subject, have since been based. At an earlyperiod it was disputed in England whether or not therules of the law merchant applied to promissory notesas well as to bills of exchange but the negotiability of theformer was afterward, in 1705, settled by statute. Thesecustoms of merchants and mariners based, you will ob-serve, upon the general convenience and a common senseof justice, and recognized as law more than seven cen-turies ago, have since become the public law of everycivilized country in the world.T, 1' 4. j- The French were the first to syste-Earliest codifica-tions of the law matically arrange the rules of the Lawmere ant. Merchant, in so far as they relate to com-mercial paper and, in the 17th Century, codified themin what was kno^\ai as ''The Commercial Code ofFrance." This Code, it is said, formed the basis of allcontinental codes. Later they were collected and codi-fied in Spain, in 1829, and in Germany in 1848. No gen-eral codification took place in England until 1882. Inthe United States there had been no attempt to codifythe laws relating to commercial paper as established byusage, until 1872 when California did so, in a way, in its** Civil Code" adopted that year.

Prior to 1882, in England and in allThe need for the United States, with the exception ofEngland and the California, the law upon the subject ofUnited States commercial paper consisted in part ofand the BritishB. of E. act. statutory enactment, but more largely of

judicial decisions interpreting the estab-lished customs of the banking and business communities.Up to that time there had not been, with the exceptionreferred to, any codification of these decisions and es-tablished rules into written, enacted law in either coun-try. Of course, in this state of the law, varying inter-


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HISTORICAL AND IxNTRODUCTORY 5pretations of many of the important rules of the lawmerchant confronted the lawyer in England and in ourown country, more particularly in the United States,where there were then, as now, about fifty courts of finalresort. Bewildering complications and contradictionsresulted from their conflicting decisions and the solu-tion of the perplexing problems which arose out of con-tradictory interpretation of this branch of business lawinvolved, for the lawyer, the laborious examination ofa multitude of decisions seldom, even then, providing aclear and uniform rule for the interpretation of therights and duties of parties to commercial paper, andpresented to the business man justifiable occasion fordispute and litigation.In England the need for codification was met by theenactment by Parliament in 1882 of the "Bills of Ex-change Act" and this became the first general codifica-tion of the laws relating to commercial paper in any ofthe English speaking countries. It was designed tocodify, as nearly as possible, all the existing law uponthe subject in that country. That Act is thoroughly com-prehensive and covers the entire field of commercialpaper.

Since our system of law is based upon^ZJ^e^i^r^^' the jurisprudence of England it was, ofments law. course, a very logical consequence thatupon this important subject the business community ofour 0A\Ti country looked for guidance to the codificationof the law merchant in Great Britain when the needfor revision was proposed at the annual conference of theCommissioners on Uniform State Laws at their meetingin 1895. In that year, in response to this very generalneed and urgent demand, which had already engaged theearnest attention of the Uniform Laws Committee of the


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6 THE NEGOTIABLE INSTRUMENTS LAWAmerican Bankers ' Association, the annual conference ofthe Commissioners on Uniform State Laws appointed acommittee to draft an act which would meet our businessneeds. The committee to which this work was intrustedwas instructed to prepare a bill to be based upon theBritish Act which had then been in use for nearly four-teen years. This committee was not limited, however, tothe consideration of that Act alone but it was instructedto prepare and present a report which should have re-gard also to information to be obtained from whateverother source it might see fit to consult. Therefore, whilethe British Act forms the basis of our Uniform Nego-tiable Instruments Law, and while the continental codeswere all consulted by its authors, the committee, never-theless, did not hesitate to depart from any prior actswhenever they were found to be in conflict with the set-tled law of this country.There is a marked difference in the forms of the Brit-

ish Act and our own, due very probably to the more com-mon use of bills of exchange in England than in theUnited States. This difference, is, however, mainly inthe structure of the law our own Act being equally ascomprehensive as the British Act, and amply providingfor an equally general use of bills of exchange in our do-mestic and foreign commerce, which we shall presentlysee when what seems to be the real business purpose ofour new currency legislation is fully taken advantage ofby the banks and merchants of this country. Bills areexpected then to exercise the same influence upon themovement of trade and the investment of funds in thiscountry as they now do in the countries of Europe wherethey are so extensively employed. Discounts will in allprobability greatly increase and since it is expected thataccounts will become available discount items by means


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HISTORICAL AND INTRODUCTORY 7of time acceptances in lieu of, or as an addition to thepresent method of obtaining credit by promissory notes,which prevails in most parts of this country, there seemsnow to be even greater reason than ever before that menengaged in business, and those seeking a business educa-tion, shall make themselves familiar with the law upon thesubject of commercial paper and that the lawyer shallhave a ready means of reference to the statute when hisaid is sought.The committee to which the work of drafting a suitable

act was intrusted prepared and submitted to the Com-mission at the next Conference in Saratoga, N. Y., heldthere in 1896, a draft of what is now known as the Uni-form Negotiable Instruments Law. After some amend-ments had been made by the Conference, most of which,the author of the Act says, were such changes in the ex-isting law as he had not felt at liberty to incorporate inhis draft of the proposed bill, the Act was agreed uponand prepared for submission to the legislatures of all theStates with the recommendation of the Conference for itsadoption. At this Conference representatives of four-teen States were present and participated. Its commit-tee had the assistance of an able expert upon the law ofcommercial paper and during the year of its preparationthe draft of the proposed Act was submitted to many ofthe most eminent American and English authoritiesupon the subject for their approval and criticism. Itwas later submitted to the members of tlie committee onUniform Laws of the American Bankers' Associationwho, deeming the Act so complete and satisfactory andso much better than any which it could frame, reportedit favorably and recommended to the State Associationsthat they present the Uniform Act to their respectivestate legislatures and urge its adoption in all the States.


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8 THE NEGOTIABLE INSTRUMENTS LAWStates in which it ^^^ adoption proceeded slowly but now,is in effect. after twenty-one years, the statute hasbeen enacted in every State but Georgia and Texas andin the District of Columbia, Hawaii, Alaska and thePhilippine Islands, in most, without change, and in allsubstantially in the form in which it was recommendedby the commission. It is, perhaps, to be regretted thelegislatures of some have seen fit to change any of theprovisions of this Act. Such small ambiguities, discrep-ancies or obscurities as might appear in it can better becleared away by judicial interpretation, and this seems tohave been the conclusion of all subsequent Conferencesof the commissioners for, though many amendments tothe Act have been proposed, none have been adopted bythat body. However, in such States as have altered thelaw in any material respect, the changes will be indicatedin this book by marginal notes. These will refer thereader to an Appendix where they will be found.j^^^ jjg^ The words of the statute are given con-controlling effect trolling effect wherever they are in con-flict with the law as it previously existed either by stat-utory enactment or by judicial interpretation of the com-mon law. The Act was intended to be a code of all thelaws relating to the use of commercial paper. Its styleand language have been said to be better, in some re-spects, than the British Act. It is also said to be simpler,less technical and more easily intelligible than that Act,and it has been commended by the courts and by eminentEnglish authority because of these qualities.

The purpose of the Act being to clearpurp^s'^roflhe up.whatever conflict existed in the law ofact. negotiable instruments in this countryand to establish certainty and uniformity in their con-struction and effect in all the States, in order that the


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HISTORICAL AND INTRODUCTORY 9business man may more readily understand his rightsand his duties in regard to the commercial paper whichhe issues or accepts or to which he otherwise becomes aparty in the course of his business dealings, the Act willbe set forth in this volume with such explanations asmight be helpful to him. The arrangement of the bookThe arrangement ^^'^^^ present each section of the Act in theof the book. form in which it is in effect in those Stateswhere no changes have been made, following these withthe explanations which seem necessary to make it intelli-gible to the man of ordinary comprehension and by ref-erences to related sections. Attention will be directed,as has been said, by marginal notes, to such States ashave made changes in the Act and what they are. Thesewill be found to be comparatively few and not seriouslyto impair its essential characteristic of uniformity.

Citations will be used and these will either illustratethe cases upon which is based the provision in the Act towhich they refer, or they will be of cases in which it hasbeen interpreted. The courts of all the States will, ofcourse, be guided by the interpretations of other courtsof their own States where they have passed upon the Act,but when they have no precedent decision of their ownthey will freely accept, with the same authority as theirown, the decisions of the courts of other States interpret-ing identical provisions of this Act. This fortunate dis-position toward uniformity in interpretation has madeit possible for me to use cases in the citations which aptlywell illustrate the conclusions stated in the text, whenthey are not obviously sustained by the Act itself, with-out cumbering the volume with the multitude of cumula-tive decisions that are available and may be found in thevarious digests of the law.


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10 THE NEGOTIABLE INSTRUMENTS LAWAlthough it is applicable to all forms of negotiable in-

struments, the Act has particular reference to promis-sory notes, bills of exchange and checks these being theprincipal forms of commercial paper and the three withwhich business men most frequently meet in their dailytransactions, and perhaps the reader will be enabled toapproach, apply and better understand the provisions ofthe first title of the Act if he is here made familiar withthe definition of each of these instruments as it is con-tained in the law. Accordingly, a negotiable promissorynote is defined as followsDefinition of *


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HISTORICAL AND INTRODUCTORY 11Bill of exchange "A bill of exchange is an uncondi-defined. tional order in writing addressed by onePERSON TO another, SIGNED BY THE PERSON GIVING IT, REQUIR-ING THE PERSON TO WHOM IT IS ADDRESSED TO PAY ON DEMANDOR AT A FIXED OR DETERMINABLE FUTURE TIME A SUM CER-TAIN IN MONEY TO ORDER OR TO BEARER. 'A bill of exchange is more commonly known as a''draft," ''bill," "acceptance" and "trade acceptance,"the designation newly applied to bills drawn and acceptedby merchants in order to distinguish them from ' ' Bank-ers ' Bills ' ' which are at present used only in transactionsgrowing out of our foreign trade. A bill is usually,though not necessarily, drawn by one person upon an-other with whom he has a credit or who is indebted tohim. It directs the person upon whom it is drawn to paythe money due upon the drawer's credit, either immedi-ately upon presentment of the instrument or at a futuretime, to some other person whom he names. Wlien suchan order is to be issued certain requisites of form mustbe observed. These are fixed in this Act and while, asin other negotiable instruments, the Act does not desig-nate the exact lang-uage to be used in drawing a bill, thesubstance of the law must be complied with and is suffi-ciently so in the forms with which we are all familiar andcan readily obtain.

In the introduction to the second title, the provisionsof which are applicable to bills of exchange, I have usedthe occasion to outline the principal business features ofthe new Federal Reserve Bank Act which was designedto permit and encourage the acceptance business bynational banks, and to establish a rediscount market inthis country similar to those of the financial centers ofEurope, based, to a very large extent, upon bankers ' bills.The third form of familiar commercial paper to which

the law applies is a check, and this is defined in the Actas follows:


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12 THE NEGOTIABLE INSTRUMENTS LAWA check defined. ' 'A check is a bill of exchange dkawnox A bank payable ox demaxd. Except as hereix other-A^iSE provided, the peovisioxs of this act applicable toA BILL OF EXCHAXGE PAYABLE OX DEMAXD APPLY TO Acheck/'A check dra^m upon a bank is, therefore, considered tobe and is in fact a bill of exchange payable upon de-mand. Every provision of this Act which governs theinterpretation and enforcement of the liabilities andrights of parties to a bill of exchange payable upon de-mand, or at sight, is, by this section, made applicable to acheck unless by the Act itself it is otherwise provided.All of its provisions in regard to notice of non-paj^mentand in regard to protest, if the check is upon its face aforeign bill, that is to say, a bill drawn in one State andpayable in another, must be complied with.

The manner in which checks and other instruments arehandled for collection and some of the duties and respon-sibilities of banks and collecting agents will be describedand explained, with reference to applicable sections ofthe Act, at the conclusion of the treatment of Title 3.

Certificates of deposit and bonds andCertificates of v 4? n + 1.1 deposit and their coupons, being fully negotiable m-^onds. struments, being in effect, and in fact butpromissory notns, while they are not specially treated inthe Act or in the explanations, are wholly governed by itsprovisions. At the beginning of Title 3, a short divisionof the Act, the provisions of which are applicable to prom-issory notes and checks, I shall very briefly mentionagain that their negotiation and interpretation are gov-erned by the Uniform Negotiable Instruments Law andwill state a few of the most important provisions of thelaw by which their use is governed.

^. , In addition to the three forms of com-Quasi-negotiable j jinstruments. mercial paper mentioned and to certifi-


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HISTORICAL AND INTRODUCTORY 13cates of deposit and bonds and their coupons, which areregulated wholly by the Law Merchant, others, consid-ered as quasi-negotiable, that is, having some of thefeatures of negotiable instruments and governed in partby the same or similar laws, are bills of lading, ware-house receipts and certificates of stock.

These are made the subject of other Uniform Actsproposed by the Commissioners on Uniformity of StateLaws notably warehouse receipts, and these, in forty-oneStates, the District of Columbia, Alaska and the Philip-pine Islands, are now governed by the Uniform Act pre-pared and recommended by the Commissioners for theirinterpretation.Aside from that Act, however, the other Uniform Actshave not yet met \vith a generous approval from the legis-

latures of the States. The Bills of Lading Act has beenenacted in only twenty-one and the Uniform Stock Trans-fer Act in only twelve States. The principles of the lawswhich they are designed to partially codify are, how-ever, interpreted to very much the same effect in nearlyall. I shall, therefore, attempt to state these generalprinciples in relation to each under the title ''Quasi-Negotiable Instruments."Being impressed, now, with the real purpose of the

Act, namely, to make uniform the law of negotiable in-strum.ents in all of the States, in order that the businessman may readily know and understand what are, every-where, his rights and his duties upon his ordinary com-mercial paper, and repeating that it was prepared andenacted particularly for the benefit of men in business,the reader will, perhaps, with this brief introduction andexplanation of its history, be more interested and betterprepared to proceed with the examination of the Actitself.


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14 THE NEGOTIABLE INSTRUMENTS LAW 1

TITLE I.NEGOTIABLE INSTRUMENTS IN GENERAL.

SUBDIVISION I

Form and Interpretation.Section Section

1 Fomi of negotiable instru- 13 AVhen date may be inserted.ments. 14 Blanks; when may be filled.

2 Certainty as to sumwhat 15 Incomplete instrument notconstitutes. delivered.

3 When promise is uncondi- 16 Delivery; when effectual;tional. when presumed.

4 Detenninable future time; 17 Ambiguous instrument.what constitutes. 18 Liability of persons signing4 Additional provisions affect- in trade or assumed name.ing negotiability. 19 Signature by agent; author-6 Omissions; seal; particular ity; how shown.

money. 20 Liability of persons signing7 AVhen payable on demand. as agent, etc.8 When payable to order. 21 Signature by procuration;9 When payable to bearer. effect of.

10 Termswhen sufficient. 22 Effect of indorsement of in-11 Date; presumption as to. fa"t or corporation.12 Antedated and postdated. 23 Forged signature; effect of.''Sec. 1. An- instrument to be negotiable ml^st con-

form to the following requirements :Form of negoti- 1- It must be in writing and signedable instrument, by the maker or drawer ;'^Wisconsin. 2. Must contain an unconditionalpromise or order to pay a sum certain in money

3. Must be pay'able on demand, or at a fixed or de-terminable FUTURE time;4. Must be payable to order or to bearer; and,5. Where the instrument is addressed to a drawee,HE must be XAIMED OR OTHERWISE INDICATED THEREIN WITH

reasonable CERTAINTY. ' '*

The opening section of the law provides what shall beformal requisites of a negotiable instrument. If any arelacking-, the instrument, although it may be a valid note


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1 FORM AND INTERPRETATION 15or bill, is not negotiable and its interpretation and therights and liabilities of its parties are not governed bythe Act.^ Observe that the instrument must, first of all,be in writing and signed by the person who issues it. Hemust either himself sign it or his name nmst have beenplaced upon it by some one whom he has authorized todo it. (Sec. 19.) Writing includes print (Sec. 191) andthe instrument may be written in pencil or in ink andthe signature made by mark.- It may be written orprinted on material other than paper or parchment,though unusual forms of material ought to be avoidedas raising a suspicion of irregularity.By "maker" is meant the person who makes and is-

sues a promissory note. By ''drawer" is meant the per-son who makes and issues bill of exchange or draft, ora check and it must, likewise, be signed. Of course, twoor more persons may join in making a promissory noteor drawing a bill or a check.The drawer of a check is not the person who presents

it at the bank upon Avhich it is issued and draws themoney upon it, but is the person who signs and issuesit. The second requirement of this section is explainedin the next two sections of the Act.The instrument must be payable in money, except in

those States where by other statutes instruments pay-able in anything besides money are declared to be ne-gotiable.The third subsection of this section is amplified in sec-

tions 4 and 7 and sections 8 and 9 define the terms1. Windsor Cement Co. vs. Thompson, 86 Conn. 511.2. Gear\- vs. Phvsic, 5 Barn. & Cress. 234.Brown vs. Biitchcrs & Drovers Bank, 6 Hill (N. Y.) 443. 41Am. Dec. 755.Baker vs. Dening, 8 Adol & Ellis, 94.Reed vs. Roark, 14 Tex. 329, 65 Am. Dec. 127.

Closson vs. Steams, 4 Vt. 11, 23 Am. Dec. 245.


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16 THE NEGOTIABLE INSTRUMENTS LAW 2** order" and ''bearer." If the instrument is neitherexpressly payable to "order" or "bearer," it is notnegotiable unless, without the use of these words, negoti-ability may clearly be inferred from other words em-ployed. (Sec. 10.)The fifth sub-section requires that the drawee of a

draft or bill of exchange, that is, the person, firm or cor-poration upon whom it is drawn, must be named or de-scribed with sufficient certainty and clearness to enablethe holder to know to whom and where the bill shall bepresented. But if the bill, at its inception, names nodrawee but designates a place where it is to be presentedfor payment, its acceptance by any one at that place willbe deemed to be an acknowledgment that he is the per-son to whom it was intended the bill should be presentedand that he was intended as the drawee.^Certainty as to "Sec. 2. The sum payable is a SUMsum ; what certaiist within the meaning of this actconstitutes. although it is to be paid :

1. With interest ; or2. By stated installments; or^Wyoming, Idaho, 3. By stated installments, with a

Iowa, N. Caro- provision that upon default in payment^i^^- OF ANY installment OR OF INTEREST,'^ THE^Nebraska whole shall become due; orN. Carolina, 4. With exchange, whether at a fixedS. Dakota. rate or at the current rate ; or

5. With costs of collection or ax attorney's fee, inCASE payment shall NOT BE MADE AT MATURITY."^When an insti*ument is payable with interest the sum

payable is not an uncertain amount for it can be as-certained -with exact certainty what sum is payable up-on its maturity. The word "installments" used in this

3. Blackman vs. Lehman, 63 Ala. 547.Gray vs. Milner. 8 Taunt. 739.Walton vs. Williams, 44 Ala. 347.Wheeler vs. Webster, 1 E. D. Smith (N. T.) 1.


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2 FORM AND INTERPRETATION 17section means, as in ordinary' usage, partial payments,and when a bill or note is drawn or given to become pay-able in this manner the amount and time when each in-stallment is to be paid must be named; therefore, theword ''stated" is used, meaning, mentioned in or deter-minable from the instrument with certainty as to bothtime and amount.A negotiable instrument which is payable in stated in-stallments,, or in which the interest is payable at stated

periods, may contain the provision that if any of theseinstallments or if the interest is not paid when due thewhole amount of the instrument shall become payable atonce.* It may also contain a provision that the personupon whom a bill is drawn must in addition to the amountnamed in it pay ''exchange" which is the premium orcharge to be collected by reason of the difference in thevalue of the same amount of money in different countries,or the disparity in the value of the use of the sameamount of money in different parts of the same country.'^Such an instrument usually has written or printed onits face the words "with exchange" and it may fix adefinite rate or state that the "exchange" shall be madeat the rate prevailing on the date when it is payable andin that event the words "at the current rate," or wordsof similar import, are usually employed.A promissory note or bill of exchange may also con-tain a provision that if it is not paid when due the person

obliged to pay it shall pay attorney's fees and othercosts of collection in addition to the sum promised. Sucha provision is enforceable unless, as is the case in some

4. Markey vs. Casey, 108 Mich. 184.Hodsre vs. Wallace, 129 Wise. 84.Bright vs. Offield, 81 Wash. 442.

5. riagg vs. School Dist., 4 N. D. 30.Whittle vs. Fond du Lac Natl Bk. (Tex.), 26 S. W. 1106.


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18 THE NEGOTIABLE INSTRUMENTS LAW 2States, it is made illegal either by express statute or isheld to be so by the courts as. in conflict with the laws ofusury.^ In that event, however, the insertion of thisprovision in the instrument does not destroy its negoti-ability.'' If a draft is presented to the drawee whichcontains any provisions requiring him to pay exchange,costs or fees of any kind, he should, if he is unwilling topay them, refuse to accept it. If he does accept it, hewill be liable to pay a holder for value strictly in ac-cordance with the terms of the bill, unless other laws ofthat State under which such an acceptance is to be en-forced negative any provision on the instrument requir-ing him to do so.When an instrument is payable in installments, eitherof principal or interest, and it contains a provision

that upon default in the payment of any all shallbecome due, and one or more of the installments ispast due and unpaid, one who takes it afterward withnotice of the default will not be considered to be a holderin due course but he will take the instrument subject toall the rights existing between its original parties.* Aholder who takes the instrument after a known or appar-ent default in the payment of any installment is charge-able with notice that the party obliged to pay the in-strument may have some good defense available against

6. Miller vs. Gardner, 49 la. 235.Tyler vs. Walker, 101 Tenn. 306.

7. Miller vs. Kyle, 85 Ohio St. 186.Oppenheimer vs. Fanners & Merch. Bk., 97 Tenn. 19.Montgomery vs. Crossthwaite, 90 Ala. 553.Stapleton vs. Louisville Bankor. Co., 95 Ga. 802,Dorsey vs. Wolff, 142 111., 589.Stoneman vs. Pyle, 35 Ind. 103.

8. Hodge vs. Wallace, 129 Wis. 84.Vette vs. La Barge, 64 Mo. A. 179.Natl. Bk. of N. A. vs. Kirby, 108 Mass. 497.Waverly First Natl. Bk. vs. Forsyth, 67 Minn. 257,


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3 FORM AND INTERPRETATION 19it in the hands of the original payee, and consequently inthe hands of any subsequent holder who takes it afterany known or apparent default in the payment of aninstallment of principal or interest.'^ If the instrumentdoes not contain a provision making all installments ma-ture upon default in the payment of any one, or if it isprovided that the subsequent installments shall matureat the option of the holder, what I have just said will notapph ', and one taking such an instrument under thesecircumstances will take it in due course, if he takes theinstrument before the holder exercises his election,^**unless he is otherwise disqualified. Also see Sec. 52.Uncertainty in the sum payable will not be imputed whenthere is an obvious omission or the amount is misspelt.^Wlien promise is "Sec. 3. An unqualified order orunconditional. promise to pay is unconditional withinTHE MEANING OF THIS ACT THOUGH COUPLED WITH :

1. An INDICATION OF A PARTICULAR FUND OUT OF WHICHreimbursement is to be made, or a particular accountto be debited with the amount; or

2. a statement of the transaction which gives riseto the instrument.But an order or promise to pay out of particularFUND is not unconditional.^^This section means that a promise or an order to pay,

otherwise unqualified, meets the requirement of sub-section 2 of section 1 and is to be considered uncondi-tional, although the instrument contains a reference to aparticular fund out of which the person who is to pay itshall reimburse himself.^- It is also unconditional if it

9. McCorkle vs. Miller, 64 Mo. A. 153, 156.Vette vp. La Barge, 64 Mo. A. 179.

10. Battle Creek Nat. Bk. vs. Dean. 86 Iowa. 656, 53 N. W. 338.Morgan vs. U. S., 113 U. S. 476.11. McCov vs. Gilmore, 7 Ohio, 268.

Beardslev vs. Hill, 61 111. 354.Ohm vs. Yung, 63 Ind. 432.12. Schmittler vs. Simon, 101 N. Y. 554.


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20 THE NEGOTIABLE INSTRUMENTS LAW 3directs the payment to be charged to a particular ac-count. If it contains a ' ' statement, ' ' meaning an indica-tion or description of the nature of the transaction whichgives rise to, that is, causes the instrument to be madeand issued, it is not to be considered a conditional prom-ise or order and its negotiability is not affected by sucha statement.'^ But if the instrument is so drawn thatit directs or promises the payment to be made out ofa particular fund, it is not unconditional and thereforenot a negotiable instrument, for its payment then de-pends upon the sufficiency of the particular fimd out ofwhich it is to be paid. Municipal warrants which are sodraAvn, and all usually are, are therefore not negoti-able.^* An order or promissory note drawn to be so pay-able would not be governed by the provisions of this Actand the rights and liabilities of parties to such an in-strument would not be the same as upon a negotiable billor note.

Negotiability, however, is not essential to the validityof a bill or note,^-^ and while an instrument which is non-negotiable may be transferred from one person to an-other by indorsement and delivery^ it is, in the hands ofany holder, subject to all of the defenses which the makeror other primary party could interpose to prevent itspa^Tnent if still in the hands of the original payee. ^'^ Theassignee of such an instrument takes no greater right ortitle than that of his predecessor. This is not true of

13. Schmidt vs. Pegg, 172 Mich. 159.14. Read vs. Buffalo, 67 Barb. (N. Y.) 526.

Beverqne vs. San Francisco, 1 MeAll (U. S.) 175, 2 Fed. Cas.No. 1137.

15. Roads vs. Webb, 91 Me. 406, nt 410, 41 Atl. 128.16. Richards vs. Warring, 39 Barb (N. Y.) 42.17. Warren vs. Scott, 32 Iowa. 22.Ravmond vs. Middleton, 29 Pa. St. 529.Roads vs. Webb, 91 Maine, 406, at 411.


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4 FORM AND INTERPRETATION 21negotiable instruments and forms their principal distin-guishing feature.Determinable "Sec. 4. An instrument is payablefuture time; -'^'^ ^ determinable future time, withinwhat constitutes, the meaning of this .\ct, which is ex-"Wisconsin. pressed to be payable

1. At a fixed period after date or sight ; or2. On or before a fixed or determinable future time

specified therein; or3. On or at a fixed period after the occurrence opA SPECIFIED event, WHICH IS CERTAIN TO HAPPEN, THOUGHTHE TIME OF HAPPENING IS UNCERTAIN."An INSTRUMENT PAYABLE UPON A CONTINGENCY IS NOT

NEGOTIABLE, AND THE HAPPENING OF THE EVENT DOES NOTCURE THE DEFECT."The first sub-section of this section embraces a noteor bill payable a certain number of days, months, or

years after date or after sight.The second embraces such as are payable on or before

a fixed date, and in this would be included such as maybe payable '*on or by" a fixed time, the w^ord *'by" be-ing regarded as the equivalent of ** before. "^^ It alsoembraces one payable on or before a determinable fu-ture time which can be known and determined from thelanguage used in the instrument itself.The third embraces such as are payable at a fixed per-

iod (number of days, months or years, o?i demand, or ata fixed date) after the happening of a named event whichmust be certain to happen although the time when it vdWhappen may be uncertain. The most common illustra-tion of an instrument payable after the happening of anevent certain to happen is of one payable after thedeath of a person whom it names but, of course, suchcertainty as this is not always required. A certificateof deposit, for example, may be made payable ''upon re-

18. Preston vs. Dunham, 52 Ala. 217.Massie vs. Bolford, 68 111. 290.


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22 THE NEGOTIABLE INSTRUMENTS LAW 5turn of this certificate ' ' and this has been held to be suffi-ciently certain to meet this requirement and not impairits negotiability, these words being the equivalent of apromise to pay ''on demand. "^^ (See Sec. 17.)

This section also provides that an instrument pay-able upon a contingency, that is, an uncertainty, is notnegotiable, and even though the uncertainty upon whichit depends does happen, it does not thereby becomenegotiable. This so distinctly states the rule that nofurther explanation seems necessary.^" Examples areto be found in the cases cited.

*' Sec. 5. An instkument which contains an order or

PROMISE to do any ACT IN ADDITION TO THE PAYMENT OFMONEY IS NOT NEGOTIABLE." BuT THE NEGOTIABLE CHARAC-Additional "^^^ ^^ -^^" instrument otherwise negoti-provisions not able is not affected by a provisionaffecting nego- whichtiability. ^ Authorizes the S4LE of collateral^Illinois. securities in case the instrument be^N. Carolina. not paid at maturity; or^Kentucky. . ^Authorizes a confession of judg-


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5 FORM AND INTERPRETATION 23the force and legal effect of a simple contract, would beinterpreted under the rules of law which apply to simplecontractual relations, and would be assignable assuch.^^ There are, however, four exceptions given tothis rule which are declared not to affect the negoti-ability of the instrument and either or all of these mayappear in it without destroying its negotiable character.The first is usually found in that form of promissory

note used when a loan is made upon collateral, such asstocks, bonds, etc., which are pledged to secure it. Insuch an instrument the holder is given pov/er to sell thesecurity pledged. The negotiability of such an instru-ment will not be impaired by a provision requiring addi-tional collateral or authorizing the surrender of thewhole or part of the pledge upon the complete or partialperformance of the promise,^- but a provision in a mort-gage note accellerating its maturity if the mortgagorshall do anything to impair the security of the pledgewill destroy its negotiability.-^The second is of instruments Avhich authorize some

one to admit the maker's indebtedness and confess judg-ment upon the obligation if it is not paid at maturity.The instrument may not, however, contain a provisionauthorizing the confession of judgment before maturityfor such a provision would destroy its negotiability.^-*A promissory note of this kind usually contains a waiverof notice and of other benefits which the maker wouldotherwise be entitled to enjoy and the third sub-section

21. Reed vs. Murphy, 1 Ga. 236.22. Kennedy vs. Broderiok, 216 Fed. 137. 166 C. C. A. 381.

Finlev vs. Smith, 16.5 Kv. 445.Il?ley vs. Smedes, 15 Dalv (N. Y.) 488, 8 N. Y. Suppl. 470,

29 N. Y. St. 417.Gross vs. Emerson, 23 N. H. 38.

23. Bright vs. Offield, 81 Wash. 442.24. Wis. Yearlv Meetff. of F. Baptists vs. Babler, 115 Wise. 289.

First Nat'l" Bank, Elgin, vs. Rasscll, 124 Tenn. 618.


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24 THE NEGOTIABLE INSTRUMENTS LAW 5provides that this waiver, as well as a waiver of anyof his other rights and benefits by the person obliged topay the instrument, secured to him by laws intended forhis protection, may be contained in the instrument and,notwithstanding this provision, the instrument will con-tinue to be negotiable.^^

The fourth means, as it says, that the instrument maybe payable in money and provide as well that the holder,who is the person lawfully having it in his possession,may have the election, that is, the choice, of requiringthe person obliged to pay it to make payment in moneyor, in the alternative, to perform some act instead, as,for example, in lieu thereof to deliver certain propertyor securities, or perform certain services, which must beset forth in the instrument.^^ But, observe, that if theinstrument itself contains a direction to the personobliged to pay it or contains his promise to do any act inaddition to the pajniient of money, it is not negotiable.Another section of the Act (Sec. 132) provides that theacceptance of a bill of exchange may not express that thedrawee will perform his promise by any other meansthan the payment of money. Yet, the negotiability ofthe instrument would not be affected by an acceptancewhich agrees to pay the instrument in money but pro-vides also that the holder may, at his election, requiresomething to be done instead.

If, however, the instrument contains any illegal pro-vision, or stipulation, such a provision or stipulation isnot made lawful by this section. There are in all Stateslaws which define what are illegal acts and this sectionis not intended to make legal any which would otherwisebe unlawful. What are unlawful provisions differ in the

25. Hughitt vs. Johnson, 28 Fed. 865.26. Hostetter vs. ^^ilson, 36 Barb. (N. Y.) 307.


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6 FORM AND INTERPRETATION 25several States and to know them the statutes of eachState must be examined. Very generally stated theyare such as violate positive law, the laws of religion ormorality or such as are distinctly opposed to publicpolicy.Omissions; seal; ''Sec. 6. The validity and negotiableparticular character of an instrument are not af-money. fected by the fact that^"Illinois. "1^^ j^ jg -^Q^ dated; or

2. Does not specify the value given, or that anyvalue has been given therefor; or

3. Does not specify the place where it is drawn orthe place where it is payable ; or4. Bears a seal; or5. "Designates a particular kind of current money

in which payment is to be made.But NOTHING IN THIS SECTION SHALL ALTER OR REPEALANY STATUTE REQUIRING IN CERTAIN CASES THE NATURE OFTHE CONSIDERATION TO BE STATED IN THE INSTBUMENT. ''The negotiable character of an instrument, otherwise

negotiable, is not destroyed nor is its negotiabilitj^ af-fected by the fact that it is not dated or that the words"value" or "value received" are omitted or it does notspecify what value was given for it. Nor is a note or abill bearing a seal thereby rendered the less negotiable.An investment bond of a municipal or other corporationbearing a seal is negotiable, as are its interest coupons.(See Sec. 184.)The instrument is negotiable if it does not appear to

have been drawn or made payable at any specified place.Such an instrument is deemed to have been drawn atthe place where it is issued and if no place of payment isnamed, it is payable at the given address of the personwho is to pay it; and if this has also l)een omitted thenat his residence or place of business. (Sec. 73.)A promissory note, bill of exchange, or other nego-tiable instrument may designate payment to be made


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26 THE NEGOTIABLE INSTRUMENTS LAW 7in a particular kind of money in common and generaluse at the place where it is payable, and receivable andpassing by law as money, without destroying or affectingits negotiability.^'^ In some of the States there are lawsrequiring that in certain cases the nature of the consid-eration must be expressed in the instrument, as, in cer-tain States, that a note given for some kinds of croppingseeds must so state, and this section is not intended toalter or rejDeal such laws. Therefore it is provided gen-erally that if the nature of the consideration upon whichit is based is expressed in the instrument its negotiabilityis not affected by such a provision.When payable ' ' Sec. 7. An instrument is payable onon demand. demand

1. Where it is expressed to be payable on demand, orat sight, or on presentation ; or

2. In which no time for payment is expressed.Where an instrument is issued, accepted, or indorsedwhen overdue, it is, as regards the person so issuing,accepting or indorsing it, payable on demand. '^A promissory note Avhich by its terms is payable upondemand, or a draft or bill of exchange payable at sightor upon presentation, or a note or other negotiable in-strument in which no time for payment is fixed, must bepaid by the person who is obliged to pay it, wheneverthe holder presents it to him and demands its payment.And it is so payable even if it is payable with interestand contains a provision that the interest shall be pay-able annually or at other fixed periods after its date.^^Such a provision is not regarded as an indication thatthe holder is not expected to present the instrumentfor payment until the time at which the interest is payable

27. Hatch vs. First Nat'l Bank, 94 Me. 348, SO Am. St. Rep. 401.28. Header vs. Dollar Savg. Bk., 56 Ga. 605.

Converse vs. Johnson, 146 Mass. 20, 14 N. E. 925.Shaw vs. Shaw, 43 N. H. 170.Knight vs. Braswell, 70 N. C. 709.


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7 FORM AND INTERPRETATION 27and not at all to be understood to require liim to with-hold demand until that time.An instrument which is issued, accepted, or which istransferred from one person to another by indorsementafter it is past due, is, as to the person so issuing, accept-ing or indorsing it and, of course, as to all prior parties,payable at once. In order to hold the indorser indorsingsuch an instrument after maturity the holder must pre-sent it for payment within a reasonable time after itsnegotiation to him, although it has previously been dis-honored, and if it is not then paid must give notice ofdishonor to his transferers^ if his liability had notalready been fixed by notice upon its previous dishonor.^^*The holder of an instrument payable on demand hasthe right to demand payment immediately after its issue

or negotiation to him.^*^ He may, if he desires, wait areasonable time before doing so, but what is a reasonabletime is a question w^hich will permit of varying con-struction (see sees. 53, 71, 144 & 193) and it is proper,if the instrument bears indorsements, to make demandat once unless a delay has been agreed upon, and thenproceed as required under Sees. 89 to 118 inclusive. Ofcourse, it is unusual to do this when the instrument isa promissory note but not at all unusual in this countryin the case of bills of exchange payable on demand. In-deed, when the instrument is a check, its detention for avery few days without presenting it for payment hasbeen held to be an unreasonable delay.^^ It is not rec-

29. Smith vs. Caro & Baum, 9 Oregon, 278.Colt vs. Barnard, 18 Pick. 260.Libbey vs. Pierce, 47 N. H. 309, 314.Beer vs. Clifton, 98 Cal. 323.

29a. Libbey vs. Pierce, 47 N. H. 309, 314.30. Merritt vs. Todd, 23 N. Y. 28.31. Nat'l State Bk. vs. Weil, 141 Pa. St. 457; 21 A. 667.


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28 THE NEGOTIABLE INSTRUMENTS LAW 8ommended, however, that immediate demand be madefor the payment of a bill or note which has been issuedor drawn to be used as a credit instrument.^^

After demand and notice to the indorsers, the holdermay sue upon the instrument at his pleasure and he islimited as to the length of time he may wait before doingso only by the statute of limitations governing suchinstruments in the State in which they are to be enforced.More will be said upon this subject under the sectionsabove referred to. The maker of a demand note has, ofcourse, the right to pay it at any time after its issueunless a delay has been agreed upon.^^When payable to ''Sec. 8. The instrument is payablePJ,*??^- . TO ORDER where IT IS DRAWN PAYABLE TO"Illinois. THE ORDER OF A SPECIFIED PERSON OR TO HIMOR TO HIS ORDER. It MAY BE DRAWN PAYABLE TO THE ORDEROF

1. a payee who is not maker, drawer, or drawee; or2. The drawer or maker ; or3. The drawee; or4. Two or more PAYEES JOINTLY; OR5. One or some of several payees ; or6. The holder of an office for the time being."Where the instrument is payable to order the payeemust be named or otherwise indicated therein with

reasonable certainty,''An instrument payable to order requires indorsementto pass the title or ownership. To be payable to orderthe payee must either be named in it or described suffi-ciently so that his identity can be easily ascertained,^*(Sec. 1) and the instrument must state that it is pay-able to the order of the person named or described asthe payee. If these words are not used and negotiability

32. Columbian Banking- Co. vs. Bowen, 134 Wise. 218.Nutting vs. Burked, 48 Mich. 241, 12 N. W. 184.33. Stover vs. Hamilton, 21 Gratt (Va.) 273.34. United States vs. White, 2 Hill, 59.Blackman vs. Lehman, 63 Ala. 547.


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8 FORM AND INTERPRETATION 29cannot clearly be inferred from other language employedin the instrument it will not be negotiable.^''

It is payable to order and must be transferred byindorsement, when it is payable to one's own self or orderor, if a bill of exchange, when it is payable to the personupon whom it is drawn or to his order. It is also pay-able to order if it is payable to the order of a personwho is not the maker, drawer or drawee. That personis then called the ''payee." The instrument may bemade or drawn payable to several persons jointly, ora person and a corporation jointly, a corporation being,by a fiction of the law, an artificial person having a dis-tinct existence as such. It may also be made or drawnpayable in the alternative to one or more of several per-sons whose names may be mentioned or who may bedescribed in the instrument.The holder of an office need not be designated by

name.36 An instrument payable to the holder of an officewhose name it does not mention may be presented forpayment when due by or to whatever person holds theoffice designated, and such a presentment is good and theinstrument may be negotiated by the indorsement of theperson holding the office named. (See Sec. 42.) The de-scription of the officer, as for example, "Pay the Treas-urer of Blank Company," would designate the payee withthe certainty required by Section 1, Sub-section 5. So alsois a payment made to the holder of the office designatedin the instrument or indorsement as the payee good, evenif it is not made at the office named. And if a personis named and described as the holder of an office and hehas relinquished his office, presentment or payment to,or suit to enforce the instrument by his successor is

35. Putnam vs. Cryines, 1 McMul. (S. C.) 9, 36 Am. Dec. 250.36, McBroom vs. Treas. Lebanon Co., 31 Ind. 268


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30 THE NEGOTIABLE INSTRUMENTS LAW 8proper,^" unless the instrument is his own property andthe designation of the office he holds is used only fordescription. However, care must be exercised to seethat the proper person accepts the instrument or thatpajTiient is made to the proper person when the draweeor payee is the holder of an office and is not mentionedby name, or if he is mentioned by name together witha description of the office he holds, and payment shouldnever be made unless the instrument is at once surren-dered. (Sees. 88, 119.) Even if the instrument is surren-dered, payment to the wrong person will not always dis-charge the obligation. Exceeding great care must beexercised when there is any uncertainty in this regard.Reasonable certainty in describing the drawee or payee isrequired if he is not designated by name for the reason,as has already been stated, that it must appear to whomand Avhere the instrument is to be presented, and in orderthat it shall indicate clearly by whose indorsement it maybe negotiated and to whom payment is to be made. (Sec.1.) It has been held that an instrument payable to a'* Trustee" is not commercial paper and there are diffi-culties in the way of the transfer of such paper by in-dorsement which very well deserve careful inquiry.^^(See Sec. 42.)

If an instrument is payable to a named person but notto his order, and if it is not payable to bearer as is pro-vided in the next section, it is not negotiable, unless fromthe use of other words negotiability is clearly to be in-ferred. But an instrument which is negotiable at itsorigin continues to be so until it has been restrictively

37. McDonald vs. McLaudilin, 74 Me. 480.Tainter vs. Winter, 53 Me. 348.Davis vs. Gore, 6 N. Y. 124.

38. National Citv Bk. vs. Bankers Trust Co., 37 App. (D. C), 533.Third Nat '1 Bk. vs. Lana:e, 51 Md. 138, 34 Am. R. 304.Sturtevant vs. Jacques, 14 Allen (Mass.) 523.


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9 FORM AND INTERPRETATION 31indorsed or is discharged by payment (sec. 47) and if,during its negotiation, the instrument obtains an in-dorsement from which words are absent wliich imply thepower to further negotiate it, that is, which merely omitssuch words, it continues to be negotiable notwithstand-ing their omission. (Sec. 36.)When payable ''Sec. 9. The instrument is payableto bearer. r^^ bearer"Illinois. I When it is expressed to be so pay-able; OR

2. AVhen it is payable to a person named therein orbearer; or

3. "^When it is payable to the order of a fictitiousOR non-existing person, and such fact was known tothe person making it so payable; or

4. When the name of the payee does not purportTO BE the name OF ANY PERSON; OR5. "When the only or last indorsement is an in-dorsement IN blank."An instrument is payable to and negotiable by the

person who has it in his possession when it is written*'pay to bearer," these w^ords meaning that the personwho has the instrument in his possession and presentsit for payment, is the proper person to receive the moneydue upon it. (Sec. 51. ) Words of similar import maybe employed. Payment to the bearer at the maturity ofthe instrument is good even though the person receiv-ing payment does so without authority of the owner ofthe instrument, provided the person paying had at thetime of payment no knowledge, or was not charged withany duty to know that the holder acted fraudulently inpresenting the instrument and receiving the payment.(Sec. 88.) An instrument which is made payable to anamed person whose name is followed by the words *'orbearer" is payable to any one who has it in his posses-sion and can be negotiated by him even if it does notbear the indorsement of the payee whose name appears


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32 THE NEGOTIABLE INSTRUMENTS LAW 9upon its face as the person to whom it is payable, forthe obvious reason that such an instrument is to be paideither to the person named or to anybody else whobears it.When an instrument is payable to a fictitious person,

that is, one who is not real, but a pretended person, or ifreal, one who has no interest in the instrument andwhose name is used merely for the purpose of decep-tion, ^^^ and the person making the instrument knows atthe time of issuing it that the payee is fictitious, it ispayable to bearer. The obvious intention of this sub-section is that such an instrument shall not require in-dorsement since no person capable of or interested in in-dorsing it exists. Quite obviously also, an instrumentpayable to the assumed, trade name under which one maybe doing business would not become payable to bearerbecause the instrument was not made payable to the fic-titious name for the purpose of deception.^^ (See Sec.18.) If the instrument is so written that the words usedto indicate to whom it is to he paid do not appear to bethe name of any person, for example, a check payableto ^'Cash," or if it does not describe any one with thecertainty required, (See Sec. 1) it is then, in either case,also payable to bearer. But the instrument is probablynot payable to bearer if the person making it knowinglymakes it payable to a person who is dead. Such an in-strument would recjuire the indorsement of the repre-sentatives of the decedent's estate. ^^

39. Snvder vs. Corn Exchange Natl. Bk., 221 Pa. 599, 12S Am.S. R. 780.

Shipman vs. Bank of K Y., 126 N. Y. .318.40. Edgerton vs. Preston, 15 111. A. 23.

Jones vs. Home Furnishing Co., 9 App. Div. 103, 41 N. Y.S. 71.

Biyant vs. Eastman, 7 Cnsh. (Mass.) 111.41. Lewisohn vs. The Kent & Stanley Co., 87 Hun 257.


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10 FORM AND INTERPRETATION 33A negotiable instrument made payable to order, as

mider Sec. 8, becomes payable to bearer and can bepassed by mere delivery when the only or the last in-dorsement upon it is in blank. An indorsement in blankis made by writing one's name upon the back of the in-strument without any words indicating another to whomit is to be paid. (Sec. 34.)An instrument which is made payable to bearer or be-

comes so may be transferred by mere delivery. (Sec.30.) It does not require indorsement by the holder totransfer the title. However, no person is liable uponthe instrument, except as is otherwise provided in thisact (Sees. 18, 19, 20), unless he has placed his signatureupon it, and an instrument negotiated by mere deliverydoes not accumulate the security which added indorse-ments give to one negotiated by indorsement.Terms when *'Sec. 10. The instrument need notsufficient. follow the language of this act, but"Wisconsin. ^^^ tebms aee sufficient which clearlyindicate an intention to conform to the requirementsHEREOF. ' '"The Negotiable Instruments Act was not intended tomake invalid instruments which are not written in thelanguage of this law. Any language, English or for-eign,^ ^ jjiay be used in drawing a bill, note or check whichwill show clearly that the parties to the instrument in-tended to make such an instrument as will substantiallyconform to the provisions of the Act. Doubt and uncer-tainty, confusion and delay, expensive litigation and dis-pute will be avoided, however, if instruments orderingor promising the payment of money and which are in-tended for negotiation, that is, for transfer by deliveryor indorsement from one person to another in the regu-lar course of trade, are so written that there can be no

42. Debebian vs. Gala, 64 Md. 262, 265.


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34 THE NEGOTIABLE INSTRUMENTS LAW 11doubt of their character. Forms are readily obtainable,differing not very materially in their language fromthose employed since the fourteenth century, and wher-ever practicable they should be used.

If language is used in an instrument which by long es-tablished custom has obtained a special meaning or sig-nificance different from its ordinary meaning, it will beinterpreted according to its special significance unlessto do so would ])e clearly inconsistent with the purpose ofthe instrument.*^ The provisions of this Act definitelyfix the rights, liabilities and duties of all the parties tocommercial paper. Its provisions cover every require-ment of the commercial relationships between businessmen and an instrument executed in conformity with thisAct will have the same interpretation in every State inwhich it has been adopted.

Informal instruments which clearly indicate by theterms used that they are intended to be negotiable andwhich are not lacking in any of the essential require-ments of this Act will be construed to be, and are, in ef-fect, negotiable instruments.**Date; presump- "Sec. 11. Where the instrument ortion as to. ^^^ acceptance or any indorsementthereon is dated, such date is deemed prima facie to bethe true date of the making, drawing, acceptance orindorsement as the case may be."This section means that when an instrument or anacceptance upon a draft or bill of exchange is dated, the

date given is presumed to be the date when it was madeor given. Likewise when an indorsement is dated. Butif the date is an impossible one, then the nearest or prob-

43. Pilmer vs. Branch of State Bank, 16 Iowa, 321.44 Owen vs. Blackburn, 161 App. Div. (N. Y.) 827.Kerr vs. Smith, 156 App. Div. (N. Y.) 807.

Westberg vs. Chicago Lbr. Co.. 117 Wise. 589.Gilley vs. Harrell, 118 Tenn. 115.


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12 FOKM AND INTERPRETATION 35able one will be adopted. (April 31st may be April 30th,or May 1st, probably the latter.)"*^ Of course, if the dategiven is not really the date upon which the act was done,the person disputing it will be permitted to show that itis not the true date and if the question arises in an actionupon the instrument he must offer some evidence to sup-port his contention. If he does not, the presumption inits favor mil prevail and the date upon the instrument,acceptance, or indorsement will be taken to be its truedate.''^Antedated and "Sec. 12. The instrument is not in-postdated. valid for the reason only that it is an-tedated or postdated, provided this is not done for anillegal or fraudulent purpose, the person to whoman instrument so dated is delivered acquires the titlkthereto as of the date of delivery."

If an instrument is dated before (antedated) or laterthan the real date of its issue (postdated) or an indorse-ment or acceptance is so dated, it is not thereby made in-valid, unless the antedating or postdating is done for anunlawful or a fraudulent purpose. A postdated instru-ment is regarded very much the same as a bill payable somany days after sight, and the person to whom an instru-ment so dated is delivered or transferred acquires titleto it, that is, he becomes its owner, upon the day whenit is delivered or transferred to him and he may nego-tiate it immediately. It is not necessary that he holdit until the day it is dated before transferring it to an-other.^' An instrument so dated, if payable at a giventime after its date, does not become due earlier becauseissued before its date. The fact that it is postdated isnot sufficient to put the indorsee upon notice of irregu-

45. Wa^er vs. Kenncr, 2 Rob. (La.) 120.46. Mobley vs. Ryan, 14 111. 51.47. Brewster vs. McArdle, 8 Wend. 478.Passmore vs. North, 13 East, 517, 104 Reprint, 471.


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36 THE NEGOTIABLE INSTRUMENTS LAW 13larity or fraud,^^ (Sec. 56) and the person who executesand delivers a postdated instrument cannot, in the ab-sence of any agreement to the contrary, recall the in-strument by reason of the fact that it is dated later thanthe date of its issue. He can, it is true, countermandpayment of such an instrument, as he can of one notpostdated, but the effect of this would be merely to pre-vent its pajTiient when presented. His countermandwould not release him from his obligation to the holder. ^-^Even if the death of one of the parties to a postdatedinstrument occurs before the day of its date, this willnot render the instrument invalid and will not, in allcases, amount to a revocation.'^" An antedated instru-ment can, of course, be put in issue by its maker at anytime after its date. If it is payable at a given time thetime of maturity is not postponed by the fact that it wasdelivered later than its date and if it is issued or nego-tiated after its maturity it is, by the provisions of Sec.7, payable upon demand.When date may '*Sec. 13. Where a^ instrument ex-be inserted. pressed to be payable at a fixed periodAFTER DATE IS ISSUED UNDATED, OR WHERE THE ACCEPTANCEOF AN INSTRUMENT PAYABLE AT A FIXED PERIOD AFTER SIGHTIS UNDATED, ANY HOLDER MAY INSERT THEREIN THE TRUEDATE OF ISSUE OR ACCEPTANCE AND THE INSTRUMENT SHALLBE PAYABLE ACCORDINGLY. ThE INSERTION OF A WRONG DATEDOES NOT AVOID THE INSTRUMENT IN THE HANDS OF A SUB-SEQUENT HOLDER IN DUE COURSE ; BUT AS TO HIM, THE DATESO INSERTED IS TO BE REGARDED AS THE TRUE DATE."

If an instrument or an acceptance is payable at a fixedperiod after date or sight and it is issued or delivered

48. Albers vs. Hoffman, 64 Misc. (N. Y.) 87.49. Usher vs. A. S. Tucker Co., 217 Mass. 441, 105 N. E 36050. Passmore vs. North, 13 East. 517, 104 Reprint, 471.

Cutts vs. Perkins, 12 Mass. 206.Nassano vs. Tuolumne County Nat. Bk., 20 Cal. A. 603, 130

P. 29.


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14 FORM AND INTERPRETATION 37without bearing a date, the holder may insert the truedate of its issue or acceptance for a date is then neces-sary to fix its maturity. If he inserts a wrong date andthe instrument in due course, meaning, by a regulartransaction and for value before maturity, passes intothe hands of another, the date inserted, even thoughwrong, is, as to this holder in due course, considered tobe its true date. As between the maker of the instru-ment or acceptance and the holder who has knowinglyinserted a wrong date, and any holder taking with noticeof the insertion of the wrong date, it has been held thatthe instrument is thereby avoided and is not enforce-able.^^ And, it seems, this might be true even thoughhe has made the insertion in good faith believing it to-be the true date.

Section 6 provides that if the date is omitted alto-gether the instrument is not thereby invalidated and thissection gives the holder the right to insert the true date.It follows, therefore, that if the holder of an undatedinstrument or acceptance does not know its true datehe ought not to insert any without the consent of theparties to whom he looks for payment.-,, , , "Sec. 14. "Where the instrument isBlanks; wnenmay be filed. wanting in any material, particular, the"Wisconsin. person in possession thereof has a prima''Illinois. FACIE AUTHORITY TO COMPLETE IT^ BY FILIr-'^So. Dakota. ^^^ ^,p ^^j, blajtks therein. And a sig-nature ON a blank PAPER DELIVERED BY THE PERSON :MAK-ING THE SIGNATURE IN ORDER THAT THE PAPER MAY BE CON-VERTED INTO A NEGOTIABLE INSTRUMENT OPERATES AS A PRIMAFACIE" AUTHORITY TO FILL IT UP AS SUCH FOR ANY AMOUNT.In ORDER, HOWEVER, THAT ANY SUCH INSTRUMENT WHENCOMPLETED MAY BE ENFORCED AGAINST ANY PERSON WHO BE-.CAME A PARTY THERETO PRIOR TO ITS COMPLETION, IT MUSTBE FILLED UP STRICTLY IN ACCORDANCE WITH THE AUTHORITYGIVEN AND WITHIN A REASONABLE TIME. BUT IF ANY >^rCU

51. Houston Bank vs. Day, 145 Mo. A. 410, 122 S. W. 756.


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38 THE NEGOTIABLE INSTRUMENTS LAW 14INSTRUMENT, AFTER COMPLETION, IS NEGOTIATED TO A HOLDERIN DUE COURSE, IT IS VALID AND EEFECTUAL FOR ALL PURPOSESIN HIS HANDS, AND HE MAY ENFORCE IT AS IF IT HAD BEENFILLED UP STRICTLY IN ACCORDANCE WITH THE AUTHORITYGIVEN AND WITHIN A REASONABLE TIME/'

This section grants to the person in possession of theinstrument the right to sujjply any material thing whichmay have been omitted when it was executed. Observethat this right is prima facie, that is to say, he is pre-sumed to have authority to do so and this presumptioncontinues until the person who is affected by what hedoes disputes it and is able to show by some evidencethat he either had not this authority, or if he had, thatit has not been properly exercised. If the omissions arecorrectly supplied and not made contrary to the terms ofthe transaction out of which the instrument arose, theright to make them will have been properly exercised.'^

This section also provides that when a paper whichis intended to be used as a negotiable instrument, andit is important that it must have been so intended, ^^ issigned in blank, that is, without having been filled out asto the date, amount, to whom, and the time when it ispayable, or in one or some of these particulars, or evenif a blank piece of paper is signed by any person anddelivered to another in order that it may be convertedinto and used as a negotiable instrument, the one to whomit is given has the right to supply the omissions or towrite over the blank signature words which will con-vert the blank paper into a negotiable instrument forany amount. The person who thus supplies omissions orfills up such a paper cannot himself enforce its payment

52. Younc: vs. Baker, 29 Ind. A. 130. 64 X. E. 54.Marshall vs. Drescher, 68 Ind. 359.Weyerhauser vs. Dunn, 100 N. Y. 150.

53. Iowa St. Bank vs. Claypool, 91 Kas. at 251.Richards vs. Day, 137 N. Y. 183.


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14 FORM AND INTERPRETATION 39by the one who signed it in blank, unless he has filled itup strictly in accordance with the authority which thesigner gave him to do so, and unless he has done it withina reasonable time after its delivery to him. Nor can anyone who is not a holder in due course enforce it, unlessit was so done. And if one transfers such an instru-ment to another without first completing it in accord-ance with his authority, his transferee will not be deemeda holder in due course and cannot recover upon it.^^But if after completion by any one the instrument is

negotiated in due course, that is, transferred before itsmaturity in a regular transaction for a valuable con-sideration to some other person Avho had no knowledgeand is not in law chargeable with notice or any duty toknow that it was incomplete when delivered, and notafterward completed in strict accordance with the au-thority given within a reasonable time after being signedin blank, such a holder and subsequent holders for valuecan enforce it against the signers in blank even if theperson who filled up the blanks or converted into a nego-tiable instrument the signed blank piece of paper, didnot do so in strict accordance with his authority, andwithin a reasonable time after it was so signed. Signersin blank cannot resist payment of an instrument in thehands of a holder in due course, even if it has not beenfilled up and issued in accordance with the authorityunder which it was given.The particular circumstances of each case in which the

question of the proper exercise of authority to fill inblank instruments arises will be inquired into and ifthere is doubt about the authority of the person who fills

54. Stone vs. Sargent, 220 Mass. 445.Tower vs. Stanley, 220 Mass. 429.Hartington Bk. vs. Rreslin, 88 Neb. 47.Boston Steel & Iron Co. vs. Steuer, 183 Mass. 140.


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40 THE NEGOTIABLE INSTRUMENTS LAW 14it up, either of his right to do it or his right to fix theamount of the instrument, the one to whom such paper isoffered may be put upon inquiry if any suspicious cir-cumstances appear from the instrument itself ; and if heis chargeable with notice, he cannot recover upon theinstrument if the person who filled it up exceeded hisauthority in doing so. Notice is defined in Sec. 56.The authority given by this section to fill up blankspaces in the instrument extends to the person in posses-

sion the right to fill up such blanks as are obviously andintentionally left unfilled, but the section is not intendedto and does not grant the right to fill in any spaces uponthe instrument which are not occupied by written orprinted words, by writing additional words or figuresupon it when the instrument is not signed in blank andis otherwise complete. Numerous decisions are to befound in the reports of all of the States upon this subject,the courts expressing widely diverging views. Thesecases have nearly always grown out of instruments uponwhich blank spaces have not been filled up by lining themout when the Avords or figures written in the instrumentdo not fully occupy the spaces intended for their inser-tion. Because of the opportunity thus given to alter theinstrument, dishonest persons have been enabled tochange its amount without in any way indicating that afraudulent change has been effected. Of course, an obli-gation rests upon every signer of a negotiable instru-ment to so prepare it, or to see that at the time he at-taches his signature to the instrument it is made out insuch a way that it cannot readily be changed by fraud in-tending persons into any different contract from thatwhich, on its face, it purports to be. But he is not boundto so prepare it that it is impossible to change it.''^

55. Otis El. Co. vs. First Nat. Bk., 163 Cal. 31, 124 P. 704, 41L. R. A. (N. S.) 529 and Note


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14 FOKM AND INTERPRETATION 41The strong presumption exists that all men are honest,

and if an instrument which is complete when delivered,even though it is so filled out that it is possi))le to changeits amount by inserting additional words and figuresin it, and it is so altered, this, of itself, is not sufficientto make liable for the altered sum the person whose ob-ligation it is. For example, if a promissory note is writ-ten for seventy-five dollars and these words and figuresare written into it, but in such a manner that a space isleft before the first word and figure, and such an instru-ment is afterward fraudulently raised by adding thewords ''one hundred" before "seventy-five" and thefigure 1 before 75, thereby changing it to a note for onehundred and seventy-five dollars, the alteration will beconsidered material alteration and the instrument un-enforceable in the raised amount. On such a note theparties, except those who became parties after the altera-tion, would be liable only in the original amount.^^ (Sec.125.) Aside from the instrument, however, they mightbe liable to a holder in due course for the full amountof the altered sum as damages, if their carelessness wasresponsible for the fraud and his injury, and they wouldbe if their negligence amounted to an estoppel."'^ But-this is a different subject and it is only referred to inorder to illustrate the importance of properly makingout a negotiable instrument. When the written wordsand figures do not completely fill the blank spaces, draw

Garrard vs. Hadden, 67 Pa. St. 82.Yocum vs. Smith, 63 111. 321.Scotland Co. Nat. Bk. vs. O'Connell, 23 Mo. App. 165.Hacket vs. First Nat. Bk. of Louisville, 114 Ky. 193.

56. Greenfield Savgs. Bk. vs. Gray, 123 Mass. 196.Nat. Exchange Bk. vs. Lester, 194 N. Y. 461, 87 N. E. 771,.

21 L. R. A. (N. S.) 402, where cases are reviewed.57. Holmes vs. Tnimper, 22 Mich. 427.

Otis El. Co. vs. First Natl. Bk., 163 Cal. 31, 41 L. R. A.(N. S.) 529, 124 S. 704.


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42 THE NEGOTIABLE INSTRUMENTS LAW 15a line through the unoccupied parts. Consult section 6for the right to supply omissions, section 23 for whatconstitutes a forgery and sections 124 and 125 for whatare material alterations and their effect upon the instru-ment.Incomplete ''Sec. 15. Where an incomplete in-instrument not strument has not been delivered it willdelivered. :soT, if completed and negotiated, with-"Wisconsin. 'OUT authority, be a valid contract inTHE hands of any HOLDER, AS AGAINST ANY PERSON WHOSEsignature WAS PLACED THEREON BEFORE DELIVERY.'""An initial delivery is essential to the validity of anincomjDlete negotiable instrument.Now, if a bill, note, check, or other negotiable instru-

ment is incomplete on its face, or is signed in blank, butnot voluntarily delivered by the person whose obligationit is to become after it has been lawfully completed andhas had a valid initial delivery, and such an instrumentis negotiated without authority, it does not bind any onewhose signature was placed upon it before its unlawfulnegotiation, even if it is presented in the hands of aholder in due course. ^^ And when an instrument which isapparently complete but is not so because it lacks thesignature of additional parties who are to sign it has beendelivered under an agreement that it is not to take effectuntil the additional signatures are obtained, such aninstrument is not a valid instrument between the originalparties or a subsequent holder taking with notice. ^^ (SeeSec. 55.)But persons who become parties to an incomplete

undelivered instrument after it has been wrongfully com-pleted and negotiated will be liable upon it to a subse-quent holder in due course, because the contract is theirs

58. Linick vs. Nuttino:, 140 App. Div. 2G5. 267, 12.5 N. Y. S. 93.Nance vs. Laiy, 5 Ala. 370.59. Hodge vs. Smith, 130 Wis. 326.


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16 FORM AND INTERPRETATION 43in the rorm in which they signed it. The next sectionwill inform you when and under what circumstances aninstrument is deemed to be incomplete. (Also see Sees.55 and 184.)Delivery; when ''Sec. 1(3. Every conieact on a nego-effectual; when ^j^^le instrument is incomplete andSorth^^c'arolina. RI^vocable until delivery of the instru-ftKansas. * ment for the purpose of giving effectS. Dakota. . thereto. As between immediate parties,AND AS REGARDS A REMOTE PARTY OTHER THAN A HOLDER INDUE COURSE, THE DELIVERY, IN ORDER TO BE EFFECTUAL, MUSTBE MADE EITHER BY OR UNDER THE AUTHORITY OF THE PARTYMAKING, DRAWING, ACCEPTING" OR ENDORSING, AS THE CASEMAY BE ; AND IN SUCH CASE THE DELIVERY MAY BE SHOWN TOHAVE BEEN CONDITIONAL, OR FOR A SPECIAL PURPOSE ONLY,AND NOT FOR THE PURPOSE OF TRANSFERRING THE PROPERTYIN THE INSTRUMENT.'' BuT WHERE THE INSTRUMENT IS INTHE HANDS OF A HOLDER IN DUE COURSE, A VALID DELIVERYTHEREOF BY ALL PARTIES PRIOR TO HIM SO AS TO MAKE THEMLIABLE TO HIM IS CONCLUSIVELY PRESUMED. AnD WHERETHE INSTRUMENT IS NO LONGER IN THE POSSESSION OF A PARTYWHOSE SIGNATURE APPEARS THEREON, A VALID AND INTEN-TIONAL DELIVERY BY HIM IS PRESUMED UNTIL THE CONTRARYIS PROVED.''

Like other contracts, a negotiable instrument has novalid inception until it has been delivered by the makeror drawer for the purpose of giving effect to it. Thecontract of indorsement is incomplete until the indorserdelivers the instrument to his transferee for the pur-pose of giving effect to his indorsement, and the contractof the acceptor is incomplete until he returns the ac-cepted instrument to the holder for the purpose of givingeffect to his acceptance or notifies him of the accept-ance. (Sec. 191.) In every case the contract isrevocable until it is delivered for the purpose of givingeffect to it ;" and as to all parties except a holder in due

60. Burson vs. Huntincrton, 21 Mich. 410, 431.Burr vs. Beckler, 264 111., 230.


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44 THE NEGOTIABLE INSTRUMENTS LAW 16course, the delivery is not effectual, that is completedand binding unless it is made by the party who issues,accepts or indorses the instrument or by his authority.x\nd, except when the instrument is in the hands of aholder in due course, it can in every case be shown thatthe delivery was not for the purpose of giving effect toinstrument or transferring its ownership, if it is a factthat its effective delivery was not intended. But if one'ssignature appears anywhere upon a nego'tiable instru-ment and the instrument is no longer in his possession anintentional and valid delivery by him to any one whoholds it will be presumed until he is able to show that hedid not deliver or intend to deliver the instrument to theholder, or any other prior party, for the purpose oftransferring the ownership of the instrument.^^But now observe that when an instrument which is

complete in every other respect except delivery, comesinto the hands of a holder in due course, (see sec. 53for definition) a valid delivery by all persons whosesignatures appear upon it when it reaches him is con-clusively presumed, that is to say, the contrary cannotbe shown, as to him, even if it is true. All parties uponthe instrument are liable to this holder in due course not-withstanding any rights or defenses they may haveamong themselves.*^^By reason of this section a holder in due course of a

negotiable instrument which at its inception was com-plete in every other respect except delivery*^^ can enforceit against all parties, and all parties are liable thereonto him if the instrument, after completion, was lost by

61. Hill vs. Hall, 191 Mass. 253.Niblock vs. Sprague, 200 N. Y. 390.Hodge vs. Smith, 130 Wise. 326.

62. Buzell vs. Tobin, 201 Mass. 1.63. Schaefifer vs. Marsh, 90 Misc. (N. Y.) 307.


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17 FORM AND INTERPRETATION 45or stolen from them, or any of them, or from some onenot a party to it, or its issue was obtained by fraud."^However, the hohler of a stok'ii

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Law of Business Paper and Securities