of consideration exists in favor of all negotiable paper unless this presumption is overcome by evidence. The presumption is that the paper was given for value.

To recapitulate: The assignee acquires the rights of the assignor subject to existing claims or defenses. The purchaser of negotiable paper acquires full title, and the right to collect the full amount, notwithstanding, that counter-claims and defenses may exist between the original parties. The transfer defeats existing claims or defenses. This is the law of negotiability.

161. What Negotiable Papers Are. All papers issued for the purpose of assisting in the exchange of money, and which bear certain necessary elements, are negotiable; for example, notes, drafts, checks, certificates of deposit, etc.

The Law Merchant rules, together with the common law, were introduced into this country by the early settlers from England. The law relating to Negotiable Instruments is largely the result of custom and statutory enactments from time to time. The many courts having jurisdiction in this country, through their decisions and interpretations, have produced many conflicting conclusions. Many states have added to the confusion by enacting special statutes. As a consequence, there have been presented many suggestions for legislation by the various state legislatures harmonizing and unifying the laws on the subject. In 1882 the English Parliament passed the "English Bills of Exchange Act." This codified the laws and settled conflicting decisions. Such a law was first passed in this country by New York in 1895. It has been passed since by a large majority of the states. This law does not abrogate the laws of notes and bills, but settles conflicting opinions and unifies the application of the law merchant. This text is in accordance with the negotiable instrument act.

Note. This subject is considered so important a part of commercial law that it is thought proper to omit the recapitulation, thereby indicating to the student that a review should include the complete text on Negotiable Paper.

What is exchange? Why desirable?

What is money? Name some of the articles that have been used as money. What is used chiefly for this purpose now? Why?

What is credit? On what is it based? How does credit help money

in transacting business?

What is assignability? What is negotiability? Give an example to illustrate assignability and negotiability.

Define the law merchant. What three rights did the law merchant add to the common law?

Name the usual negotiable instruments.

Give a sketch of the de

velopment of the law relating to negotiable paper.

CHAPTER XXI

ELEMENTS OF NEGOTIABLE PAPER

163. INTRODUCTION

164. ELEMENTS

1. Contract in Writing

2. Absolute Promise or Order

3. Certainty as to Time

4. Certainty as to Amount

5. Payable in Money

6. Specification of Parties
7. Negotiable Words
8. Delivery

165. SOME NON-ESSENTIALS

1. Date

2. Value Received

3. Days of Grace

166. LIABILITY

167. QUESTIONS

168. DECISIONS BY THE COURTS

163. Introduction. The common law of England recognized no such rules as are found in the law merchant which found its birth among the merchants on the continent of Europe, but the advantages of these rules were found to be wise and needful for a commercial nation. Their adoption was hedged about by the requirements of certain characteristics which are known as the elements of negotiable paper. Negotiable instruments are contracts of a special character.

164. Elements. 1. Contract in Writing. All negotiable contracts must be in writing and signed. While an oral promise under common law might be a valid contract, it could not be

considered negotiable under the law merchant. The writing may be with ink or in pencil on any ordinary writing material.

2. Absolute Promise or Order. The promise contained in the note, or the order on a third person in a draft, must be an unconditional promise or order to pay money; any condition would make the contract non-negotiable and subject to the rules of the common law. Courtesy of language, as "please pay," will not affect the negotiability; it is no less an order or promise to pay. In a note payable on or before a certain date, the paper is payable absolutely on that date, but may be paid earlier. If a note is made payable in the alternative, it is non-negotiable, and a note payable after the arrival of a particular steamer, or other uncertain event, is a conditional promise, and therefore non-negotiable. A promise to pay on the death of a certain person is considered an absolute promise to pay. If made payable out of a certain fund the instrument is non-negotiable, as the promise is conditional. This is because of the uncertainty of the particular fund.

3. Certainty As to Time. Negotiable instruments are based on certainties, and time is no exception. If no time is specified, the instrument is payable on demand. Time is generally specified as “after date" or "after sight"; other words of the same import may be used. The word "month" means a calendar month; a note payable one month after Aug. 30 is due on Sept. 30, while a note payable 30 days after Aug. 30 is due on Sept. 29. Notes drawn on Dec. 28-29-30-31 and each reading "two months after date," would all fall due on Feb. 28, unless a leap year, when the first would fall due on the 28th and the rest on the 29th.

4. Certainty As to Amount. The amount to be paid must be certain, and stated in the instrument. If the amount cannot be definitely determined from a reading of the instrument, it is non-negotiable. The amount is generally written once in words. and once in figures; but this is merely a precautionary measure. The amount in words controls. If the note contains a provision for the payment of interest, it does not affect its negotiability, for that is a determinable amount. It may also contain the follow

ing provisions: payable in installments, default of one making balance due and payable; with exchange; with the addition of collection; attorney's fees and cost when not paid at maturity.

5. Payable in Money. It has always been held that negotiable paper must be payable in money or an equivalent thereof. A note payable in merchandise is not a negotiable instrument, unless made so by statutory enactment.

6. Specification of Parties. There must be no uncertainty in regard to the parties to a negotiable instrument. Not only must it be shown who is the payer, but also it must be made certain to whom payment is to be made. The giver of the instrument must sign; the receiver may be indicated as in "bearer." The capacity of the parties to the contract is the same as in common law. Parties are classed as original and subsequent. The first class are the ones who made the original contract; the second includes all those who may at a subsequent time receive the contract. The first are familiar with the making of the contract; the second know of the contract as it stands completed; they probably know nothing of the real consideration, but they are bound by the contract as expressed. While the signatures are generally at the end of the contract, it is not necessarily so.

7. Negotiable Words. This element is the chief one that originated with the custom of merchants. Under the common law, choses in action were transferable only; that is, the buyer acquired the rights of the seller and no more. The law merchant goes farther and allows to the buyer a perfect title. In order to make a bill negotiable, the intent must be clearly shown. This is done by making use of the words, "order or bearer," or any word or words having the same import. Without these words the instrument is non-negotiable, and the holder takes it subject to defenses existing at the time of the transfer, or until notice of transfer is made. When the word "order" is used, the name of the payee must also appear. If the word "bearer" is used, the payee's name may or may not appear. A paper reading "pay to the order of A" is the same as "pay A or order." One reading "pay to the bearer, A" is not negotiable, unless so made by statute.