For failure of consideration in contract dated May 15, 1913. I .......hereby agreeing to hold you harmless for said amount, and all expenses and costs incurred by you on account of your refusing payment of said check, and agreeing further not to hold you liable on account of payment contrary to this request if same occur through inadvertence or accident only. Respectfully, E. H. Dennis Depositor. security for, the pre-existing debt. In this way the creditor is enabled to realize or to secure his debt, and thus may safely give a prolonged credit, or forbear from taking any legal steps to enforce his rights. The debtor also has the advantage of making his negotiable securities of value equivalent to cash. Otherwise, the discounts, by banks, of negotiable securities are restricted, and credit and circulation of negotiable paper hampered." This is the general view throughout the country, with the exception of a few states. 4. Transfer Before Maturity. Negotiable paper is presumably payable at its maturity, and if not paid then it is open to suspicion. If equities are available against the present holder, they will be available against any subsequent holder who obtains title after maturity. If, however, a holder, in good faith, intervenes before maturity, then a subsequent holder, although after maturity, will take the latter's rights. Likewise, after an instrument has been dishonored, protested and notices sent, it may be put into circulation by an indorsement. 212. Stopping Payment. The receipt of a check by a payee does not give the holder any claim against the drawee; in other words, the issue of the check does not work an assignment of so much of the drawee's funds with the banker. The drawer may direct the drawee to dishonor or refuse payment of the check issued. This is called stopping payment; however, it is at the risk of the drawer for damages. 213. QUESTIONS What are the conditions of transfer? What is "transfer in good faith?" Illustrate. What is the effect if one receives paper knowing that full consideration was not given? Does it make any difference if notice is received before or after acquiring the paper? Explain "transfer in the usual course of business." Give illustrations. Would receiving the paper from a notorious gambler have any effect on your title? Explain fully. Explain "transfer for value." Illustrate. Would receiving a note at a discount be receiving it for value? What if the discount was as great as fifty per cent? When must the transfer be made to be fully within the provisions of the law merchant? How may one receive paper after maturity and still have a good claim against a set-off? 214. DECISIONS BY THE COURTS 1. In M N B v. H, 33 Minn. 40, the plaintiff sent for collection to one, Luce, its agent, certain notes indorsed as follows: "For collection account of Merchants' National Bank, St. Paul." Before their maturity Luce transferred them by indorsement to the defendant in payment of his own private debt. It was held that the defendant receiving them with the above indorsement uncanceled, and without making any inquiry, acquired them not merely negligently but in bad faith and could not protect himself as a bona fide purchaser against the plaintiff's superior right. To be a bona fide holder one must take paper without notice, either actual or constructive, of any fraud, defect of title, or illegality of consideration in the transferrer's hands. 2. In the 42d S. W. Rep. 1055, a certain note, which was one of a series of five and so mentioned on the face of the note, was transferred before maturity to one who knew that one of the notes of the series was past due and unpaid. It was held that the purchaser of the first mentioned certain note took it subject to the offset and defenses of the maker. 3. In M. R. Burr. 452, a bank note was stolen and came to the hands of the plaintiff, and he was held entitled to it. The Court of K. B. considered bank notes as cash, which passed as money in the way of business; and the holder, in that case, came by the note, for a full and valuable consideration, by giving money in exchange for it, in the usual course of business, and without notice of the robbery, and on those considerations he was entitled to the amount of the note. 4. In 3 G v. Burr. 1516; 1 Black, Rep. 785, a bill of exchange, payable to bearer, was lost, and the finder paid it to a grocer, for teas, and took the change. The Court laid stress on the facts that the holder came by the bill bona fide, and in the course of trade, and for a full and fair consideration, and that though he and the real owner were equally innocent, yet he was to be preferred for the sake of commerce and confidence in negotiable paper. 215. Introduction. Business necessity has contrived and put into use a number of contracts that are sometimes classed as quasi-negotiable. These contracts have not been afforded full negotiability largely because business necessity does not require it. The chief ones are letters of credit, bonds, warehouse receipts, and bills of lading. 216. Letters of Credit. A letter of credit is an instrument somewhat similar to a draft. It is payable at the convenience of the purchaser, and in the currency of the country where payable, but it is not primarily for negotiation. It is largely used by travelers. 1. How Used. For example, A wishes to travel in Europe. To take the currency (gold) of this country would subject him to the inconvenience of carrying it, to say nothing of liability to loss. Again, if required to change this currency to the currency of the country where he happens to be traveling, he would be charged with the exchange each time. Instead of doing this, he goes to his banker, before leaving home, and buys a letter of Mr. John Dor in whose favel we beg to open a credit with you collectively for the sum of One thousand Pounds Sterling, to which extent be pleased to finish payments in sums as required inscribing the amounts, so paid on the back of this letter. In reimbursement you will sath_sight draft on The Union of London & Smiths Bank, Ltd. Londen. Eng, inserting therein the Date and We remain Gentlemen to your usual courtesy Your obedient servants Arthur Mann Cashier N. B. The bearer is advised to keep the list of correspondents apart from the Letter of Credit to prevent their being lost or stolen together, also to affin IMMEDIATELY his gual signature at place indicated on the made of the cover of the list of correspondents as a precaution against ery in the event of the list of correspondents or Letter of Credit falling into improper hands. The Illinois Trust and Savings Bank will not be responsible for the com sequences arising from an omission by the bearer to observe these precautions |