CHAPTER Gross negligence not equivalent to notice. Notice to an agent. Gift, inter vivos, of a bill or note. But mere negligence, however gross, not amounting to wilful and fraudulent blindness and abstinence from inquiry, will not of itself amount to notice, though it may be evidence of it (t). Where the holder in taking the bill employs an agent, though the principal be unaffected with notice to himself personally, yet notice to the agent so employed, whether explicit or implicit, is notice to his principal the holder (u). Perhaps, however, the rule may be subject to this qualification, that the knowledge of the agent, in order to affect his principal, must either have been acquired by the agent in the same transaction, or at least so recently as that it may be presumed to remain in his memory; and it must be knowledge of a fact material to the transaction, and which it would be the duty of the agent to communicate to his principal (x). The effect of notice to an agent, commonly called constructive notice, is not to be extended (y). But wherever the agent's conduct amounts to fraud, it is conceived that the innocent principal who takes the benefit of the agent's fraudulent act is civilly responsible for the agent's fraud (2). It would seem, on general principles, that the payment of no bill of exchange, promissory note or check, given by the maker or acceptor to the payee, as a gift, inter vivos, can be enforced by action at the suit of the donee against the donor (a). Thus, where a bill of exchange was accepted by the defendant, as a present to the payee, who indorsed it to the plaintiff for a small sum advanced to him, Lord Ellenborough held, that the plaintiff was only entitled to recover so much as he had advanced on the bill (b). The effect of a gift of a negotiable instrument, payable to bearer, or indorsed by the donor in blank, should seem on principle to the Court were equally divided. 7 H. & N. 172; Eyn v. M'Dowell, 14 Ir. C. C. Rep. 814. (a) Milnes v. Dawson, 5 Exch. 948. (b) Nash v. Brown, Chitty, 10th ed. 54; and see Holiday v. Atkinson, 5 B. & C. 501; 8 D. & R. 163, S. C.; Easton v. Prachett, 4 Tyrwh. 472; 1 C., M. & R. 798; 3 Dowl. 472; 1 Gale, 33, S. C., in error; 2 C., M. & R. 542; 1 Gale, 250; but see Milnes v. Dawson, 4 Exch. 948. be this. As between the donor and the donee, the donor cannot recover the bill back or receive the amount from prior parties (c), but the donee himself cannot sue the donor upon it. As between the donee and the other prior parties to the bill, they are liable to him. If the bill be not transferable, or be payable to order and not indorsed, it is conceived that the effect of a gift of it is to vest the legal property in the paper and the beneficial interest in the money in the donee (d); who, however, must recover from prior parties in the donor's name. CHAPTER X. consideration. The same general rules, as apply to the nature of the Nature of the consideration for other simple contracts, are also applicable to the various contracts on a bill or note. It may suffice to observe here, for the sake of the unprofessional reader, that a consideration is, in general, either some detriment to the plaintiff, sustained for the sake or at the instance of the defendant, or some benefit to the defendant (e) moving from plaintiff. Natural affection is not a sufficient consideration to support a simple contract (ƒ). If a man give his acceptance to another that will be a good consideration for a promise, or for another bill or acceptance, though such first acceptance is, after all, unpaid (g). And, therefore, cross acceptances for mutual accommodation are respectively considerations for each other (h). A pre-existing debt due to the holder of a negotiable Pre existing instrument is a good consideration, and it should seem is debt. equivalent to a fresh advance (i). At all events where the bill or note is payable at a future time, it places the holder in the same situation as if he had made fresh advances on (c) Milnes v. Dawson, 5 Exch. 948. (d) See Barton v. Gainer, 27 L. J., Exch. 390; 3 H. & N. 387, S. C., as to the effect of a gift of a specialty. (e) It is not necessary that the consideration should move to the defendant personally; if it moves to a third person by his desire or acquiescence, that is sufficient. Therefore, the debt of a third person is a good consideration to support a contract on a bill payable at a future day. Sowerby v. Butcher, 2 C. & M. 368; 5 Tyr. 320, S. C.; vide post. Past gra- (f) Holiday v. Atkinson, 5 B. (g) Rose v. Sims, 1 B. & Ad. 521. (h) Cowley v. Dunlop, 7 T. R. 565; Buckler v. Buttivant, 3 East, 72; Rose v. Sims, 1 B. & Ad. 521. (i) Story on Bills of Exchange, s. 192. CHAPTER Fluctuating balance. Debt of a third person. the instrument (k); for the remedy for the previous debt is suspended till maturity of the bill or note (1). A fluctuating balance may form a consideration for a bill (m). Where a banker's acceptances for his customer exceeded the cash balance in his hands, and accommodation acceptances were deposited by the customer with the banker as a collateral security, it was held, that, whenever the acceptances exceeded the cash balance, the bankers held the collateral bills for value (n). Where bills or notes are deposited as a security for the balance of an account current, the successive balances form a shifting consideration for the bill. Thus, where A. and Co. bankers in the country, being pressed by the plaintiffs B. and Co., bankers in town, to whom they are indebted, to send up any bills that they can procure, transmit for account an accommodation bill accepted by the defendant; when the bill becomes due the balance is in favour of A. and Co., but the bill is not withdrawn, and afterwards the balance between the houses turns considerably in favour of B. and Co., the plaintiffs, and is so when A. and Co. become bankrupts, B. and Co. are entitled to recover against the defendant, the accommodation acceptor (o). A subsisting debt due from a third person is a good consideration for a bill or note (p) payable at a future day; (k) See Percival v. Frampton, 2 C., M. & R. 180; 3 Dowl. 748, S. C.; Foster v. Pearson, 1 C., M. & R. 849; 5 Tyr. 255, S. C.; but see De la Chaumette v. Bank of England, 9 B. & C. 208; Vallance v. Siddel, 6 Ad. & E. 932; 2 N. & P. 78, S. C.; Poirier v. Morris, 1 E. & B. 103; see In re Carew, 31 Beav. 39. (7) In America the judicial decisions on this important point vary in different States. But the SUPREME COURT of the United States has gone the full length of holding that the taker of a note for a pre-existing debt has all the rights of a holder for a new consideration. Swift v. Tyson, 16 Peters, 1. See the state of the American authorities, Byles on Bills, 5th American edition, pp. 229 to 233. (m) Pease v. Hirst, 10 B. & C. 122; 5 M. & Ry. 99, S. C.; Collenridge v.. Farquharson, 1 Stark. 259; Richards v. Macey, 14 M. & W. 484; and for a bond, Henniker v. Wigg, 4 Q. B. 792; and see Cholmley v. Darley, 14 M. & W. 344. (n) Bosanquet v. Dudman, 1 Stark. 1; and see Bolland v. Bygrave, 1 R. & M. 271. (0) Atwood v. Crowdie, 1 Stark. 483; see Woodroffe v. Hayne, 1 Car. & Payne, 600. (p) Popplewell v. Wilson, 1 Stra. 264; Coombs v. Ingram, 4 D. & R. 211; Sowerby v. Butcher, 2 C. & M. 372; 4 Tyr. 320, S. C.; Garnet v. Clarke, 11 Mod. 226; Ridout v. Bristow, 1 C. & J. 231; 1 Tyr. 84, S. C.; Wilders v. Stevens, 15 L. J., Exch. 108; 15 M. & W. 208, S. C.; and see Lechmere v. Fletcher, 1 C. & M. 623; Baker v. Walker, 14 M. & W. and so is a debt due from the defendant and a third person (q). If the debt of the third person is extinguished by the bill or note being taken in satisfaction, there is a good consideration, though the instrument be payable on demand. CHAPTER A judgment debt is a good consideration for a note pay- A judgment debt. able at a future day; for it imports an agreement on the part of the judgment creditor to suspend proceedings on the judgment till the maturity of the note (r). claim. The compromise of a claim, though really unfounded and Compromise of a believed to be so by the party against whom it is made, may be a good consideration for a promissory note (s). A moral obligation is in general insufficient, but may, in Moral obligation. some cases, be a consideration for a bill or note, as where there once existed a legal liability, though it may have been barred by statute (t). "Quisque renunciare potest juri pro se introducto." Thus, for example, where a bankrupt, after his bankruptcy, gave a promissory note to the plaintiff, one of his creditors, for part of his debt, it was held that the note was given on a good consideration (u). And a note given by the purchaser of an estate to the vendor for the purchase-money, though the contract be void by the Statute of Frauds, is made on sufficient consideration (x). 465; Walton v. Mascall, 14 L. J., Exch. 54; 13 M. & W. 453, S. C.; Cook v. Long, Car. & M. 510. At least, if the note be payable at a future day, for then the note amounts to an agreement to give time to the original debtor, and that indulgence to him is a consideration to the maker. Balfour v. Sea Fire and Life Insurance Company, 3 C. B., N. S. 300. Secus, if the original debtor is dead and has no representative. Nelson v. Serle, 4 M. & W. 795; reversing Serle v. Waterworth, 4 M. & W. 9; 6 Dowl. 684, S. C. But if the note be payable immediately, it is conceived that the pre-existing debt of a stranger could not be a consideration, unless it were taken in satisfaction, or unless credit had been given to the original debtor at the maker's request. Crofts v. Beale, 11 C. B. 172, acc. (q) Heywood v. Watson, 4 Bing. 496; 1 M. & P. 268, S. C. (r) Baker v. Walker, 14 M. & W. 465. (8) Cooke y. Wright, 30 L. J. Q. B. 321. Callidur 6.8:5215 (t) See the note to Wennall v. 544; and see Brix v. Braham, 1 A majority of the Court of Ex- CHAPTER X. Cases where more than one consideration comes in question. Between immediate parties—that is, between the drawer and acceptor, between the payee and drawer, between the payee and maker of a note, between the indorsee and indorser, the only consideration is that which moved from the plaintiff to the defendant, and the absence or failure of this is a good defence to an action. Thus, where a bill was drawn in the regular course of trade, and delivered to the payee's agent, before the consideration was given, and the payee's agent, who was to have paid the consideration, failed, the payee could not recover against the drawer (y). But, between remote parties-for example, between payee and acceptor, between indorsee and acceptor, between indorsee and remote indorser, two distinct considerations, at least, must come in question: first, that which the defendant received for his liability; and, secondly, that which the plaintiff gave for his title. An action between remote parties will not fail unless there be absence or failure of both these considerations (z). And if any intermediate holder between the defendant and the plaintiff gave value for the bill, that intervening consideration will sustain the plaintiff's title (a). Thus it is no defence to an action by an indorsee for value against an acceptor, that the acceptor received no value (b). Nor on the other hand, that though the acceptor received value, the indorsee gave none. On the same principle, if the acceptance were without consideration, and the plaintiff, the indorsee, knew it, he, as a general rule, can recover no more than he gave for the bill (c); for, suppose the bill to be for 1001. and that the indorsee gave 601. for it, if he (y) Puget de Bras v. Forbes, 1 Esp. 117; Astley v. Johnson, 29 L. J., Exch. 161; 5 H. & N. 137, S. C., where it was held that, a promise to give consideration in money at a specified future time having been broken, parties liable on the bill have a right to treat the payment of money as the consideration, and not the promise to pay it. Jeffries v. Austen, 1 Stra. 674; Jackson v. Warwick, 7 T. R. 121. In Munroe v. Bordier, 19 L. J., C. P. 133; 8 C. B. 862, S. C., it seems to be held, that a payee who takes a bill bona fide for value from a person to whom the drawer had entrusted the bill, but who parts with it against his instructions, acquires a title. Indeed, a payee, when he is a third person, seems to have the same title as the first indorsee of a bill payable to the drawer's own order. Poirier v. Morris, 2 E. & B. 89. (z) Robinson v. Reynolds, 2 Q. B. 196; Thiedemann v. Goldschmidt, 1 De G., F. & J. 4. See Agra and Masterman v. Leighton, 36 L. J., Exch. 33; L. R., 2 Exch. 56, S. C., where an equitable plea stating facts amounting to a failure of both these considerations was held good. (a) Hunter v. Wilson, 19 L. J., Exch. 8; 4 Exch. 489, S. C. (b) Collins v. Martin, 1 Bos. & Pul. 651. (c) Wiffen v. Roberts, 1 Esp. 261. |