chapter ten, intituled An Act to provide for the issue of Provincial Notes, shall be held to be notes of the Dominion of Canada, and shall be redeemable in specie on presentation at Toronto, Montreal, Halifax, or St. John, according as the same are respectively made payable, and shall be legal tender except at the offices at which they so are respectively made payable. 3 E. VII., c. 43, s. 8. Sec. 10. BOOK II. NEGOTIABLE INSTRUMENTS AND THE BILLS OF EXCHANGE ACT. CHAPTER XXX. NEGOTIABLE INSTRUMENTS. In Crouch v. Credit Foncier, 1873, L.R. 8 Q.B. at p. 381, Blackburn, J., quoting the editors of Smith's Leading Cases, states the tests of negotiability thus: "It may be laid down as a safe rule that where an instrument is by the custom of trade transferable, like cash, by delivery, and is also capable of being sued upon by the person holding it pro tempore, then it is entitled to the name of a negotiable instrument, and the property in it passes to a bonâ fide transferee for value, though the transfer may not have taken place in market overt. But that if either of the above requisites be wanting, i.e., if it be either not accustomably transferable, or, though it be accustomably transferable, yet, if its nature be such as to render it incapable of being put in suit by the party holding it pro tempore, it is not a negotiable instrument, nor will delivery of it pass the property of it to a vendee, however bonâ fide, if the transferor himself have not a good title to it, and the transfer be made out of market overt." According to Chalmers (p. 317), Blackburn, J.'s statement requires modification in two respects. Firstly, an instrument, not otherwise negotiable, may be made negotiable by statute. Secondly, foreign government bonds to bearer may undoubtedly be negotiable, yet the holder cannot sue the foreign government upon them in the courts of this country; the explanation may, however, be that the exemption of a foreign government from suit in this country is a personal exemption, and does not arise out of any defect of title on the part of the holder. Blackburn, J., in the same case at p. 382, continues: BANK ACT-21. Tests of negotiability "Bills of exchange and promissory notes, whether payable to order or to bearer, are by the law merchant negotiable in both senses of the word. The person who, by a genuine endorsement, or, where it is payable to bearer, by a delivery, becomes holder, may sue in his own name on the contract, and if he is a bonâ fide holder for value, he has a good title notwithstanding any defect of title in the party (whether indorser or deliverer) from whom he took it." Yet, when the two characteristics just mentioned as belonging to bills and notes are considered, it is evident that they do not afford satisfactory tests to distinguish so-called negotiable instruments from other choses in action. (1) All choses in action might formerly be sued on in equity, and by the effect of statute may now be sued on in law, in the name of the transferee. The characteristic which has been spoken of as one peculiar to bills and notes is really but a matter of practice upon which different courts took different views. This characteristic, as a peciliar one, either never existed or, if it did, has been abolished. (2) As to the second characteristic, a bill or note does not cease to be a "negotiable instrument" when it becomes overdue, yet in that case "it can be negotiated only subject to any defect of title affecting it at its maturity" (Bills of Exchange Act, sec. 70). Even before maturity, honest acquisition of a bill or note does not always confer title (e.g., if the signature has been obtained by fraud, or if a simple signature not delivered in order that it may be converted into a bill has been fraudu lently filled up as a complete bill, or if a completed but unissued bill is stolen: cf. effect of material alteration before the passing of the Bills of Exchange Act). Nor on the other hand is the characteristic in question one which attaches only to bills and notes or other so-called negotiable instruments. "Generally speaking a chose in action assignable only in equity must be assigned subject to the equities existing between the original parties to the contract; but this is a rule which must yield when it appears from the nature or terms of the contract that it must have been intended to be assignable free from, and unaffected by, such equities." (Re Agra and Masterman's Bank, 1867, L.R. 2 Ch. at p. 397.) Thus when bills and notes are distinguished from other Tests of choses in action by being described as negotiable, they are so negotiability distinguished by a peculiarity of which they not only have no exclusive possession but which frequently they have not themselves. Some of the difficulties of defining the word negotiable disappear when it is noted that it has an original and an acquired meaning. Originally it meant (1) transferable; but afterwards. it was used to indicate the effects of transfer, namely, that the transferee (2) could sue in his own name, and (3) took free from the equities. The primary meaning truly indicated at one time a real distinction among choses in action. Now any chose in action arising out of contract may be transferred, and it is not essential to the validity of a bill that it shall be transferable from one person to another, except under the ordinary rules governing the assignment of choses in action, as for instance a "non-negotiable" bill. Nevertheless there does exist a real distinction among choses Real in action, namely between those intended to be assignable free distinction. from equities, and those not so intended. All contracts are now transferable by the obligee, but some are made with the intention that they shall be payable to persons other than the immediate promisee, that is, are intended to be ambulatory. Ambulatory intent is perhaps more truly the distinguishing Ambulatory characteristic of "negotiable" instruments than the character- intent. istics usually assigned. This characteristic is not confined to bills and notes, although the non-recognition of the true distinguishing characteristic made the admission of other instruments to the class called negotiable unnecessarily difficult. Other instruments are equally negotiable instruments "when it appears from the nature or terms of the contract that it must have been intended to be assignable free from, and unaffected by, such equities." (Re Agra & Masterman's Bank, supra.) As to the foregoing, cf. Ewart in 16 L.Q.R. 135, especially at pp. 140-142, and his book on Estoppel by Misrepresentation, Chapter XXIV, where the confusion surrounding the meaning of "negotiable" is discussed. "Negotiability" may affect the rights of holders of instru- Negotiaments (1) in regard to the equities of the person liable as against bility. |