How and when presentment for acceptance should be made.

1198

§ 1135. Law governing negotiable instruments.

A bill of exchange or a promissory note constitutes a formal contract or set of contracts. An instrument in order to come within the principles which govern the subject, must be made in conformity with certain precise rules. Otherwise it is a simple contract in writing and merely evidence of such intangible rights as may have been created by the assent of the parties. If, however, the rules are duly observed the document is itself the contract. It is a mercantile specialty.1

A bill or note may be negotiable or non-negotiable, but it is especially in regard to negotiable bills and notes that the custom of merchants and the law based thereon becomes applicable. The custom of merchants is sometimes spoken of as if it was something distinct from the common law, but in fact the particular customs governing negotiable instruments have become part of the common law and only to the extent that customs of merchants are adopted into the common law can they have any legal importance.

Hence the

Most of the principles governing negotiable instruments can be stated in the form of precise rules. subject lends itself readily to codification and it has been codified both in England and the United States. The Bills of Exchange Act which was passed in 1882, codifies the law of England; and the Uniform Negotiable Instruments Law, so called, has been enacted in almost every one of the United States. This statute does not apply to non-negotiable bills and notes. It does, however, apply to negotiable bonds, for the rule of the common law denying the possibility of negotiability to an instrument under seal has been repealed by the statute. The text of the statute is here appended as a statement of the law governing negotiable instruments. In some States variations have been made in the statute as originally drafted, and the more important of these are indicated in the notes. As the statute is intended in the main as a codification of previously existing common law, it will be construed, unless a contrary intention appears, as restating that law.

5

Annotations to the various sections and comment upon them will illustrate and amplify the words of the statute.

There are numerous possible personal defences (see infra, § 1158) and lack of consideration or value is one of them.

It has not yet been enacted in Georgia.

3 See Windsor Cement Co. v. Thompson, 86 Conn. 511, 86 Atl. 1; Johnson v. Lassiter, 155 N. C. 47, 71 S. E. 23.

4 Montvale v. People's Bank, 74 N. J. L. 464, 67 Atl. 67.

5 This rule had previously been broken in upon by judicial decision, holding bonds payable to bearer negotiable. Goodwin v. Robarts, L. R. 10 Ex. 337; Mercer County v. Hacket, 1 Wall. 83, 17 L. Ed. 548; Chase Nat. Bank v. Faurot, 149 N. Y. 532, 44 N. E. 164, 35 L. R.

§ 1136. The Uniform Negotiable Instruments Law-general rules governing form of instrument.

TITLE I

NEGOTIABLE INSTRUMENTS IN GENERAL

ARTICLE I

FORM AND INTERPRETATION

Section 1.-[FORM OF NEGOTIABLE INSTRUMENT.] An instrument to be negotiable must conform to the following requirements:

(1) It must be in writing and signed by the maker or drawer; 6

(2) Must contain an unconditional promise or order to pay a sum certain in money;"

(3) Must be payable on demand, or at a fixed or determinable future time;

(4) Must be payable to order or to bearer; and

(5) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty.8

It may be signed in pencil or by mark or symbol. Brown v. Butchers', etc., Bank, 6 Hill, 443.

7 In a few States promises to deliver a stated quantity of goods are by statute made negotiable, and in many States warehouse receipts and bills of lading (which in effect contain promises to redeliver specific bailed goods) are by statute negotiable if made out to order or bearer.

8 In the Wisconsin Act the following is added to this section: "But no order drawn upon or accepted by the treasurer of any county, town, city, village or school district, whether drawn by an officer thereof or any other person, and no obligation nor

instrument made by any such corporation or any officer thereof, unless expressly authorized by law to be made negotiable, shall, or shall be deemed to be negotiable, according to the custom of merchants, in whatever form they may be drawn or made. Warehouse receipts, bills of lading and railroad receipts upon the face of which the words 'not negotiable' shall not be plainly written, printed or stamped, shall be negotiable as provided in section 1676 of the Wisconsin Statutes of 1878, and in sections 4194 and 4425 of these statutes, as the same have been construed by the Supreme Court."

§ 1137. Explanation of meaning of requirements stated in the preceding section.

Section 2. [CERTAINTY AS TO SUM; WHAT CONSTITUTES.] The sum payable is a sum certain within the meaning of this act, although it is to be paid:

(1) With interest; or 9

(2) By stated instalments; or 10

(3) By stated instalments, with a provision that upon default in payment of any instalment or of interest, the whole shall become due; or 11

(4) With exchange, whether at a fixed rate or at the current rate; or

(5) With costs of collection or an attorney's fee, in case payment shall not be made at maturity.12

Section 3.-[WHEN PROMISE IS UNCONDITIONAL.] An unqualified order or promise to pay is unconditional within the meaning of this act, though coupled with:

(1) An indication of a particular fund out of which reimbursement is to be made, or a particular account to be debited with the amount; or 13

(2) A statement of the transaction which gives rise to the instrument.

There can be no doubt that a mere statement of executed consideration for the instrument does not impair its negotiability.14 But if the payment of a note is in terms con

See as to the effect of a provision diminishing the rate of interest from the date of the note if the note is paid at maturity. Union Nat. Bank v. Mayfield, (Okl. 1917), 169 Pac. 626.

10 First Nat. Bank v. Barrett, 52 Mont. 359, 157 Pac. 951.

11 In the Acts of Idaho, Iowa and North Carolina the words, "Or of interest" are omitted. See Tipton v. Ellsworth, 18 Idaho, 207, 109 Pac. 134.

12 See supra, § 786. In Nebraska, North Carolina and South Dakota, there are express provisions that nothing in the Act shall be construed as authorizing the enforcement of a stipulation for attorney's fees.

13 See In re Boyse, 33 Ch. D. 612; Union Bank v. Spies, 151 Iowa, 178, 130 N. W. 928; First Nat. Bank v. Lightner, 74 Kan. 736, 88 Pac. 59, 8 L. R. A. (N. S.) 231, 118 Am. St. Rep. 353; Whitney v. Eliot Nat. Bank, 137 Mass. 351, 50 Am. Rep. 316; Hanna v. McCrory, 19 N. Mex. 183, 141 Pac. 996; Schmittler v. Simon, 101 N. Y. 554, 5 N. E. 452, 54 Am. Rep. 737; Van Tassel v. McGrail, 93 Wash. 380, 160 Pac. 1053; Brown v. Cow Creek Sheep Co., 21 Wyo. 1, 126 Pac. 886.

14 Slaughter v. Bank of Bisbee, 17 Ariz. 484, 154 Pac. 1040; Newbury v. Wentworth, 218 Mass. 30, 105 N. E. 626 ("value received, per terms of

ditional on the performance of an executory promise or requested act, in consideration of which the note was given, the note seems clearly non-negotiable. 14" A majority of courts hold that negotiability of the instrument is not affected by the mere fact that it recites an executory consideration without any statement that payment is conditional on the subsequent performance of the executory consideration; and that such recital will not deprive the indorsee of the character of a holder in due course unless he also has notice of the breach of the executory agreement before acquiring the note, in which event he cannot recover. 146 A note reciting that it was given for a chattel, title to which is reserved by the payee until payment, is negotiable. 14

contract"); Snelling State Bank v. Clasen, 132 Minn. 404, 157 N. W. 643; Merchants Bank v. Santa Maria Sugar Co., 162 N. Y. App. Div. 248, 147 N. Y. S. 498, ("for the amount of the second instalment agreed on of a crane purchased this date"); Waterbury-Wallace Co. v. Ivey, 99 N. Y. Misc. 260, 163 N. Y. S. 719; First Nat. Bank v. Sullivan, 66 Wash. 375, 119 Pac. 820, Ann. Cas. 1913 C. 930. See also Postal Telegraph-Cable Co. v. Citizens' Nat. Bank, 228 Fed. 601; Val Platz Brewing Co. v. Interstate Ice, etc. Co., 161 Mo. App. 531, 143 S. W. 542.

14 Equitable Trust Co. v. Harger, 258 Ill. 615, 102 N. E. 209 (cf. Equitable Trust Co. v. Taylor, 146 N. Y. App. D. 424, 131 N. Y. S. 475); Pope v. Lumber Co., 162 N. C. 206 76 S. E. 65. ("This note is for part of the purchase price of timber conveyed... by deed of even date herewith... and is subject to the provisions of the deed.")

14 Porter v. Steel Co., 122 U. S. 267, 30 L. Ed. 1210, 7 Sup. Ct. 1206; McNight v. Parsons, 136 Iowa, 390, 113 N. W. 858, 22 L. R. A. (N. S.) 718, 125 Am. St. Rep. 265; Miller v. Finley, 26 Mich. 249, 12 Am. Rep. 306; Jennings v. Todd, 118 Mo.

296, 24 S. W. 148, 40 Am. St. Rep. 373; Rublee v. Davis, 33 Neb. 779. 51 N. W. 135, 29 Am. St. Rep. 509. A few decisions hold the contrary. Thus in Sumter County State Bank v. Hays, 68 Fla. 473, 67 So. 109, where a negotiable note was given and indorsed by the payee to plaintiff bank and it appeared from extrinsic facts that it was given in consideration of an executory promise and the bank acquired the note with knowledge of this, but before there was a breach of the promise, it was held that the indorsee was not a holder in due course, even though the indorsee did not know of the subsequent breach. And in Heard v. Shedden, 113 Ga. 162, 38 S. E. 387, where the consideration was an insurance policy not yet issued, a purchaser who took the note with notice that policy had not yet been issued, was held to take the risk of possible failure of the company to issue such a policy as was applied for. See further, infra, § 1157, n. 44 a. See also Sacred Heart Church Bg. Comm. v. Manson (Ala.), 82 So. 498; Continental Bank &c. Co. v. Times Pub. Co., 142 La. 209, 76 So. 612, L. R. A. 1918 B. 632.

140 Ex parte Bledsoe, 180 Ala. 586, 61 So. 813; Citizen's Nat. Bank v. Bucheit,