DIVISION E LAW OF NEGOTIABLE INSTRUMENTS Part I. Part II. Part III. General Nature and History. The Formation of the Contract. Part IV. Discharge of Negotiable Paper. PART I GENERAL NATURE AND HISTORY Chapter 48. General Description of Negotiable Paper. Chapter 49. Negotiability of Various Instruments. Chapter 50. History and Origin. CHAPTER 48 GENERAL DESCRIPTION OF NEGOTIABLE § 392. Meaning of word "negotiable.'' § 393. Peculiarities of negotiable paper. § 392. (Nego. Instru., Sec. 1.) Meaning of word (Note: To get generally before us the technical meaning of negotiability as applied to money obligations, the following brief statement is made: We already know that credits, that is, rights to receive money, are assignable. Thus if A owes money to B, B may assign his right against A to C. This operates to put C in B's shoes in respect to the right to enforce the claim against A. C, however, is no better off than B (in the absence of anything done or said by A to mislead C). C takes the right subject to all the "equities"; that is, A may make the same defenses against C that he could have made against B, had B sought to enforce the claim, whether these defenses be payment, breach of contract, fraud, or otherwise. This is true even if C relied on the terms of the original contract between A and B, which have been later modified without C's notice. Obviously, A has a right not only to originally contract with B, but at any time later to modify the contract, or make advance payments on it without danger of having to account to C unless A has already been notified of C's rights. If B assigns to C, obviously C must notify A of the assignment in order to charge A and hold A to account to C. We therefore have two outstanding facts in case of assignment. (1) the assignee is clothed only with the rights of the assignor; (2) the assignee must give notice to the debtor. The transfer of a negotiable instrument is upon a different basis. C, a transferee, may take a right against A, though B have no such right, and C does not have to notify A that he has acquired the paper. Of course this is a very general statement, but will serve to start us on our way.) § 393. (Nego. Instru., Sec. 2.) Peculiarities of negotiable paper. (Note: Negotiable paper has the following peculiarities: (1) A quality of transferability as above described. (2) Days of grace (now usually abolished). (3) A presumption of consideration (which may be overcome by proof, except as against a "holder in due course").) CHAPTER 49 NEGOTIABILITY OF VARIOUS INSTRUMENTS §§ 394 to 405. (Nego. Instru., Secs. 3 to 14.) (Note: It seems unwise to attempt cases at this point to show the negotiability of various types of instruments before we have discussed essential elements. Nevertheless it also seems desirable that the reader should be introduced to the different types of paper with which this subject is concerned. With that end in view, the following tabulation is given, with illustration of the commoner forms of negotiable paper. Of course forms frequently appear throughout the cases.) A. Promissory Notes. (1) Promissory notes defined. Case 394. Uniform Negotiable Instrument Law, Sec. 184. "A negotiable promissory note within the meaning of this act, is an unconditional promise in writing, made by one person to another, signed by the maker, engaging to pay on demand or at a fixed or determinable future time, a sum certain in money, to order or to bearer. When a note is drawn to the maker's own order, it is not complete until indorsed by him." Question 394: Define a promissory note. $10.00 (2) Form of general promissory note. Chicago, August 15, 1923 Thirty days after date I promise to pay to the order of John Doe, Ten Dollars, at Commonwealth State Bank, Chicago, Illinois, with interest at the rate of six per cent per annum from date hereof. Value received. Richard Roe. $100. (3) Special types of promissory notes. (a) Collateral note. Chicago, Ill., Aug. 15th, 1923. Thirty days after date, for value received, The Richard Roe Manufacturing Company promises to pay to the order of John Doe One Hundred ($100) Dollars, at with interest at the rate of six per cent. per annum after date, having deposited with this note as collateral security for the payment of this note, and every other liability or liabilities, either direct or contingent, now owing or which may hereafter be owing, whether now or hereafter contracted, of the undersigned, or any of them (including all liabilities of any partnership created while the undersigned or any of them may have been or be a member thereof), to said payee, or to the legal holder hereof, the following property, viz.: Certificate No. 16 of Preferred Stock of Jones-Smith Corporation, representing 25 shares, par value $2,500; market value, $2,000. With the right on the part of the said payee or the legal holder hereof from time to time to call for additional security of such kind and value as will be satisfactory to said payee or the legal holder hereof, and on failure to respond, or if in the judgment of said payee, or the legal holder hereof, said security, or any additions thereto or substitutes therefor or any part thereof, shall have depreciated in value, then the whole of this note shall be deemed immediately payable at the election of the said payee or the legal holder hereof, with full power in said payee or the legal holder hereof on maturity of this note, either by its terms or by election as aforesaid, or on the non-payment of any of the other liabilities above mentioned, to at any time, and from time to time, sell, assign and deliver the whole of said property and all additions thereto and substitutes therefor, or any part of said property, additions and substitutes, at any public or private sale, at the option of said payee, or the legal holder hereof, and without advertising the same and without notice to the undersigned, or any of them, and with the right of said payee or the legal holder hereof, to be a purchaser at any public sale or sales; and in the event of any sale or purchase hereunder no matter by or to whom made, all notice thereof, and any and all equity or right of redemption, whether before or after sale hereunder is hereby expressly waived; and, after deducting all legal and other costs and expenses, including reasonable attorneys' fees, from the proceeds of such sale or sales to apply the remainder on any one or more of said liabilities, whether due or not, as said payee or the legal holder hereof shall deem proper (making rebate of interest on any demands not matured), and return the surplus, if any, to the undersigned, or any of them. Said payee or the legal holder hereof, may at its, his or their discretion enforce the collection of said security, additions thereto and substitutes there for by suit or otherwise, and may surrender, compromise, release, renew, extend or exchange all or any of the same. Said payee or the legal holder hereof is hereby authorized and empowered at any time to apply to the payment of any liability or liabilities, whether the same be due or not, of the undersigned, or any of |