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(2) Is precluded from denying to a holder in
due course the existence of the payee and
his then capacity to indorse.? The maker of a promissory note is the principal debtor on the instrument.3
The maker is sometimes called the drawer, but the primary and absolute liability of the maker of a note must be distinguished from the secondary and conditional liability of the drawer of a bill of exchange. In general the maker of a note corresponds with the acceptor of a bill of exchange, and the same rules apply to both. A note indorsed by the payee resembles an accepted bill payable to drawer's order and indorsed by the drawer, the payee corresponding with the drawer.5 The distinctions that exist between maker and acceptor arise from this. The acceptor is not the creator of a bill, his contract is supplementary, while the maker of a note originates the instrument. Hence (a) a note cannot be made conditionally, while a bill may be accepted conditionally ; (b) the provisions of sect. 19 (2), ante, p. 46, relating to bills accepted payable at a particular place, have no application to notes, which are therefore on the same footing as bills previous to the 1 & 2 Geo. 4, c. 78, which is reproduced in that section ;? (c) maker and payee are immediate parties in direct relation with each other, while acceptor and payee, except in the case of a bill payable to drawer's order, are remote parties. See also sect. 89.—Damages. The measure of damages against the maker of a note would in general be the same as against the acceptor of a bill, as to which see sect. 57, ante, p. 190.
89. (1) Subject to the provisions in this part,
Application of Part II. to notes.
1 See “holder in due course defined by sect. 29, ante, p. 88.
? Drayton v. Dale (1823), 2 B. & C. 293, bankrupt payee ; Lane v. Kreckle (1869), 22 Iowa R. 399 ; cf. sect. 54, acceptor's estoppels.
3 Cf. Chartered Bank v. Dickson (1871), L. R. 3 P. C. at p. 580. 4 Gwinnell v. Herbert (1836), 6 N. & M. 723.
5 Heylyn v. Adamson (1758), 2 Burr at p. 678, Ld. Mansfield ; and sect. 89 (2).
6. See sect. 83, ante, p. 261.
7 Cf. Gibb v. Mather (1832), Cr. & J. at pp. 262, 263 ; Embli v. Dartnell (1844), 12 M. & W. 830.
s Cf. Bishop v. Young (1800), 2 B. & P. at p. 83, Ld. Eldon.
and except as by this section provided, the pro
$ 89. visions of this Act relating to bills of exchange apply, with the necessary modifications to promissory notes.
(2) In applying those provisions the maker of a note shall be deemed to correspond with the acceptor of a bill, and the first indorser of a note shall be deemed to correspond with the drawer of an accepted bill payable to drawer's order."
(3) The following provisions as to bills do not apply to notes; namely, provisions relating to
(a) Presentment for acceptance;
By the statute 3 & 4 Anne, c. 9, § 1, promissory notes were made negotiable" in the same manner as inland bills of exchange are or may be by the custom of merchants.” This Act, however, was, it seems, merely declaratory.” (4) Where a foreign note is dishonoured, pro- Protest of
foreign note test thereof is unnecessary.
not required. Sub-sect. (4) is declaratory, but it may be advisable to protest a foreign note for the purpose of charging a foreign party in his own country. See sect. 51, ante, p. 170, as to foreign bills. As to conflict of laws, see sect. 72 (3), ante, p. 243. The sub-section appears to apply only to foreign notes dishonoured in the British Islands.
See Heylyn v. Adamson (1758), 2 Burr. at p. 678, per Lord Mansfield.
See Goodwin v. Robarts (1875), L. R. 10 Ex. at p. 350, per Cockburn, C.J.
3 Bonar v. Mitchell (1850), 5 Exch. 415.
90. A thing is deemed to be done in good faith within the meaning of this Act, where it is in fact done honestly, whether it is done negligently or not.
See sect. 29, ante, p. 88, defining “holder in due course,' and sect. 59, ante, p. 200, defining "payment in due course.” Cf. also sects. 60, 19, and 82.
The test of bona fides as regards bill transactions has varied greatly. Previous to 1820 the law was much as it now is under the Act. But under the influence of Lord Tenterden due care and caution was made the test, and this principle seems to be adopted by sect. 9 of the Indian Act. In 1834 the Court of King's Bench held that nothing short of gross negligence could defeat the title of a holder for value. Two years later Lord Denman states it as settled law that bad faith alone could prevent a holder for value from recovering. Gross negligence might be evidence of bad faith, but was not conclusive of it. This principle has never since been shaken in England, and it seems now firmly established in the United States.*
Byles, J., in a judgment where he is distinguishing deeds from negotiable instruments, says, referring to the
“Honest acquisition confers title. To this despoti but necessary principle the rules of the common law are made to bend.
Negligence in the maker of such an instrument makes no difference in his liability to an honest holder for value. The instrument may be lost by
1 Gill v. Cubitt (1824), 5 D. & R. 324.
3 Goodman v. Harvey (1836), 4 A. & E. at p. 876 ; cf. Other v. Rich (1839), 10 A. & E. 784.
* Murray v. Lardner (1864), 2 Wallace, at p. 121, Sup. Ct. U. S. ; Chapman v. Rose (1874), 56 New York R. at p. 140.
the maker without his negligence or stolen from him, still
§ 90. he must pay; the negligence of the holder, on the other
Test of bona hand, makes no difference in his title. However gross fides. the holder's negligence, if it stop short of fraud, he has a title.” 1
The whole subject was fully discussed in a recent case in the Court of Appeal, when the question was whether the giving of a certain bill was a fraud by the drawer and acceptor on their creditors. Baggallay, L. J., in giving judgment, says, “I fully recognise the importance of maintaining the wellestablished principle that negligence or carelessness on the part of the holder of a bill is not of itself sufficient to deprive him of his remedies for procuring its payment. But negligence or carelessness, when considered in connection with the surrounding circumstances, may be evidence of mala fides; and the question in this case is whether the surrounding circumstances accompanying the negligence or carelessness of the holder was such as to affect him with notice of the fraudulent character of the transaction out of which these bills originated.” ? Every case must be determined on its own merits. Good faith or bad faith is a question of fact depending on the circumstances of the individual case.3 It is for the tribunal, whether court or jury, that has to decide questions of fact, to determine whether a particular holder took a given bill bonâ fide or not. To this issue they must apply their common sense.
As Lord Justice Brett observes in the same case, “If a jury has to consider facts they are entitled and bound to make use of their general knowledge of business, in order to appreciate the evidence which is before them; and, if a court has to consider evidence, I think the judges are bound to use their own general knowledge of business, and of the ordinary moving motives of mankind, just as a jury would."
Lord Blackburn, in the House of Lords, thus sums up the law on the subject :-"I consider it to be fully established that if value be given for a bill of exchange, it is not enough to show that there was carelessness, negligence, or foolishness in not suspecting that the bill was wrong, when there were circumstances that might have led a man
1 Swan v. North British Australasian Co. (1863), 2 H. & C. 184. ? Re Gomersall (1875), 1 Ch. D. at p. 146, C. A. 3 Peacock v. Rhodes (1781), 2 Doug. 633, per Lord Mansfield. c.
to suspect that. All these are matters which tend to show that there was dishonesty in not doing it, but they do not in themselves make a defence to an action upon a bill of exchange. I take it that in order to make such a defence, whether in the case of a party who is solvent and sui juris or when the bill is sought to be proved against the estate of a bankrupt, it is necessary to show that the person who gave value for the bill, whether the value be great or small, was affected with notice that there was something wrong about it when he took it. I do not think it is necessary that he should have notice of what the particular wrong was. If a man, knowing that a bill was in the hands of a person who had no right to it, should happen to think that perhaps the man had stolen it, when if he had known the real truth, he would have found, not that the man had stolen it, but that he had obtained it by false pretences, I think that would not have made any difference if he knew there was something wrong about it and took it. If he take it in that way he takes it at his peril. But then, I think, such evidence of carelessness or blindness as I have referred to may, with other evidence, be good evidence upon the question, whether he did know there was something wrong in it. If he was (if I may use the phrase) honestly blundering and careless, and so took a bill of exchange or a bank note when he ought not to have taken it, still he is entitled to recover. But if the facts and circumstances are such that the jury, or whoever has to try the question, comes to the conclusion that he was not honestly blundering, but that he must have had a suspicion that there was something wrong, and that he refrained from asking questions not because he was an honest blunderer, but because he thought in his own secret mind—I suspect there is nething wrong, and, if I make further inquiry, it will be no longer my suspecting it, but my knowing it, and then I shall not be able to recover,-I think that is dishonesty."
91. (1) Where, by this Act, any instrument or writing is required to be signed by any person, it is not necessary that he should sign it with his
1 Jones v. Gordon (1877), 2 App. Cas. at p. 629, H. L.