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term “duress,” but its signification, perhaps, is somewhat wider : see Bell's Principles, 9th ed., $ 12.
In America, it has been held that if the holder has in good faith given partial value, he may recover pro tanto.1 Probably the same would be held in England.
Rules as to Impeachment of Value. The law as to absence of consideration, or its failure, total or partial, fraud, or illegality of consideration may, perhaps, be expressed in the following rules— Rule 1. Any defence available against an immediate Immediate
and remote party is available against a remote party who is in privity
parties. with such immediate party.
Explanation 1.-“Immediate parties” are parties in direct relation with each other. All other parties are remote. Primâ facie, the drawer and acceptor, the drawer and the payee, the indorser and his indorsee, are in direct relation. For example :
1. A. draws a bill on B. payable to C., and delivers it to the latter. B. accepts the bill while in O.'s hands. B. and C. are remote parties.
2. B. makes a note payable to C. Primâ facie B. and C. are immediate parties; but if it appear that B. made the note at the request of X. under the belief that he had done something which he had not done, and that X. on his own account delivered the note to C., who gave value and took it without notice, then B. and C. are remote parties. Aliter, if X. had been C.'s agent. 4
Explanation 2.—Privity is created in all cases by want of consideration, and in some cases by notice; it may also be created by agreement.
1. The holder of a bill who has not himself given value, is, as regards third parties, deemed to be the agent of the party from whom he received it, whatever their private relations may be. 2. Notice creates privity when it is notice of defective title in the party from whom the bill is taken, i.e., notice that he had no right to hold the bill or
| Holcomb v. Wyckoff (1870), 10 Amer. R. 219; Dresser v. Missouri Co. (1876), 3 Otto, 92, Sup. Ct. U. S.
2 Robinson v. Reynolds (1841), 2 Q. B. 196, Ex. Ch.
5 Cf. Pitch v. Jones (1855), 5 E. & B. at p. 246 ; and cases quoted ante, p. 94; also Lee v. Hayes (1865), 17 Ir. C. L. R. at p. 408.
Absence of value.
no right to part with it. Title to a bill must be distinguished froin the right to enforce payment of it against particular parties—e.g., the donee of a bill has a good title, though he could not enforce payment against the donor. Whenever a bill is held adversely to the true owner, and there is privity between the true owner and the holder, a third party, if sued, may set up the jus tertü. 3. Again, when a person expressly or impliedly agrees to hold a bill as agent or trustee for another person, he holds it subject to all defences against the person for whom he holds, irrespective of the state of accounts between them.”
Rule 2. Mere absence of consideration, total or partial, is matter of defence against an immediate party or a remote party, who is not a holder for value, but it is not a defence against a remote party who is a holder for value.3
An accommodation party is liable to a bolder for value, who takes a bill knowing him to be such. For example :
1. B., by way of gift, makes a note in favour of C. C. cannot recover from B. 5
2. C., the holder of a bill for value, indorses it to D. by way of gift. The property in the bill passes to D., but he cannot recover from 0.6
3. Bill for 1001. accepted for the accommodation of the drawer. The drawer discounts it with C., who knows that it is an accommodation bill. C. can sue the drawer or acceptor for 1001. ;? but if C., instead of discounting it, merely advanced 501. on it, he can only recover 501.8
H. B. owes A. 501. A. draws a bill on B. for 1001. B. to accommodate A., and at his request, accepts it. If A. sue B. he can recover only 501.9
6. C. is D.'s agent abroad. C. purchases a bill for D. The bill
· See Rule 5, and notes to sect. 21.
? De la Chaumette v. Bank of England (1829), 9 B. & C. 208, as explained Currie v. Misa (1875), L. R. 10 Ex. at p. 164, Ex. Ch.
3 Cf. Forman v. Wright (1851), 11 C. B. at p. 492.
4 Scott v. Lifford (1808), 1 Camp. 246 ; cf. Strong v. Poster (1855), 17 C. B. at p. 222 ; Petty v. Cooke (1871), L. R. 6 Q. B. 790 ; and sect. 28 (2).
• Holliday v. Atkinson (1826), 5 B. & C. 501 ; cf. Re Whitaker (1889), 42 Ch. D. 119, C. A., as to voluntary note given by lunatic.
6 Easton v. Pratchett (1835), 1 C. M. & R. at p. 808 ; cf. Milnes v. Dawson (1850), 5 Exch. 948.
7 Cf. Mills v. Barber (1836), 1 M. & W. 425 ; Sturterant v. Ford (1842), 4 M. & Gr. 101.
8 Nash v. Brown (1817), cited Chitty, 11th ed. p. 60; Jones v. Hibbert (1817), 2 Stark. 304 ; Ex parte Newton (1880), 16 Ch. D. 330, C. A., proof.
9 Darnell v. Williams (1817), 2 Stark. 166.
is made payable to C.'s order, and he indorses it to D. This is
§ 30. done merely for the purpose of safe transmission, and not to guarantee the bill. If the bill is dishonoured, C. is not liable to D. as indorser.1
6. A. and C. supply goods to B. A. draws a bill on B. for the price, and indorses it to C. to collect on joint account. If the bill is dishonoured, A, is not liable to 0.2
7. B. accepts a bill drawn by A. to accommodate him. A. indorses it to ©. without receiving value. C. indorses to D. without receiving value. D. cannot recover from B., but it lies on B. to show that neither D. nor any intervening holder was a holder for value.
Although the donee of a bill cannot sue the donor on the instrument, the making of the note may perhaps constitute a valid declaration of trust in favour of the donee.
Rule 3. Total failure of consideration is a defence Total failure against an immediate party, but it is not a defence against of value. a remote party, who is a holder in due course.5 For example:
1. B. makes a note payable to C. The only consideration is that C. is to act as B.'s executor. C. dies first. His personal representatives cannot enforce payment against B.6
2. B. authorizes A. to draw on him against bills of lading. A. draws a bill on B., and indorses it to C. with the bill of lading attached. C. gives value to A. B. accepts the bill on receiving from C. the bill of lading. The bill of lading turns out to be a forgery, but C. did not know it when he obtained the acceptances. C. can sue B.7
3. A. draws a bill at three months on B. in favour of C., to be paid for in seven days. B., who is A.'s agent, accepts on his account. C. does not pay A. He cannot sue B.8
4. A. draws a bill on B. payable to his own order. B. accepts. The consideration between A. and B. fails. A. subsequently in
Castrique v. Buttegieg (1855), 10 Moore P. C. 110; cf. Re Nunn (1817), Buck, 113.
Denton v. Peters (1870), L. R. 5 Q. B. 475. 3 Mills v. Barber (1836), 1 M. & W. 425 : cf. Thompson v. Clubley (1836), 1 M. & W. 212.
4 Arthur v. Clarkson (1865), 35 Beav. 458 ; but see the criticisms on this class of cases in Re Whitaker (1889), 42 Ch. D. 119, C. A.
5 Robinson v. Reynolds (1841), 2 Q. B. at p. 211, Ex. Ch. As to what amounts to total failure, Wells v. Hopkins (1839), 5 M. & W. 7; Hooper v. Treffry (1847), 1 Exch. 17.
Solly v. Hinde (1834), 2 Cr. & M. 516. 7 Robinson v. Reynolds (1841), 2 Q. B. 196, Ex. Ch. ; cf. Leather v. Simpson (1871), L. Ř. 11 Eq. 398. 8 Astley v. Johnson (1860), 5 H. & N. 137 ; 29 L. J. Ex. 161. C.
dorses the bill for value to C., who knows that the consideration between A. and B. has failed. C. cannot sue B.'
Failure of consideration, it seems, is a defence against a remote holder for value with notice. The reason probably is that it is in the nature of a fraud to negotiate a bill when the holder knows that the consideration on which he re. ceived it has failed. But might there not be cases in which it would not be a fraud to do so ? Again, qu. as to the effect of failure of consideration after the maturity of the bill, i.e., after a cause of action has accrued ? 3 When the consideration for a bill fails, the Court will usually restrain its negotiation by injunction.*
Rule 4. Partial failure of consideration is a defence pro tanto against an immediate party when the failure is an ascertained and liquidated amount, but not otherwise. It is not a defence against a remote party who is a holder for value. For example :
Partial failure of value.
1. B. accepts a bill for 1001. drawn by A. This is the agreed price of goods to be supplied by A. to B. When the goods arrive they are found to be inferior to sample, and worth only 801. B. retains the goods. If A. sue B. on the bill, this is not a defence pro tanto.7 But B. could now counterclaim.
2. B. accepts a bill for 1001. This is the agreed price of two bales of cotton to be supplied by A. to B. A. only delivers one bale. A. indorses the bill to C., his agent, to collect. C. can only recover 507.8
3. B. accepts a bill drawn by A. for 1001. This is the agreed price of two bales of cotton to be supplied by A. to B. When the cotton arrives, one bale is found to be inferior to sample, and is returned as useless. A. indorses the bill to C. without value. If C. sues B. he can only recover 507., the price of the one bale which is kept.
In some cases of partial failure of consideration, the
Lloyd v. Davis (1824), 3 L. J. K. B. 38 ; cf. Pairclough v. Pavia (1854), 9 Exch. 690 (same principle assumed).
? Cf. Oulds v. Harrison (1854), 10 Exch, at p. 579.
* Cf. Patrick v. Harrison (1792), 3 Bro. C. C. 476 ; Bainbridge v. Hemingway (1865), 12 L. T. N. S. 74.
6 Day v. Nix (1824), 9 Moore, 159 ; Warwick v. Nairn (1855), 10 Exch. 762.
6 Archer v. Bamford (1822), 3 Stark. 175. 7 Glennie v. Imri (1839), 3 Y. & C. 436. 8 Cf. Agra Bank v. Leighton (1866), L. R. 2 Ex. at pp. 64, 65.
Court would perhaps restrain the holder from negotiating
30. the bill after notice. 1
Rule 5. Fraud is an offence against an immediate party Fraud or and against a remote party who is not a holder in due duress. course.
Explanation 1.-A bill is affected with fraud when the issue or any subsequent negotiation of it is obtained by fraud, or coercion, or when it is negotiated in breach of faith, or in fraud of third parties.
Explanation 2.—The holder of a bill subsequent to a fraud, who is not a holder in due course, cannot enforce payment against any party thereto, neither can he retain the bill against the true owner.7
When the consideration for a bill is clearly fraudulent, and it is in the hands of a party with notice, the Court will order it to be given up at once. When only a primâ facie case of fraud is made out, the Court will restrain the negotiation of the bill for a specified time, in order that the question may be tried.8
Where a party sued on a bill sets up the jus tertii, e.g., if the acceptor when sued by an indorsee sets up that the indorsee obtained the bill Ly fraud from his immediate indorser, it seems the nature of the fraud must also be looked at. If the indorser never intended by his indorsement to pass the property in the bill to the indorsee, the jus tertii alone is a good defence ;' but if the indorser intended to pass the property in the bill to the indorsee, though he was induced to do so by fraud, it seems the acceptor must go on to show that the indorser has dis
1 Cf. Jackson v. Shanks (1866), 12 Jur. N. S. 917.
3 Wienholt v. Spitta (1813), 3 Camp. 376 ; Dawes v. Harness (1875), L. R. 10 C. P. 166.
4 As to duress, Duncan v. Scott (1807), 1 Camp. 100 (onus probandi); Kearns v. Durell (1848), 6 C. B. 596 ; White v. Heylman (1859), 34 Pennsyl. R. 143 ; Loomis v. Ruck (1874), 56 New York R. 462.
5 Lloyd v. Howard (1850), 15 Q. B. 995 ; Barber v. Richards (1851), 6 Exch. 63; cf. sect. 21 (2), ante, p. 54.
6 Jones v. Gordon (1877), 2 App. Cas. 616, H.
7 Ibid. ; Lloyd v. Howard, supra ; Alsager v. Close (1842), 10 M. & W. 576.
& Joyce on Injunctions, p. 369 ; and see Jones v. Lane (1829), 3 Y. & C. at
293 9 Lloyd v. Howard (1850), 15 Q. B. 995 ; Barber v. Richards (1851), 6 Exch. 63.