it must be remembered, differs materially from the

English.

and notes.

The origin and history of bills of exchange and other Origin and negotiable instruments are traced by Lord Chief Justice history of bills Cockburn in his judgment in Goodwin v. Robarts.* He says: "Bills of exchange are known to be of comparatively modern origin, having been first brought into use, so far as is at present known, by the Florentines in the twelfth, and by the Venetians about the thirteenth, century. The use of them gradually found its way into France, and, still later and but slowly, into England. We find it stated in a law tract, by Mr. Macleod, entitled 'Specimen of a Digest of the Law of Bills of Exchange,' that Richard Malynes, a London merchant, who published a work called the Lex Mercatoria, in 1622, and who gives a full account of these bills as used by the merchants of Amsterdam, Hamburg, and other places, expressly states that such bills were not used in England. There is reason to think, however, that this is a mistake. Mr. Macleod shows that promissory notes, payable to bearer, or to a man and his assigns, were known in the time of Edward IV. Indeed, as early as the statute of 3 Rich. II. c. 3, bills of exchange are referred to as a means of conveying money out of the realm, though not as a process in use among English merchants. But the fact that a London merchant writing expressly on the law merchant was unaware of the use of bills of exchange in this country, shows that that use at the time he wrote must have been limited. According to Professor Story, who herein is, no doubt, perfectly right, 'the introduction and use of bills of exchange in England,'

*

Goodwin v. Robarts (1875), L. R. 10 Ex. pp. 346-358. See further an interesting article by Mr. Jenks on "The Early History of Negotiable Instruments," Law Quarterly Review, vol. ix., p. 70.

as indeed it was everywhere else, 'seems to have been founded on the mere practice of merchants, and gradually to have acquired the force of a custom.' With the development of English commerce the use of these most convenient instruments of commercial traffic would of course increase, yet, according to Mr. Chitty, the earliest case on the subject to be found in the English books is that of Martin v. Boure (Cro. Jac. 6), in the first James I. Up to this time, the practice of making these bills negotiable by indorsement had been unknown, and the earlier bills are found to be made payable to a man and his assigns, though in some instances to bearer. But about this period, that is to say, at the close of the sixteenth or the commencement of the seventeenth century, the practice of making bills payable to order, and transferring them by indorsement, took its rise. Hartmann, in a very learned work on Bills of Exchange, recently published in Germany, states that the first known mention of the indorsement of these instruments occurs in the Neapolitan Pragmatica in 1607. Savary, cited by Mons. Nouguier, in his work 'Des Lettres de Change,' had assigned to it a later date, namely, 1620. From its obvious convenience this practice speedily came into general use, and, as part of the general custom of merchants, received the sanction of our Courts. At first, the use of bills of exchange seems to have been confined to foreign bills between English and foreign merchants. It was afterwards extended to domestic bills between traders, and finally to bills of all persons, whether traders or not." The law throughout has been based on the custom of merchants respecting them: the old form of declaration on bill used always to state that it was drawn "secundum usem et consuetudinem mercatorum." In the time of Chief Justice Holt, a controversy arose between the Courts and the merchants, as to whether the customary

incidents of negotiability were to be recognized in the case of promissory notes. The dispute was settled by the stat. 3 & 4 Anne, c. 9, which vindicated the custom and confirmed the negotiability of notes. Again, in 1873, the Court of Queen's Bench were of opinion that documents other than bills and notes could not be endowed by custom with the incidents of negotiability. But the efficacy of custom was again upheld by the Exchequer Chamber in 1875, in Goodwin v. Robarts, where it was determined that foreign scrip might be rendered negotiable by custom, so as to pass with a good title, and free from all equities to a bonâ-fide purchaser. The Court there say (p. 356): "While we quite agree that the greater or less time during which a custom has existed may be material in determining how far it has generally prevailed, we cannot think that if a usage is once shown to be universal it is the less entitled to prevail because it may not have formed part of the law merchant as previously recognized and adopted by the Courts." The House of Lords approved the decision in 1876. Though the law merchant is now recognized as part of the law of the land, the process by which this principle has been evolved is still in need of elucidation. Lord Blackburn, in an interesting digression in his work on Sale (2nd ed. p. 317), observes: "There is no part of the history of English law more obscure than that connected with the common maxim that the law merchant is part of the law of the land. In the earlier times it was not a part of the common law as it is now, but a concurrent and co-existent law enforced by the power of the realm, but administered in its own Courts in the Staple or else in the Star Chamber." After referring to a case in 13 Edw. IV. 9, he proceeds: "It is obvious that at that time the law merchant was a thing distinct from the common law. This accounts for the very remark

French and English theory of bills compared.

able fact that there is no mention whatever of bills of exchange or other mercantile customs, in our early books; not that they did not exist, but that they were tried in the Staple, and therefore were not mentioned in the books of common law. But as the Courts of the Staple decayed away, and the foreign merchants ceased to live subject to a peculiar law, those parts of the law merchant which differed from the common law either fell into disuse or were adopted into the common law as the custom of merchants. How this great change was brought about does not appear; but though bills of exchange were in common use among merchants in the thirteenth century, the first mention of one in an English report is in Cro. Jac. in the beginning of the seventeenth century."

The results of this formation of the law by custom are instructive. A reference to Marius' treatise on Bills of Exchange, written about 1670, or Beawes' Lex Mercatoria, written about 1720, will show that the law, or perhaps rather the practice, as to bills of exchange, was even then pretty well defined. Comparing the usage of that time with the law as it now stands, it will be seen that it has been modified in some important respects. Comparing English law with French, it will be seen that, for the most part, where they differ, French law is in strict. accordance with the rules laid down by Beawes. The fact is, that when Beawes wrote, the law or practice of both nations on this subject was uniform. The French law, however, was embodied in a Code by the "Ordonnance de 1673," which is amplified but substantially adopted by the Code de Commerce of 1818. Its development was thus arrested, and it remains in substance what it was 200 years ago. English law has been developed piecemeal by judicial decision founded on custom. The result has been to work out a theory of bills widely different

from the original. The English theory may be called the Banking or Currency theory, as opposed to the French or Mercantile theory. A bill of exchange in its origin was an instrument by which a trade debt, due in one place, was transferred in another. It merely avoided the necessity of transmitting cash from place to place. This theory the French Law steadily keeps in view. In England bills have developed into a perfectly flexible paper currency. In France a bill represents a trade transaction; in England it is merely an instrument of credit.* English law gives full play to the system of accommodation paper; French law endeavours to stamp it out. A comparison of some of the main points of divergence between English and French law will show how the two theories are worked out. In England it is no longer necessary to express on a bill that value has been given, for the law raises a presumption to that effect. In France the nature of the value must be expressed, and a false statement of value avoids the bill in the hands of all parties with notice. In England a bill may now be drawn and payable in the same place (formerly it was otherwise, see the definition of bill in Comyns' Digest†). In France the place where a bill is drawn must be so far distant from the place where

"La

This passage was written in 1878, when the first edition was published. The theory it advances is independently confirmed by the excellent Introduction to the Portuguese Commercial Code in the French edition, published by the "Comité de Législation Etrangère." See p. xxix., where it is said, lettre de change, qui, à son origine, n'était destinée qu'à effectuer un payement de place en place, en évitant les dangers de la circulation du numéraire, s'est considérablement modifiée et perfectionnée. Aujourd'hui elle remplace le numéraire, et constitue entre commerçants, sinon l'unique moyen du payement, du moins le mode de libération le plus usuel. Nous sommes loin de l'époque où elle n'était considérée que comme un simple instrument du contrat de change et où l'on exigeait que le tiré en eût préalablement reçu la contrevaleur. La lettre de change est devenue dans le nouveau code un simple contrat literis, indépendant, valable par le seul fait des stipulations qu'il renferme et des signatures qu'il porte.'

+"A bill of exchange is when a man takes money in one country or city upon exchange, and draws a bill whereby he directs another person in another country or city to pay so much to A. or order for value received of B., and subscribes it."

C.