tive by American bankers, for the reasons set forth in the memorandum submitted by the American delegate in response to the original "Questionnaire" of the Government of the Netherlands. The provisions of the uniform law on this subject are contrary to the existing laws of Great Britain and France as well as of America, and it is possible that a strong protest against them at the conference of next autumn would secure their modification.

In spite of several provisions of this character, which obviously call for careful scrutiny, long steps were taken by the recent conference toward the comparative liberality and respect for the intent of the contracting parties which have characterized for many years the American and English laws on bills. The spirit of many of the delegates was well illustrated by Mr. Lyon-Caen, at the first plenary sitting at which details were discussed, in the declaration that the Anglo-Saxon system had every preference in France if she were to modify her legislation. The French banking institutions consulted, he declared, pronounced for the most liberal system, which was that of Great Britain. The elaborate project submitted by the delegation of Hungary also, while adopting some regulations unfamiliar to English and American law, made many concessions toward the liberal spirit in which the eminent French delegate urged that the conference should act.

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Hence, although the British delegation were distinctly instructed by their government that, as a general rule, they should "not hold out any hope that English rules of law are likely to be substantially modified and brought into conformity with continental rules," the two technical delegates strongly recommended, in their final report August 16, that Great Britain should take part in the next conference and support certain points where, in their opinion, the English law was "distinctly more convenient than the foreign rule." Upon this subject they said:

As regards these points, if English mercantile opinion is in accordance with our views, we trust that there will be an opportunity to bring out views before the final conference which will meet about a year hence to shape the draft uniform law into its final and complete form. Although England can not join in the uniform law, it is important for us that that law should not contain provisions which are inimical to international commerce.

In view of the fact that the draft of the uniform law is to be subjected to further examination and amendment at the conference of next autumn before it is put in its final form, it does not seem advisable at this time to recommend any changes which might be desirable in American laws in order to bring them into a greater degree of conformity with the uniform law on those points where conformity would not be inimical to American interests and legal practice. Copies of the translation of the proposed uniform law have been sent to leading bankers, exporters, and others interested, with the suggestion that they single out the most important provisions which they consider desirable on the one hand or especially objectionable on the other. With the data obtained from the replies to these inquiries it will be possible for the American delegation, if the country is represented at the next conference, to concentrate its efforts upon such changes as are most desirable and after the conference to recommend to the American States, through the Department of State, those amendments or additions to American law which may be

made to advantage. It might tend to additional confusion to attempt to introduce such changes before the meeting of the conference of next autumn, except perhaps upon points where it appears to be clear that the provisions of the uniform law as it now stands will receive final approval. The British technical delegates have suggested that certain amendments in the English law "may be made at once, as desirable in themselves, without waiting for the adoption by other nations of the uniform law." The changes which they recommend are as follows:

1. That days of grace should be abolished.

2. That when a bill falls due on a nonbusiness day it should be payable on the next succeeding business day.

3. That when the sum payable by a bill is expressed more than once in words, or more than once in figures, and there is a discrepancy, the lesser sum shall be the sum payable.

4. That when a bill is expressed to be payable with interest and no rate of interest is specified, interest at the rate of 5 per cent shall be understood.

5. That where the acceptance consists of the simple signature of the drawee it must be on the face of the bill.

6. That where a bill is dishonored by nonacceptance, a party who is liable on the bill may nevertheless accept it for honor.

7. That payment for honor by the acceptor of a bill shall be prohibited.

8. That where the holder of a bill loses his right of recourse on the bill by reason of his failure duly to present or protest it or to give notice of dishonor, he shall not thereby lose his right of action on the consideration, but that if the drawer or indorser whom he sues has been prejudiced by that failure, such drawer or indorser shall be discharged from his liability on the consideration to the extent of any loss he may have suffered.

While most of these changes are such as are not likely to cause controversy, the method of securing legislation in the United States on these subjects is so complicated that it would probably not be advisable for the department to make any recommendations on the matter to the governments of the 46 States until after the conference of next autumn. If it then appears that the list of desirable recommendations can be extended and that similar modifications are likely to be introduced into the laws of Great Britain and her dependencies, thereby insuring an approach to uniformity throughout the Englishspeaking world, it may be advisable to refer to the States and to the legal bodies interested in the uniformity of commercial law the entire list of changes upon which agreement seems to be attainable and desirable.

THE PROPOSED CONFERENCE ON CHECKS.

An important reason why it may be desirable for the United States to be represented at the conference of next year is the adoption, at the close of the recent conference, of a resolution in regard to checks. This resolution declares that a later conference shall be charged with consideration of the unification of the law relative to the check, and to this end the Government of the Netherlands is requested to employ methods of inquiry and preparation similar to those employed in anticipation of the conference just held.

It is not necessary here to discuss at length the subject matter of such a conference. The questions which arise in regard to checks, while not so complicated perhaps as those arising in regard to bills, are nevertheless of considerable importance. They involve questions of the time within which a check should be presented to relieve

the parties from negligence, the consequences of such negligence, and the obligations of banks which accept, indorse, or collect checks which may be found to be invalid or not properly provided for.

Some of the same conflicts of legal system and commercial practice suggest themselves in regard to checks, however, which arise in regard to bills of exchange between the English and American systems on the one hand and those of continental Europe on the other. Under the English bills of exchange act of 1882, "a check is a bill of exchange drawn on a banker payable on demand." the American definition, in the negotiable instruments law, is substantially the same "a check is a bill of exchange drawn on a bank, payable on demand." Both laws further set forth that, except as otherwise provided, "the provisions of this act applicable to a bill of exchange payable on demand apply to a check.

Quite different from a legal point of view is the position of the check in other countries, where indeed, for fiscal reasons, it is in some cases deliberately excluded from classification as a bill of exchange. By the French law of June 14, 1865, which first gave a definite status in France to the check in its modern form, "a check is a written instrument which, in the form of an order for payment, enables the drawer to effect the withdrawal, for his account or the account of a third party, of all or a part of the available funds carried to his credit." It is to be noted that the order for the payment of money need not be drawn upon a banker in order to constitute a valid check in France. The issue of a check, moreover, does not constitute in France an act of commerce, which brings the drawer ipso facto under the commercial law. If a check is issued by a trader or merchant, recognized as such by the law, it is a commercial act; if issued by a nontrader, it is not a commercial act and the drawer is subject to the civil law.

Notwithstanding these differences in the legal status of the check in different countries, there are several points involved of considerable interest to American bankers and merchants. One of these is the difference between the American rule in regard to liability for payment of a check to a wrongful holder and the European rule, which greatly restricts such liability. In this particular, the American rule, instead of being in harmony with the English rule, as in most matters affecting bills, stands by itself in opposition to both the English and continental rules. English bankers feel bound to exercise no greater care in paying a check to the actual holder, without inquiry as to the validity of his title, than is exercised by the bankers of the Continent.

When checks first came into general use in England they were almost invariably made payable to bearer. When they began to be made payable to order, a section was included in the stamp act of 1853 (16 and 17 Victoria, ch. 59) which specifically relieved bankers paying such checks from liability for wrongful payment, except as regards the signature of the drawer. This provision was carried over into the bills of exchange act of 1882 in the following terms:

SEC. 60.-When a bill payable to order on demand is drawn on a banker, and the banker on whom it is drawn pays the bill in good faith and in the ordinary course of business, it is not incumbent on the banker to show that the indorsement of the payee or any subsequent indorsement was made by or under the authority of the person whose indorsement it purports to be, and the banker is deemed to have paid the bill in due course, although such indorsement has been forged or made without authority.

The result of this rule is to detract materially from the security of the check as a means of making remittance, since any holder, whether properly identified or not, may convert an ordinary check to order into cash by presenting it at a bank counter. Serious losses have been suffered by American bankers under this rule, in cases where checks have been abstracted from the mails and diverted from the legitimate holders.

What is the remedy for this difficulty? A remedy has been found in England in a system which is slowly making its way on the Continent of Europe and might receive a considerable impetus if recognized and recommended by an international conference. This is the sytem of the crossed check. A crossed check is a check with two parallel lines on the face, between which are usually written the name of a bank or banking house. A crossed check is payable only through a banker. Hence it is difficult, if not impossible, for an illegitimate holder to obtain cash for it by presentment at a bank counter. He must deposit the check in an account at a bank in order that it may be honored when presented by such bank to the institution upon which it is drawn.1

The result of this system of crossed checks is to afford a means of transfer of money much safer than the ordinary check, upon which cash can be drawn directly, and affords no inconveniences to persons having a bank account and depositing checks of which they are legitimate holders in such an account for collection.

The system of crossed checks has been as yet employed but little in the United States. It is not necessary in the matter of inland transactions, for the purposes for which it is employed in England, because the American drawer and payee of a check are protected by the rule making the bank responsible for wrongful payment. In drawing checks upon foreign institutions, however, the system of crossed checks has been employed to a limited extent by American bankers. Its advantages are such that it has gradually obtained a footing on the Continent of Europe, even in the absence of definite legislation giving it legal recognition. Within a very recent date the National Bank of Belgium has begun the issue of crossed checks for remittances between clients at different branches. A notice, prominently posted by the bank at its offices, furnishes the following information:

The crossed cheque has rendered great services in all countries where it has been employed, and especially in England, the country of its origin.

The administration of the National Bank of Belgium has felt that it would be useful to make the system known in Belgium and has decided with this object to permit the crossing of the transfer cheques (accréditifs) which it delivers.

The public will hereafter be able to obtain upon demand such transfer cheques bearing across the face two transverse parallel lines, which, according to established usage, will signify that the cheque is payable only through the medium of a banker. The intervention of a banker for the collection is of a character to avoid the risks resulting from loss or theft, and to permit the sending of the cheques in the majority of cases in an ordinary envelope.

Crossed cheques may be employed for a payment to be made:

1. To a bank or to a banker.

2. Tó a person who is known to have a current account in a bank.

So obvious are the advantages of the system of the crossed check that efforts have several times been made to introduce the system

1 The provisions of the English bills of exchange act of 1882, defining fully the liability of bankers in respect to crossed checks, appear in the appendix to this report.

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into France. It is actually in operation by agreement between the Bank of France and several of the large joint-stock banks, but the system requires the sanction of law to permit its general use. this end measures have been several times introduced and favorably reported in the French Chambers, giving legal sanction to crossed checks. Thus far, although there has not been much organized opposition, none of these measures has become law. The text of the report made to the Senate in 1906 by Senator Ratier, with the bill which was then proposed, appears in the appendix to this report. It is pointed out in this report of Mr. Ratier that the wide use of checks in England, and their comparatively restricted use in France, is due in part to the failure of French law to protect the check, while in England remittances are made by crossed checks through the postoffice without the necessity of registering the letters in which they

are sent.

Crossed checks are recognized by the Scandinavian law and by the Spanish Code of Commerce, which was extended in 1886 to Cuba, Porto Rico, and the Philippines. A similar practice is recognized by the Austrian law of 1906, which sanctions the indorsement of a check "for account" (nur zur Verrechnung).1

It is not proposed here to discuss at length the merits of the system of crossed checks or the other form of safeguard involved in making a check "not negotiable," which means, not that it can not be transferred, but that if transferred, it is at the risk of a wrongful holder. It is obvious, however, that the subject is one of great interest in international finance and that it would be unfortunate if the United States, which now plays so important a part in the aggregate commerce of the world, should have no share in framing the rules which are to govern international payments by means of the check.

For the purpose, therefore, of presenting clearly the views of the United States in regard to the provisions of the proposed uniform law on bills of exchange and for the purpose of participating in the preparation of legislation in regard to checks, it is recommended that the Government of the United States be represented at the Second International Conference on these subjects, to be held at The Hague next autumn.

CHARLES A. CONANT,
American Delegate.

To the honorable the SECRETARY OF STATE,

Washington, D. C.

1 Lyon-Caen et Renault, "Droit Commercial," Paris, 1907, IV, p. 489.