Rule IV

principal

discharges

all.

his rights against one of the parties, releases all parties to the bill subsequent to the party in whose favour the renunciation is made for these subsequent parties as you know are sureties for those before them on the bill.

Payment of the debt by the principal debtor obviously puts an Payment by end to the liability of the surety. This explains the first part of section 59 (1) as to the discharge of the bill itself, because no liability whatever is left outstanding after the acceptor or principal debtor has paid the bill in due course. It also explains, in section 59 (3), why the payment in due course of an accommodation bill by the accommodated party discharges the bill.

S. 59 (1).

S. 59 (3),

Rule V.

Surety entitled to

hands of creditor.

A surety, on being compelled to pay, is entitled to all securities for the debt in the possession of the holder, and this has been held securities in to apply to the various contracts of suretyship which arise on a bill (Duncan Fox & Co., and N.S. Wales Bank 6 App. Cas. 1). And the surety is entitled to this benefit, whether he was aware of the securities or not, when he became surety; because his right arises, not out of any contract, but from the peculiar nature of his position and the equities that arise out of it, and if a creditor having securities does not do his best to keep them available he will find that, by so prejudicing the position of the surety, he has released him from liability altogether.

Rule VI. Acceptances for honour

ease of suretyship, S. 65 (4).

It is in ease of suretyship that we find by section 65 (4) that when an acceptance for honour does not expressly state for whose construed in honour it is made, it is deemed to be an acceptance for the honour of the drawer, because the drawee, not having accepted, is not liable on the bill, and the drawer is therefore the principal debtor, and intervention on his behalf relieves the largest number of sureties. So again by section 68 (2) where a bill is dishonoured by nonpayment, and two or more persons offer to pay for the honour of different parties, the person whose payment will discharge most parties to the bill shall have the preference.

6. 68 (2).

Presumptions.

S. 13 (1).

Now let us look at some of those presumptions which the law makes in favour of the correctness, validity and negotiability of bills of exchange. Presumptions are made on various grounds. Sometimes on account of their inherent probability, sometimes on grounds of public policy, sometimes on grounds of the balance of convenience. But those to which I wish to direct your attention are provisions in the Act. Our present aim is to get some of the numerous complicated provisions grouped and explained, so that when you come to a detailed examination of the Act itself, it will be an advantage to recognise previous acquaintances, just as friendly faces, appearing in different directions, might encourage a person otherwise disinclined to face a crowd.

Presumptions are either rebuttable or conclusive.

1. The date of a bill or the acceptance, or of any indorsement is prima facie the true date. Section 13 (1.)

2. Where a simple signature on a blank stamped paper is delivered by the signer in order that it may be converted into a bill (Baxendale v. Bennett, 3 Q.B.D. at p. 531, C.A.) it operates as a primâ facie authority to fill it up as a complete bill for any amount the stamp will cover, using the signature for that of drawer or acceptor or indorser. Section 20 (1.)

S. 20 (1).

3. So where a bill is wanting in any material particular the person in possession has prima facie authority to fill up the omission in any way he thinks fit. Section 20 (1). As against any s. 20 (1). person who became party thereto prior to the completion of the bill, these particulars must be filled in within reasonable time and strictly in accordance with the authority that was actually given; so that as against those immediate parties these last two presumptions are rebuttable: Section 20 (2).

4. But if any such instrument, after being so filled up, is negotiated to a holder in due course, those who pass bills about in such an incomplete condition must take the consequences of any error, delay or departure from authority, and the above last two presumptions are conclusive, i.e., the bill may be enforced as if it had been filled up in reasonable time and strictly in accordance with the authority given. Section 20 (2). Proviso.

S. 20 (2).

S. 20 (2).

Proviso.

5. In the hands of a holder in due course, a valid delivery of the bill by all parties prior to him is conclusively presumed. Section 21 (2). This is a most important presumption in favour of the S 21 (2). negotiability of paper. It puts in the strongest light the necessity for all those who have to deal with negotiable instruments watching over the custody of the bill itself, and employing only the most trustworthy hands for its conveyance from place to place. When once the document is a bill, or, if incomplete, has been delivered in order that it may be filled up and take effect as a bill, then, however fraudulently the person to whom it is entrusted negotiates it away, the holder in due course can recover against the party who has been so defrauded. But the document must be a real bill. If a man wrote his name upon a piece of paper, to try a pen for instance, and somebody took the piece of paper and filled it up as a cheque and stamped it and negotiated it to an honest holder for value, there would be nothing to prevent the so-called drawer from showing what the true facts were.

6. There also is this general presumption :-Where a bill has been signed by a party as drawer, acceptor or indorser, and it is no longer in his possession, a valid and unconditional delivery by him is presumed until the contrary is proved. Section 21 (3).

7. In determining whether a signature is to be treated as that of a principal or of the agent by whose hand it is written, the construction most favourable to the validity of the instrument shall be adopted. Section 26 (2).

S. 21 (3).

S. 26 (2).

S. 30 (1)

S. 30 (2).

S. 32 (5).

S. 36 (4).

Presump-
tion as to
Adhesive
Stamps.

Stamp Act,

1870, s. 51, Proviso (1).

Replaced by

Stamp Act, 1891, s. 35.

8. In ordinary contracts not under seal a consideration must be proved, but on all the contracts to a bill of exchange it is primâ facie presumed. Section 30 (1).

9. Every holder is primâ facie a holder in due course, though on proof or admission that the acceptance, issue or subsequent negotiation is affected with fraud, duress (or, as the Scotch say, force and fear) or illegality, the burthen of proof is shifted, unless and until the holder proves that, subsequent to the alleged fraud or illegality, value has in good faith been given for the bill. Section 30 (2).

10. Where more than one indorsement appears on a bill, each is presumed primâ facie to have been made in the order in which it appears on the bill. Section 32 (5).

11. Except where an indorsement bears date after the maturity of the bill (in which case the presumption of true date, which we noticed first, applies), every negotiatiou is primâ facie presumed to have been effected before the bill was overdue. Section 36 (4).

12. When a bill or signature appears to have been cancelled, the cancellation is presumed primâ facie to have been done intentionally, and if by an agent, with the holder's authority. Section 63 (3). This seems at first sight a presumption against the correctness, validity and negotiability of bills, but it is not so. It is a pre

sumption that the bill as it stands, means what it says, and, the cancellation appearing on its face, a party chargeable on the bill would have the presumption in his favour that the bill which purported to be discharged was really discharged.

Now there are a dozen presumptions for you, arranged in the order in which they occur in the Act, and having seen them in this connection as part of the policy of the law to give effect to the purport of the bill, you will regard them as acquaintances when you meet them again as in their several places under different parts of the code.

One more presumption, not enacted by the Bills of Exchange Act but by a Revenue Statute, will show how the law favours bills.

The Stamp Act of 1870, as you know, laid down stringent rules as to the affixing and cancellation of adhesive stamps denoting the ad valorem duty upon bills of exchange and promissory notes drawn or made out of the United Kingdom. You can imagine what a paralysing effect would be produced upon negotiability if a person taking a bill with an adhesive stamp on it, purporting to be duly cancelled, might find the instrument reduced to a dead letter by some irregularity in the affixing or cancellation of the stamp. Well, section 51 of that Act, proviso 1, afforded in favour of any bona fide holder thereof into whose hands it comes in that condition a conclusive presumption that such cancellation was duly made. And that was supplemented by giving him power to cancel the

stamp himself if the bill comes to his hands with the stamp affixed but uncancelled. And when the Stamp Act of 1891 replaced the Act of 1870, the same wholesome provisions were inserted in section 35.

able Time.

Another set of provisions, connected by a common principle, are Reasonworth looking at, as a group, before passing to a general survey of the Act. They are those in which certain consequences, and serious consequences, follow from the mere lapse of time, and yet no specified time is limited after which those consequences are to follow. In some countries, the tendency is to fix a hard and fast line, and say after the lapse of so many days, weeks, months, such or such consequences will follow from delay. There are great advantages in that method, because you get certainty. And some people will say certainty, even with occasional hardship, is better, in business, than uncertainty at any price. However, the English law, not only in the cases we are going to consider to-day, but in a great number of other matters, abhors a hard and fast rule in varying circumstances, preferring to rely upon the common sense of men of business and, in the last resort, of a legal tribunal. And the word used to express this flexible and adaptable quantity or quality in any requirement, is "reasonable."

(1). We have seen that, by section 20 (1), when a simple s. 20 (1). signature, on a blank stamped paper, is delivered by the signer to be converted into a bill, it operates as a primâ facie authority to fill it up for any amount the stamp will cover, using the blank signature as that of the drawer, acceptor, or endorser; and if a bill is wanting in any material particular, e.g., the date, the person in possession of it has, prima facie, a right to fill up the omission in any way he thinks fit. And if a document, built up in this way, gets into the hands of a holder in due course, it is binding in his favour as it stands. But in order that the person who so fills it up (or any person identified with him by notice or by want of value) should be able to enforce it against anyone who became a party to it before its completion it must be filled up within a reasonable time.

On the one hand, it is not to be kept indefinitely hanging over the parties who have trusted to the honour, good sense and promptitude of the person to whom it was handed to complete. If it were, all proof, even all recollection, of the precise circumstances under which it was handed to him might have failed and the door would be open to all sorts of frauds. On the other hand, how could anyone possibly lay down the number of months or even years after which every such incomplete bill, no matter under what circumstances or conditions given, should become waste paper? The Act therefore goes on to say reasonable time in this respect is a question of fact. The parties may come and prove exactly what took place, and for what purpose, and with what instructions

Overdue.

S. 36(2).

S. 36 (3).

S. 40 (1).

S. 40 (2).

S. 45 (2).

the incomplete bill was handed to the party who now seeks to enforce it.

(2). It is involved in the definition of holder in due course that he takes the bill before overdue, section 29 (1) (a), because that is one of the circumstances upon which his being bound to enquire into the title of his transferor depends.

And by section 36 (2), where an overdue bill is negotiated the holder gets no better title than the transferor had; in other words, though an overdue bill retains the element of transferability it is no longer negotiable in the full sense of the term. Anybody can tell you when a bill after date or after sight is overdue. But supposing a bill is payable on demand, it is not due till the money is demanded. Unless therefore it suits the holder to present the bill for payment, it never becomes due, and therefore however long he delays it can never be overdue in the strict sense. But it is clear that if a holder took a bill, on demand, that had been a very exceptionally long time outstanding, it would raise a suspicion that there was something wrong about that bill. Here again the law steps in and says it is impossible to fix a precise time when suspicions ought to arise, because the circumstances and the purposes involved are so widely different; and the test provided is, whether the bill has been in circulation for an unreasonable length of time, and whether that fact is apparent on its face, so that a person taking it would know it was a stale bill. Section 36 (3). Unreasonable length of time is here again a mere question of fact. Id.

(3). A bill payable after sight is negotiated. By section 40 (1), the holder must either present it for acceptance or negotiate it within a reasonable time; and, by (2), if he does not do so the drawer and the indorsers are discharged.

But here the reasonableness of the time is dependent upon the nature of the bill, the usage of trade with respect to similar bills, and the facts of the particular case. The construction to be put on the bill would be for the Court, so that reasonable time here would be a question of law and of fact together.

(4). We considered just now when a bill on demand became overdue for the purpose of fixing the holder with suspicion of a defective title. But there is another question arising on bills payable on demand. How long are they to be held over the drawer and indorser? No doubt the time of applying for payment is left to the payee or his transferees; but it is not intended that the bill should be kept outstanding so long that the drawer and indorsers would never know whether a claim might be sprung upon them. Section 45 (2) accordingly enacts that a bill payable on demand must (unless presentment for payment is dispensed with under certain special provisions of the Act) be presented within a reasonable time.