66 "motive for borrowing is increased. He borrows more, and thus capital is transferred from one employment to another, without "the necessity of a manufacturer discontinuing his usual occu"pation." ("Political Economy," p. 84, cited by Gilbart; History, &c., I, 165). The transfer, says Gilbart, is chiefly effected by bills of exchange. "The manufacturer, who has sold a less quantity of commodities, will have fewer bills for his banker to discount; the other, having sold a greater quantity of commodities, has more bills to discount. The banker's capital, which he employs chiefly in the discount of bills, is thus easily transferred from one branch of manufacture to another, in exact proportion to the circumstances of the respective parties." Gilbart also mentions an advantage of bills that has its amusing side. Supposing a debtor is too good a (d) Punctual customer to lose, but still is a bad hand at paying his debts, if the creditor can induce such a customer to accept a bill or make a promissory note in his favour for the amount, with a comfortable credit and no appearance of undue haste, the creditor can get his money the very next day by negotiating that note or bill away for value to a stranger, or discounting it with his banker, who will have no scruple in getting the money at maturity; while the original creditor can still remain the obedient servant of the valued but dilatory customer. payment eusured from solvent but dilatory cus. tomer. (e) Amount of debts fixed. (f) Consideration procedure. Besides thus fixing the date for payment of debts, bills are useful in fixing the amount, and dispensing with the necessity of proving the sale and delivery of all the goods for which the immaterial. bill is drawn, as no consideration for the bill need be proved. (9)Summary Moreover a stringent and speedy method of recovering the amount was provided by the Act known as Keating's Act in 1855, a procedure which has since with great advantage been extended to all money demands of ascertained amount, under Order XIV of the Rules of the Supreme Court. Bills are also an easy form of giving a guarantee, because, as we shall see a little later, the drawer prior to acceptance, and after acceptance, the acceptor, is the principal debtor; and the drawer is surety for the acceptor; and all indorsers are sureties for the acceptor, the drawer, and all prior indorsers. So that any person who puts his name to the bill in order to further its negotiation becomes a surety for those who are already liable thereon. (h) An easy Iorm of guarantee. (i) release of specie from currency. In this country, however, bills have been encouraged not only on the ground of Commercial convenience, but as supplying the place of the precious metals and so operating in aid of the currency. "At the first introduction of bills of exchange,' wrote the late Sir John Byles, "the English Courts of Law "regarded them with a jealous and evil eye, allowing them only "between Merchants, but their obvious advantages soon compelled "the Judges to sanction their use by all persons, and of late years "the policy of the Bench has been industriously to remove every ས་ 66 "impediment and to add all possible facilities to those wheels 66 that restric promissory demand "Notes for small sums," adds Sir J. Byles, "payable to bearer "on demand were found to answer most purposes of the ordinary circulating medium and have at length in all civilised countries "supplanted a great portion of the gold and silver previously in "circulation." It was however found necessary to place the issue So much so of negotiable notes for small sums under legislative restrictions. tion on issue You may notice, at this stage, three points in regard to promissory of bank notes, viz. :-that the maker of a promissory note is in the notes to position of an acceptor of a bill of exchange, with this difference bearer on that he volunteers his promise to pay, instead of assenting to the found order of a drawer calling upon him to do so. The second point is necessary. this, that you now see how Bankers' promissory notes to bearer on demand, or shortly "Bank Notes," originated, and how legislative restrictions upon their issue came to form part of the legislation of the day for regulating the currency. The third point is, that the restriction on the issue of Bankers' promissory notes to bearer on demand gave a stimulus to the use of cheques, a matter which we shall return to hereafter. There is no need to dwell at undue length upon the amount of duty done in lieu of the circulating medium by paper money, in different forms. "All payments for our immense exports and "imports, almost every remittance to and from every quarter "of the world, nearly every payment of large amount between "distant places in the kingdom and a large proportion of payments "in the same place are made through the intervention of bills, not "to mention the amount of common promissory notes at long and "short dates, the notes of the Bank of England and Country banks Extent to which paper money in replaces currency. Growth of legal decisions and statute law on Bills, etc. "and the universal and daily increasing use of cheques." Those words written by Sir J. Byles, in 1829, might have been written to-day with even greater force, considering the extension of manufactures, commerce and banking within the last 60 years. Evidence before a select committee of the House of Commons in 1858, showed that in the last seven weeks of 1857, nearly £5,000,000 worth of bills, discounted for brokers, matured in the hands of one of our great banks alone. Coming to the present day, returns of the paid clearing at the London Clearing House show that the amount of bills, cheques, etc. passed through the House in 1890, had reached the enormous figure of £7,801,048,000. In 1893 the figure was £6,478,013,000, a fluctuation of £3,549,000 less than passed through in 1892, and a falling off of £1,323,035,000 since 1890, partly due to low prices. Such, then, being the importance and utility of bills of exchange and such the favour with which their use was consequently encouraged in our courts, there had grown up around these instruments a mass of legal decisions, beginning to appear in our reports from the time of James I, and increasing in volume and complexity with the extension of manufactures and commerce to our own time. There were some 2,500 of these reported decisions and 17 statutory enactments, when, shortly before 1882, His Honour Judge Chalmers, then at the bar, collected the substance of all those decisions, and, by the light of the best English, French, and American commentaries on the subject, arranged the whole in the form of a digest. This digest naturally attracted the attention of the banking, commercial and legal world, and he was instructed by the Institute of Bankers and the Associated Chambers of Commerce to prepare a bill. Now this bill before being introduced was submitted to a searching criticism by the Institute of Bankers, in order that, in those parts of the proposed code which dealt with points not covered by judicial authority, the law should be settled in strict conformity with the business usage of the banking and commercial community. Sir John Lubbock introduced the bill in the House of Commons, and it was referred to a select committee of merchants, bankers and lawyers. With the aid of distinguished Scotch commercial lawyers, it was found possible to extend the bill to Scotland. In the House of Lords it was again submitted to the ordeal of a select committee, and finally became law as the The Act of Bills of Exchange Act, 1882. I have mentioned those particulars because (1) they will recur to your minds and explain, and by explaining, impress upon your memory, certain points where previous doubts as to banking or mercantile usage have received legislative solution, and where Scotch law and English law have, by concession on one side or the other, been brought into uniformity, or special provision made for their divergence; and (2) because I want to impress upon you the value of that Act and the scrupulous 1882. care brought to bear upon its preparation, its discussion and its final embodiment as the law of the land. But, as literature, the Act is naturally somewhat concentrated reading. It was said of some of the creeds, in which the theologians of old summed up their argumental victories, that each phrase was the tomb of a controversy. And it must be conceded that the 100 sections into which all those cases and statutory provisions have been reduced would require a close and sustained effort for their mastery if the Act, pure and simple, were placed in the hands of a beginner. There are, however, certain underlying principles Advantage which govern groups of provisions in the Act; and a right under- of studying standing of these will enable us to find our way about the Act with such increased facility hereafter as will, I think, repay the time devoted to their inspection at the outset. principles. ability. In the first place it is well, for anyone wishing to get his legal Negotibearings true on the subject, to consider carefully what is meant by Negotiability. If one man owes another money, the creditor, of course, can authorise a third party, to whom he is in debt, to call for it, and may instruct the debtor to pay the debt to that third party when he calls. If the debtor chooses to do so, well and good. But how if the debtor refuses? Neither the creditor nor the third party can compel the debtor, in the absence of agreement, to accept the third party in lieu of the original creditor, unless under certain equitable and statutory exceptions. Suppose again that a man agreed with you that, if you would sell and deliver your horse to him at some distant place, he would pay the price to a creditor of yours there to whom you were desirous of sending the money. You duly deliver your horse. He refuses to pay at all, or insists on remitting the amount to you. You have your remedy by action upon the contract which he made with you. But your creditor has no remedy against him, because there is no privity or legal relationship between them. And you could not, formerly, assign your right of action to the creditor; because the law deemed it contrary to good policy that if a man, having a right to bring an action, was disinclined to enforce his rights, he should be allowed to sell or transfer his chance of a verdict to a more enterprising or pugnacious person. A chattel was of course assignable. A claim of this kind was not a chattel, but it was a matter or thing or (in Norman French) a chose requiring an action to reduce it to tangible form, in other words, "A chose in action," and the rule of law was that a chose in action was not assignable. 66 The Courts of Equity had gradually mitigated the harshness of this rule by admitting the transfer of debts in certain circumstances, and when in 1873 law and equity were fused, it was expressly enacted that an absolute assignment (not a mere charge) in writing, signed by the assignor, of a debt or legal chose in action should (subject to all equities formerly entitled to priority over the rights of the assignee) pass and transfer to the assignee the legal right to the debt or chose in action and all remedies for the same, from the time that express notice in writing of the assignment is given to the debtor. Now there we have a useful Chancery Lane sort of transferability; subject to formalities as to writing, signature of assignor, and written notice of assignment given to the debtor. But the assignability here provided falls very far short of the needs of the world-wide commerce in which bills of exchange play their part, passing through numerous hands and discharging numerous obligations among parties at great distances and generally strangers to one another. To say nothing of the written notice, to the debtor, of each assignment, we find that even when the assignee has got his written document and has ascertained that the debtor has been duly notified in writing, there is that awkward limitation on his rights that they are subject to all the equities or prior claims which attached to the debt before it was assigned to him. In other words his assignor can give him no better title than he had himself, and therefore there is hanging over his assignment the chance of someone who has been defrauded or unjustly treated claiming to rip up the whole transaction, however honestly the assignee has taken over the debt, and however ample the value which he has given for his supposed assignment. Now, as might be expected, the mercantile world had devised a much more workable method of assigning debts than the methods thus tardily grafted by Equity, and afterwards by Statute upon the Old Common Law. What was needed for commercial purposes was (1) Complete transferability of the debt, with the least possible formality at the time of transfer; (2) the certainty on the part of any business man (so long as he combined honesty and common precaution with business despatch), that when he took a written assignment of a debt in exchange for value, that assignment was valid against all comers. These two essentials it would appear must have preceded, in point of time, two others which are now enumerated along with them as going to complete the modern definitions of negotiability. It is further laid down as part of the connotation of negotiability that the transferee is empowered to sue in his own name and that the transfer is presumed to have been for consideration. But inasmuch as the law of negotiability had its origin in mercantile usage, the two latter qualities seem to have been added in aid of the two former, when the Lex Mercatoria, becoming gradually recongnised as part of the law of England, received enforcement in the legal tribunals instead of depending as it must have done at first upon the sanctions of commercial opinion. The negotiability of bills of exchange has received from our Courts every support and encouragement for reasons to which we have already referred, |