as a general rule in the United States that all bills are inland bills which are drawn and payable in the same state, unless the local statute provides otherwise, and this is true although the bill is drawn on another state or addressed to a person in another state, if it is made expressly payable in the state where it is drawn.10

§ 3352. Definitions of a promissory note.-The Negotiable Instruments Law defines a promissory note as follows: "A negotiable promissory note within the meaning of this act is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand, or at a fixed or determinable future time, a certain sum in money to order or to bearer. Where a note is drawn to the maker's own order, it is not complete until indorsed by him.""" In general terms a

promissory note may be defined to be a promise in writing by one person to pay to another person therein designated or order a fixed sum of money, at all events, and at a time specified therein, or at a time which must certainly arrive.1 The instrument is not a promissory note if it contains, besides a promise to pay money, a promise to pay in something else, as to deliver goods.13 It is essential to the validity of a promissory note that it contain

sinck v. Rogers, 189 N. Y. 252, 82 N. E. 134, for construction of the above section of the statute.

Young v. Bennett, 7 Bush (Ky.) 474; Buttrick Lumber Co. v. Collins, 202 Mass. 413, 89 N. E. 138.

10 Miller v. Hackley, 5 Johns. (N. Y.) 375, 4 Am. Dec. 372. The actual place of drawing may be ascertained from the intention of the parties as shown by the local date of the bill. Strawbridge v. Robinson, 10 Ill. 470, 50 Am. Dec. 420.

" Negotiable Instruments Law, § 320. The above section of the law has been construed in Young v. American Bank, 44 Misc. (N. Y.) 305, 89 N. Y. S. 913. See also, Sherman v. Goodwin, 11 Ariz. 141, 89 Pac. 517; Baumeister v. Kuntz, 53 Fla. 340, 42 So. 886; Alexander v. Hazelrigg, 123 (Ky.) 677, 97 S. W. 353; National Exchange Bank v. Lubrano, 29 R. I. 64, 68 Atl. 944; Hoff

man v. Planters' Nat. Bank, 99 Va. 480, 39 S. E. 134.

12 Smith v. Myers, 207 Ill. 126, 69 N. E. 858; Alexander v. Hazelrigg, 123 Ky. 677, 97 S. W. 353; Smith v. First State Bank, 95 Minn. 496, 104 N. W. 369; Bick v. Clark, 134 Mo. App. 544, 114 S. W. 1144; Nashville v. Fisher, 1 Tenn. Cas. 345. For other definitions see Blevins v. Blevins, 4 Ark. 441; Beall v. Water Co., 185 Fed. 179; Stapleton v. Louisville Banking Co., 95 Ga. 802, 23 S. E. 81; Gilpin v. People's Bank, 45 Ind. App. 52, 90 N. E. 91; Mereness v. First Nat. Bank, 112 Iowa 11, 83 N. W. 711, 51 L. R. A. 410, 84 Am. St. 318; Bank v. Augusta, 49 Maine 407; Longwell v. Day, 1 Mich. (N. P.) 286; White v. Harris, 69 S. Car. 65, 48 S. E. 41, 104 Am. St. 791; Morgan v. Edwards, 53 Wis. 599, 11 N. W. 21; 40 Am. Rep. 781.

13

Travis V. Forbes, 41 Nova Scotia 226.

no contingency or uncertainty as to the person by whom it is payable or to whom it is payable."

§ 3353. Form and negotiability of a promissory note.—A promissory note must contain a promise to pay,15 but an actual promise in express terms is not necessary, if there are words in the instrument from which a promise to pay can be collected.16 No particular form of words is necessary to constitute a negotiable promissory note," and various expressions have been held to amount to such promise.18 Negotiability, in a general sense, as applied to promissory notes, is the quality which renders them transferable from one person to another, hence they are termed negotiable paper.19 Promissory notes were first made negotiable by the statute of Anne in 1705, which statute has been enacted in substance in nearly all of the states. In some states, however, their negotiability has been somewhat restricted by statute, especially in the sense of negotiability under the law merchant as a rule protecting bona fide purchasers. Negotiability in this sense will be considered in a subsequent section.

§ 3354. Analogy between bills and notes.-Lord Mansfield said that the true analogy between bills and notes is obscured by an apparent but unreal resemblance between the drawer of a bill and the maker of a note.20 While bills and notes are governed by the same rules with respect to the certainty required in their

14 Frazier v. Tex. 755. 15 Forward v. Thompson, 12 U. C. Q. B. 103; Smith v. Bridges, 1 Ill. 18.

Moore's Adm'r, 11

16 Taylor v. Steele, 11 Jur. 806, 16 M. & W. 665; Rice v. Rice, 68 Ala. 216; Woodbridge v. Drought, 118 Ga. 671, 45 S. E. 266.

17 Bank of Peru v. Farnsworth, 18 Ill. 563; Myers v. Petty, 153 N. Car. 462, 69 S. E. 417.

18 La Forest v. Babineau, 37 Can. Sup. Ct. 521; Beckstrom v. Krone, 125 Ill. App. 376. Some expressions that have been held sufficient as, promises are, "To be accountable for" (Miller v. Austin, 13 How. (U. S.) 218); "This is to certify that I am to pay"

terms and their general elements, yet, at its inception, a note differs from a bill in the parties thereto. Before a note is transferred only the rights of the maker and payee are involved, but after the transfer to an indorsee the similarity of the note to an accepted bill is perfected. It then becomes an order from the payee upon the maker for the payment of money to a third person, the indorsee. Such indorsee must use the same diligence to collect from the maker before he can charge the indorser that the payee of a bill of exchange must use toward the acceptor before charging the drawer.21

§ 3355. Meaning of the law merchant.-The uniform practice of merchants in transferring credits, represented by commercial paper, as a means of purchasing goods, settling accounts, and transacting mercantile business between merchants residing in different parts of the country, gave rise to certain rules, demanded by the wants and convenience of trading communities, which rules are known as the law merchant, and have become a part of the common law.22 It is a system of customs and usages of trade which have gradually become ingrafted into our system of laws, and is as firmly fixed as any other part of that system. At first it was a sort of usage, gradually becoming general in its character, and finally it received recognition and sanction by judicial tribunals. Although variously modified by statute and judicial construction, this English common-law merchant still governs in a few of the United States. Most of the states, however, have adopted what is known as the Negotiable Instruments Law, which is on the general line of the English Bills of Exchange Act.

§ 3356. Instruments governed by the law merchant.-It may be stated generally that negotiable instruments that are gov

Collins v. Butler, 2 Strange 1087; Penniman v. Alexander, 112 N. Car. 778, 17 S. E. 530.

22 Woodbury v. Roberts, 59 Iowa 348, 13 N. W. 312, 44 Am. Rep. 685; First Nat. Bank v. McCullough, 50 Ore. 508; 93 Pac. 366, 17 L. R. A. (N. S.) 1105n, 126 Am. St. 758. See also, 1 Bl. Comm. 75, where it is

said: "A particular system of customs used only among one set of the king's subjects * ** which, however different from the general rules of the common law, is yet ingrafted into it, and made a part of it; being allowed for the benefit of trade, to be of the utmost validity in all commercial transactions."

erned wholly by the law merchant include foreign and inland bills of exchange, checks and promissory notes. There is a class of quasi-negotiable instruments, such as bills of lading, certificates of deposit, collateral securities, corporate and municipal bonds, coupons, letters of credit and warehouse receipts that are governed in part by the law merchant or similar principles.23 It is provided in the Negotiable Instruments Law that in any case not provided for in that act the rules of the law merchant shall govern.

24

§ 3357. Negotiability in general.—Commercial paper is distinguished from all other contracts for the payment of money by the quality of negotiability. This means the quality attached to bills of exchange and promissory notes which renders them transferable from one person to another,25 and it also means that the assignee may sue upon the instrument in his own name, that he takes it, where he does so as a bona fide holder for a valuable consideration before maturity, free from defenses that may exist between prior parties, and clothed with the well established rights and liabilities that are created by the law merchant.26 While negotiability is the characteristic quality of bills of exchange and promissory notes, it is not essential to their validity.27 Nonnegotiable instruments have a validity and an effect of their own and may be sued upon as bills and

23

Wettlaufer v. Baxter, 137 Ky. 362, 125 S. W. 741, 26 L. R. A. (N. S.) 804.

Neg. Inst. Law, § 7. For construction of the above section see, National Exch. Bank v. Lester, 119 App. Div. (N. Y.) 786, 104 N. Y. S. 418; Timbel v. Garfield Nat. Bank, 121 App. Div. (N. Y.) 870, 106 N. Y. S. 497; First Nat. Bank of Shawano v. Miller, 139 Wis. 126, 120 N. W. 820, 131 Am. St. 1040 (holding that where the Negotiable Instruments Law conflicts with Supreme Court decisions, as to instruments made subsequent to the passage of that act, the act controls instruments made subsequent to its passage).

23 Anniston Loan & Trust Co. v. Stickney, 108 Ala. 146, 19 So. 63, 31 L. R. A. 234; Odell v. Gray, 15 Mo.

337, 15 Am. Dec. 147; Shaw v. Merchants' Nat. Bank, 101 U. S. 557, 25 L. ed. 892.

Miller v. Race, 1 Smith Lead. Cas. (9th ed.) 750; Bank of Luvern v. Fertilizer Co., 143 Ala. 152, 39 So. 126; Lilly v. Hamilton Bank, 178 Fed. 53, 102 C. C. A. 1, 29 L. R. A. (N. S.) 558n; Oliver v. Miller, 130 Ga. 72, 60 S. E. 254; Bank of Sampson v. Hatcher, 151 N. Car. 359, 66 S. E. 308, 134 Am. St. 989n.

27 Bates v. Butler, 46 Maine 387; Duncan v. Maryland Sav. Inst., 10 Gill & J. (Md.) 299; Seymour v. Van Slyck, 8 Wend. (N.. Y.) 403, affd. 15 Wend. (N. Y.) 19; Thompson v. Osborne, 152 N. Car. 408, 67 S. E. 1029; Arnold v. Sprague, 34 Vt. 402; Corbett v. Clark, 45 Wis. 403, 30 Am. Rep. 763.

notes,28 have been held to import a consideration," and are entitled to days of grace.30 The Negotiable Instruments Law provides: "An instrument is negotiated when it is transferred from one person to another in such a manner as to constitute the transferee the holder thereof. If payable to bearer it is negotiated by delivery; if payable to order it is negotiated by the indorsement of the holder completed by delivery." "An instrument negotiable in its origin continues to be negotiable until it has been restrictively indorsed or discharged by payment or otherwise." In general the negotiability of foreign bills of exchange has been left as it was by the law merchant,32 but in some states negotiability has been expressly conferred by statute on such instruments as corporate bonds, bills of lading, and warehouse receipts; also in some states promissory notes have been enlarged to include notes which are payable in property or work.33

§ 3358. Assignability in general.-The chief distinction between assignability and negotiability lies in the fact that the former term pertains to contracts in general while the latter pertains only to a special class of contracts. Debts, rights in property, choses in action, and other valuable rights evidenced by an instrument in writing are transferred by assignment.34 There are certain well settled rules governing the transfer of such contracts that do not apply to negotiable instruments. For example, the title to any property or rights in property cannot be completely passed, as to the debtor, by assignment without

"Kendall v. Galvin, 15 Maine 131, 32 Am. Dec. 141; Downing v. Backenstoes, 3 Caines (N. Y.) 137.

"Goshen &c. Turnpike Road v. Kurtin, 9 Johns. (N. Ÿ.) 217, 6 Am. Dec. 273; Arnold v. Sprague, 34 Vt. 402.

30 Reed v. Murphy, 1 Ga. 236; Dufuys v. Farmer, 22 La. Ann. 478; Hamilton Gin &c. Co. v. Sinker, 74 Tex. 51, 11 S. W. 1056. In Connecticut negotiability is considered essential to a bill or note to make it import a consideration, or to entitle it to days of grace. Curier v. Lockwood, 40 Conn. 349, 16 Am. Rep. 40. 37-CONTRACTS, VOL. 4

31

33

Neg. Inst. Law, §§ 60 and 77. 82 Haddock v. Haddock, 118 App. Div. (N. Y.) 412, 103 N. Y. S. 584. Such notes have been held negotiable in Archer v. Claflin, 31 I11. 306; Spurgin v. McPheeters, 42 Ind. 527; Huse v. Hamblin, 29 Iowa 501, 4 Am. Rep. 244; Rankin v. Sanders, 6 How. (Miss.) 52, 38 Am. Dec. 431; Spears v. Bond, 79 Mo. 467. Hoag V. Mendenhall, 19 Gil. (Minn.) 289; Andrews v. Nat. Bank of North America, 7 Hun (N. Y.) 20; Harlowe v. Hudgins, 84 Tex. 107, 19 S. W. 364, 31 Am. St. 21.

34