of nego The most frequent examples of negotiable instruments Qualities are bills of exchange (of which cheques are a species) (k) tiable inand promissory notes. Their exceptional qualities are con- struments. Limiting cisely stated in the case of Crouch v. Crédit Foncier of rules in England (1) which has been already referred to :— "Bills of exchange and promissory notes, whether payable to order or to bearer, are by the law merchant negotiable in both senses of the word. The person who, by a genuine indorsement, or, where it is payable to bearer, by a delivery, becomes holder, may sue in his own name on the contract, and if he is a bona fide holder for value he has a good title notwithstanding any defect of title in the party (whether indorser or deliverer) from whom he took it." We may here notice the positions contained in the judgment of the Court, which show the limits beyond which the special law of English negotiable instruments cannot be extended. 1. It is extremely doubtful whether the seal of a corporation can be treated as equivalent to signature for the purpose of making an instrument under it negotiable at common law (m). 2. A bond containing a contract not merely to pay the principal but to cause the bonds to be drawn for payment in a specified manner cannot be negotiable, since it violates the general rule that the contract to pay must be unconditional. (It must also be a contract to pay money or to deliver another negotiable security representing money (n): therefore a promise in writing to deliver 1000 tons of iron (k) Bills of Exchange Act 1882 (45 & 46 Vict. c. 61, s. 73). And they are equally negotiable: M'Lean v. Clydesdale Banking Co. 9 App. Ca. 95. (4) L. R. 8 Q. B. 374. (m) But if a corporation is expressly enabled by statute to issue promissory notes under seal they may be sued on as ordinary promissory notes: Slark v. Highgate Archway Co. 5 Taunt. 792, and in any case the addition of the seal will not prevent an instrument from being a good bill or note if it is also signed by an agent or agents for the company so that it would (n) Goodwin v. Robarts, Ex. Ch., Crouch v. Crédit Foncier. Negoti ability by estoppel. to the bearer is not negotiable and gives no right of action to the possessor) (0). 3. Mere private agreement or particular custom cannot be admitted as part of the law merchant so as to introduce new kinds of negotiable instruments. But the fact that a universal mercantile usage is modern is no reason against its being judicially recognized as part of the law merchant. The notion that general usage is insufficient merely because it is not ancient is founded on the erroneous assumption that the law merchant is to be treated as fixed and invariable (p). The bonds of foreign governments issued abroad and treated in the English market as negotiable instruments are recognized as such by law (q). So is the provisional scrip issued in England by the agent of a foreign government as preparatory to giving definitive bonds (r). Such bonds or scrip, and other foreign instruments negotiable by the law of the country where they are made, may be recognized as negotiable by our Courts though they do not satisfy all the conditions of an English negotiable instrument (8). From what was said in Goodwin v. Robarts (t) in the House of Lords it seems that where the holder of an instrument purporting on the face of it to be negotiable, and in fact usually dealt with as such, intrusts it to a broker or agent who deals with it in the market where such usage prevails, he is estopped from denying its negotiable quality as against any one who in good faith and for value takes it from the broker or agent. (0) Dixon v. Bovill, 3 Macq. 1, and see Byles on Bills, Ch. 7. Such a contract may however be made assignable free from equities: Merchant Banking Co. of London v. Phoenix Bessemer Steel Co. 5 Ch. D. 205. (P) Goodwin v. Robarts, supra, overruling Crouch v. Crédit Foncier on this point; Rumball v. Metropolitan Bank, 2 Q. B. D. 194. 45. (a) Gorgier v. Mieville, 3 B. & C. (r) Goodwin v. Robarts, L. R. 10 Ex. 76, affd. in Ex. Ch. ib. 337, in H. L. 1 App. Ca. 476. (s) See Crouch v. Crédit Foncier, L. R. 8 Q. B. at pp. 384-5; Goodwin v. Robarts, 1 App. Ca. at pp. 494-5. (t) 1 App. Ca. 486, 489, 493, 497. It is also to be observed that an instrument which has How in struments been negotiable may cease to be so in various ways, may cease namely― Payment by the person ultimately liable (u). Restrictive indorsement (a). Crossing with the words "not negotiable" (Bills of Exchange Act, 1882, 45 & 46 Vict. c. 61, s. 77). A person taking a cheque so crossed has not and cannot give a better title than the person from whom he took it: s. 81. To a certain extent, in the case of bills payable to order, indorsement when overdue, which makes the indorsee's rights subject to what are called equities attaching to the bill itself, e. g. an agreement between the original parties to the bill that in certain events the acceptor shall not be held liable, but not to collateral equities such as setoff (y). to be negotiable. of con We have purposely left to the last the consideration of Transfer certain important classes of contracts which may be roughly tracts described as involving the transfer of duties as well as of where rights. This happens in the cases (A) Of transferable shares in partnerships and companies. (B) Of obligations (2) attached to ownership or interests in property. duties as well as rights trans ferred. A. The contract of partnership generally involves per- (A.) Partsonal confidence, and is therefore of a strictly personal Shares in nerships: character. But, "if partners choose to agree that any of ordinary them shall be at liberty to introduce any other person into the partnership, there is no reason why they should not: unincorporated nor why, having so agreed, they should not be bound by companies (u) Lazarus v. Cowie, 3 Q. B. 464. As to the possibility of suing on a bill after it has been paid by some other person, see Cook v. Lister, 13 C. B. N. S. 594, 32 L. J. C. P. 121. (x) 1 Sm. L. C. 479. (y) See Ex parte Swan, 6 Eq. 344, 359, where the authorities are dis- (2) We use the word here in its case. partner ships and may be made transferable at common law. But no uncertain contract and no real anomaly in this. the agreement" (a). At common law the number of persons engaged in a contract of partnership does not make any difference in the nature or validity of the contract; hence it follows that if in a partnership of two or three the share of a partner may be transferred on terms agreed on by the original partners, there is nothing at common law to prevent the same arrangement from being made in the case of a larger partnership, however numerous the members may be; in other words, unincorporated companies with transferable shares are not unlawful at common law. This is worked out by Lord Justice Lindley in another part of his book, where he shows by an ingenious and convincing analysis that such a conclusion is demanded by principle, and by an examination of decided cases that it is consistent with authority (b). "Those who form such partnerships, [i. e. partnerships whether small or large in which shares are transferable] and those who join them after they are formed, assent to become partners with any one who is willing to comply with certain conditions” (c). At first sight this may seem to involve the anomaly of a floating contract between all the members of the partnership for the time being, who by the nature of the case are unascertained persons when we look to any future time (d). But there is no need to assume any special exception from the ordinary rules of contract. It was pointed out by Lord Westbury that the transfer of a share in a partnership at common law is strictly not the transfer of the outgoing partner's contract to the incoming partner, but the formation of a new contract. 66 By the ordinary law of partnership as it existed previously to" the Companies Acts "a partner could not transfer to another person his share in the partnership. Even if he attempted to do so with the consent of the other partners, it would not be a (a) Lindley, 1. 699. (b) Ib. 1. 191-196. (c) Ib. 1. 699. (d) Cp. per Abbott, C. J. in Josephs v. Pebrer, 3 B. & C. 639, 643. This line of objection, however, does not appear to have been distinctly taken in any of the cases where the legality of joint-stock companies was discussed. transfer of his share, it would in effect be the creation of a new partnership" (e). This therefore is to be added to the cases in which we have already found apparent anomalies to vanish on closer examination. difficulties companies apart from sory pro Notwithstanding the theoretical legality of unincor- Practical porated companies, there does not appear to be any very of uninsatisfactory way of enforcing either the claims of the com- corporated pany against an individual member (ƒ), or those of an would reindividual member against the company (g). But the man, even power of forming such companies is so much cut short by compulthe Companies Act 1862, which renders (with a few ex- visions of ceptions) unincorporated and unprivileged () partnerships Companies of more than twenty (i) persons positively illegal, that questions of this kind are not likely to have much practical importance in future. In like manner the transfer of shares in companies as well as their original formation is almost entirely governed by modern statutes. Act. tions attached to B. Obligations ex contractu attached to ownership or Obligainterests in property are of several kinds. With regard to those attached to estates and interests in land, which alone property. offer any great matter for observation, the discussion of them in detail is usually and conveniently treated as belonging to the law of real property. We shall have to dwell on them however so far as to point out the existence of a real conflict between common law and equity as to the right way of dealing with burdens imposed on the use of land by contract. A general statement in a summary form will serve both to shorten our subsequent remarks and to make them better understood. (e) Webb v. Whiffin, L. R. 5 H. L. 711, 727. (f) We have seen (supra, p. 204) that they cannot empower an officer to sue on behalf of the association. (g) See Lyon v. Haynes, 5 M. & Gr. 504; but perhaps since the Judicature Acts a partner can sue or be sued by the partnership in the (h) i. e. such as but for the Act (i) Ten in the case of banking: Companies Act 1862, s. 4. |