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Bills or notes may be made payable by instalments.
The Bills of Exchange Act, 1882, codifies the law relating to Bills of Exchange, Cheques, and Promissory Notes, and applies to the whole of the United Kingdom. The law is now the same for England, Ireland and Scotland, with one exception, which preserves to Scotland the rule as to the operation of a bill as an assignment of funds in the hands of the drawee.
Where a bill drawn in one country is negotiated, accepted, or pay. able in another, the rights, duties and liabilities of the parties thereto, so far as regards each distinct contract on the bill, are determined by the law of the place where the contract is made.
Definitions. A BILL OF EXCHANGE is unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand, or at a fixed or determinable future time, a sum certain in money to, or to the order of, a specified person. The person who gives the order is called the Drawer; the person ordered to pay is called the Drawee, and the person to whom or to whose order the money is payable is called the Payee.
A PROMISSORY NOTE 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 sum certain in money to, or to the order of, a specified person, or to bearer.
A Promissory Note may be made by two or more makers, and they may be liable thereon jointly and severally according to its tenor.
Incompleteness, Irregularity and Alterations. A bill is not invalid by reason that it is not dated, that it is antedated or post-dated, or that it bears date on a Sunday, or that it does not specify the value given or that any value has been given therefor, or that it does not specify the place where it is drawn or the place where it is payable. Where a bill expressed to be payable at a fixed period after date is issued undated, or where the acceptance of a bill payable at a fixed period after sight is undated, any holder may insert therein the true date of issue or acceptance.
Where a bill or acceptance is materially altered without the assent of all parties liable, the bill is discharged, except as against a party who has himself made, authorized or assented to the alteration and subsequent indorsers.
The following alterations are material, namely, any alteration of the date, the sum payable, the time of payment, the place of payment,
, and the addition of a place of payment without the acceptor's consent.
A bill which has been altered need not necessarily be redrawn, provided the alteration is initialed by all the parties to the bill.
Negotiation and Indorsement. When the holder of a bill payable to his order wishes to obtain or use the money before the bill becomes due, he indorses it by writing his signature across the back, thus rendering himself responsible for its due payment. The bill may then be negotiated, that is, transferred to another person in such a manner as to constitute the transferee the holder of the bill. A bill payable to Bearer is negotiated by delivery, but if payable to Order it must also be indorsed.
A bill may be indorsed generally by merely signing it in blank, when it becomes payable to Bearer, or specially by adding the name of a person to whom or to whose order it is to be payable.
When a bill contains words prohibiting transfer or indicating an intention that it should not be transferable, it is valid between the parties thereto, but is not negotiable. A bill may be made not negotiable by drawing it in the form, “pay John Brown only.”
The drawer of a bill or any indorser may insert therein an express stipulation negativing or limiting his own liability to the holder, as by the addition of the words “ without recourse to C D.” A person who transfers a bill to another without indorsement is not liable thereon.
Where a person signs a bill otherwise than as drawer or acceptor, he thereby incurs the liability of an indorser to a holder in due course.
Acceptance. The majority of those who read this work will have to do chiefly with Inland Bills, which when drawn are usually forwarded through the post or otherwise to the drawee for him to accept and return. Perhaps all that such readers will require is to know that the acceptance must be written on the bill and signed by the drawee, which may be done either before or after the drawer has signed. The mere signature of the drawee without additional words is sufficient.
Foreign Bills are usually payable at a specified period after sight. They are, as a rule, either sent by the drawer to the payee, or are sold by the drawer to another party, who transmits them to a creditor of his own, and he arranges for presentment for acceptance and payment. Such bills must be presented to the drawee for acceptance immediately they are received by the payee, in order to fix the maturity of the instrument. The acceptor should mark the date of his acceptance on the bill.
An agent to whom a bill is sent for negotiation should present it for acceptance at once, or he may be made personally liable.
Where a bill expressly states that it shall be presented for acceptance, or where a bill is drawn payable elsewhere than at the residence or place of business of the drawee, it must be presented for acceptance before it can be presented for payment.
When a bill is duly presented for acceptance, and is not accepted within the customary time (usually 24 hours), the person presenting it must treat it as dishonoured by non-acceptance. If he do not, the holder loses his right of recourse against the drawer and indorsers (e).
(e) A ticket is usually attached to bills presented for acceptance, with the words " Left for acceptance by.
.....of. January 2nd, 1884,” and, if the bill authorizes, the words “ To be accepted payable at London ” may be added.
Acceptance supra protest, or Acceptance for Honour, is an acceptance by a party not liable on the bill, with the consent of the holder, to preserve the honour of the drawer or indorser. The bill must be protested against the drawee for non-acceptance before it is accepted supra protest. The acceptor for honour by accepting it engages that he will, on due presentment, pay the bill if it is not paid by the drawee. The bill must be duly presented to the drawee and protested for nonpayment before it is presented for payment to the acceptor for honour (see also Payment for Honour).
In some trades when an account becomes due it is customary for the creditor to pass a draft through his bankers for the amount, and to advise his debtor that he has done so. The draft in this case is practically presented for acceptance and payment at the same time.
Presentment for Payment. Where a bill is payable on demand presentment must be made within a reasonable time. In determining what is a reasonable time, regard must be had to the nature of the bill, usage of trade, &c. A safe rule to follow is for presentment to be made on the day after the bill is received. Where a bill is not payable on demand, it must be presented on the day it falls due.
If a bill be not duly presented for payment the drawer and indorsers are discharged from liability. The bill must be presented on the exact due date, and neither before or after. Where a bill is not payable on demand the due date is determined as follows:— Three days, called days of grace are added to the time of payment as fixed by the bill, and the bill falls due on the last day of grace. Provided that when the last day of grace falls on Sunday, Christmas Day, Good Friday, or an authorized fast or thanksgiving day, the bill is due on the preceding business day. When the last day of grace is a Bank Holiday (other than Christmas Day or Good Friday), or when the last day of grace is a Sunday and the second day of grace a Bank Holiday, the bill is due on the succeeding business day.
There are no days of grace on bills drawn on Germany, France, Italy, Denmark, Sweden and Norway. In Russia there are ten days of grace on accepted bills.
Where no place of payment is specified, the bill is to be presented at the address, or last known address, of the drawee or acceptor.
Much trouble and difficulty may be avoided by passing all bills through the firm's bank.
Notice of Dishonour. When a bill is dishonoured, notice of dishonour must be given to the drawer and each indorser, otherwise they will be discharged from liability.
A holder should give notice to parties living in the same place as himself in time to reach them on the day after the dishonour, and to parties living in a different place the notice should be sent off not later than the day after the dishonour. Although notice by the holder inures to the benefit of antecedent parties, they must not rely upon him giving notice to all who are responsible on the bill, as the holder is only bound to give notice to the party against whom he wishes to have recourse. Each indorser has the same period of time for giving notice, after receiving notice himself, as the holder has after the dishonour. Notice may safely be given in the following forms :
Notice of Dishonour to Drawer.
Date and Address. Please take notice that a Bill for £. ....... drawn by you under date the......... on......
and payable..... has been dishonoured by non-payment.
(Signed) C. D. To A. B.
Notice of Dishonour to Indorser.
Date and Address. Please take notice that a bill for £. drawn by.....
..under date the on....
....and which bears your indorsement, has been dishonoured by non-payment.
(Signed) A. B. To Messrs. C. D. & Co.
Noting and Protest.
Although the expenses of noting can be recovered, noting is not necessary in the case of Inland Bills. Foreign Bills must be duly protested when dishonoured.
Payment (f) and Rights of the Holder. Possession of the bill should be obtained by the party who pays it, and when a bill is taken up by an indorser after dishonour he should be careful to ascertain that the holder has duly preserved his rights of recourse.
When a bill is dishonoured by non-payment a holder may immediately sue on the bill in his own name, may enforce payment against all prior parties liable thereon, and no personal defence will be heard as against a holder in due course.
The drawer who has been compelled to pay the bill may recover from the acceptor, and an indorser who has been compelled to pay may recover from the acceptor, or from the drawer, or from a prior indorser.
(f) Bills are more readily negotiated when made payable at a London Bank, and it is usual therefore with country firms to insert the name of their Bank's London Agency. A bill accepted payable at the Acceptor's Bank is, like a cheque, an order to the banker to pay it. It is customary to advise bills payable at the London Agency, forms for which purpose are provided by all banks.
In Scotland, where a drawee of a bill has in his hands funds available for the payment thereof, the bill operates as an assignment of the sum for which it is drawn in favour of the holder from the time when the bill is presented to the drawee.
Interest can be recovered from the time of presentment for payment if the bill is payable on demand, and from the maturity of the bill in any other case.
A contemporaneous agreement that payment shall be postponed in no way controls the operation of a bill.
Where a bill has been protested for non-payment, any person may intervene and pay it supra protest for the honour of any party liable thereon, and the payer for honour has a right of recourse for repayment to the person for whose honour he paid, and to all parties to the bill who are liable to that person (see Acceptance, supra protest).
It frequently happens that when the acceptor is unable to meet the bill at maturity he applies for an extension of time, and a new bill is prepared in place of the old one. In such case the acceptor should be careful to cancel the old bill, and the holder to obtain the consent of other parties to the bill who are responsible to him. If a holder agrees with the acceptor to give him time to pay without the consent of the other parties responsible on the bill, the other parties are discharged from liability.
Valuable consideration is presumed to have been given for a bill, and it is for the party liable thereon to prove that no consideration was given. Valuable consideration for a bill may be constituted by an antecedent debt or liability, or any consideration sufficient to support a simple contract. A holder who has a lien on the bill is deemed a holder for value to the extent of the sum for which he has a lien.
Where the holder has given no consideration for a bill he cannot enforce payment, but if he pays over the bill to another person and · receives value therefor that person can recover on the bill.
An accommodation party to a bill is a person who has signed a bill as drawer, acceptor, or indorser without receiving value therefor, and for the purpose of lending his name to some other person. An accommodation party is liable on the bill to a holder for value, and it is immaterial whether when such holder took the bill he knew such party to be an accommodation party or not.
Accommodation acceptances are frequently exchanged, a practice which is the source of much commercial immorality.