SECTION III.

THE CONSIDERATION OF NEGOTIABLE PAPER.

1. EXCEPTION TO THE COMMON LAW RULE, IN THE CASE OF NEGOTIABLE PAPER.-By the common law of England and of this country, as we have seen, no promise can be enforced, unless made for a consideration, or unless it be sealed. But bills and notes payable to order, that is, negotiable, are, to a certain extent, an exception to this rule. Thus, an indorsee cannot be defeated by the promisor showing that he received no consideration for his promise; because the promisor made an instrument for circulation as money; and it would be fraudulent to give to paper the credit of his name, and then refuse to honor it. But as between the maker and the payee, or between indorser and indorsee, and, in general, between any two immediate parties, the defendant may rely on the want of consideration; that is, if an indorsee sues the maker, and the maker says he had no consideration for the note, this is no defense; but if the indorsee sues his indorser, and the indorser shows that the indorsee paid him nothing, this would be a good defense; and so it would be if the payee sued the maker. So, if a distant indorsee has notice or knowledge, when he buys a note, that it was made without consideration, he cannot recover on it against the maker, unless it was an accommodation note, or was intended as a gift.

Thus, if A, supposing a balance due from him to B, gives B his negotiable note for the amount, and afterwards discovers that the balance is the other way, B cannot recover of A; nor can any third or more distant indorsee who knows these facts before buying the note. But if A gives B his note wholly without consideration, for the purpose of lending him his credit, or for the purpose of making him a gift to the amount of the note, and C buys the note with a full knowledge of the facts, he will nevertheless hold A, although B could not. If the note was bought honestly for a fair price, the buyer should recover its whole amount. Every promissory note imports a consideration; that is, none, in the first place, need be proved; but when want of consideration is relied on in defense, and evidence is given on one side and the other, the burden of proof is on the plaintiff to satisfy the jury that consideration was given.

If an indorser, sued by an indorsee, shows that the note was originally made in fraud, he may require the holder to prove that he paid consideration; but if this be proved, he must pay the whole of the note, unless he was himself defrauded by the holder. And if an accommodation note be discounted in violation of the agreement of the party accommodated, the holder can still recover, provided he received the note in good faith, and for valuable consideration.

2. OF VALUE RECEIVED."-"Value received" is usually written, and therefore should be; but is not necessary. If not written, it will be presumed by the law, or may be supplied by the plaintiff's proof. If expressed, it may be denied by the defendant, and disproved. And if a special consideration be stated in the note, the defendant may prove that there was no consideration, or that the consideration was different. If "value received" be written in a note, it means received by the maker from the payee; if the note be payable to the bearer, it means received by the maker from the holder. In a bill, "value received" means that the value was received from the payee by the drawer. But if the bill be payable to the drawer's own order, then it means received by the acceptor from the drawer.

3. WHAT THE CONSIDERATION MAY BE.-A valuable consideration may be either any gain or advantage to the promisor, or any loss or injury sustained by the promisee at the promisor's request. A previous debt, or a fluctuating balance, or a debt due from a third person, might be a valuable consideration. So is a moral consideration, if founded upon a previous legal consideration; as, where one promises to pay a debt barred by the statute of limitations, or by infancy. But a merely moral consideration, as one founded upon natural love and affection, or the relation of parent and child, is no legal consideration.

No consideration is sufficient in law if it be illegal in its nature; and it may be illegal because, first, it violates some positive law, as, for example, the Sunday law, or the law against usury. Secondly, because it violates religion or morality, as an agreement for future illicit cohabitation, or to let lodgings for purposes of prostitution, or an indecent wager; for any bill or note founded upon either of these would be void. Thirdly, if distinctly opposed to public policy; as an agreement in restraint of trade, or injurious to the revenue, or in restraint of marriage, or for procurement

of marriage, or suppressing evidence, or withdrawing a prosecution for felony or public misdemeanor.

SECTION IV.

THE RIGHTS AND DUTIES OF THE MAKER.

THE maker of a note or the acceptor of a bill is bound to pay the same at its maturity, and at any time thereafter, unless the action be barred by the statute of limitations, or he has some other defense under the general law of contracts. As between himself and the payee of the note or bill, he may make any defenses which he could make on any debt arising from simple contract; as want or failure of consideration; payment in whole or in part; set-off; accord and satisfaction; or the like. The peculiar characteristics of negotiable paper do not begin to operate, so to speak, until the paper has passed into the hands of third parties. Then, the party liable on the note or bill can make none of these defenses, unless the time or manner in which it came into the possession of the holder lays him open to these defenses. But the law on this subject may better be presented in our next section.

SECTION V.

THE RIGHTS AND DUTIES OF THE HOLDER OF NEGOTIABLE PAPER. 1. WHAT A HOLDER MAY DO WITH A BILL OR NOTE.-An indorsee has a right of action against all whose names are on the bill when he received it. And if one delivers a bill or note which he ought to indorse and does not, the holder has an action against him for not indorsing, or may proceed in a court of equity, to compel him to indorse. If a bill comes back to a previous indorser, he may strike out the intermediate indorsements and sue in his own name, as indorsee; but he has, in general, no remedy against the intermediate parties, because, if he made them pay as indorsers to him, they would make him pay as indorser to them. If, however, the circumstances are such that they, if compelled to pay, would have no right against him as an indorser to them, as, for example, if he indorse it "without recourse, then he might have a claim against them.

The holder of a bill indorsed and deposited with him for collection, or only as a trustee, can use it only in conformity with the trust. And if the indorsement express that it is to be collected for the indorser's use, or use any equivalent language, this is notice to any one who discounts it; and the party discounting the paper against this notice will be obliged to deliver the note, or pay its contents, if collected, to the indorser. Thus, Mr. Sigourney, a merchant in Boston, remitted to Williams, a London banker, for collection, a bill of exchange indorsed by him, and over his name was written, "Pay to Williams or order for my use. Williams had the bill discounted for his own benefit by his bankers, and failed; and the English court held that the indorsement showed that the bill did not belong to Williams, and that the discounters had no right to discount it for him; and they were obliged to pay the amount of it to Sigourney.

2. OF A TRANSFER AFTER DISHONOR OF NEGOTIABLE PAPER.-So long as a note remains due, everybody has a right to believe that it has not been paid, and will be paid at maturity, and may purchase it in that belief. But as soon as it is overdue the date shows it, and every person must know that it is either paid, and so extinguished, or that it has not been paid, and therefore is dishonored, and that there may be good reasons why it was not paid, or good defenses against it. He therefore now takes it at his own peril; and therefore a holder who takes the note after it becomes due is open to many of the defenses which the promisor could have made against the party from whom the holder took it; because, having notice that the bill or note is dishonored, he ought to have ascertained whether any, and, if so, what defense could be set up.

So, too, if an indorsee takes the note or bill before it is due, but with notice or knowledge of fraud or other good defense, which could be made against his indorser if he sued it, it is a general rule that the same defense may be made against him.

A note payable on demand is considered as not overdue, unless very old indeed, without some evidence of demand of payment and refusal, but in some States this has been changed by statute. But it is not so with a check; for this should be presented without unreasonable delay.

3. OF PRESENTMENT FOR ACCEPTANCE. It is most important to the holder of negotiable paper to know distinctly what his

duties are in relation to presentment for acceptance or payment, and notice to others interested in case of non-acceptance or nonpayment.

It is always prudent for the holder of a bill to present it for acceptance without delay; for if it be accepted, he has new security; if not, the former parties are immediately liable; and it is but just to the drawer to give him as early an opportunity as may be to withdraw his funds or obtain indemnity from a debtor who will not honor his bills. And if a bill is payable at sight, or at a certain period after sight, there is not only no right of action against anybody until presentment, but, if this be delayed beyond a reasonable time, the holder loses his remedy against all previous parties. And although the question of reasonable time is generally one only of law, yet, in this connection, it is treated as so far a question of fact, that it is submitted to the jury. There is no certain rule determining what is reasonable time in this respect. If a bill of exchange be payable on demand, it is not like a promissory note, but must be presented within a reasonable time, or the drawer will be discharged. A holder may put a bill payable after sight into circulation, without presenting it himself; and in that case, if a subsequent holder presents it, a longer delay in presentment would be allowed than if the first holder had kept it in his own possession.

The presentment should be made during business hours; but in this country they extend through the day and until evening, except in the case of banks. Any distinct usage established where the presentment is made would probably be received in evidence, and permitted to affect the question.

Ill health, or other actual impediment without fault, may excuse delay on the part of the holder; but the request of the drawer to the drawee not to accept does not excuse non-presentment for acceptance.

Presentment for acceptance should be made to the drawee himself, or to his agent authorized to accept. And when it is presented, the drawee may have a reasonable time to consider whether he will accept, during which time the holder is justified in leaving the bill with him. This time is now generally fixed by statute as twenty-four hours. And if the holder gives more than twenty-four hours for this purpose, he should inform the previous parties of it. If the drawee has changed his residence, the