HANDBOOK OF NEGOTIABLE BILLS AND NOTES FOURTH EDITION CHAPTER I INTRODUCTION 1. Origin of Negotiability. 2-7. Distinction between Assignability and Negotiability. 10. Negotiable Bonds. 11. Payment by Negotiable Instrument. ORIGIN OF NEGOTIABILITY 1. The negotiability of bills of exchange and promissory notes originated in the custom of merchants. The statute of Anne, which was declaratory of mercantile custom, established the negotiability of promissory notes payable to order or bearer. The custom of merchants means a body of usages and rules relating to trade, which grew up among merchants, and were enforced as law by the courts. In English law it is as old as Magna Charta, and it is recognized in the stat NORT.B.& N.(4TH ED.)—1 utes of the Plantagenets and the Tudors,' though its sub'stantial adoption into the law took place much later. Orig 2 1 Magna Charta, c. 30; Acton Burnel de Mercatoribus, 11 Edw. I; Statute of Merchants, 13 Edw. I. See, also, 27 Edw. III, cc. 19, 20. See, also, 13 Edw. VI, c. 10, 34 Hen. VIII, cited in Brown, Abr. tit. "Customs," p. 59. 2 It seems more accurate to say that the customs of merchants never became a part of the common law, but have been and still are recognized and enforced by the courts which administer the common law. The customs of merchants are a source of law separate from the two well-recognized sources, the common law of England and statutes. That the customs of merchants are thus an independent source of law is obscured by the practice which now prevails in England and the United States of applying all the law to all classes, by one system of courts. There was a time, however, when all controversies were not decided by the courts of the sovereign. Not only were there special local courts for the manors, the towns and the cities, but there were special courts of the merchants in which disputes between members of that class were heard and determined according to the practices and rules which the merchants were accustomed to follow. Just when these courts of the merchants had their beginning is not known. But it is certain that "as early as the twelfth century in Italy, France, Spain, and Germany, and, in fact, wherever commerce flourished, special courts existed for the trial of mercantile cases." Introduction to Smith's Mercantile Law (11th Ed.) lxxv. There were probably two principal reasons for the existence of these courts: (1) The merchants, in the Middle Ages, were a class sharply distinct from the rest of the community. Trade and commerce was the occupation of but few. In England the business of trading was learned from foreigners. These foreign merchants were accustomed to follow certain practices in dealing with each other; practices which, in the case of the Lombard merchants, had determined a considerable part of the civil and maritime law. Much of the trading at that time was done in great fairs, which were held on the continent and in England. Many of the merchant courts were held at these fairs to settle differences arising there. Holdsworth, 1 Anglo-Am. Leg. Essays, 289, 298. Merchant courts were also held in the important trading towns. The merchant courts in the Staple Towns (towns designated by the sovereign for trade in particular articles of commerce) were called Courts of the Staple. Id. 302. The unity of the merchant class supplied the body of custom and also caused the reluctance of the merchants to submit to different rules applied by the courts of different sovereigns. The great prejudice of the subjects of the English sovereign against foreign merchants made it seem necessary that the merchants have their own courts in order to have fair trials. (2) The power to administer justice was in the inally it distinguished the contracts of foreign merchants from the contracts of ordinary individuals, construing them hands of the sovereign, who could grant the right to the lords of the manors or to the merchants directly. The right to hold fairs was granted in this way, the necessity for the grant arising from the laws against the admission of foreign merchants. It was to the sovereign's interest to encourage trade and commerce, but at the same time to keep it confined to a few centers of trade. The former was a ready source of additional royal revenue; the latter made it much easier to collect such revenue and made the introduction of foreign trading more gradual. The least expensive inducement that the king could offer to the merchants was the privilege of having their causes tried in their own courts. See Coke, 4 Inst. 272; 3 Blackstone's Com. 33; 27 Edw. III, St. 2 (1353) ch. 2; Malynes' Lex Mercatoria, Part III, ch. xvi, p. 300. The latter purpose was shown in the chartering by the crown of certain towns as "Staple Towns," with a right to hold a court to determine mercantile disputes. The origin and jurisdiction of these courts of the fairs and "of the staple" have been the subjects of several able essays. Brodhurst, The Merchants of the Staple, L. Q. R. xvii, 56, 76; 3 Anglo-Am. Leg. Essays, 16–33; Chas. Gross, Introduction to Select Cases Concerning the Law Merchant, Publications of Seldon Society, vol. 23, p. xvi; A. T. Carter, Early History of the Law Merchant in England, 17 L. Q. R. 122; Scrutton, The Elements of Mercantile Law; Burdick, Contributions of the Law Merchant to the Common Law, 2 Col. L. R. 470–485. But the rapid increase in the number of English merchants, the decline of the guild merchant, and the constantly increasing strength of the crown, and, therefore, of the common-law courts, gradually resulted in the decision of mercantile, as well as other, causes by the commonThe eagerness of the common-law courts, headed by Lord Coke, to cut off the jurisdiction of the admiralty courts in any except strictly maritime causes, hastened the assumption, by the common-law courts, of jurisdiction in these commercial cases. HoldsWorth, 3 Anglo-Am. Leg. Essays, 308-21, 319. But this assumption of jurisdiction by the common-law courts did not immediately make the customs of the merchants applicable as rules of conduct to all persons. Says Scrutton, Elements of Mercantile Law, III: "You had to show yourself to be a merchant before you got into the mercantile court; and, until about two hundred years ago it was still necessary to show yourself to be a merchant in the common-law courts before you could get the benefit of the law merchant." Moreover, for a long time mercantile causes were decided in the common-law courts, by special juries of merchants. "It was the habit to leave the custom and the facts to the jury without any directions in point of law, with the result that the cases were rarely reported as laying down any particular rule, because it was almost impossible to separate the law courts. utes of the Plantagenets and the Tudors, though its sub'stantial adoption into the law took place much later. Orig 1 Magna Charta, c. 30; Acton Burnel de Mercatoribus, 11 Edw. I; Statute of Merchants, 13 Edw. I. See, also, 27 Edw. III, cc. 19, 20. See, also, 13 Edw. VI, c. 10, 34 Hen. VIII, cited in Brown, Abr. tit. "Customs," p. 59. 2 It seems more accurate to say that the customs of merchants never became a part of the common law, but have been and still are recognized and enforced by the courts which administer the common law. The customs of merchants are a source of law separate from the two well-recognized sources, the common law of England and statutes. That the customs of merchants are thus an independent source of law is obscured by the practice which now prevails in England and the United States of applying all the law to all classes, by one system of courts. There was a time, however, when all controversies were not decided by the courts of the sovereign. Not only were there special local courts for the manors, the towns and the cities, but there were special courts of the merchants in which disputes between members of that class were heard and determined according to the practices and rules which the merchants were accustomed to follow. Just when these courts of the merchants had their beginning is not known. But it is certain that "as early as the twelfth century in Italy, France, Spain, and Germany, and, in fact, wherever commerce flourished, special courts existed for the trial of mercantile cases." Introduction to Smith's Mercantile Law (11th Ed.) lxxv. There were probably two principal reasons for the existence of these courts: (1) The merchants, in the Middle Ages, were a class sharply distinct from the rest of the community. Trade and commerce was the occupation of but few. In England the business of trading was learned from foreigners. These foreign merchants were accustomed to follow certain practices in dealing with each other; practices which, in the case of the Lombard merchants, had determined a considerable part of the civil and maritime law. Much of the trading at that time was done in great fairs, which were held on the continent and in England. Many of the merchant courts were held at these fairs to settle differences arising there. Holdsworth, 1 Anglo-Am. Leg. Essays, 289, 298. Merchant courts were also held in the important trading towns. The merchant courts in the Staple Towns (towns designated by the sovereign for trade in particular articles of commerce) were called Courts of the Staple. Id. 302. The unity of the merchant class supplied the body of custom and also caused the reluctance of the merchants to submit to different rules applied by the courts of different sovereigns. The great prejudice of the subjects of the English sovereign against foreign merchants made it seem necessary that the merchants have their own courts in order to have fair trials. (2) The power to administer justice was in the |