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On the forfeiture of the bond, the whole penalty was formerly recoverable at law : but courts of equity would not permit a man to acquire any collateral advantage from the bond,-as, e.g., to take more than his principal, interest, and costs, where the bond was conditioned for the payment of money ; or to recover more than the amount of the damage actually sustained, where the bond was conditioned for the performance of (or abstention from) some act. With respect to common money bonds, this principle of equity was in due course introduced into the practice of the courts of law; and such practice was afterwards confirmed by statute (e). On the same equitable principle, with respect to bonds conditioned for the performance of (or abstention from) some act, it was enacted by the statute 8 & 9 Will. III. c. 11 (the provisions of which act were recognised and preserved by The Common Law Procedure Act, 1852, and are adopted into the new practice under the Judicature Acts) that in every action upon a bond of that character, the jury shall inquire of the damages which the plaintiff has actually sustained from the breach of the condition ; and though (for his better security in the event of any future breach) he is still in such a case allowed to enter up judgment for the whole penalty, yet he is prevented from taking out execution to a larger amount than the damages which the jury had assessed (F). In the case of a common money bond, a claim can be made by specially indorsed writ under Order 3, rule 6 of the Rules of the Supreme Court (9).

Contracts secured by penalties are of an analogous character, being covenants to do (or abstain from doing) certain acts, the covenant providing that, in the event of its being broken, the covenantor shall pay to the covenantee a sum of money ; and upon contracts of this nature, the question usually arising is, whether the sum shall be considered as a penalty, or as liquidated damages. This is a distinction of considerable importance, because if (e) 4 & 5 Anne, c. 3.

(9) Gerrard v. Clowes, [1892) (f) R. S. C., 0. xiii., r. 14. 2 Q. B. 11.

the sum is a penalty, then the covenantee is compelled to limit his erecution to the amount of the damages which the jury shall have assessed ; but if the sum is liquidated damages, he is entitled to judgment (and also to execution) for the entire sum, the parties themselves being in that case deemed to have settled and agreed the damages.

The question whether, in any particular case, a given sum is a penalty or is liquidated damages, is often difficult to determine, depending (as it does) partly upon the nature and terms of the contract itself, and partly upon considerations of equity. If the sum is expressed and intended by the parties themselves to be a penalty, the court will always so regard it ; but the expressed intention of the parties to stipulate for liquidated damages is not conclusive of their real intention. For if the sum appears to be essentially a penalty, the law will so construe it in disregard of the expressed intention (h). Therefore, where the agreement is to pay a certain sum of money, with a proviso for the payment in case of default) of a much larger sum of money by way of liquidated damages, the larger sum will be treated as a penalty (). Where a contract contains a variety of provisions, and provides for the payment of a specified sum by way of liquidated damages, upon breach of all or any one of the provisions, that sum will be held a penalty (k). On the other hand, where a sum is agreed to be paid as compensation for doing or not doing some one particular act, e.g., where a man engages with a woman to marry nobody but her, and (on marrying with any other woman) to pay her 1,0001., the party will usually be entitled to judgment and execution for the entire sum, as liquidated damages (1).

(h) Lord Elphinstone v. Monk (k) Willson 1. Love, [1896] I land Iron Co. (1886), L. R. 11 App. Q. B. 626. Ca. 332 ; Wallis v. Smith (1882), 21 (1) Lowe v. Peers (1768), 4 Burr, Ch. D. 243.

2225 ; Law v. Redditch Local (Hatton V. Harris, [1892] Board, [1892] 1 Q. B. 127. A. C. 547.

CHAPTER V.-SECTION IX.

OF BILLS OF EXCHANGE, AND PROMISSORY NOTES.

Bills and notes are a species of written mercantile instruments by which men enter into contracts for the payment of money ; and the whole law regarding these has been codified by the Bills of Exchange Act, 1882. We shall consider, first, Bills: and secondly, Notes.

(1.) BILLS OF EXCHANGE :—These were originally invented for the more easy remittance of money from one country to another, but are now of almost universal use in all pecuniary transactions. A bill of exchange is defined by the · Bills of Exchange Act, 1882, as “an “ unconditional order in writing addressed by one person “ to another, signed by the person giving it, and 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 or “ the bearer.” Where the specified person (payee) is a fictitious or non-existing person, the bill is (in effect) payable to bearer (a).

A bill of exchange is frequently called a draft ; the person who makes it is called the drawer ; the person on whom it is made is called the drawee ; and the person in whose favour it is made is called (when a third person) the payee. But the drawer and the payee may be (and very commonly are) one and the same person.

Bills of exchange are either inland or foreign,-an inland bill being one which is, or on the face of it purports to be, drawn and payable within, or drawn there upon any

(a) Section 7 (3) ; Clutton v. Attenborough, [1897] A. C. 90.

person resident within, the United Kingdom (which for this purpose includes the islands of Man, Guernsey, Jersey, Alderney, and Sark, and the islands adjacent to any of them, being part of the king's dominions) (b). A foreign bill is any other bill, that is to say, a bill which is either drawn by a person residing abroad upon some person within the United Kingdom and made payable within the United Kingdom, or vice versa ; or which is both drawn and payable abroad (c). Formerly, foreign bills of exchange were much more regarded in the eye of the law than inland ones, being thought of more public concern in commerce ; but for a very long time there has not been any difference between them as regards their material legal incidents, -although of course, in minor matters (e.g., as regards stamps, etc.), there are still certain differences. .

A bill of exchange, payable to beurer or to order, is said to be negotiable-a term which in law is applicable to any instrument the right of action on which is, by exception from the common rule, freely assignable from man to man, either by simple delivery or (as the case may require) by indorsement coupled with delivery (el). The indorsement of a bill consists in writing one's name on the back thereof; and such indorsement may be either in blank, or else in full, or special (sections 32--34). It is in blank, if the payee simply writes his own name ; in full, if he writes “pay X. or order," and signs his own name thereto,—but in either case he delivers over the bill so indorsed (section 21). The first indorsee may in like manner indorse to another, and so on, in infinitum, until the bill is due, and even when it is overdue ; but an overdue bill is no longer strictly negotiable (s. 36). If the bill be payable simply to a person named, and to him only, and not to order, or to bearer, it

(b) Section 4 (C) Section 8 ; Colonial Bank v. Cady (1890), L. R. 15 App. Ca. 267.

(d) Goodwin v. Robarts (1875), L. R. 10 Ex. 337; 1 App. Ca. 476 ; London Joint Stock Bank v. Simmonds, [1892] A. C. 201.

is not negotiable at all ; and, on the other hand, if made payable to bearer, -as is often the case with that species of bill which is called a cheque on a banker, -it is negotiable without any indorsement, and by mere .delivery ; and the case is the same where a bill, which was originally payable to order, has been indorsed in Blank by the payee. But note, that although an instrument may be negotiable by the law of a foreign country, it is not necessarily negotiable also in this country (e); also, that post-office orders and postal orders are not negotiable ($), although, for purposes of collection, they may be (and very commonly are) indorsed to a banker. An instrument can only be or become negotiable, by statute or by custom of merchants (g).

With regard to crossed cheques (including “stock dividend warrants"), it has been provided, by the Bills of Exchange Act, 1882, ss. 76—82, re-enacting with amendments the like provisions contained in the Crossed Cheques Act, 1876, as follows, that is to say :-(1.) That when a cheque is crossed “generally” (ie., without naming any particular banker to whom it is to be paid), the banker on whom it is drawn shall not pay it otherwise than to a banker ; and where it is crossed “specially ” the banker shall pay it only to the particular banker to whom it is crossed, or to his agent for collection : (2.) That where a banker has, in good faith and without negligence, paid according to its tenor a cheque, crossed either “ generally” or “specially," both he and (if the cheque has come into the hands of the payee) the drawer, shall be in the same position as they would respectively have been in, if the amount of the cheque had been paid to the true owner thereof. But, on the other hand, if

(e) London and County Banking Co. v. London and River Plate Bank (1887), 20 Q. B. D. 232.

(1) Fine Art Society v. Union

Bank of London (1886), 17 Q. B. D. 705.

(9) Goodwin v. Robarts, supra; Crouch v. Credit Foncier (1873), L. R. 8 Q. B. 374.

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