instruments, and by virtue of this they became part of the currency of the country, passing by mere delivery, and conferring an absolute title on the bearer or actual physical holder.

Apart from the question of discharge by the party primarily liable when a bill becomes no longer negotiable, the characteristic of negotiability may in some cases be removed, and an instrument, previously negotiable, may be made not negotiable or made negotiable subject only to the fulfilment of certain specified conditions. For example, a crossed cheque (whether payable to order or to bearer), which is a negotiable instrument, may be made not negotiable by the addition of these two words to the crossing on its face. An open order cheque, which in its origin is negotiable by indorsement and delivery, may be made not negotiable by the addition to the payee's name of words prohibiting transfer, as for instance, "Pay James Brown only." Similarly the negotiability of an open or a crossed cheque may be removed if it is restrictively endorsed, although it is to be noted that where a restrictive indorsement permits further transfer, then, although the instrument loses its negotiability, it is nevertheless still transferable.

The true owner of a Negotiable Instrument is the person who is entitled to the property in the instrument. There is a presumption that the bearer of an instrument payable to bearer is the true owner, and therefore any negotiation by him is valid and effectual, as far as third parties, acting in good faith, are concerned. The true owner of an instrument payable to order is generally the person to whom the instrument is by its terms made payable. A holder in due course is always a true owner, even in respect of a stolen negotiable instrument which has been transferred to him. The person from whom the instrument was stolen has no rights over the instrument in precedence of those of the holder in due course.

It must be borne in mind that an absolute title to a negotiable instrument, good against all the world, is not passed unless the instrument is taken for valuable consideration, and in good faith. Valuable consideration in regard to bills of exchange (w) is always presumed until the contrary is proved, and although, in the case of an accommodation bill (i.e., one which a person has signed without receiving value therefor, or for the purpose of lending his name to another party), valuable consideration is absent as between the party accommodating and the party accommodated, yet as soon as value has been given for the bill a subsequent holder obtains a valid title good against everyone, including the accommodating party. Good faith is defined by section 90 of the Act. Any mala fides must be proved very clearly in order (w) See post, p. 109.

to dispute the title, and the fact that a person has not exercised great caution, or has shown negligence, will not necessarily be sufficient to upset the title. This, however, depends on the circumstances. For instance, in London Joint Stock Bank v. Simmons (1892), a broker who held negotiable instruments belonging to his clients, in fraud of the owner pledged certain of them with his bankers, who made no inquiries as to whether they were his or whether he had authority to deal with them. The broker absconded and the bankers realized the securities. The true owner, who had merely left the securities with the broker in the ordinary way of business, brought an action against the bankers; but it was held that, there being no circumstances to create suspicion, the bankers were entitled to realize the securities and retain the proceeds. But in a similar case, Sheffield v. London Joint Stock Bank (1888), the bankers had notice that the broker was himself only a pledgee re-pledging, and therefore they could not get a better title than he himself had.

Instruments recognized as Negotiable.

In the Introduction it was stated that the custom of merchants became part of the law merchant, and was enforced and administered by the Courts. This applies particularly to negotiable instruments, and the Courts, in several modern decisions, have judicially recognized the general usage of merchants in regarding as negotiable various instruments payable to bearer. In the case of Bechuanaland Exploration Co. v. London Trading Bank (1898) debenture bonds to bearer under the seal of a company were legally recognized as negotiable when it was shown that by mercantile usage they were so treated. In the more recent case of Edelstein v. Schuler & Co. (1902), it was not only held that British and foreign bearer debentures were negotiable instruments, but it was stated that the Court would take judicial notice of the negotiability of such instruments, without requiring evidence to prove the usage of merchants in regard to them. Certain instruments are regarded as negotiable by Acts of Parliament, notably Bills, Cheques, and Notes. The negotiability of others has been recognized from time to time by legal decisions in the Courts based on evidence of mercantile usage.

Amongst English instruments now legally recognized as negotiable are:-Bills of Exchange, Promissory Notes, Cheques, Exchequer Bills, East India Bonds, Bank Notes, Dividend Warrants, Share Warrants, Bankers' Circular Notes, Debentures payable to Bearer, and certain scrip and bonds. The tendency is for the list of negotiable instruments to be increased when it is shown that by the custom of merchants an instrument is transferable by delivery and that it passes free from defects in the title of the

transferor. Foreign instruments are negotiable here only in so far as they are so recognized by English general mercantile usage. Bills of Lading, Post Office Orders, Share Certificates and Transfers are not negotiable, although some, e.g., bills of lading, have some of the characteristics of negotiability.

The most important forms of negotiable instruments which require detailed consideration are Bills of Exchange, Promissory Notes, and Cheques. The law relating to them has been collected and codified in the Bills of Exchange Act, 1882, which is set out in the Appendix and is referred to in the remainder of this chapter as "the Act." Short amending Acts were passed in 1906 and 1917, of which mention will be made hereafter.

BILLS OF EXCHANGE

The relative sections of the Act given in Appendix A should be constantly perused in connection with the following paragraphs. Section references are to the sections in the Act.

Definition.

Every word of the definition of a bill, as given in section 3 of the Act, is important, and every requirement must be fulfilled, for an instrument which does not comply with the conditions is not a bill of exchange.

The Essentials of a Bill are therefore that:(1) It must be in writing.

(2) The order must be unconditional; i.e., there must be no conditions attached to the making of the payment. (3) It must be addressed by one person to another, and it must be imperative in terms, i.e. it must be an order. (4) It must require payment to be made to a specified person or to bearer.

(5) If the order is not to pay on demand, the time of payment must be fixed or determinable.

(6) It must order payment of a certain sum of money only, i.e. money as defined by the Coinage Act, 1870.

(7) It must be signed by the drawer.

The writing may be in ink or in pencil, and may be printed in whole or in part. The bill may not order any act to be done other than the payment of money; for example an instrument running, Pay A. B. or order and deliver to him the attached documents, would not be a bill. Reference should be made to section 17 (2) in this connection. A bill may not order payment to be made out of a particular fund, but a bill is not conditional if it contains (a) an indication of the particular fund from which the drawee may reimburse himself or a particular account to be debited, or (b) a statement of the transaction giving rise to the

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instrument [Section 3 (3)]. An instrument made payable to or order," the blank not being filled in, is not a legal bill of exchange, but it was decided in Chamberlain v. Young (1893) that it will be construed as payable to the order of the drawer, and if the drawer indorses it, it becomes a valid bill of exchange.

It is to be noted that many orders for the payment of money which do not come within the above definition, and are therefore not bills within the meaning of the Act, nevertheless come within the wider definition given in the Stamp Act, 1891, and require to be stamped as bills of exchange. The provisions of the latter Act are saved by section 97 of the Bills of Exchange Act, 1882.

Form.

No set form of words is necessary in a bill of exchange, as long as it conforms with the foregoing requirements, but, in practice, the form of an inland bill does not differ materially from that given on p. 334.

To every bill there are usually three parties, although, as will be indicated hereafter, one person may fill the rôle of two parties. In the specimen given, Arthur Brown is the "drawer "of the bill; Ernest Franks is the "drawee"; and Charles Davies is the payee." If the drawee agrees to pay the bill on the due date, he accepts," that is, he writes the word "Accepted" and his signature across the face of the bill. He is then termed the "acceptor." Until he does this he is not a party to the bill, and is in no way liable thereon. His signature alone, without the word "accepted," is sufficient, but this is not usual, as the date and also the place of payment are generally added. The drawee must be named or otherwise indicated with reasonable certainty, and a bill may be addressed to two or more drawees, whether partners or not; but if an instrument is addressed to two drawees in the alternative or in succession, it is not a bill of exchange. If the drawer and drawee are the same person, or if the drawee is a fictitious person, or a person not having capacity to contract, the instrument may be treated as a bill of exchange or as a promissory note. Where in a bill drawer and drawee are the same person, and the bill is dishonoured, the holder need not give notice of dishonour.

Unless a bill is payable to bearer, the payee must be named or otherwise indicated with reasonable certainty, and it may be made payable to two or more payees jointly or, in the alternative, to one of two or one of several payees, or to the holder of an office for the time being. The drawer may insert his own name as payee, or he may insert the words, " pay to me or my order," in which case he fills the position of two parties, being both drawer and payee. The bill may also be drawn payable to the drawee

(e.g., Pay to your own order "), in which case it must be endorsed by him before it can be negotiated. If the payee is fictitious, or is a non-existing person, the bill is treated as being payable to bearer. Cheques made payable to impersonal payees, such as "Wages or order," "Cash or order," are frequently regarded as payable to bearer, although in practice bankers may require the indorsement of the cashier, or other person who receives the money, as evidence of payment. A banker who has been accustomed to treat such cheques as payable to bearer, cannot, however, discontinue to do so without incurring liability to his customer. On the other hand, cheques payable to such impersonal payees as "Income Tax or Order," "Borough Rates or Order," should not be treated as payable to bearer, and the discharge of a recognized official should be required.

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An instance of what will amount to a fictitious person is found in the important case of Bank of England v. Vagliano (1891). It was held in this case that the payee is fictitious wherever the name inserted as that of the payee is so inserted by way of pretence merely, without any intention that payment shall be made only in conformity therewith, that it makes no difference whether the name inserted as that of the payee is that of an existing person, or of a person who did once exist, or of a person who never existed, and that the bill may in such case be treated by a lawful holder as payable to bearer. the other hand where, as in Vinden v. Hughes (1905), a principal signs cheques to the order of actual customers for sums which his clerk had falsely told him were owing, such cheques are not treated as payable to bearer. In this instance, the clerk obtained such cheques and, having forged the indorsements, obtained cash from tradesmen for the cheques. It was held that the employer could recover the value of the cheques from the tradesmen who had cashed them, as the names of the payees were not used by way of pretence only; consequently the payees were not fictitious, and the cheques could not be treated as payable to bearer.

As a rule, the amount for which the bill is drawn is expressed in figures in the top left-hand corner, as well as in words in the body of the instrument. Where there is a discrepancy between the two amounts, the sum denoted by the words is the amount payable. The sum payable is deemed "certain" although it is required to be paid (a) with interest, (b) by stated instalments, (c) by stated instalments with a provision that upon default in payment of any instalment the whole shall become due, (d) according to an indicated rate of exchange or according to a rate of exchange to be ascertained as directed by the bill.

A bill is not invalid by reason that it is un-dated, ante-dated,