The next step in the history was that bankers and goldsmiths who held money on deposit began to issue promissory notes payable on demand, that is to say they began to issue Bank Notes. To these again the custom of merchants very speedily gave negotiability, and in the leading case of Miller v. Race, Lord Mansfield decided that bank notes also were negotiable instruments, holding that it was necessary for the purposes of commerce that their currency should be established and secured. And by the custom of merchants, bank notes have acquired a superior position to promissory notes. They are payable to any holder who may present them without the necessity of his indorsing them. There is a legend that the Bank of England always required persons presenting their bank notes to indorse them, and that on one occasion when the clerk of the bank behind the counter spoke in rather a cavalier manner to a gentleman who came in, telling him that he could not be paid unless he wrote his name on the back, the gentleman with the note walked out and promptly sued the Bank of England for dishonoring their promissory note, and of course sued them successfully, with the result of altering the custom at the Bank. Bank of England notes are now legal currency and tender, and in the case of country banks their notes may be, under certain circumstances, treated as currency and payment. The next step was when the banks, besides issuing their promissory notes payable on demand, or bank notes, accepted and honored bills of exchange drawn on them by their customers, payable on demand; that is to say when the system of Cheques came into existence, for a cheque is a bill of exchange drawn on a bank by its customer, payable on demand. To cheques, also, the practice of merchants has affixed certain incidents, as for instance the practice of crossing cheques, which originated partly in the usages of commerce and partly in the Clearing House; and has now been definitely recognized by Act of Parliament. Banks, by the custom of merchants, are also bound to honor cheques if they have funds of the customer in their hands; though a drawee, even though he had funds in his hand, would not be bound to accept a bill of exchange. So far, the law of negotiable instruments, (bills of exchange, promissory notes, cheques, bank notes), has been codified by Parliament in the Bills of Exchange Act, 1882; "an Act to codify the law relating to bills of exchange, cheques, and promissory notes," and on all matter treated on by that Act the Law Merchant is now to be found in its clauses, and not in the cases and customs on which those clauses were founded. CHALMERS' DIGEST OF BILLS OF EXCHANGE, ETC. [From the Introduction to the Third Edition.] The results of this formation of the law by custom are instructive. A reference to Marius' treatise on Bills of Exchange, written about 1670, or Beawes' Lex Mercatoria, written about 1720, will show that the law, or perhaps rather the practice, as to bills of exchange, was even then pretty well defined. Comparing the usage of that time with the law as it now stands, it will be seen that it has been modified in some important respects. Comparing English law with French, it will be seen that, for the most part, where they differ, French law is in strict accordance with the rules laid down by Beawes. The fact is, that when Beawes wrote, the law or practice of both nations on this subject was uniform. The French law, however, was embodied in a Code by the " Ordonnance de 1673," which is amplified but substantially adopted by the Code de Commerce of 1818. Its development was thus arrested, and it remains in substance what it was 200 years ago. English law has been developed piecemeal by judicial decision founded on custom. The result has been to work out a theory of bills widely different from the original. The English theory may be called the Banking or Currency theory, as opposed to the French or Mercantile theory. A bill of exchange in its origin was an instrument by which a trade debt, due in one place, was transferred in another. It merely avoided the necessity of transmitting cash from place to place. This theory the French law steadily keeps in view. In England bills have developed into a perfectly flexible paper currency. In France a bill represents a trade transaction; in England it is merely an instrument of credit." English law gives full play to the system of accommodation paper; French law endeavors to stamp it out. A comparison of some of the main points of divergence between English and French law will show how the two theories are worked out. In England it is no longer necessary to express on a bill that value has been given, for the law raises a presumption to that effect. In France the nature of the value must be expressed, and a false statement of value avoids the bill in the hands of all parties with notice. In England a bill may now be drawn and payable in the same place (formerly it was otherwise, see the definition of bill in Comyns' Digest). In France the place where a bill is drawn must. 5 This passage was written in 1878. when the first edition was published. The theory it advances is independently confirmed by the excellent introduction to the Portuguese Commercial Code in the French edition, published by the Comité de Législation Etrangère. See p. xxix. "A bill of exchange is when a man takes money in one country or city upon exchange, and draws a bill whereby he directs another person in another country or city to pay so much to A. or order for value received of B., and subscribes it." be so far distant from the place where it is payable, that there may be a possible rate of exchange between the two. A false statement of places, so as to evade this rule, avoids the bill in the hands of a holder with notice. As French lawyers put it, a bill of exchange necessarily presupposes a contract of exchange. In England, since 1765, a bill may be drawn payable to bearer, though formerly it was otherwise. In France it must be payable to order; if it were not so, it is clear that the rule requiring the consideration to be expressed would be an absurdity. In England a bill originally payable to order becomes payable to bearer when indorsed in blank. In France an indorsement in blank merely operates as a procuration. An indorsement, to operate as a negotiation, must be an indorsement to order, and must state the consideration; in short, it must conform to the conditions of an original draft. In England, if a bill be refused acceptance, a right of action at once accrues to the holder. This is a logical consequence of the currency theory. In France no cause of action arises unless the bill is again dishonored at maturity; the holder, in the meantime, is only entitled to demand security from the drawer and indorsers. In England a sharp distinction is drawn. between current and overdue bills. In France no such distinction is drawn. In England no protest is required in the case of an inland bill, notice of dishonor alone being sufficient. In France every dishonored bill must be protested. Grave doubts may exist as to whether the English or the French system is the soundest and most beneficial to the mercantile community, but this is a problem which it is beyond the province of a lawyer to attempt to solve. (b) Other negotiable paper. SCRUTTON, ELEMENTS OF MERCANTILE LAW. 1891. [From Chapter II.] There are, however, other negotiable instruments besides those which have been dealt with by the Act of 1882, and to such instruments the rules of the Common Law and the customs of the Law Merchant are still applicable. Fresh usages may be introduced, or new documents may be proved by the usage of merchants to have the two marks of negotiability already stated. The usage that is proved must, however, be a usage of English merchants. In the case of Picker v. The London and County Bank,' an attempt was made to This rule is said to be now obsolete; but the Code remains unaltered, • Ante, p. 26. [Herein pp. 25-26. — H.] 118 Q. B. D. p. 515, treat certain Prussian bonds as negotiable instruments in England; but the only evidence that was offered was that those bonds were negotiable by the custom of Prussian merchants, and the Court unanimously rejected the evidence as insufficient. As it was pointedly put, the fact that in Africa cowries are negotiable instruments does not therefore bind the English Courts to accept cowries as negotiable instruments in England, and the same principle has always been applied in any attempt to prove the negotiability of instruments in England; the usage proved must be a usage of English merchants. It is not necessary that that usage should be from time immemorial, Mr. Justice Blackburn did, indeed, in one case lay down that such a usage, existing as part of the ancient Law Merchant was necessary; but in the later case, Goodwin v. Robarts, both the Court of Appeal and the House of Lords held that to be too narrow a limitation, deciding that the Law Merchant might be added to by proof of recent usage, and thus that new negotiable instruments might be from time to time created. We find in the Reports a series of illustrations of these principles of law in the various documents that have been from time to time proved or not proved to be negotiable instruments. For instance, in the case of Glynn v. Baker, East India bonds were held not to be negotiable in the absence of any evidence that they customarily passed by delivery; but the decision in the Courts was immediately remedied by Parliament, who passed an Act giving to East India bonds the character of negotiability." In Dixon v. Bovill, a document called an "iron warrant," running "I will deliver one hundred tons of iron when required after Sept. 18th to the party lodging this document with me," was held by the House of Lords not to be a negotiable instrument, and not therefore to pass by delivery, there being no evidence before the Court of any mercantile usage affecting such documents; it is, however, very probable that if the question of iron warrants came before the Court at the present day, they could be abundantly proved to be negotiable. To come to more recent cases, in The Fine Arts Society v. The Union Bank, it was held that Post Office orders crossed for collection by a bank were not negotiable instruments; and in Crouch v. The Credit Foncier debenture bonds of an English company were held not negotiable because the only proof of usage tendered was 2 Crouch v. Credit Foncier, L. R. 8 Q. B. 374, followed on this by Manisty, J., in 20 Q. B. D. at p. 239. 3 L. R. 10 Ex. at p. 355; 1 App. C. at p. 494. 413 East, 509. 551 Geo. III. c. 64. • 3 Macqueen's Reports, p. 1. 717 Q. B. D. 705. $ L. R. 8 Q. B. D. 374. 3 one originating in the last twenty years. On the other hand, in Gorgier v. Mieville, certain foreign bonds were held to be negotiable instruments on proof that bonds of that description were sold in the English market, and passed from hand to hand daily like Exchequer bills. And that case was followed in Goodwin v. Robarts,1 in which certain scrip, which on the payment of all instalments due was to be exchanged for bonds, was held a negotiable instrument on proof of usage of the English Stock Exchange. There is one other case I wish to mention to you as an illustration of the Common Law maxim I have already reminded you of, that a man cannot give what he has not got, and therefore if he has not got a title cannot give it. The recent case of Barton v. The London and North Western Railway is at the present time exciting very great apprehension in commercial cireles. Mr. Barton held certain shares in the L. & N. W. Railway which passed to his executors, and one of the executors by forging the signature of the other executor sold those shares some twelve or thirteen years ago. The purchaser took the transfer with the forged signature to the L. & N. W. Railway Company, who registered it, and for the twelve or thirteen years the purchaser has been registered for those shares and has received the dividends. The executrix whose signature was forged for a lady was concerned did not find out the absence of these shares for the thirteen years, but on finding it out and on proof of the forgery, the L. & N. W. Company were ordered to replace her name on the register, and the unfortunate purchasers have had to give up their shares, and to pay back the dividends which they have received during the thirteen years. A man cannot give what he has not got. The people who purported to pass these shares had not got them to give. At present agitation, if one may use such a word, is taking place on every English Stock Exchange for an Act which will protect the people whose transfers have been registered by Railway Companies against the rules of the Common Law.* 93 B. & C. 45. 1 L. R. 10 Ex. 2 For recent cases in which the question of negotiability was raised see Lord Sheffield v. London Joint Stock Bank, L. R. 13 App. C. 333, and Colonial Bank v. Williams, 15 App. C. p. 267. L. R. 24 Q. B. D. 77. See also on the subject of negotiable instruments, other than bills, notes and checks, Chalmers' Bills of Exchange Act (5th ed.), pp. 312-327; 2 Ames' Cases on Bills and Notes, pp. 748-784; 2 Daniel on Neg. Inst., pp. 496-595, 730 |