SECTION III. ON CREDIT, BILLS, AND NOTES. We propose in this section to give only such parts of the Law relating to Credit, Bills of Exchange, and Promissory Notes as it is indispensable that a banker should be familiar with in his daily business. It will be seen that changes of great practical importance have been made in the Law of Credit by the Supreme Court of Judicature Act. DEFINITIONS and GENERAL PRINCIPLES. On the Origin and Nature of CREDIT or DEBT. 1. 1. When one person "borrows" money, or buys goods from another "on credit," an Obligation, or Contract, is created between these two persons, consisting of two parts— (a) A RIGHT TO DEMAND payment is created in the person of the lender or seller. (b) A DUTY TO PAY is created in the person of the bor rower or buyer. 2. The lender or seller's Right to Demand payment is termed a CREDIT: and the borrower's or buyer's Duty to pay is termed a DEBT. 3. But in law and common usage the Right to demand payment is also called a DEBT. 4. The word Debt is, therefore, used indiscriminately to mean the Right to demand as well as the Duty to pay: and it must always be observed from the context of the passage in which sense it is used. 5. Hence CREDIT or DEBT in Legal, Commercial, and Economical language, means a Right of Action against a person for a sum of money. 6. Such a Right, Credit, or Debt is a Chose-in-action, and is included under the term Goods and Chattels. Sheppard. A grand Abridgment of the Common and Statute Law of England. 1675. p. 329. Ford & Sheldon's Case, 12 Co. Rep., 2. Ryal v. Rowles, Ves., sen., 348. Stephen's Blackstone, Vol. I., ch. 5. 7. The person who owes the money is termed the DEBTOR: the person to whom it is owed is termed the CREDITOR, and sometimes the DEBTEE. On the TRANSFER of a CREDIT, or DEBT. 2. 1. A Credit, Debt, or Chose-in-action may be transferred orally by the Creditor to another person with the consent of the Debtor: a trust is then created in the person of the Debtor, and the transferee may sue him in his own name. Bracton, Lib. iii., c. 2., s. 13. Tatlock v. Harris, 3 T. R., 174. Baker v. Gerard 2. If a debtor creates an Obligation assignable or transferable to bearer, such an Obligation may be sold or transferred; and the assignee, or bearer, may sue the Debtor in his own name. Three Priests' Case, Y. B., 41 Edw. III. (1368), 27. Brook, Dyer, 65, 1. Maund v. Gregory, 7 Co. Rep., 28b. v. Bowden, Hetl., 80. Shelden v. Hentley, 2 Show., 1601. Hinton's case, 2 Show., 235. Bromwich v. Lloyd, 2 Lutw., 1583. Williams v. Williams, Carth., 269. Pearson v. Garrett, Comb., 227. Lambert v. Oakes, 1 Ld. Raym., 443. Carter v. Palmer, 12 Mod., 380. Miller v. Race, 1 Burr., 452. Grant v. Vaughan, 3 Burr., 1516. Keene v. Beard, 8 C. B., N. S., Goodwin v. Robarts, L. R., 10 Ex., 357. 372. 3. "Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any Debt, or other legal Chose-in-action, of which express notice in writing shall have been given to the Debtor, Trustee, or other person from whom the assignor would have been entitled to receive or claim such Debt, or Chose-in-action, shall be, and be deemed to be effectual in law (subject to all equities which would have been entitled to priority over the right of the assignee if this Act had not passed) to pass and transfer the legal right to such Debt, or Chose-in-action, from the date of such notice, and all legal and other remedies for the same, and the power to give a good discharge for the same, without the concurrence of the assignor. "Provided always that if the Debtor, Trustee, or other person liable in respect of such Debt, or Chose-in-action, shall have had notice that such assignment is disputed by the assignor, or any one claiming under him; or of any other opposing or conflicting claims to such Debt, or Chose-in-action, he shall be entitled if he think fit, to call upon the several persons making claim thereto, to interplead concerning the same; or he may if he think fit pay the same into the High Court of Justice, under and in conformity with the provisions of the Acts for the relief of trustees. 36 & 37 Vict. (1873), ch. 66, s. 25, § 6. "Generally in all matters in which there is any conflict or variance between the Rules of Equity and the Rules of the Common Law with reference to the same matter, the rules of Equity shall prevail. 36 & 37 Vict. (1873), ch. 66, s. 25, § 11. Definitions of Instruments of Credit or Debt. 3. 1. Any written record of a fact is termed an INSTRUMENT. Any written evidence of a Debt is termed an INSTRUMENT of CREDIT or of DEBT. 2. A written contract by which one person is bound to pay (1) a certain sum of money; (2) to a certain person; (3) at a certain time; is termed an OBLIGATION, or SECURITY FOR MONEY, or a VALUABLE SECURITY. 24 & 25 Vict. (1861), c. 96, s. 1. 3. A written ORDER from one person to another who owes, or appears to owe, him money as a DEBTOR, directing him to pay absolutely and at all events (1) a certain sum of money; (2) to a certain person; (3) at a certain time; is, in modern language termed a BILL of EXCHANGE, or, shortly, a BILL. 4. A written PROMISE made by one person to pay absolutely and at all events (1) a certain sum of money; (2) to a certain person; (3) at a certain time; is in modern language termed a PROMISSORY NOTE, or, shortly, a NOTE. 5. A written ORDER addressed by one person to another, who holds a fund not as his own property, but merely as the AGENT, BAILEE, TRUSTEE, or SERVANT of the writer, to pay a sum of is termed a DRAFT, or ORDER for the payment of money. money, Row v. Dawson, 1 Ves., sen., 331. 6. A mere acknowledgment of a debt, not containing any promise to pay, is usually termed an I O U. 7. A Bill, Note, or IO U is always a chose-in-action, that is, it operates as a charge, or Credit against the person of the Debtor. 8. A Draft, or Order, is always a chose-in-possession, and it operates as a charge, or Credit against the fund. Row v. Dawson, 1 Ves., sen., 331. Definitions of Parties to an Instrument of Credit. 4. 1. In a Bill the person who addresses the order is termed the DRAWER the person to whom he addresses it is termed the DRAWEE. 2. If the Drawee consents to pay the order he must subscribe his name to it, usually with the word "accepted" before it; he is then termed the ACCEPTOR. 3. In a Note the person who makes the promise is termed the MAKER. 4. The person to whom a Bill, Note, or Draft is made payable is termed the PAYEE. 5. The Acceptor of a Bill and the Maker of a Note is termed the PRINCIPAL DEBTOR or OBLIGOR. 6. Before the 36 & 37 Vict. (1873), c. 66, came into effect, unless the Obligor of a Bill or Note expressly made it payable to the payee, or order, the instrument could not be transferred so as to enable the transferee to sue the obligor at law in his own name: and such an instrument was termed non-Negotiable. Since that Act came into effect on Nov. 1, 1875, this is no longer the case, and any instrument of Credit or Debt may now be transferred so that the transferee may sue the Obligor in his own name. 7. If, however, the instrument is made payable to the payee "or order," it cannot be transferred without the payee's order; this the payee does by writing his name on it, usually on the back of it: hence, this signature is termed the INDORSEMENT. The payee is then termed the INDORSER, and the person to whom he delivers it is termed the INDORSEE. 8. The person who has the lawful possession of the instrument, either actual or constructive, and is entitled to sue the parties to it, is termed the HOLDER. Definitions of Terms relating to the Instrument. 5. 1. To "DRAW," "MAKE," "ACCEPT" (a) or "INDORSE' (b) a Bill, Note, or Draft, means besides writing the instrument, or the name on it, as the case may be, to deliver it to some person, or his agent, as his property. (a) Cox v. Troy, 5 B. & Ald., 474. (b) Rex v. Lambton, 5 Price, 428. Brind v. Hampshire, 1 M. & W., 365. Adams v. Jones, 12 A. & E., 455. Marston v. Allen, 8 M. & W., 494. Green v. Steer, 1 Q. B., 707. Bell v. Lord Ingestre, 12 Q. B., 317. Lloyd v. Howard, 15 Q. B., 995. Barber v. Richards, 6 Exch., 63. 2. To "ISSUE" a Bill, Note, or Draft, is to deliver it to some one who thereby acquires a right of action on it. 3. To "PRESENT" a bill for "ACCEPTANCE' or "SIGHT" (a) is to bring it to the Drawee, and to request him to undertake to pay it. (a) Campbell v. French, 6 T. R.,'200. 4. To "PRESENT" a Bill or Note for "PAYMENT" is to bring it to the Principal Debtor and demand payment of it. 5. To "COLLECT" a Bill, Note, or Draft, is to present it for payment as agent for the holder. 6. To "RETIRE a Bill or Note is for one of the parties to it to buy it up and so withdraw it from circulation. Elsam v. Denny, 15 C. B., 87. 7. To "DISCOUNT" a Bill or Note is to buy from the holder of it the right to receive the money due upon it. 8. To" DOMICILE" a Bill or Note is to state in it the place where it is payable. Lowndes v. Anderson, 13 East., 130. Robarts v. Tucker, 16 Q. B., 579. 9. To "UTTER" a Bill or Note is for a person either himself, or by his agent, to use it in any way whatever to obtain Money or Credit by means of it. Rex v. Shukard, R. & R., 200. 59. Reg. v. Ion, 2 Den., C. C., 475. Reg. v. Radford, 1 Den., C. C., 10. "DAYS of GRACE" are days which mercantile. usage and law allow the obligor on certain Notes and Bills to pay them in, beyond the day limited in the instrument itself. 11. If a person merely writes a Bill or Note, or signs his name on one, and then retains it in his own possession, he does not draw, make, accept, or indorse, the instrument as the case may be. 12. But if he then delivers the instrument to another person without any consideration, and for his accommodation only, so that the transferee acquires a property in it, the writer draws, makes, accepts or indorses the instrument as the case may be, but he does not issue it. 13. A Bill, Note, or Draft is not issued until it is delivered to some person, who is entitled to sue all the parties to it. Swan v. Downes v. Richardson, 5 B. & Ald., 674. Bignold ex parte, 2 |