as non-trading corporations, to which the power must be expressly given, or there must be terms in the charter wide enough to include it." In the United States, every private corporation, while acting within the legitimate purposes of its institution, and unless restrained by its charter provisions, has power to make notes, draw and accept bills, and to receive bills and notes and to transfer them by indorsement; the power is implied the charter need not expressly confer it." The reason for the doctrine is that the power of a corporation to borrow money carries with it incidentally the power to bind itself by the usual evidences of indebtedness-negotiable paper;" besides, wherever a corporation is acting within the scope of the legitimate purposes of its institution, all parol contracts, made by its authorized agents, are express promises by the corporation." The power to issue and indorse negotiable paper is not limited to particular kinds of corporations, as in England; nor to corporations created for any particular purpose." The power will not be implied in any case where the business is such that it is not necessary or usual to do so; and, beyond the scope of its legitimate business, a corporation cannot issue, accept, or indorse a negotiable instrument any more than it can make any other contract."1 Where commercial paper is payable to a corporation, the corporation indorsement transfers the property in the same, although the corporation, from want of capacity, may not itself be liable upon its indorsement."2 Where a corporation issues or negotiates commercial paper, when absolutely without power to do so, it cannot be held bound by its signature thereto." Where the issue of negotiable paper by a corporation is not expressly prohibited, but merely in excess of its authority, the corporation will be liable upon the same in the hands of a bona-fide holder; but, when one knows at the time of receiving the paper that its 75 L. R. 1 C. P. (Eng.) 499, 505 (1866). 76 15 N. Y. 64 (1857). 77 Ibid. 781 Cow. (N. Y.) 532 (1823), citing 7 Cranch (U. S.) 299 (1813). 79 24 III. 180 (1860). 80 15 Wall. (U. S.) 566 (1872). issue was beyond the powers of the corporation, he cannot hold the corporation liable thereon." Capacity to incur liability must be distinguished from capacity to transfer. An executed contract is often valid where an executory contract cannot be enforced. An indorsement usually consists of two distinct contracts, one executed, the other executory; by the one, it transfers the property in the bill, and by the other, it involves a contingent assumption of liability on the part of the indorser."" Where, therefore, a negotiable instrument is drawn or indorsed by an infant, or corporation having no capacity or power to incur liability thereon, the drawing or indorsing entitles the holder to receive payment of the instrument, and to enforce it against any other party thereto;" in other words, the executed contract of indorsement, that of transferring the property in the instrument, is complete and valid, while the executory contract, that which imposes a contingent liability for the payment of the instrument upon the indorser, is invalid, and neither an infant indorser nor a corporation indorsing without capacity to incur liability on the instrument can be held liable for its payment by virtue of the contract of indorsement." Municipal corporations, as opposed to private corporations, have no power to issue commercial paper, unless by virtue of express legislation, or by very strong implication from such legislation." CONSIDERATION 28. In our instruction concerning contracts, it is shown that there must be a consideration to support every contract. This is, also, an especial requisite in simple contracts, to which class negotiable instruments belong, and, therefore, a simple contract without consideration is void and no action can be maintained upon it.' In a contract under seal, as a 84 120 N. Y. 145 (1890). 873 H. & N.(Eng.) 222 (1858). 85 Chal. Dig. Eng. B. of E. Act (5th Ed.), p. 60. 86 Eng. & Can. B. of E. Acts, Sec. 22 (2); N. Y. N. I. L., Sec. 41; Pa. N. I. L., Sec. 22. 197 Pa. 363 (1881); see The Law of Contracts. general rule, consideration is implied; in other words, the presence of a seal upon an instrument imports that it is founded upon a consideration.' At common law, this presumption as to sealed instruments was conclusive, but, under the statutes of some states, consideration is not always presumed, and must be proved in some cases. Bills of exchange, promissory notes, checks, and all other instruments, negotiable under the law merchant, are presumed to be founded upon a valid and valuable consideration and prima facie import it, being like sealed instruments in respect to the presumption of consideration, though they are, in fact, simple contracts; that is to say, it is presumed in law, upon the production in a suit of a bill or note, that it was issued or negotiated for a valuable consideration, and the holder need not prove such to be the fact until the opposite party shows that no consideration was given, or that the consideration was illegal or failed, although he does not lose the benefit of the presumption by offering to prove consideration." Even as to a non-negotiable bill of exchange, there exists a prima facie presumption of consideration; but as to a nonnegotiable promissory note, the question of presumptive consideration depends upon the statute as to these instruments in the jurisdiction in which the question may arise.' In a jurisdiction where bills and notes are held to have the same standing at common law, the presumption of consideration arises as to notes, the same as in the case of non-negotiable bills. In Indiana, a written promise to pay money, whether it be a promissory note negotiable by the law merchant, or a note payable upon condition, and, therefore, assignable only under the statute, imports a consideration." In an action between original parties, upon a promise in writing, it does not seem to be necessary to aver a 27 T. R. (Eng.) 475 (1798); 176 Pa. 498 (1896). 371 Pa. 312 (1872). N. Y. N. I. L., Sec. 50; Eng. B. of E. Act, Sec. 30 (1, 2). $153 N. Y. 67 (1897). 610 Mod. (Eng.) 294 (1715). 731 Pa. 506 (1858);.9 Johns. (N. Y.) 217 (1812); 10 Allen (Mass.) 122 (1865); 22 Pa. 26 (1853). 8 51 Ind. 426 (1875); 98 Ind. 245 (1884). consideration.' Blackstone says, "If a man gives a promissory note, he shall not be allowed to aver the want of consideration, in order to evade payment; for every note, from the subscription of the drawer, carries with it an internal evidence of a good consideration.' 9910 WHAT CONSTITUTES CONSIDERATION 29. Valuable consideration is some right, interest, profit, or benefit accruing to the one party to a contract, or some forbearance, detriment, loss, or responsibility, given, suffered, or undertaken by the other." In a negotiable instrument, a valuable consideration may be constituted by (a) any consideration sufficient to support a simple contract, (b) an antecedent debt or liability. Such a debt or liability is deemed valuable consideration whether the instrument be payable on demand or at a future time." Generally, the usual words importing valid consideration are value received. The absence of these words neither destroys the paper's negotiability nor renders it such as cannot be sued upon; for it is well settled that if a bill or note do not contain the words value received, it is, nevertheless, negotiable and an action of debt will lie upon it. The following are considerations sufficient to support a simple contract, and, therefore, constitute value for a negotiable instrument: A cross-acceptance; the forbearance of a debt of a third person; the compromise of a disputed liability; a promise to give up a bill thought to be invalid; a debt barred by the statute of limitations; the obligation on the part of a thief to restore stolen property." The following, being insufficient to support a simple contract, will not support a negotiable instrument: A mere moral obligation; a debt represented to be due though not really due; the giving up a void note; a voluntary gift of money." An antecedent debt or liability is also a sufficient 1 Cranch (U. S.) 367, 446 (1803). 102 Black. Comm. 446. 11 L. R. 10 Ex. (Eng.) 162 (1875). 13 Chal. Dig. Eng. B. of E. Act (5th Ed.), p. 80. 14 Ibid. 12 Eng. B. of E. Act, Sec. 27 (1); N. Y. N. I. L., Sec. 51. consideration for a bill or note. So, if A, being indebted to B in a certain amount, make his promissory note in favor of B in payment thereof, B can hold A liable on the note, and the consideration to support it is his preexisting indebtedness to B. There is no valid distinction in this respect between an instrument payable in futuro and one payable on demand. In each case, the instrument operates as a conditional payment of the debt unless and until the bill be dishonored.15 30. Adequacy of Value. - The courts do not inquire into the adequacy of a bona-fide consideration. Adequacy of consideration is not essential to the validity of a bill or note. A note given for services rendered may be twice the amount of the value of the services and the maker would be bound. Inadequacy of consideration, however, may be evidence of bad faith or fraud." Again, inadequacy of consideration must be distinguished from partial absence of consideration, partial failure of consideration, part payment on account, or a mere advance on a bill or note which is pledged or deposited as security. 31. Unconscionable Bargains. Although the adequacy of the value given will not be inquired into where parties contract on an equality, the court in the exercise of its equitable powers will grant relief, as between immediate parties, when an unfair advantage has been taken of a person's position, though there may be nothing amounting to positive fraud." Sometimes, the relations between parties to bills or notes are so close, and the transactions between them are regarded with so much suspicion, that the burden of proof is put on the person who seeks to enforce them; he must, therefore, show that he has taken no unfair advantage of his influence or knowledge. But, if a note be given by a son to a father, the genuineness of which is unquestioned, no consideration = 15 Chal. Dig. (Eng.) B. of E. Act (5th Ed.), p. 82 (1875), citing L. R. 10 Ex. (Eng.) 164. 16 Ibid. |