resultant effects and consequent responsibilities and penalties may appear.

The principles of law, and the rules of construction, by which the validity of negotiable instruments are governed and interpreted, and the necessary operations by which instruments are made effective, follow in regular order after the heading Definitions, under which are defined the various kinds of instruments useful in commercial transactions, including not only the instruments in general use, but such related instruments as bills of lading, warehouse receipts, certificates of deposit, letters of credit, and bonds, all of which are given separate treatment under this general title.

To afford the student an early acquaintance with all the instruments before he begins the more laborious work of fathoming the details, and to acquaint him with the meaning of the common terms used in this title, we have arranged the headings Definitions and Words and Phrases collectively in the outset.

DEFINITIONS

5. In defining the various kinds of commercial paper the purpose is to give each kind its exact signification in the words employed in each definition. Analysis is made in the definitions of bills and notes with a view of impressing the distinct features of each one on the mind of the student. A bill of exchange is an unconditional written order or request from one person to another to pay to a third person a certain sum of money, therein named, absolutely.

A promissory note is an unconditional written promise to pay to a certain person or order, or to bearer, a certain sum of money, either on demand or at a fixed time.

The definitions of a bill of exchange and a promissory note (commonly called a bill and a note) are fulfilled if they be open contracts, and if the agreement to pay, the fact of payment, and the amount to be paid be certain; if, also, the medium of payment and the object of the contract be for money; and, lastly, if there be a delivery.

In a bill, the party who draws it is the drawer, the party to whom it is directed is the drawee, who, upon accepting it, becomes the acceptor, and the party to whom it is payable is the payee.

In a note, the one who makes it is the maker and the party to whom the promise is made is the payee. If the note be transferred from the payee to a third person by indorsement, the last-named parties are, respectively, indorser and indorsee, but if the transfer from the payee to third party be by delivery only, they are assignor, and assignee, respectively.

The distinctive attributes of a bill and note are material. A bill is an order or request to pay money. Both are unconditional in character, yet as to the word "conditional" there is a difference. A bill may not be drawn conditionally, and a note may not be made conditionally, but a bill may be accepted conditionally, as in a qualified acceptance; either may be indorsed conditionally, and, as between immediate parties, either may be delivered conditionally. As to liability, the maker of a note is the principal debtor thereon, and he corresponds in this particular to the acceptor of a bill, who is primarily the debtor in that kind of instrument.

Foreign and inland bills are the two general kinds of bills of exchange, the former being those drawn or payable in another state or country, and the latter those drawn or payable in the same state or country. Formerly, there was another difference, that a foreign bill had to be protested in order to charge a drawer or indorser, while an inland bill did not have to be protested; it is now the custom to protest all bills when parties are to be held liable. The different states of the Union are foreign to each other in matters of business, and the words foreign bills of exchange will be understood as including bills drawn in one state and payable in another.

Foreign bills of exchange are usually drawn in sets, or parts, each being numbered and containing a reference to the other parts. The whole set constitutes but one bill and the payment of any one of the parts extinguishes all, aș

stipulated in a condition contained in each, that it shall continue payable only so long as the others remain unpaid.

A bill is often called a draft for convenience, but is more properly termed a bill of exchange, which is the more legal, as well as the mercantile, expression.

A check is a draft or order upon a bank or banking house for the payment of a certain sum of money absolutely and on demand, to a certain person therein named, or to him or his order, or to bearer.

A judgment note is a promissory note in the usual form with an authority added to the payee or holder, or his attorney, to confess judgment for the amount named therein.

A bank note, or bank bill, is a promissory note, payable to bearer on demand, issued by a bank under authority of law, as a circulating medium.

A due bill is a paper by which one acknowledges a debt due to another, without expressing a promise to pay. It is drawn payable on demand or at a specified time, or it may simply specify the fact of indebtedness, in which case it is merely evidence of an existing debt.

An I. O. U. is a mere acknowledgment of a debt owing by one person to another. If it contain an agreement that it is to be paid on a given day or on demand, it is a promissory note, according to the law of England.

A draft is the common term applied to a bill of exchange or a check, for convenience.

A certificate of deposit is a paper acknowledging the receipt of money deposited in a bank for such purpose as the depositor and the certifier may agree.

A letter of credit is a letter of request whereby one person, usually a merchant or banker, requests some other person to advance money, or give credit to a third person named therein, for a certain amount, and promises that he will repay such sum to the person advancing the same, or accept bills drawn upon himself for the like amount.

A circular note is a species of letters of credit, in fact the same, and is commonly, and in some countries almost exclusively, used by travelers.

A bill of lading is a written acknowledgment of the receipt of goods shipped by land or water, and a contract for a consideration to transport and deliver the goods to the place to which, and the party to whom, they have been consigned, or to the party's order.

A warehouse receipt is a written acknowledgment by a warehouseman of goods deposited in his place of storage, called a warehouse.

A post-office order, called also a money order, is a written order issued by the postmaster of one post office to another, to pay at sight the amount specified in the paper. Its issue is dependent on the deposit of the sum at the post office that issues it, together with the payment of a commission or charge therefor, and its purpose is to provide a safe and convenient mode of transmitting funds from one place to another. Similar orders are also issued by express and

telegraph companies.

A bond is an obligation in writing and under seal by which the maker, called the obligor, binds himself to pay a specific sum of money to another, called the obligee.

A corporation bond is an instrument issued under the corporate seal of an incorporated company, obligating the maker to pay money to the holder, usually with interest payable in instalments, which is stipulated in coupons in the form of promissory notes attached to the bond.

Government, state, and municipal bonds, generally come under the definition of a corporation bond. Specifically, they are evidences of indebtedness issued by a government, state, or municipality, respectively. Securities issued by cities, towns, counties, townships, school districts, and like territorial divisions of a state, are classed under municipal bonds or securities.

A debenture is an instrument in the nature of a bond, given as an acknowledgment of debt, and providing for repayment out of some specified fund or source of income.

WORDS AND PHRASES

To convey knowledge of the meaning of particular terms in the sense in which they are used herein, the words and phrases employed (unless where the context otherwise require) shall have signification as given below. The substantial definitions are given in their appropriate places:

Acceptance means an acceptance completed by delivery and notification.

Action includes counter-claim and set-off.

Bank and banker includes any person, or association of persons, carrying on the business of banking.

Bearer means the person in possession of an instrument which is payable to bearer.

Bill signifies a bill of exchange, and note a promissory note.

Bona fide means in good faith. A thing is deemed to be done in good faith where it is done honestly, whether it be done negligently or not.

Burden of proof is the duty of proving matters in dispute.

Delivery stands for transfer of possession.

Holder is the payee or indorsee of a bill or note who is in possession of it, or the bearer thereof.

Holder in due course is one who has taken an instrument complete and regular on the face of it, (a) before it was overdue, and without notice that it had been previously dishonored, if such were the fact; (b) that he took it in good faith and for value, and that, at the time it was negotiated to him, he had no notice of any defect in the title of the person who negotiated it. A holder in due course is variously termed a "bona-fide holder for value without notice," a “bonafide holder for value," a "bona-fide holder," "innocent indorsee."

Every party whose signature appears on a bill is prima facie deemed to have become a party thereto for value; every holder is prima facie deemed to be a holder in due

course.

Immediate parties are parties in direct relation with