Page images
PDF
EPUB

"Negotiable instrument."

13. A "negotiable instrument" means a promissory note, bill of exchange or cheque expressed to be payable to a specified person or his order, or to the order of a specified person, or to the bearer thereof, or to a specified person or the bearer thereof.

This section declares that promissory notes, bills of exchange and cheques, when made payable "to order" or "to bearer" may be transferred. The rules as to how the transfer or negotiation may be effected, and the rules controlling the same, are to be found in Chapter IV. The gist of a negotiable instrument is, that at its inception, it was expressed to be so, as by insertion of the words "to order," or "to bearer." The right of suing upon an instrument should appear on the face of it, and if it does not, evidence cannot be admitted to confer upon it, the character and incidents of negotiability.1

In illustration of the origin and principles of the negotiation of mercantile instruments, we shall have occasion to refer to cases, in which instruments, other than those mentioned in the section are referred to, but in considering those cases, the reader is reminded, that the act purports only to deal with the instruments mentioned in it, and the negotiability or otherwise of other instruments will have to be decided, according to law independent of the Act. No inference is to be drawn against their negotiability from their non-mention in the Act, which by its title and preamble sufficiently describe its purpose, although the title would seem to imply otherwise.

The following is the definition of a negotiable instrument according to English law, as laid down by Abbott, C. J.: "The "next question is what instruments may with propriety be "termed negotiable. And to this it may be answered, that "whenever an instrument is such, that the legal right to the property secured thereby, passes from one man to another by "the delivery thereof, it is properly speaking a negotiable instrument, and the title to it will vest in any person taking it bona "fide and for value, whatever may be the defects in the title of

66

66

1 Crouch v. Credit Foncier, L. R. 8 Q. B. 374; S. C. 42 L. J. (Q. B.) 183; but see Goodwin v. Robarts, L. R. 10 Ex. 356; Affd.

I App. Cas. 476; S. C. 44 L. J., (Ex.) 57 & 157.

2 Gorgier v. Mieville, 3 B. & C. 45; S. C. 4 D. & Ry, 641.

"the person transferring it to him.. An instrument is called "negotiable when the legal right to the property passes by its "delivery, because, although an instrument may be saleable in "the market, and treated in many respects like cash, yet if by “the transfer of it nothing pass but a right to sue on it in the name of the transferor or original party to it, such an instru"ment is not properly speaking negotiable."

[ocr errors]
[ocr errors]

66

The following notes on the case of Miller v. Race, were quoted by Blackburn, J.' with approval as to what were negotiable instruments :—“ It may therefore be laid down as a safe rule, “that where an instrument is by the custom of trade, transfera"ble like cash, by delivery, and is also capable of being sued upon by the person holding it pro tempore, then it is entitled “to the name of a negotiable instrument and the property in it, passes to a bona fide transferee for value, though the transfer may not have taken place in market overt. But if either of "the above requisites be wanting, i.e., if it be either not accustomably transferable, or, though it be accustomably transferable, yet, if its nature be such as to render it not capable of being put in suit, by the party holding it pro tempore, it is "not a negotiable instrument, nor will delivery of it pass the property in it to a vendee, however bona fide, if the transferor “himself have not a good title to it, and the transfer of it be "made out of market overt."

[ocr errors]
[ocr errors]

66

[ocr errors]

A case in the Allahabad High Court2 shows that by the law of this country, if a promissory note is not made payable to any other person than the payee, it is not negotiable, but that a chose-in-action being assignable, and as Courts of Equity allow an assignee of a chose-in-action to sue in his own name, and as the Courts in this country are Courts of Equity as well of law, a transferee will be entitled to sue in his own name, subject however to the rule, that whatever defences might be set up against the assignor, may also be set up against the assignee. And this is consistent with the section, which only declares what are negotiable instruments with their incidents, and does not in any way interfere with the general law. Thus if an instrument

! I Sm. L. C. 6th ed. p. 479; Crouch v. Credit Foncier, L. R. 8 Q. B. at p. 381; S. C. 42 L. J. (Q.B.) 183.

2 Kanhaiya Lal v. Domingo, I. L. R. I All, 732.

Negotiation.

Indorsement.

were drawn as laid down in the section, and the holder had given value therefor, it would not be open to the maker to prove it was an accommodation bill, but under the circumstances in the case in the Allahabad Court it would, as such a defence would, be open as between maker and payee, or drawer and drawee.

When considering Sec. 20, we shall have to notice certain cases where an instrument is negotiable before it is completed.

14. When a promissory note, bill of exchange or cheque is transferred to any person, so as to constitute that person the holder thereof, the instrument is said to be negotiated.

[ocr errors]

3

From what we have seen, as to what is necessary to constitute a person a holder," it follows that to constitute a valid transfer, the rules by which transfer can be effected laid down in the Act, must be followed. There must be, if the instrument be payable to bearer, a delivery' with intention to the pass the property in the instrument, or if payable to order, by indorsement2 and delivery. The term used in English law is, “issued,” and an instrument is said to be issued, when it is in the hands of some person entitled to make a claim upon it, and not before ; and this is prima facie so soon as it is passed away by the drawer or maker, or accepted by the drawee. Presentment for acceptance is not negotiating.5 "Transferred or negotiated" says Lush, J.," "I understand to mean passed away from the original holder to another person."

15. When the maker or holder of a negotiable instrument signs the same, otherwise than as such maker, for the purpose of negotiation, on the back or face thereof or on a slip of paper annexed thereto, or so signs for the same purpose a stamped paper intended to be completed as a negotiable instrument,

1 Sec. 46, cl. (4.)

2 Sec. 15.

Sec. 46, cl. (5).

Sharples v. Rickards, 2 H. & N. 57; S. C. 26 L. J. Ex. 302. 6 Griffin v. Weatherby, L. R.

Sm. Merc. Law, 9th ed. by 3 Q. B. at p. 761.

Dowdeswell, p. 267.

he is said to indorse the same, and is called the

"indorser."

This section lays down the manner in which an indorsement may be made, and who may make it. The first portion treats of indorsement of a completed instrument, the latter of an inchoate one. It must be signed by the maker, otherwise than as maker, or the holder, for the purpose of negotiation. As to when the maker of a promissory note may indorse it (see ante note to Sec. 4). The case of Edis v. Bury,2 is an illustration of where the maker of, an instrument which was allowed to be treated as a promissory note, indorsed, but that was an ambiguous instrument.

A hundi drawn upon the drawer by himself and accepted by himself, has been held to be a promissory note, and of course would require indorsement; and the maker must be the first indorser. Another case suggests itself, where a person makes a promissory note in an individual or representative capacity, and indorses it in another.

3

For the purpose of Negotiation.-Supposes an intention to part not only with the possession of, but also the property in the instrument, and when we discuss Sec. 20, we shall see instances, in which signatures, as makers, acceptors, and indorsers have been held not to have been made, for purposes of negotiation.

Under the section a written transfer of the instrument for the purpose of enabling the transferee of the instrument to sue will not be an indorsement, though according to English law, the right to do so is allowed and also in Calcutta3 (see also Sec. 50).

The signature may be on the back or face of the instrument, but is usually on the back which is the literal meaning of the word, or on a slip of paper annexed thereto. This slip of paper is known in English law as an 'allonge' and is annexed to a bill, upon which, there being no legal limit to the number of indorsements, when there is not room to write them all distinctly on

1 Brown v. De Winton, 17 L. J. (C. P.) 281; S. C. 6 C. B. 336; Gay v. Lawder, 17 L. J. (C. P.) 286; S. C. 6 C. B. 336.

2 6 B. & C. 433; post, Sec. 17. 3 Harjiban Das v. Bhagwan

Das, 7 Beng. L. R. per Macpherson, J. at p. 557.

4 Ancona v. Marks, 7 H. & N. 686; S. C. 31 L. J. (Ex.) 163.

Ram Lal Mookerjee v. Haran Chunder Dhar, 3 Beng. L. R. O. C. J. 130.

Indorsement
"in blank" and
"in full."

"Indorsee."

the back of the bill, the supernumerary indorsements may be written. It is annexed by the holder in order that he may write the indorsement.1 It thenceforth becomes part of the bill, but does not require an additional stamp.2

Or so signs for the same purpose a stamped paper intended to be used as a negotiable instrument. This provision extends to indorsement, the rules laid down as to the making of inchoate instruments.3 The section says nothing about dating an indorsement, but to do so is useful, for by Sec. 118 a presumption arises that indorsements were made in the order they appear on the instrument.

The custom of putting his name to a bill, by a person not the holder of the bill for the purpose of facilitating its transfer, is recognized by the English law as part of the law merchant,* but such an indorsement creates no obligation to those, who were previously parties to the bill, but only to those who take subsequently. But this would not, under this section, be an indorsement, for by it, only the maker or holder can make an indorsement.

The consideration, if any, need not appear in the indorsement any more than in the instrument. But by the law of France the indorsement must state the date and the consideration."

As to indorsements by Agents, see Sec. 27 and notes thereon, also by corporations, see Sec. 26.

16. If the indorser signs his name only, the indorsement is said to be "in blank," and if he adds a direction to pay the amount mentioned in the instrument to, or to the order of, a specified person, the indorsement is said to be "in full;" and the person so specified is called the "indorsee" of the instrument.

In English law a blank indorsement is sometimes called 'general,' and a full one 'special'; we shall consider the effect of these indorsements in the chapter on negotiation.

Monmohinee Debi v. Secy. of
State, 13 Beng. L. R. 359.

2 Byles on Bills, 13th ed. p. 152;
Stamp Act, Sched. II, Art. 17, (a),
(App).

Sec. 20.

Hill v. Lewis, 1 Salk. 133; Penny v. Innes, 1 C. M. & R. 439. 5 Steele v. McKinlay, 5 App. Cas. per Lord Blackburn at p. 772. 6 Hirschfield v. Smith, L. R. 1 C. P. 340; S. C. 35 L. J., C. P. 177.

« PreviousContinue »