INTRODUCTION. Act. THE Bills of Exchange Act, 1882, codifies the greater Scope of the portion of the common law relating to Bills of Exchange, Cheques, and Promissory Notes, and re-enacts with modifications the provisions of the statutes, relating to these documents, which are repealed by it. The rules of the common law, including the law merchant, save in so far as they are inconsistent with the express provisions of the Act, continue in force, and will be applied in the determination. of questions relating to bills and notes. In construing the Act, it must be recollected that its object is to codify the law on this subject, and not to introduce a new or independent system. The decisions, accordingly, of Courts of Law upon the application of the principles of the common law or the law merchant remain of weight in the questions which will arise as to the limits of the principles now embodied in the statute law, or of the mode in which these principles are to be applied when they come into conflict with other principles of common law. Where a rule is laid down in express terms-e.g., in § 29 (2), it will not be competent to maintain that the general rule— in that case that a signature to a bill obtained by force and fear is valueless even in the hands of an innocent third party ought to be applied in construing and limiting its effect. On the other hand, where a clause introduces a change into the law, the change will not be assumed to go farther than its express terms warrant, in infringing the rules of the common law. As an illustration, the construction put upon § 100 may be referred to. Where the Act does not lay down a rule, but implies that if such a rule 1 B Assimilation of law. exists, or so far as it is required, its application shall be as In addition to codifying the law of the United Kingdom, the Act assimilates the laws of the three countries relating to bills or notes. Thus the rules of the Scotch law are adopted, as regards the essential negotiability of a bill without the use of words permitting transfer by indorsation, and as regards the renunciation by a holder of his rights against the acceptor being in writing; and the law of Scotland is assimilated to that of England in making a bill, granted under duress, or force and fear, voidable instead of void, and so rendering it unimpeachable in the hands of a holder in due course. The rule of the Scotch law limiting proof to writ or oath in rebutting any of the presumptions in favour of the holder of the bill, and on other questions connected with liability is altered, and a rule equivalent to the rules of the English law permitting parole evidence, is made applicable, vide 100. In one or two points the laws of the two countries remain dissimilar. The assignation of a debt due to the drawer by the drawee, which in Scotland is completed by the presentation of a bill to the drawee, which is not altered by the Act, but presentment has no such effect in England, vide § 53, and as already noticed, the rule of the Scotch law not requiring valuable consideration is not altered. The rules in Bankruptcy of the two countries remain distinct and unaffected, vide § 97 (1), and the law relating to the summary enforcement of bills and notes, the law of prescription, continue to depend on the statutes applicable to each country; while the rules of the common law on these matters, which have been elaborated by a long series of decisions, are neither extended nor restricted, vide §§ 98, 100. The Stamp Act, and some minor enactments, are specially declared not to be affected by the provisions of the Act, vide § 97 (3). law. In several points the law common to both countries has Alteration of been altered, and doubts as to the others have been removed. See inter alia, §§ 7 (2), 15, 33, 36 (3), 44 (2), 49 (6), 61, 73, 74, 91. A bill of exchange, as defined by the Act, is the instru- Contract of exchange. ment employed to carry into effect the contract of exchange, by which one person, in return for a sum of money paid, or promised to be paid to him, or for goods transferred, or to be transferred to him, or for the doing, or abstaining from doing some act, engages to pay a certain sum in money at another time, at a determined place, to the other party in the contract. It is thus defined by Pardessus:-"Le contrat de change est une convention par laquelle l'un des contractans s'oblige à faire payer une certaine somme d'argent dans un lieu determiné pour une valeur qui lui est promise ou donnée dans un autre. Cet engagement s'execute, soit en créant sous le nom de lettre de change ou de billet appelé dans l'usage billet à domicile un titre qui donne droit à celui qui en sera porteur legitime d'exiger la somme désignée, soit en cedant un titre de celle espece, créé par un autre, et dont on a la libre disposition" (Pardessus, Cours du Droit Commercial, part ii., tit. iv., chap. i.). The essential part of this contract is the mandate which enables the party to whom it is given to obtain payment. The obligant under such a contract is accordingly bound (1) to deliver to the other party a bill, payable at the time and place, and for the sum agreed on. The bill must have all the requisites of form which are necessary according to the law of the place where it is made. The parties may stipulate that a bill-i.e., the bill of the obligant in the contract, be given; or that a discountable bill be given, which is held to mean a bill with such names upon it, and drawn payable at such a period, that it will be discounted by a banker; or that an approved bill be given, which seems to import only a bill to which no reasonable objection can be made (Bell's Prin. §§ 105-107). The obligant must (2) provide funds in the hands of the drawee for the payment of the bill at maturity, or arrange that he shall pay the bill, if he have no funds of the drawee; and he must advise (3) the drawee that a bill has been drawn upon him, in order that the latter may raise no difficulty as to accepting or paying. This contract exists independently of the bill of exchange to which it gives rise, and is to be distinguished from the bill itself and the contracts on the bill. If a bill be not granted, notwithstanding a prior agreement to grant one, the person who gave the consideration is entitled to sue on the original contract for payment of the sum for which the bill ought to have been granted. The Act does not deal with this contract, but if the contract be invalid at common law, its invalidity may be pleaded as fatal to the bill of exchange founded on it, in those cases, where value is required, vide 27. The bill operates a discharge of the counter obligation in the contract, but that discharge only takes full effect when the bill has been discharged by payment or renunciation, or by the holder of the bill failing to perform certain duties imposed on him by law, and so impliedly discharging the other party, but it does not so operate where the bill is not paid at maturity, Anderson v. M'Dowal, 21st March, 1865; 3 M. 727. Where the bill is not paid at maturity, the holder can either sue on the bill, or on the original contract, if made with him. If the bill be avoided by a material alteration, vide § 64, I. Bell's Com. 414, or if it be extinguished by the running of the years of prescription, the right to enforce the original contract revives, Sinclair v. Sinclair, 19th Dec. 1823, 2 Sh. 600, vide Note on Prescription, note (c) on § 100. In a bill in which the drawer, payee, and drawee are all different persons, the original contract which gives rise to the bill is that between the drawer and the payee; where the bill is drawn payable to drawer's order, the original contract may be either between the drawer and the acceptor, or between the drawer and the first indorsee, to whom he delivered it before presentment for acceptance, but it will be presumed to be the former. The contract, upon which the bill rests, is to be distinguished also from the debt due by the drawee to the drawer, and which the latter assigns to the payee by drawing the bill. The debt due by the drawee of a bill to the drawer, does not constitute the consideration of a bill drawn payable to a third party. If, accordingly the payee have given valuable consideration for the bill, it will be immaterial that the drawee's obligation to accept and his acceptance rest upon an illegal or fraudulent transaction, but if the drawee do not accept, the assignation completed by presentment will not entitle the payee to obtain payment from the drawee, whose debt to the drawer is tainted with fraud or illegality, because in such a case the holder must prove the existence of a debt, using his bill as an assignation of it. If a drawee have accepted a bill for an insufficient consideration, and the payee of the bill thereafter takes it in payment of the valuable consideration which he has given or promised to give the drawer, the bill is one for which valuable consideration has been given. Though in a regular bill a contract exists independently of the bill, parties may make a bill or note which is not founded on any antecedent contract, and such a bill will be valid in the hands of a holder for value, although there be no value between any of the original parties to it, or there is no debt existing between the drawer and the drawee or acceptor. Such bills are called accommodation bills. But the contracts implied on such bills, and the rights of the holder against the parties liable thereon, are the same as in an ordinary bill. bill. The contracts on a bill are (1) that of the acceptor who Contracts on a engages to pay the sum in the bill; (2) that of the drawer who engages that the drawee will accept and pay, and that he will pay in the event of the drawee's failure to accept and pay; (3) that of an indorser (whether one to whom the bill has been indorsed, or an indorser per aval), who engages that the drawee will accept and pay, and that he will pay his indorsee and any subsequent holder the sum in |