27. Value defined. The Consideration for a Bill. 27. (1) Valuable consideration1 for a bill may be constituted by, (a) Any consideration sufficient to support a simple contract; ILLUSTRATIONS. 1. A cross acceptance, the forbearance of the 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, or the obligation on the part of a thief to restore stolen property, constitute value. 8 10 2. A mere moral obligation, a debt represented to be due though not really due, the giving up a void note,1o or a voluntary gift of money," do not constitute value. (b) An antecedent debt 12 or liability. Such a By sect. 2, ante, p. 7, "value means valuable consideration, i.e., as defined by this section. 2 Rose v. Sims (1830), 1 B. & Ad. at p. 526; cf. Burdon v. Benton (1847), 9 Q. B. 843; Hornblower v. Proud (1819), 2 B. & Ald. 327. As to proof on cross-acceptances, see Ex parte Cama (1874), L. R. 9 Ch. 687. 3 Balfour v. Sea Assur. Co. (1857), 3 C. B. N. S. 300; 27 L. J. C. P. 17; Crears v. Hunter (1887), 19 Q. B. D. 341, C. A. (forbearance in fact, without binding agreement to forbear). 4 Cook v. Wright (1861), 30 L. J. Q. B. 321. 5 Smith v. Smith (1863), 13 C. B. N. S. 418; 32 L. J. C. P. 149. 6 Latouche v. Latouche (1865), 3 H. & C. at p. 576; 34 L. J. Ex. 85. London and County Bank v. River Plate Bank (1888), 21 Q. B. D. 535, C. A. 8 Eastwood v. Kenyon (1840), 11 A. & E. 438; cf. Flight v. Reed (1863), 32 L. J. Ex. 265; cf. White v. Bluett (1853), 23 L. J. Ex. 36, as to attempting to discharge a note for a loan by a promise which was nudum pactum. 9 Southall v. Rigg (1851), 11 C. B. 481. And in Stott v. Fairlamb (1883), 52 L. J. Q. B. 420, Denman, J., seems to have held an agreement to pay a debt within three years is no consideration for giving a note payable on demand. See, too, Bell v. Gardiner (1842), 4 M. & Gr. 11, note given in satisfaction of bill not known to have been altered. As to renewal of note made without consideration, which stands on the same footing as the original, see Edwards v. Chancellor (1888), 52 J. P. 454. 10 Coward v. Hughes (1855), 1 K. & J. 443 ; but cf. Mather v. Maidstone (1856), 18 C. B. 273; 25 L. J. C. P. 310, where an estoppel intervened. 11 Hill v. Wilson (1873), L. R. 8 Ch. at p. 894. 12 Poirier v. Morris (1853), 2 E. & B. 89; Swift v. Tyson (1842), 15 debt or liability is deemed valuable considera- ILLUSTRATION. A customer, being indebted to his bankers, gets a cheque on another bank from a friend, for the purpose of reducing his overdraft. The cheque is paid in and credited to his account. The bankers hold that cheque for value, and can recover from the drawer if he stops it.2 The words "or liability" were added in committee. They perhaps extend the previous law. Valuable consideration has been defined as "some right, interest, profit, or benefit accruing to the one party, or some forbearance, detriment, loss, or responsibility given, suffered, or undertaken by the other."3 As to consideration to support a simple contract, see further, notes to Lampleigh v. Braithwaite, 1 Smith's L. C., 9th ed., p. 153. This section it seems does not affect the principle of Scotch law that valuable consideration is not necessary to support an obligation. But want of value (non-onerosity) may be pleaded in evidence when a bill is challenged on other grounds, as for illegality, fraud, or failure of the consideration." "4 Until 1875 it was uncertain how far an antecedent debt constituted a sufficient consideration for an instrument payable on demand. In the case of a bill or note payable in futuro it was said that the suspension of the creditor's remedies during the currency of the instrument constituted value; but that when the instrument was payable on demand there was no such giving time; in Currie v. Misa,5 Pet. 1 Sup. Ct. U. S., Story, J.; cf. Butcher v. Stead (1875), L. R. 7 H. L. 839. 1 Currie v. Misa (1875), L. R. 10 Ex. 153, Ex. Ch. ; approved but affirmed on another ground, 1 App. Cas. 554. 2 M Lean v. Clydesdale Banking Co. (1883), 9 App. Cas. 95. 3 Currie v. Misa (1875), L. R. 10 Ex. at p. 162, per Lush, J.; and cf. Carlill v. Carbolic Co. (1893), 1 Q. B. at pp. 271, 272, per Bowen, L.J. Bell's Princ., 9th ed. § 333 b. 5 Currie v. Misa (1875), L. R. 10 Ex. 153, Ex. Ch. ; approved M'Lean v. Clydesdale Banking Co., supra. C. G § 27. § 27. 2 the Court pointed out that there is no valid distinction between a bill payable in futuro and a bill payable on demand. In each case the instrument operates as conditional payment of the past debt, that is to say, it is payment of the debt unless and until the bill is dishonoured. Except where there is a lien by implication of law, in order that a past debt may constitute value the bill or note must, of course, be given in respect of the debt. In Ex parte Richdale, the payee of a post-dated cheque paid it in to his bankers who credited it to his account. The payee failed, and it was held that his trustee could not recover the amount from the drawer, on the broad ground that as soon as his account was credited with the amount of the cheque the bankers became holders for value, whether his account was over-drawn or not. It may be doubtful how far this principle could be supported in its generality, or pressed beyond similar facts.3 Adequacy of value.-The Courts do not inquire into the adequacy of a bona fide consideration.* This was always the law as regards considerations other than money, but when the consideration was money, the usury laws formerly created a difficulty. This has now been removed.5 But inadequacy of consideration 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,7 or a mere advance made on a bill which is pledged or deposited as security. 1 Cf. De la Chaumette v. Bank of England (1829), 9 B. & C. 208, as explained in Currie v. Misa, L. R. 10 Ex. at p. 164, and M‘Lean v. Clydesdale Bank, 9 App. Cas. at p. 114. 2 Ex parte Richdale (1882), 19 Ch. D. 409, C. A.; approved Royal Bank of Scotland v. Tottenham (1894), 2 Q. B. at p. 718, C. A. ; and cf. National Bank v. Silke (1891), 1 Q. B. at p. 439. 3 Cf. National Bank v. Silke (1891), 1 Q. B. at p. 439, per Bowen, L.J. Where bankers collect bills or cheques for customers, it seems to be a question of fact in each case whether they hold the proceeds quà bankers, i.e., debtors, or as trustees for their customer. Cf. Re Commercial Bank of South Australia, W. N. (1887), p. 44; Ex parte Plitt, Re Brown (1889), 6 Morrell, 81. 4 Jones v. Gordon (1877), 2 App. Cas. 616, H. L.; Earl v. Peck (1876), 64 New York R. 596. 5 Jones v. Gordon, supra, per Ld. Blackburn, at p. 632. 6 Id.; Cf. Allen v. Davis (1850), 20 L. J. Ch. 44; Simon v. Cridland (1862), 5 L. T. N. S. 524. 7 Dresser v. Missouri Co. (1876), 3 Otto, 92 Sup. Ct. U. S. 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, either with or without terms, when an unfair advantage has been taken of a person's position, though there may be nothing amounting to positive fraud; e.g., in case of a catching bargain with an expectant heir or reversioner, or where a woman has been induced to give an accommodation acceptance without independent advice. 2 § 27. value. (2) Where value has at any time been given Holder for for a bill, the holder is deemed to be a holder for value as regards the acceptor and all parties to the bill who became parties prior to such time.3 ILLUSTRATIONS. 1. B. owes C. 507. In order to pay C., A. at B.'s request draws a bill on B. for 50l. in favour of C. C. is a holder for value and can sue A., though A. has received no value.* B. to accom 2. A. draws a bill on B. payable to his own order. modate A. accepts it. Subsequently A. gives value to B. A. is a holder for value." 3. B. makes a note in favour of C. C. is the treasurer of a loan society, and the consideration for the note is money advanced by the society to B. C. is a holder for value." 4. C. the holder of a bill indorses it in blank to D., receiving no value. D. for value transfers it by delivery to E. E. is a holder for value.7 5. A. at the request of X. draws a bill payable to C. for X.'s account with C. X. remits the bill to C. C. is a holder for value. It is immaterial that there is no consideration between A. and X., or that the consideration fails.8 1 Aylesford v. Morris (1873), L. R. 8 Ch. 484; Nevill v. Snelling (1880), 15 Ch. D. 679. 2 Maitland v. Backhouse (1847), 16 Sim. 58; Kempson v. Ashbee (1874), L. R. 10 Ch. 15. Query, since the Married Women's Property Act? Hunter v. Wilson (1849), 4 Exch. 489. 4 Scott v. Lifford (1808), 1 Camp. 246. 5 Burdon v. Benton (1847), 9 Q. B. 843. 6 Lomas v. Bradshaw (1850), 19 L. J. C. P. 273. 7 Barber v. Richards (1851), 6 Exch. 63. 8 Munroe v. Bordier (1849), 8 C. B. 862; Watson v. Russell (1862), 3 B. & S. 34; 31 L. J. Q. B. 304; (1864), 5 B. & S. 968, Ex. Ch. ; 34 L. J. § 27. 6. S., in the West Indies, is indebted to C. in Paris. In order to pay him, S. remits money to X., his correspondent in London, who thereupon obtains a bill for the amount, drawn by A. upon Paris, payable to C.'s order. X. remits the bill to C., but fails before he pays A. for it. S. subsequently pays C. C. is a holder for value, and can sue A.1 In Illust. 6, C. would be trustee for S.: see "holder" defined by sect. 2, and "holder in due course" by sect. 29. As to the holder's rights as such, see sect. 38. In the Scotch cases a holder for value is termed an "onerous holder." Sale of Bill.-In legal language, a bill is said to be sold when it is transferred by delivery without indorsement. Not so in mercantile language. Suppose Smith in London wishes to pay 1000 rupees to Brown in India. Smith goes to Jones, who has a correspondent in Calcutta, and gets him to draw a bill on Calcutta for Rs. 1000. Usually the bill is drawn payable to Brown, but sometimes it is drawn payable to Smith, who then indorses it to Brown. The amount paid by Smith to Jones for this bill depends on the rate of exchange between London and Calcutta on the day of the transaction. In some trades the custom is for Smith to pay Jones when he gets the bill; in other trades it is the custom not to pay till the next mail day. Such a transaction is called a sale of the bill by Jones to Smith. Smith, the buyer, who sends the bill out to India is called the remitter. As to fixing the rate of exchange at which a bill is to be sold, see note to sect. 9, ante, p. 27. See the conditions which regulate the rate of exchange between two countries, and the mode in which those conditions are taken advantage of, fully discussed in Goschen's Foreign Exchanges. See, too, the judgment of Wood, V.-C., explaining the practice of paying for bills partly by cash, partly by bankers' "marginal notes" or "marginal receipts." 2 3 A holder for value may or may not be a holder in due The holder of a bill who receives it from a holder for value, but does not himself give value for it, has all course. 1 Poirier v. Morris (1853), 2 E. & B. 89. 2 Jeffryes v. Agra Bank (1866), L. R. 2 Eq. 676; cf. Ex parte Kemp (1874), L. R. 9 Ch. 383. 3 Raphael v. Bank of England (1855), 17 C. B. at p. 174; cf. sect. 29, post, p. 88; and Partridge v. Bank of England (1846), 9 Q. B. at p. 426, Ex. Ch. |