to be based upon the _Law Merchant_. By the Law Merchant, is meant the
rules and customs of merchants relating to bills and notes. At an early
time, various rules were recognized by the merchants trading between
different countries. Drafts or bills of exchange were given and passed
current as money, without notice to the debtor of the transfer. As
early as the year 1200, these customs of merchants were recognized in
England. At first, they were recognized only in connection with foreign
bills of exchange. By foreign bills of exchange are meant bills made
or drawn by persons of one country to be paid or accepted by persons
of another state or country. Originally, the rules were recognized by
merchants only. The courts of England recognized and enforced these
rules in actions brought on foreign bills of exchange. Gradually, these
rules were recognized and enforced by all the merchants of England.
They were applied to inland bills as well as to foreign. Some statutes
were passed, notably one making the rules of the Law Merchant apply to
promissory notes. This statute compelled the general recognition of
the Law Merchant. Gradually these rules were applied to all negotiable
instruments by whomever used. The customs which started between
merchants of foreign countries were held applicable to all persons,
and became the recognized law relating to negotiable instruments.
This country adopted these rules, together with the greater part of
the common law of England. At the present time, most of the states
have negotiable instrument codes. These codes, for the most part, are
statutory enactments of the well recognized rules of common law.
The advantage of the codes, however, is to settle disputed points by
express statutory enactment. The code must be interpreted by the well
settled and recognized principles of the common law. The difference
between the contract formed by negotiable instruments and ordinary
contracts is based upon the Law Merchant. These customs are as well
recognized, and are as much a part of the law as they were when
originally used by the merchants of the old world six or seven hundred
years ago.
=124. Promissory Notes.= One of the most common forms of negotiable
instruments is that of the promissory note. A common form of promissory
note is shown in Fig. 1.
A promissory note is not necessarily a negotiable instrument. It
depends upon whether it contains words of negotiability. If the
note contains the words, _or order_, or, _or bearer_, or words of
similar import, it is a negotiable instrument Otherwise it is not. To
constitute an instrument a promissory note, it must contain certain
elements. It must be signed by the party making or giving it, but it
is not necessary that the signature be in any particular place. Any
mark or designation intended as a signature, or by which the maker
can be identified, regardless of its position on the paper, is a
sufficient signature. The proper and usual method of signing negotiable
instruments is at the end thereof.
[Illustration: Fig. 1. Promissory Note.]
A promissory note must contain an unconditional promise to pay a
definite sum of money, at a certain time. If the promise to pay
is conditional, the instrument does not constitute a negotiable
instrument. The following instrument was sued upon:
Stratham, March, 28, 1846.
Due to order of Sophia Gordon, widow, ten thousand dollars to be paid
as wanted for her support. If no part is wanted it is not to be paid.
Stephen Scanmore.
Since this was not an unconditional promise to pay, the court held it
not to be a promissory note.
The time of payment of a promissory note must be certain, the amount
to be paid must be specified, and the instrument must be payable in
money. If the instrument is to be paid in anything other than money,
it is not a negotiable instrument. An instrument must be delivered,
before it has a legal existence as a promissory note. The essentials of
a promissory note are also essentials of any negotiable instrument. A
promissory note need not be dated, nor need it state that it is given
for a consideration. By its nature it imports a consideration. The
party signing the note is called the _maker_, the party to whom it
is made payable is called the _payee_. If the payee transfers it by
indorsement, he is called the _indorser_, and the person to whom he
transfers it is called the _indorsee_.
[Illustration: Fig. 2. Sight Draft.]
=125. Drafts and Bills of Exchange.= The term, draft, is commonly used
to designate an order from one bank or banks on another, as well as
orders on third persons. Orders drawn by one person on another, payable
to a third person, are known technically as bills of exchange. At
present, the terms, _draft_, and _bills of exchange_ are generally used
interchangeably. A draft or a bill of exchange is a written order drawn
by one person on another, payable to a third person, to the order of a
third person, to the drawer himself or his order, or to bearer.
[Illustration: Fig. 3. Sixty-Day Draft, Accepted.]
A common form of draft is shown in Fig. 2.
Bills of exchange or drafts are frequently made payable at a time
considerably in the future. Fig. 3 is a form of sixty-day draft. This
draft is presented to the drawee, J. H. Gotrochs, and if he accepts, he
writes, _accepted_, followed by his name, across the draft. His name
written on a draft is sufficient acceptance.
The party drawing a bill of exchange is called the _drawer_, the party
to whom it is made payable is called, the _drawee_ before acceptance,
and the _acceptor_ after acceptance. The drawee may accept by signing
the instrument, by stating his acceptance on a separate piece of paper,
by oral acceptance, or even by conduct making apparent his intention to
accept. After acceptance of a draft or bill of exchange, the acceptor
is liable to pay the bill according to its terms. He is in the position
of a maker of a promissory note.
[Illustration: Fig. 4. Certified Check.]
=126. Checks.= A check is an order drawn on a bank or banker. It
differs in some respects from an ordinary bill of exchange. It does not
have to be presented for acceptance. It is presented for payment. It
presupposes funds of the drawer in the hands of the bank or banker on
which it is drawn. It is payable at any time after the date fixed for
maturity. It need not be presented at maturity. The maker may recover
damages for failure to present promptly if he is damaged thereby. For
example, if _A_ gives _B_ his check on the _X_ bank, and between the
date for payment of the check and the time of presentment for payment
by _B_, the bank fails, _A_ may recover as damages from _B_, the amount
of his loss by reason of _B's_ failure to present the check promptly.
No days of grace are allowed in the payment of checks. In this
particular, they differ from ordinary bills of exchange.
=127. Certification of Checks.= By certification of a check is meant a
written acknowledgment on checks by an officer or authorized agent of
the bank that the check will be paid when presented. In Fig. 4 is shown
a common form of certification.
The words _accepted_ or _certified_, written on a check by an
authorized officer or agent of a bank constitute a certification. If
the _holder_ of a check has it certified he elects to hold the bank,
and thereby releases the maker and prior indorsers. If the _maker_
procures the certification he is still liable thereon. When a check
is certified, the bank charges it to the account of the maker, and it
then becomes a debt of the bank, regardless of whether or not the maker
has funds in the bank with which to meet it. This is the reason that
a maker and prior indorsers of a check are released from liability
thereon when a holder has it certified. By this act, the holder elects
to rely upon the bank, rather than upon maker or indorsers.
=128. Bonds.= Bonds may be defined to be the promissory notes of
corporations, private or governmental. They are made under the seal
of the corporation issuing them. At common law, a seal destroyed the
negotiability of an instrument. At the present time this is not true
of bonds. Private corporations often secure their bonds by a mortgage
on their entire property. This is accomplished by means of a mortgage
called a _trust deed_. The mortgage is given to a trust company, or an
individual, to be held for the common benefit of all the bond holders.
It is not practicable to give each bond holder a mortgage. This would
be inconvenient, and some bond holders could obtain preference over
others. But one trust deed, covering all the assets held by a trustee
for the benefit of all the bond holders, accomplishes the purpose.
Registered bonds are registered on the books of the corporation issuing
them, and in case of transfer the transfer is noted on the books of
the company. Other bonds contain coupons, or small promissory notes
for certain amounts representing the installments of interest payable
at certain times. These coupons may be cut from the bond and sold as
promissory notes, or they may be cut at maturity and returned for
payment.
+---------------------------------------------------------------------+
| |
| No. 1. $1000.00 |
| |
| United States of America, |
| State of Ohio. |
| |
| Village of X, Ohio, Improvement Bonds. |
| |
| Know all men by these presents that the village of X, in the |
| county of Cuyahoga and state of Ohio, acknowledges itself to owe, |
| and for value received hereby promises to pay to bearer, the sum |
| of $1000.00 in lawful money of the United States of America, on |
| the second day of January, 1920, together with interest thereon |
| at the rate of 5% per annum payable semi-annually on the second |
| day of July, and second day of January of each year, as evidenced |
| by the coupons hereto attached, until the principal sum is paid. |
| Both principal and interest are payable at the City Trust Co., |
| Cleveland, Ohio, on the presentation and surrender of this bond, |
| and the coupons hereto attached as they respectively mature. |
| |
| This bond is issued for the purpose of improving a street of the |
| village of X, from the C. B. Railway to Rocky River by constructing |
| and laying water mains with all necessary connections thereon, |
| under and by authority of Sections 1536-281, and Sec. 2835 of |
| the revised statutes of Ohio, and under and in accordance with |
| resolutions of the council of the village of X, Ohio, adopted Nov. |
| 4, 1908, and Dec. 2, 1908. |
| |
| It is hereby certified that all proceedings relating to this |
| bond have been in strict compliance with said laws, statutes and |
| resolutions, and all other statutes and laws relating thereto, and |
| that the faith, credit, and revenues, and all real and personal |
| property in the village of X, Ohio are hereby pledged for the |
| payment of principal and interest hereof at maturity. |
| |
| This bond is one of a series of bonds of like date and effect, but |
| of different amounts and maturities amounting in the aggregate to |
| $3700.00. |
| |
| In witness whereof, the village of X has caused this bond to be |
| signed by the mayor and clerk of said village, and the corporate |
| seal of said village to be hereunto affixed, and the facsimile |
| signature of the mayor and clerk of said village to be affixed to |
| the attached coupon this second day of January, 1909. |
| |
| D. B. X._______________________ |
| Mayor. |
| |
| [SEAL.] |
| |
| X. Y. Z._______________________ |
| Clerk. |
| |
+---------------------------------------------------------------------+
Form of Municipal Coupon Bond.
+------------------------------------------------------------------+
| |
| On the second day of July, On the second day of January, |
| 1909,the village of X promises 1910, the village of X promises |
| to paythe bearer at the City to pay the bearer at the City |
| Trust Co.,Cleveland, Ohio, Trust Co., Cleveland, Ohio, |
| twenty-fivedollars, being 6 twenty-five dollars, being 6 |
| months' intereston its bond. months' interest on its bond. |
| |
| No. 1 dated Jan. 2, 1909. No. 2 dated Jan. 2, 1909. |
| D. B. X.___________________ D. B. X.___________________ |
| Mayor. Mayor. |
| |
| X. Y. Z.___________________ X. Y. Z.___________________ |
| Clerk. Clerk. |
| |
| On the second day of July, On the second day of January, |
| 1909,the village of X promises 1910, the village of X promises |
| to paythe bearer at the City to pay the bearer at the City |
| Trust Co.,Cleveland, Ohio, Trust Co., Cleveland, Ohio, |
| twenty-fivedollars, being 6 twenty-five dollars, being 6 |
| months' intereston its bond. months' interest on its bond. |
| |
| No. 1 dated Jan. 2, 1909. No. 2 dated Jan. 2, 1909. |
| D. B. X.___________________ D. B. X.___________________ |
| Mayor. Mayor. |
| |
| X. Y. Z.___________________ X. Y. Z.___________________ |
| Clerk. Clerk. |
| |
+------------------------------------------------------------------+
Interest Coupons Attached to Municipal Bond.
Similar coupons follow for payment at intervals of 6 months until
maturity of bond in 1920.
=129. Collateral and Judgment Notes.= Banks frequently require
borrowers to sign collateral notes. These instruments are promissory
notes, with an added agreement to the effect that certain collateral
security is given the payee by the maker as security for the note. Such
security is usually certificates of stock, bonds, other promissory
notes, or chattel property. The collateral note contains a stipulation
that upon default, the payee may sell the collateral. The following is
a common form of collateral note used by banks:
$5,000.00 Cleveland, Ohio, Dec. 26, 1908.
Six months after date, I promise to pay to the order of the Fictitious
Bank at its banking rooms in Cleveland, Ohio, the sum of Five thousand
dollars for value received, with interest at the rate of 6% per
annum. I have deposited with said bank as collateral security for the
payment of this note the following property; 20 shares of stock of the
Columbia Sewing Machine Co., par value $100.00 each, 2 diamond rings,
1 warehouse receipt of the City Storage Co., covering household
furniture valued at $3,000.00. The value of this property is now
$5,600.00. It is agreed that the payee, or his assigns, may have the
right to call for additional security at any time it considers this
collateral security insufficient, and on failure of the maker of this
note to furnish additional security to satisfy the holder of this
note, the note may be deemed payable at once at the holder's option.
The holder shall also have power to accept substitutes for this
collateral. Should the maker violate any of the conditions of this
note, or fail to pay it when due, the holder shall have the power to
sell the collateral or any substitute given therefore, at private or
public sale, at any time without notice to anyone, and after deducting
all legal expenses connected with the sale, and after paying the note,
shall return the balance to the maker.
(Signed)
John Smith.
A judgment note contains a provision that upon default of payment,
any attorney at law may appear in court and take judgment thereon by
presenting the note, without observing the formalities of an ordinary
suit at law. This kind of a note is also called a _cognovit_ note. The
following is a common form of judgment note:
$100.00 Boston, Dec. 8, 1909.
One year after date, I promise to pay to the order of John Jones the
sum of one hundred dollars with interest at 6%, and I hereby authorize
any attorney at law in the United States to appear before any Justice
of the Peace, or in any court of record, after this note is due, and
waive the service of summons, and confess judgment against me in favor
of the holder of this note for the amount which shall then be due and
unpaid thereon, together with interest and costs.
(Signed)
Thos. Thomas.
=130. Certificates of Deposit.= It is customary for banks to issue
customer's receipts showing that a deposit of a certain amount has been
made by the customer, which will be held for payment of the receipt
upon presentation. These receipts ordinarily are made payable to the
customer's order, and circulate like money. They are, in effect, the
promissory notes of the bank issuing them. They differ from promissory
notes in that banks require a special deposit of its customers before
issuing them. Banks issuing such receipts are supposed to hold these
deposits as a special fund with which to pay the certificate when
presented. The following is a common form of certificate of deposit:
--THE PEOPLES BANK OF CHICAGO--
We hereby certify that John Jones has deposited $1,000.00 in this
bank, for which this certificate is issued, and which will be paid to
the order of John Jones in current funds of this bank when presented.
The Peoples Bank of Chicago,
June 23, 1909. By A. Z. Marshall, Cashier.
The payee of this certificate of deposit may indorse and transfer it.
The holder may collect the amount by presenting the certificate to the
bank.
=131. Requisites of Negotiable Instruments.= Certain elements are
recognized, by long usage, as being necessary to constitute an
instrument a valid negotiable instrument. The instrument must contain
words of negotiability, such as _or bearer_, _or order_, or words of
similar meaning. The instrument must contain a specific promise to
pay a certain sum of money at a definite time. The instrument must
designate an ascertainable person to whom, or to whose order the money
is payable. The instrument must be signed and delivered. It is not
necessary that a consideration be stated in the instrument, although
in a suit between the original parties, failure of consideration is
a defense. For example, if _A_ gives _B_ his promissory note for one
hundred dollars ($100.00) payable to _B's_ order, and _A_ received
no benefit for giving the note, if _B_ sues _A_ thereon, _A_ may
plead that he received no consideration for the note. This would be a
complete defense to _A_. If, however, _C_ purchased the note from _B_
before it was due, paying value for same, and having no notice of its
being given without consideration, _A_ could be compelled to pay it to
_C_ or his successors. It is not necessary that a negotiable instrument
be dated. It is proper, however, and good business policy to date all
negotiable instruments. The signature need not be at the bottom of the
instrument. This, however, is the proper place for the signature.
_I. O. U._ $500.00
(_Signed_) _John Jones_, is not a promissory note.
It is not a promise to pay at a definite time or to a definite person.
It is a mere acknowledgment of indebtedness.
=132. Parties to Negotiable Instruments.= By usage and custom, parties
to negotiable instruments are given certain well recognized names. The
name of the party to whom a promissory note is made payable is always
called the _payee_. When the payee transfers a negotiable instrument
by indorsement, he is called the _indorser_, and the party to whom he
indorses the note is called the _indorsee_. Indorsers and indorsees are
designated as _first_, _second_, _third_, etc., indorsers or indorsees
according to their position on the instrument.
The maker of a draft is called the _drawer_. The one to whom it is
given is called the _payee_. The one on whom it is drawn is called the
_drawee_. After acceptance, the drawee is called the _acceptor_. The
rights and liabilities of these parties are discussed under separate
sections.
=133. Rights and Liabilities of a Drawee.= The term, _draft_, is
sometimes used to designate orders made by one bank on another. For
example, _A_ in Cleveland, purchased of his Cleveland bank a New York
draft, or an order by the Cleveland bank on a New York bank, payable
to the order of _A_. Technically, orders on persons are _bills of
exchange_, but the term draft, has come to be applied both to orders
of one bank on another and to orders of one person on another. In this
work the term, _draft_ is applied to both kinds of orders. A drawer is
a person who makes a draft on another. It is usually payable to the
order of a third person. It may be made payable to the bearer or to
the order of the drawer, himself. A drawer enters into a conditional
contract. By becoming a drawer, he agrees to pay the bill of exchange
or draft, if the payee presents it without delay, and in case of
non-payment, or non-acceptance, if notice is promptly given him of this
fact. In case the draft is a foreign one, that is, made payable or to
be accepted, in a different state or country from which it is drawn,
it must be protested by the payee to enable him to hold the drawer.
A draft is protested by being presented by a notary public, who, by
formal written instrument, declares the refusal of the drawee to
accept. Protest is discussed more at length under a separate section.
In case these conditions are complied with, and the drawee does not
accept the bill or pay the bill after acceptance, the payee may hold
the drawer. After the formalities above enumerated are observed by the
payee or holders of a draft, if the draft is dishonored, that is, not
accepted, or paid by the drawee, the payee may sue the drawer, whose
liability is similar to that of the maker of a promissory note.
=134. Rights and Liabilities of Acceptor.= The person to whom a
draft is directed is called the drawee or acceptor. When a draft
is presented to the drawee, he may accept it by writing _accepted_
thereon, or he may accept by writing his consent in a separate
instrument, such as a letter, or by sending a telegram, or he may
accept orally or by his conduct. After a drawee has accepted a draft,
he is bound by its terms. He must pay the amount mentioned in the
draft. After acceptance, his liability is similar to that of the maker
of a promissory note. Sometimes an acceptor does not accept in the
exact terms of the draft. He may change the time or place of payment,
or attach conditions to the bill or draft. This amounts to a refusal
on his part to accept the bill, which will entitle the payee to refuse
the qualified acceptance and by giving proper notice to the drawer hold
the drawer by reason of non-acceptance by the drawee. If, however, the
payee chooses to accept the qualified acceptance of the drawee, he may
do so, but by this act he releases the drawer and all prior indorsers
from liability thereon.
=135. Rights and Liabilities of Maker.= _Maker_ is the term applied
to the person who originally makes and signs a promissory note. By
this act, he agrees to pay at maturity, to the original payee, or
to whomever the note has been indorsed or properly transferred, the
amount named in the note. The maker of a note is liable absolutely and
unconditionally. While it is customary for the holder of a note to
present it to the maker at maturity for payment, this is not necessary
unless a place of payment is stipulated in the note. The holder may
commence suit against the maker at maturity without presenting the
note for payment. If the note contains indorsements, the note must
be presented to the maker, and if payment is refused, to enable the
holder to hold the indorsers liable, notice of the fact must be given
the indorsers. If the note is payable at a particular place, as for
example, a bank, the holder must present the note at the bank at
maturity, or not be able to collect interest thereafter, if the maker
proves that he had funds there sufficient to pay the note at maturity.
If the maker has been damaged other than by loss of interest, by
failure to present a note at a bank when made payable, he may collect
damages therefor from the holder.
=136. Blank Indorsement.= A negotiable instrument, if payable to
bearer, may be transferred by delivery. If payable to the order of
the payee, it may be transferred by indorsement and delivery. By
indorsement is meant the writing the name of the payee upon the back
of the negotiable instrument. Indorsement may be made in various forms,
depending upon the purpose for which made, and the kind of liability
the indorser is willing to undertake, or the kind or degree of
liability which he wishes to avoid. The most common kind of indorsement
consists of the payee's writing his name only on the back of the
instrument. A negotiable instrument with blank indorsement is shown in
Fig. 5.
[Illustration: Fig. 5. Promissory Note with Blank Indorsement.]
If X. X. Crumby desires to transfer the note to anyone, he signs his
name on the back thereof, as indicated in the illustration. This is
called a blank indorsement, and makes the note payable to bearer. The
note now passes as currency without further indorsement. Subsequent
holders may indorse the note if they so desire, or are so required. If
the back of a negotiable instrument becomes filled with indorsements,
a paper may be attached to carry further indorsements. Such a paper is
called an _allonge_.
=137. Indorsement in Full.= A holder of a negotiable instrument, not
desiring to make it payable to bearer, may indorse it by making it
payable to some particular person or to the order of some particular
person, followed by his signature. This does not destroy the
negotiability of the instrument, but prevents anyone but the person to
whom it is indorsed, or such person's indorsees, from securing payment
of the instrument. This is not true if the instrument is payable to
bearer, or if it has been indorsed in blank. Such instruments are
payable to bearer, and circulate as money without requiring further
indorsement. If subsequently indorsed in full, only those subsequent
holders can hold the indorser in full, who can trace their title
through him.
[Illustration: Fig. 6. One Form of Indorsement in Full.]
[Illustration: Fig. 7. Another Form of Indorsement in Full.]
Fig. 6 is an indorsement in full of X. X. Crumby. By this indorsement,
only John Jones, the person to whom he indorses, may obtain payment of
the note. If John Jones indorses the note in blank, that is, signs his
name to it, the note becomes payable to bearer, and passes like money,
without further indorsements.
[Illustration: Fig. 8. Indorsement without Recourse.]
By the indorsement, Fig. 7 which is also an indorsement in full, X. X.
Crumby becomes liable as indorser to John Jones only, and not to anyone
to whom John Jones may indorse the paper. X. X. Crumby's indorsement
does not contain the words "or order." The face of the note, however,
contains the words "or order," which makes the note negotiable. X. X.
Crumby's indorsement to John Jones, although not containing words of
negotiability, does not destroy the negotiability of the note. John
Jones may indorse the note in blank, or in full. The only effect of X.
X. Crumby's omitting words of negotiability from his indorsement is to
limit his primary liability as an indorser to John Jones.
=138. Indorsement without Recourse.= Frequently, the holder of a
negotiable instrument is unwilling to assume any primary liability by
transferring a negotiable instrument which he possesses. He may desire
to transfer the right he has in the instrument, without becoming liable
thereon. He may do this by indorsing it without recourse.
[Illustration: Fig. 9. Indorsement for Collection and for Deposit.]
By either of the indorsements, (Fig. 8) the one in blank, or the one in
full, Jos. Rundy, transfers his interest in the note to John Jones,
and does not become liable thereon as an indorser. It is not quite
accurate to say that an indorser without recourse has _no liability_ as
an indorser. He _impliedly warrants_ the signatures preceding his own
to be _genuine_, and that the parties making them had legal capacity
to sign. The implied liabilities of an indorser are discussed under a
separate section.
[Illustration: Fig. 10. Promissory Note with Anomalous Indorser.]
=139. Indorsement for Collection or Deposit.= A holder of a negotiable
instrument may transfer it for the purpose of collection, thereby
making the transferee his agent, for the purpose of carrying out his
will, and thereby destroying the negotiability of the instrument.
This prevents another from taking the note free from the claim of the
original indorser.
Either of the indorsements in Fig. 9 destroys the further
negotiability of the note. The indorsers are authorized to collect the
note for Arthur Hinde. They are not authorized to transfer the note,
except for the purpose of collecting it for Arthur Hinde.
=140. Anomalous Indorser.= Sometimes, a party writes his name upon the
back of a negotiable instrument outside the chain of title. That is, he
writes his name thereon, before the payee indorses it. This is for the
purpose of adding security to the note.
In this case, Fig. 10, John Arthur signs the note outside the chain of
title. He places his name thereon for the purpose of adding security
thereto. He is liable on his indorsement to the _payee_, A. Aldrich,
and to the _indorsees_ of A. Aldrich. In some jurisdictions he is
liable as a guarantor, in some as a surety, but in most as an ordinary
indorser. The liability of a surety and guarantor is discussed in the
section on Suretyship.
=141. Liability of an Indorser.= By placing his name on the back of
a negotiable instrument for the purpose of passing title, a person
becomes liable on an implied contract. If his indorsement is in
blank, or payable to the order of the indorsee, he is liable to any
innocent purchaser for the value, without notice. If made payable to
a particular person, he is liable only to that person. The implied
liability of an indorser has been said to be as follows: "I hereby
agree by the acceptance by you of title to this paper, and the value
you confer upon me in exchange, to pay you, or any of your successors
in title, the amount of this instrument, providing you, or any of
your successors in title, present this note to the maker on the date
of maturity, and notify me without delay of his refusal to pay. And
I warrant that all the parties had proper capacity and authority to
sign, and that the obligation is binding upon each of them. And I will
respond to the obligations created by these warranties, even though you
do not demand payment of the maker at maturity or notify me of default."
=142. Forgery and Alteration of Negotiable Instruments.= An act by
which a negotiable instrument is materially and fraudulently changed
and passed or attempted to be passed, is a forgery. The act may consist
of fraudulently writing another's name on a negotiable instrument, or
changing a name already on a negotiable instrument, or changing the
figures, date, rate of interest, or in fact any act of counterfeiting
or materially altering a negotiable instrument. Forgery makes the
instrument void. The forger, or those who purchase from him, obtain no
rights against the party wronged. As to the party whose name or whose
instrument is forged, the instrument is void. For example, _A_ has
_B's_ valid note for one hundred dollars ($100.00) and changes the note
by erasing one hundred dollars ($100.00) and substituting five hundred
dollars ($500.00) and sells the note to _C_. _C_ can recover nothing
from _B_. _A_, by indorsing the note to _C_, warrants the genuineness
of the note and is liable on his indorsement to _C_. Neither _A_ nor
_C_ can recover even one hundred dollars ($100.00) from _B_. The
instrument has been rendered void by the forgery, and courts will
recognize no liability of _B_ thereon.
A negotiable instrument altered in any material respect is void. If
_fraudulently_ made, it is regarded as a forgery. If _innocently_ made,
the instrument is still void, but the wronged person is liable for the
original consideration. If _A_ gives _B_ his promissory note for one
hundred dollars ($100.00) with interest at 6%, and _B_ carelessly, but
not fraudulently, writes 8% thereon instead of 6%, _B_ cannot recover
on the note at all. But he can recover from _A_ one hundred dollars
($100.00) with interest at 6% on the debt for which the note was given.
Any alteration of a negotiable instrument which changes the liability
of the parties thereto, amounts to a material alteration. Changes in
the rate of interest, the name of an indorser, the date, the place,
time or manner of payment is a material alteration and renders the
instrument void. If the alteration is made by a stranger, a person
not a party to the instrument, it does not constitute a material
alteration. The instrument may be restored to its proper form and
recovery be had thereon.
=143. Fraud and Duress.= Fraud has been defined to be "a false
representation of a material fact, made with knowledge of its falsity
or in reckless disregard whether it be true or false, with the
intention that it should be relied upon by the complaining party, and
actually inducing him to rely and act upon it." Fraud is a defense to
a party to a negotiable instrument as against the person inducing it,
but not as against subsequent innocent purchasers. _A_ offers to sell
_B_ a diamond ring for five hundred dollars ($500.00) assuring him
that the diamond is genuine. Relying upon this false statement of _A_,
_B_ takes the ring and gives _A_ his promissory note for five hundred
dollars ($500.00) payable to _A's_ order. The ring proves to be paste.
_A_ cannot recover on the note from _B_. If, however, before it is due,
_A_ sells the note to _C_, who pays value for it without notice of the
fraud, _C_ can force _B_ to pay the note.
Duress is actual or threatened violence sufficient under the
circumstances to compel a person to act against his wishes. In
connection with negotiable instruments, duress is treated as the same
kind of a defense as fraud. It is a complete defense as against the
guilty party, but is not available as against an innocent purchaser.
=144. Lost or Stolen Negotiable Instruments.= The primary function of
negotiable instruments is to circulate like money. If a negotiable
instrument is indorsed in blank, or made payable to bearer, it may
circulate without further indorsement. If such a negotiable instrument
is lost or stolen, and purchased before maturity by an innocent party,
the maker is liable thereon. For example, if _A_ makes a promissory
note payable to bearer, and it is stolen by _B_ from _A's_ possession,
and sold for value to _C_, an innocent party, _C_ may collect the note
from _A_. If _A_ makes a promissory note payable to the order of _B_,
and _B_ indorses it in blank, that is, writes his name only, on the
back thereof, and it is stolen from _B's_ possession by _C_ and sold by
_C_ to _D_, who purchases it innocently and for value, _D_ may collect
the note from _A_. This is the principal distinction between negotiable
instruments and ordinary contracts. If the thief changes the instrument
in any material way, or is obliged to forge someone's name to pass it,
this constitutes a forgery and no recovery can be had thereon.
=145. Real and Personal Defenses to Negotiable Instruments.= Defenses
to negotiable instruments are usually classified as _real_ and
_personal_. If they are good only against a particular person, they
are said to be personal. If they are good as against everyone, they
are said to be real. If the instrument is forged, given by an infant,
a person under legal age, is illegal--for example given for a gambling
contract made illegal by statute--or has been materially altered, it
is void, regardless of who holds it. These defenses are called real
defenses. If the instrument is lost or stolen, and purchased by an
innocent party, if given by reason of duress or fraud, or if there is
no consideration, the defense is good only as against the guilty party.
These defenses are called personal defenses.
=146. Consideration.= A consideration is usually defined to be
something beneficial to the party making a promise, or something
detrimental to the party to whom a promise is made. Every ordinary
contract must be supported by a consideration. Negotiable instruments
differ from ordinary contracts in that they are made to circulate
like money. In order that they may circulate like money the maker
is not permitted in some instances, to assert that the instrument
lacks consideration. As between the immediate parties to a negotiable
instrument, there must be a consideration. The maker may successfully
defend against an action based thereon for this reason. If, however,
the instrument has passed before due, to an innocent purchaser
for value, the maker cannot refuse payment on the ground of no
consideration. In case of a negotiable instrument, consideration is
presumed. Consideration need not be stated in the instrument. It
amounts to a defense, only as between immediate parties. If _A_ gives
_B_ his promissory note payable to _B's_ order, with the understanding
that _B_ is not to use the note, but is to show it to _C_, his grocer,
for the purpose of obtaining credit, and _B_ endeavors to collect
the note from _A_, _A_ may successfully defend on the ground of no
consideration. If, however, _B_ sells the note to _D_ before it is due,
and for value, _D_, not knowing there is no consideration, can collect
the note from _A_.
=147. Presentment and Acceptance of Drafts.= Drafts payable at sight,
or after sight, must be presented to the drawee for acceptance. This is
for the reason that the time of payment of such drafts is uncertain.
If a draft of which presentment is necessary, is not presented for
acceptance, the drawer and indorsers are discharged. Presentment for
acceptance must be made to the acceptor within a reasonable time after
receipt by the payee or indorsee. What consitutes reasonable time
for presentment depends upon the circumstances connected with each
particular case. Presentment for acceptance is made by exhibiting the
bill for acceptance to the person upon whom is it drawn. Presentment
for acceptance may be made by the payee, or his indorsee, and may be
made to the drawee, his authorized agent or legal representative.
Presentment may be made either at the person's place of business, or at
his residence. If made at his place of business, it must be made during
business hours. It cannot lawfully be made after noon on Saturdays,
nor can it be made on Sundays or legal holidays. Acceptance may be
indicated by writing _accepted_ or words to that effect on the bill, by
a separate writing to that effect, or by oral agreement of the drawee.
If the bill contains a stipulation not requiring acceptance, this
is called _waiver of acceptance_, and the bill need not be presented
for acceptance. If acceptance is refused, or not made for any reason,
anyone may accept the bill. This is called acceptance for honor, or
acceptance _supra protest_. The liability of an acceptor for honor is
that if the bill is presented to the drawee at maturity for payment and
refused, and notice thereof given the acceptor for honor, the latter
will pay it.
A bill or draft payable at a definite time or date need not be
presented for acceptance. For example, if a bill is drawn payable
December 23, 1909, it need not be presented for acceptance. The time of
payment is certain, and if presented for payment on December 23, and
dishonored, notice of non-payment to the drawer and prior indorsers is
sufficient to enable the payee to hold them liable. If, however, the
bill is payable at sight, or three days after sight, or any time after
sight, it must be presented for acceptance to fix the date of maturity,
If a bill is not paid by the acceptor after acceptance, notice must be
given the drawer and prior indorsers by the holder, to enable him to
hold the drawer and prior indorsers liable. This is sufficient in case
of an inland bill. In case of a foreign bill, one drawn on a person, or
made payable to a person in another state or country from the drawee,
formal protest must be made in case of non-payment or non-acceptance.
Protest is a formal act of a notary public. This is explained under a
separate section.
=148. Time of Payment and Days of Grace.= A negotiable instrument
is payable at the time mentioned in the instrument. If a negotiable
instrument is payable a stipulated time after date, and the instrument
bears no date, its date is the time it was delivered. The term month,
is held to mean calendar month, and not a certain number of days. If a
note is dated February 6th, and is payable thirty days after date, it
matures March 6th. When a negotiable instrument is payable a specified
number of days after date, the time is counted by excluding the day on
which the instrument is given, and including the final day stipulated.
Negotiable instruments may be made payable on demand of the payee
or holder. Such paper is payable at the option of the holder. It is
sometimes called paper payable _on call_. Negotiable instruments may be
made payable on or before a certain day. These instruments are valid
negotiable instruments. They really mature at the day fixed in the
instrument, but may be paid at any time after delivery at the option
of the payee or holder. According to the Law Merchant, three days were
allowed the party liable on a bill or note to make payment, in addition
to the time fixed for payment. These were called _days of grace_.
In the majority of the states, days of grace have been abolished by
statute. When not abolished by statute, days of grace are still allowed.
=149. Innocent Purchaser for Value Without Notice.= The feature that
distinguishes negotiable instruments from ordinary contracts is that
negotiable instruments may be transferred in such a manner that the
transferee receives the instrument free from certain defenses which are
good against the transferror. For example, one who purchases another's
rights under an ordinary contract takes the exact position of the
transferror. Any defenses good against the seller are good against the
purchaser. However, a purchaser for value before maturity of negotiable
instrument, who has no notice of any defenses to the instrument, takes
it free from all but real defenses. Real defenses are _infancy of the
maker_, _forgery_, _material alteration_, and _illegality_. But such
a defense as fraud, want of consideration, duress, or any except a
real defense is not available against an innocent purchaser for value
without notice. An innocent purchaser for value without notice, of a
negotiable instrument, is also called a _bon‚ fide_ holder, or a holder
in due course. A person who purchases a negotiable instrument showing
defects or defenses on its face, cannot claim to be a _bon‚ fide_
holder. A person who purchases negotiable instruments after maturity,
takes them subject to all defenses good against the seller. Such a
purchaser is not a _bon‚ fide_ holder.
=150. Presentment for Payment of Negotiable Instruments.= So far as
the maker or acceptor of negotiable instruments is concerned, in
the absence of a place for payment stipulated in the instrument, a
negotiable instrument does not have to be presented for payment. As
a matter of practice, however, negotiable instruments are presented
to the maker and acceptor at their places of business or at their
residences for payment at maturity. In order to hold indorsers,
however, a negotiable instrument must be presented to the maker or
acceptor at maturity, and, in case of failure to pay, notice must be
given indorsers, else they are relieved from liability. When a place
for payment is specified in a negotiable instrument, presentment at
that place is sufficient. When no place of payment is designated in the
instrument, presentment to the maker or acceptor personally, wherever
he may be found, or at his residence or place of business is sufficient.
=151. Notice of Dishonor and Protest.= When a negotiable instrument
has been presented to a maker or acceptor for payment, and payment has
been refused, the holder should notify the drawer, if the instrument
is a bill of exchange or draft, and the indorsers, no matter what the
form of the negotiable instrument, of the fact of dishonor. If such
notice is not given, the acceptor or indorsers are discharged from
liability. This notice should be given by the holder of the paper,
or his agent, within a reasonable length of time after dishonor. The
notice may be given by a verbal notification, by the delivery of
written message, or by mailing notice to the residence or place of
business of the indorsers or drawer. Everyone whom a holder desires
to hold liable, must be notified in case of dishonor. If a drawer
of a bill or an indorser of a note waives notice of dishonor by so
stipulating in the instrument, notice as to them is unnecessary. In
case of an inland bill, mere notice in writing mailed to their usual
address, or actual notice is sufficient. By inland bill is meant one
made payable, or to be accepted in the same state or country where
drawn. In case of a foreign bill of exchange, or one made payable, or
to be accepted, in a state or country other than where made or drawn,
notice of dishonor must be by protest. This is true of notice to the
drawer for failure of a drawee to accept, as well as for failure of an
acceptor to pay. Protest is a formal declaration of a notary public, an
officer recognized by all countries as authorized to administer oaths.
Technically, only bills of exchange need be protested. By practice,
however, promissory notes and checks are protested as well.
=152. Certificate of Protest.= The following is a common form of
protest:
State of Ohio }
Cuyahoga Co. } SS
I, John Arthur, a notary public, having been duly appointed and sworn,
and residing at Cleveland, Cuyahoga Co., Ohio, do certify that on
the 10th day of December 1909, I presented the annexed promissory
note for payment at the City Trust Co., where same is made payable,
and that I did this at the request of the State Trust Co., and that
payment was refused. I further certify that I did protest, and I do
now publicly protest against the maker, indorsers, and all others
concerned, for all costs and damages connected with the failure to
pay this instrument. I certify that I am not interested in any way in
this instrument. I further certify that I have this day deposited in
the Post Office at Cleveland, Ohio, notices of this protest, signed by
me as notary public, and addressed to the following persons. (Names
and addresses of persons connected with the instrument.) In testimony
whereof I have hereto affixed my signature and seal of my office, this
10th day of Dec., 1909.
John Arthur,
Notary Public.
Notary
Seal.
QUIZ QUESTIONS
PARTNERSHIPS
1. May a party do business under a name other than his own?
2. If a party uses a trade name does this constitute a partnership?
3. Define partnership, and give an example of an agreement constituting
a partnership.
4. How many persons may engage in a single partnership enterprise?
5. Give the principal features of the partnership relation.
6. How is a partnership created?
7. May partnerships be created by oral agreement? If so, give an
example of an oral partnership agreement.
8. Must any kind of partnership agreement be in writing? If so, give an
example.
9. What is meant by partnership by estoppel?
10. Give an example of an executory partnership agreement.
11. What classes of persons may legally become partners?
12. May an infant become a partner?
13. _A_, aged twenty-two years, enters into a partnership with _B_,
aged seventeen. May _A_ avoid a contract of the partnership made
with _C_, a third person, on account of the infancy of _B_?
14. Give an example of an infant ratifying a partnership agreement.
15. Can drunken or insane persons enter into partnerships?
16. What names are partners entitled to take as partnership names?
17. Can a partnership take the name of another partnership? If not, why
not?
18. Can a partnership take a name which does not suggest the name of
any of the partners interested?
19. Can a partnership ever have more than one name? If so, under what
circumstances?
20. Give, and define the names applied to different kinds of partners.
21. Distinguish _silent partners_ and _secret partners_.
22. May a partnership exist as between the partners, and not exist as
to third persons trading with the partnership?
23. May a partnership exist as to third persons dealing with an
apparent partnership, while none exists between the apparent
partners themselves? If so, give an example.
24. State what constitutes a partnership as to third persons dealing
with a partnership.
25. What are the powers of a partnership?
26. Of what may the property of a partnership consist?
27. May a partnership make and own promissory notes?
28. What constitutes holding a person out as a partner?
29. What is the liability of a person held out as a partner?
30. Can a person be liable as a partner who is held out as a partner
without his knowledge or consent?
31. What are the duties of partners to each other?
32. Can one partner sue his partner at law?
33. If one partner dishonestly takes possession of partnership assets,
how may his partner get legal relief?
34. What is meant by _joint liability_ of partners?
35. What is meant by _liability in solido_?
36. What is partnership liability to third persons?
37. Is the individual property of members of the partnership liable to
be subjected to the payment of partnership claims?
38. When, if at all, can the property of individual partners be
subjected to the payment of judgments against the partnership
before the property of the partnership has been exhausted?
39. What is the individual liability of the members of a partnership
for the partnership debts?
40. What effect, if any, does change of membership have upon a
partnership?
41. Does the addition of a new member dissolve a partnership?
42. Does withdrawal of a member discharge a partnership?
43. What effect, if any, does death of a partner have upon a
partnership?
44. Define _survivorship_.
45. What are the rights and duties of survivors of a partnership?
46. In what ways may a partnership be dissolved?
47. In what cases must notice of dissolution of partnership be given?
48. How, and to whom must notice of dissolution of partnership be given?
49. Upon dissolution of a partnership what part of the firm assets
belongs to firm creditors, and what part of individual assets
belongs to individual creditors?
50. In case a partnership is insolvent, and there is no living
solvent partner, what rights have firm creditors in the assets of
the individual partners as compared with individual creditors?
51. Define and describe _limited partnership_.
52. What is the principal distinction between limited and general
partnership?
53. Define _special partner_ as used in connection with limited
partnerships.
[Illustration: OFFICE BUILDING OF THE CHICAGO EDISON COMPANY, CHICAGO.
ILL.
Shepley, Rutan & Coolidge, Architects, Chicago. Two Lower Stories of
Pink Milford Granite, Polished; Upper Stories of the Same Granite, with
Ten-Cut Surface. Built in 1899, Note the Decorative Feature of the
Lighting in Lower and Upper Portion of Building.]
CORPORATIONS
1. Define _corporation_.
2. May an association of persons create a corporation by agreement?
3. Is a corporation a natural person?
4. How were corporations originally created?
5. How are corporations created at the present time?
6. Distinguish the creation of a corporation and the creation of a
partnership.
7. For what purpose may a corporation be created?
8. What is the franchise of a corporation?
9. Is a partnership distinct from the members composing it?
10. Is a corporation dissolved by a change of membership?
11. When does a partnership cease to exist?
12. Are the members of a corporation agents of the corporation?
13. Who are the authorized agents of a partnership?
14. What are the powers of a corporation?
15. Enumerate the ordinary powers of a corporation.
16. Is the charter of a corporation a contract?
17. May a charter of a corporation be revoked at the will of the
legislature that granted it?
18. How are corporations created?
19. What is meant by a _corporation's charter_?
20. What kinds of corporations, if any, may be organized under United
States laws?
21. By what authority are national banks organized?
22. Under what provisions are most corporations organized?
23. Under what conditions may corporate charters be revoked?
24. State briefly the necessary steps in organizing a corporation.
25. Must a corporation have a corporate name?
26. May a corporation change its name?
27. May two corporations use the same name?
28. May a corporation appropriate a name descriptive of an article
manufactured?
29. Give an example of a name a corporation is not permitted to
appropriate.
30. Classify corporations.
31. Define and distinguish _private corporations_ and _public
corporations_.
32. Give an example of a public corporation; a private corporation.
33. Is a street railway company a private or public corporation?
34. When does a corporation's existence commence?
35. What determines when a corporation's existence commences?
36. Define _estoppel_.
37. Give an example of a corporation estoppel from denying its
corporate existence.
38. Are third persons ever estopped from denying a corporation's legal
existence? If so, give an example.
39. Is a corporation's charter a contract?
40. If a corporation's charter is a contract, who are the contracting
parties?
41. At the present time can a corporation obtain an irrevocable charter?
42. Define _de facto corporation_.
43. Define _de jure corporation_.
44. Can a _de facto_ corporation avoid its liabilities on the ground of
incomplete organization?
45. Who can object to a _de facto_ corporation being incompletely
organized?
46. What is necessary to create a _de facto_ corporation?
47. Define _promoter_.
48. Is a promoter personally liable for the obligations made by himself
in connection with organizing a corporation?
49. Is a corporation responsible for the obligations created by its
promoter?
50. How, if at all, may a corporation adopt the obligations of its
promoters?
51. May a corporation be reorganized by consent of its members?
52. Is a reorganized corporation a new corporation, or a continuation
of the old corporation?
53. Is a reorganized corporation ever liable for the obligations of the
old corporation?
54. May a reorganized corporation ever escape the obligations of the
old corporation?
55. How, if at all, may corporations consolidate?
56. Is a consolidated corporation distinct from the corporation from
which it is formed?
57. May corporations consolidate by consent of the members of each?
58. Is a consolidated corporation liable for the debts of its component
corporations?
59. What is the _governing board_ of a corporation for profit called?
60. How are directors elected?
61. How, and under what circumstances and conditions may corporate
meetings be held?
62. Who are entitled to vote at corporate meetings?
63. May a member of a corporation ever have more than one vote?
64. What is meant by _cumulative voting_?
65. What is meant by _ticket voting_?
66. Define _quorum_.
67. What constitutes a quorum?
68. Must a member of a corporation be present to have his shares of
stock voted?
69. How, if at all, may a shareholder vote by proxy?
70. Who are members of a corporation?
71. Is a stockholder personally liable for the debts of the corporation?
72. What is the liability of a shareholder in a national bank?
73. What is meant by stockholder's double liability?
74. How may a person become a stockholder in a corporation?
75. What is a certificate of stock?
76. May a person become a stockholder without having a certificate of
stock?
77. May a person hold a certificate of stock and not be a stockholder?
78. Must directors of a corporation be stockholders?
79. How, if at all, is the authority of the board of directors limited?
80. What are the principal duties of directors?
81. May a board of directors dispose of the entire assets of the
corporation?
82. May directors act for their own private interests in dealing with
the corporation?
83. May a director ever contract with the corporation?
84. Define _by-laws_, _rules_, and _regulations_.
85. Distinguish by-laws and resolutions.
86. Define _capitalization_.
87. Distinguish capitalization from assets of a corporation.
88. Define _capital stock_.
89. May a corporation sell its shares for less than par?
90. Distinguish par value and face value of stock.
91. If a corporation sells a shareholder stock at 5% of its par value,
and the corporation is solvent, who, if any one, may object?
92. Must shares be paid for in money?
93. If a person purchases shares from a stockholder at less than par,
not knowing that the shares have not been paid for in full, is he
liable to the corporation for the balance of their par value?
94. Define _call_ and _assessment_.
95. May an assessment be made before a call?
96. May an assessment be made on stock paid for at par?
97. Define and give an example of _watered stock_.
98. Upon what authority may the capital stock of a corporation be
increased or decreased?
99. What is a _stock dividend_?
100. How many kinds of stock are there?
101. Define preferred stock, and distinguish it from common stock.
102. Do preferred stockholders have any advantage over common
stockholders when the affairs of the corporation are wound up,
and its assets distributed?
103. How may dividends be paid?
104. May a stockholder force the corporation to pay a dividend?
105. When, if at all, are dividends debts of the corporation?
106. Are certificates of stock negotiable instruments?
107. Distinguish certificates of stock from regular negotiable
instruments.
108. How are transfers of stock made by the corporation?
109. What, if any, is the individual liability of a stockholder for the
debts of the company?
110. What ownership, if any, does a stockholder have in the property of
the corporation?
111. Can a corporation transact business without the aid of officers
and agents?
112. How are the officers of a corporation appointed?
113. What are the usual officers of a corporation?
114. What are the duties of the president of a corporation?
115. May the officers of a corporation ever act without the express
authority of the board of directors?
116. What is the proper corporate signature to a contract?
117. What is the proper corporate signature to a negotiable instrument?
118. Can a corporation legally sign a contract without using its seal?
119. Define _ultra vires_.
120. Give an example of an _ultra vires act_.
121. Are third persons deemed to have notice of the powers and
limitations of a corporation.
122. Does a corporation have any rights outside the state of its
creator?
123. What kind of corporations, if any, are authorized by the United
States Constitution to transact business in any state?
124. What are the general provisions of the states regulating foreign
corporations?
125. Explain the meaning of the term _doing business_ as applied to
foreign corporations.
126. Is a corporation liable for its torts and crimes.
127. How, if at all, can a corporation be punished?
128. What is meant by _dissolution of a corporation_?
129. How can a corporation be dissolved?
130. Can a corporation be dissolved by consent of its members?
NEGOTIABLE INSTRUMENTS
1. Name some of the most common forms of negotiable instruments.
2. What is a _negotiable instrument_?
3. What advantages do negotiable instruments have over money for
commercial uses?
4. Define _negotiability_.
5. Are all promissory notes negotiable instruments?
6. What words are necessary to make an instrument negotiable?
7. May an instrument be negotiable without containing the words _or
order_, or _or bearer_?
8. What kind of negotiable instrument, if any, can be transferred
without indorsement?
9. Define _assignment_.
10. Can negotiable instruments be assigned?
11. Distinguish assignability from negotiability.
12. What is meant by the _law merchant_?
13. How do we happen to recognize the rules of the law merchant?
14. When was the law merchant first recognized in England?
15. To what classes of negotiable instruments were the rules of the law
merchant originally applied?
16. To what classes of negotiable instruments are the rules of the law
merchant now applied?
17. Define _promissory note_.
18. Name the parties to a promissory note.
19. Give the essential features of a promissory note.
20. Must a promissory note be dated?
21. Distinguish drafts and bills of exchange.
22. Give the names of the parties to a bill of exchange.
23. How is a bill of exchange accepted?
24. What is a _check_?
25. How does a check differ from a bill of exchange?
26. Are days of grace allowed in the payment of checks?
27. What is certification of a check?
28. What effect does certification of a check by the payee have upon
the maker?
29. Are bonds negotiable instruments?
30. What are _registered bonds_?
31. What are _coupon bonds_?
32. What are _trust deeds_?
33. What are _collateral notes_?
34. Are collateral notes negotiable?
35. By whom are collateral notes commonly used?
36. What is a _cognovit note_?
37. How does a cognovit note differ from an ordinary note?
38. Define _certificate of deposit_.
39. How does a certificate of deposit differ from a check?
40. Is a bank liable upon its certificates of deposit?
41. Give the requisites of a negotiable instrument.
42. Does every negotiable instrument require a payee?
43. May a negotiable instrument be signed by mark?
44. Is an "I. O. U." a negotiable instrument?
45. Name the necessary parties to a negotiable instrument.
46. How does a second indorser differ from a first indorser?
47. What is the liability of a drawer of a bill of exchange?
48. Distinguish _foreign bills of exchange_ and _inland bills of
exchange_.
49. What kinds of bills of exchange must be protested?
50. Distinguish between _drawee_ and _acceptor_.
51. What is the liability of an acceptor?
52. How may a bill of exchange be accepted?
53. What is a qualified acceptance?
54. In case of a qualified acceptance, if the acceptor fails to pay the
draft at maturity is the drawer liable?
55. What is the liability of a maker of a promissory note?
56. If a note is made payable at a bank, and is not presented at the
bank at maturity, is the maker discharged?
57. Define _indorsement_.
58. Define _blank indorsement_.
59. What is the difference as to transferability between a note payable
to bearer and one indorsed in blank?
60. Define _allonge_.
61. Define _indorsement_ in full.
62. Distinguish between the liability of one who indorses in blank and
one who indorses in full.
63. If a note indorsed in blank, is subsequently indorsed in full, can
it be transferred by delivery without the indorsement of the
indorsee in full?
64. Define and explain indorsement without recourse.
65. What is the liability, if any, of an indorser in full?
66. Does an indorsement for collection destroy the negotiability of a
note?
67. What is the purpose of an indorsement for collection?
68. Give an example of an anomalous indorser.
69. What is the difference between an anomalous indorser and an
indorser outside the chain of title.
70. In most jurisdictions what is the liability of an anomalous
indorser?
71. In general, what is the liability of an indorser?
72. Define _indorser_.
73. What are the warranties of an indorser?
74. Are the warranties of an indorser express or implied?
75. Define _forgery_.
76. Does forgery render a negotiable instrument void or voidable?
77. Distinguish between forgery and material alteration.
78. If a note is materially altered by a stranger is it void?
79. Define _fraud_.
80. Distinguish fraud and duress.
81. Are fraud and duress good defenses as against a _bon‚ fide_ holder.
82. If a forged note is lost or stolen can it be collected?
83. If a note procured through fraud is lost or stolen can it be
collected by an innocent holder?
84. Define _real defense_ to a negotiable instrument.
85. What is meant by _personal defense_?
86. Enumerate the real defenses to a negotiable instrument.
87. Enumerate the personal defenses to a negotiable instrument.
88. Define _consideration_.
89. Must consideration be stated in a negotiable instrument?
90. What kind of drafts must be presented for acceptance?
91. How are drafts presented for acceptance?
92. What must a holder do if a draft is dishonored?
93. Define _protest_.
94. When must negotiable instruments be paid?
95. What are days of grace?
96. Do most jurisdictions recognize days of grace at the present time?
97. Define _innocent purchaser for value without notice_.
98. Define _bon‚ fide holder_.
99. Define _holder in due course_.
100. Distinguish _bon‚ fide_ holder and assignee of a negotiable
instrument.
101. Can a person be a _bon‚ fide_ holder of a note who purchases it
after it is due?
102. For what purpose must a negotiable instrument be presented for
payment?
103. Can indorsers of a negotiable instrument be held if the note is
not presented for payment?
104. How is a negotiable instrument presented for payment?
105. Explain notice of dishonor.
106. What is the necessity of giving notice of dishonor?
107. How is notice of dishonor given?
108. What is a certificate of protest?
[Illustration: OFFICE OF PRESIDENT, AMERICAN SCHOOL OF CORRESPONDENCE,
CHICAGO, ILL.]
COMMERCIAL LAW