OF THE TRADESMAN'S PUNCTUAL PAYING HIS BILLS AND PROMISSORY NOTES UNDER
HIS HAND, AND THE CREDIT HE GAINS BY IT
As I said that credit is maintained by just and honourable dealing, so
that just dealing depends very much upon the tradesman's punctual
payment of money in all the several demands that are upon him. The
ordinary demands of money upon a tradesman are--
I. Promises of money for goods bought at time.
II. Bills drawn upon him; which, generally speaking, are from the
country, that is to say, from some places remote from where he lives.
Or,
III. Promissory notes under his hand, which are passed oftentimes upon
buying goods: bought also at time, as in the first head.
IV. Bonds bearing interest, given chiefly for money borrowed at running
interest.
1. Promises of money for goods bought at time. This indeed is the
loosest article in a tradesman's payments; and it is true that a
tradesman's credit is maintained upon the easiest terms in this case of
any other that belongs to trade; for in this case not one man in twenty
keeps to his time; and so easy are tradesmen to one another, that in
general it is not much expected, but he that pays tolerably well, and
without dunning, is a good man, and in credit; shall be trusted any
where, and keeps up a character in his business: sometimes he pays
sooner, sometimes later, and is accounted so good a customer, that
though he owes a great deal, yet he shall be trusted any where, and is
as lofty and touchy if his credit be called in question, as if he paid
all ready money.
And, indeed, these men shall often buy their goods as cheap upon the
credit of their ordinary pay, as another man shall that brings his money
in his hand; and it is reasonable it should be so, for the ready-money
man comes and buys a parcel here and a parcel there, and comes but
seldom, but the other comes every day, that is to say, as often as he
wants goods, buys considerably, perhaps deals for two or three thousand
pounds a-year with you, and the like, and pays currently too. Such a
customer ought indeed to be sold as cheap to, as the other chance
customer for his ready money. In this manner of trade, I say, credit is
maintained upon the easiest terms of any other, and yet here the
tradesman must have a great care to keep it up too; for though it be the
easiest article to keep up credit in, yet even in this article the
tradesman may lose his credit, and then he is undone at once; and this
is by growing (what in the language of trade is called) long-winded,
putting off and putting off continually, till he will bear dunning; then
his credit falls, his dealer that trusted him perhaps a thousand pounds
previously, that esteemed him as good as ready money, now grows sick of
him, declines him, cares not whether he deals with him or no, and at
last refuses to trust him any longer. Then his credit is quite sunk and
gone, and in a little after that his trade is ruined and the tradesman
too; for he must be a very extraordinary tradesman that can open his
shop after he has outlived his credit: let him look which way he will,
all is lost, nobody cares to deal with him, and, which is still worse,
nobody will trust him.
2. Bills drawn upon him from the country, that is to say, from some
places remote from where he now dwells: it is but a little while ago
since those bills were the loosest things in trade, for as they could
not be protested, so they would not (in all their heats) always sue for
them, but rather return them to the person from whom they received them.
In the meantime, let the occasion be what it will, the tradesman ought
on all occasions to pay these notes without a public recalling and
returning them, and without hesitation of any kind whatsoever. He that
lets his bills lie long unpaid, must not expect to keep his credit much
after them.
Besides, the late law for noting and protesting inland bills, alters the
case very much. Bills now accepted, are protested in form, and, if not
punctually paid, are either returned immediately, or the person on whom
they are drawn is liable to be sued at law; either of which is at best a
blow to the credit of the acceptor.
A tradesman may, without hurt to his reputation, refuse to accept a
bill, for then, when the notary comes he gives his reasons, namely, that
he refuses to accept the bill for want of advice, or for want of effects
in his hands for account of the drawer, or that he has not given orders
to draw upon him; in all which cases the non-acceptance touches the
credit of the drawer; for in trade it is always esteemed a dishonourable
thing to draw upon any man that has not effects in his hands to answer
the bill; or to draw without order, or to draw and not give advice of
it; because it looks like a forwardness to take the remitter's money
without giving him a sufficient demand for it, where he expects and
ought to have it.
A tradesman comes to me in London, and desires me to give him a bill
payable at Bristol, for he is going to the fair there, and being to buy
goods there, he wants money at Bristol to pay for them. If I give him a
bill, he pays me down the money upon receipt of it, depending upon my
credit for the acceptance of the bill. If I draw this bill where I have
no reason to draw it, where I have no demand, or no effects to answer
it, or if I give my correspondent no advice of it, I abuse the remitter,
that is, the man whose money I take, and this reflects upon my credit
that am the drawer, and the next time this tradesman wants money at
Bristol fair, he will not come to me. 'No,' says he, 'his last bills
were not accepted.' Or, if he does come to me, then he demands that he
should not pay his money till he has advice that my bills are accepted.
But, on the other hand, if bills are right drawn, and advice duly given,
and the person has effects in his hands, then, if he refuses the bill,
he says to the notary he does not accept the bill, but gives no reason
for it, only that he says absolutely, 'I will not accept it--you may
take that for an answer;' or he adds, 'I refuse to accept it, for
reasons best known to myself.' This is sometimes done, but this does not
leave the person's credit who refuses, so clear as the other, though
perhaps it may not so directly reflect upon him; but it leaves the case
a little dubious and uncertain, and men will be apt to write back to the
person who sent the bill to inquire what the drawer says to it, and what
account he gives, or what character he has upon his tongue for the
person drawn upon.
As the punctual paying of bills when accepted, is a main article in the
credit of the acceptor, so a tradesman should be very cautious in
permitting men to draw upon him where he has not effects, or does not
give order; for though, as I said, it ought not to affect his reputation
not to accept a bill where it ought not to be drawn, yet a tradesman
that is nice of his own character does not love to be always or often
refusing to accept bills, or to have bills drawn upon him where he has
no reason to accept them, and therefore he will be very positive in
forbidding such drawing; and if, notwithstanding that, the importunities
of the country tradesman oblige him to draw, the person drawn upon will
give smart and rough answers to such bills; as particularly, 'I refuse
to accept this bill, because I have no effects of the drawer's to answer
it.' Or thus, 'I refuse to accept this bill, because I not only gave no
orders to draw, but gave positive orders not to draw.' Or thus, 'I
neither will accept this bill, nor any other this man shall draw;' and
the like. This thoroughly clears the credit of the acceptor, and
reflects grossly on the drawer.
And yet, I say, even in this case a tradesman does not care to be drawn
upon, and be obliged to see bills presented for acceptance, and for
payment, where he has given orders not to draw, and where he has no
effects to answer.
It is the great error of our country manufacturers, in many, if not in
most, parts of England at this time, that as soon as they can finish
their goods, they hurry them up to London to their factor, and as soon
as the goods are gone, immediately follow them with their bills for the
money, without waiting to hear whether the goods are come to a market,
are sold, or in demand, and whether they are likely to sell quickly or
not; thus they load the factor's warehouse with their goods before they
are wanted, and load the factor with their bills, before it is possible
that he can have gotten cash in his hand to pay them.
This is, first, a direct borrowing money of their factor; and it is
borrowing, as it were, whether the factor will lend or no, and sometimes
whether he can or no. The factor, if he be a man of money, and answers
their bills, fails not to make them pay for advancing; or sells the
goods to loss to answer the bills, which is making them pay dear for the
loan; or refuses their bills, and so baulks both their business and
their credit.
But if the factor, willing to oblige his employers, and knowing he shall
otherwise lose their commission, accepts the bills on the credit of the
goods, and then, not being able to sell the goods in time, is also made
unable to pay the bills when due--this reflects upon his credit, though
the fault is indeed in the drawer whose effects are not come in; and
this has ruined many an honest factor.
First, it has hurt him by drawing large sums out of his cash, for the
supply of the needy manufacturer, who is his employer, and has thereby
made him unable to pay his other bills currently, even of such men's
drafts who had perhaps good reason to draw.
Secondly, it keeps the factor always bare of money, and wounds his
reputation, so that he pays those very bills with discredit, which in
justice to himself he ought not to pay at all, and the borrower has the
money, at the expense of the credit of the lender; whereas, indeed, the
reproach ought to be to him that borrows, not to him that lends--to him
that draws where there are no effects to warrant his draft, not to him
that pays where he does not owe.
But the damage lies on the circumstances of accepting the bill, for the
factor lends his employer the money the hour he accepts the bill, and
the blow to his credit is for not paying when accepted. When the bill is
accepted, the acceptor is debtor to the person to whom the bill is
payable, or in his right to every indorser; for a bill of exchange is in
this case different from a bond, namely, that the right of action is
transferable by indorsement, and every indorser has a right to sue the
acceptor in his own name, and can transfer that right to another;
whereas in a bond, though it be given to me by assignment, I must sue in
the name of the first person to whom the bond is payable, and he may at
any time discharge the bond, notwithstanding my assignment.
Tradesmen, then, especially such as are factors,[46] are unaccountably
to blame to accept bills for their employers before their goods are
sold, and the money received, or within reach: if the employers cannot
wait, the reproach should lie on them, not on the factor; and, indeed,
the manufacturers all over England are greatly wrong in that part of
their business; for, not considering the difference between a time of
demand and a time of glut, a quick or a dead market, they go on in the
same course of making, and, without slackening their hands as to
quantity, crowd up their goods, as if it were enough to them that the
factor had them, and that they were to be reckoned as sold when they
were in his hands: but would the factor truly represent to them the
state of the market--that there are great quantities of goods in hand
unsold, and no present demand, desiring them to slack their hands a
little in making; and at the same time back their directions in a plain
and positive way, though with respect too, by telling them they could
accept no more bills till the goods were sold. This would bring the
trade into a better regulation, and the makers would stop their hands
when the market stopped; and when the merchant ceased to buy, the
manufacturers would cease to make, and, consequently, would not crowd or
clog the market with goods, or wrong their factors with bills.
But this would require a large discourse, and the manufacturers'
objections should be answered, namely, that they cannot stop, that they
have their particular sets of workmen and spinners, whom they are
obliged to keep employed, or, if they should dismiss them, they could
not have them again when a demand for goods came, and the markets
revived, and that, besides, the poor would starve.
These objections are easy to be answered, though that is not my present
business; but thus far it is to my purpose--it is the factor's business
to keep himself within compass: if the goods cannot be sold, the maker
must stay till they can; if the poor must be employed, the manufacturer
is right to keep them at work if he can; but if he cannot, without
oppressing the factor, then he makes the factor employ them, not
himself; and I do not see the factor has any obligation upon him to
consider the spinners and weavers, especially not at the expense of his
own credit, and his family's safety.
Upon the whole, all tradesmen that trade thus, whether by commission
from the country, or upon their own accounts, should make it the
standing order of their business not to suffer themselves to be
overdrawn by their employers, so as to straiten themselves in their
cash, and make them unable to pay their bills when accepted. It is also
to be observed, that when a tradesman once comes to suffer himself to be
thus overdrawn, and sinks his credit in kindness to his employer, he
buys his employment so dear as all his employer can do for him can never
repay the price.
And even while he is thus serving his employer, he more and more wounds
himself; for suppose he does (with difficulty) raise money, and, after
some dunning, does pay the bills, yet he loses in the very doing it, for
he never pays them with credit, but suffers in reputation by every day's
delay. In a word, a tradesman that buys upon credit, that is to say, in
a course of credit, such as I have described before, may let the
merchant or the warehouse-keeper call two or three times, and may put
him off without much damage to his credit; and if he makes them stay one
time, he makes it up again another, and recovers in one good payment
what he lost in two or three bad ones.
But in bills of exchange or promissory notes, it is quite another thing;
and he that values his reputation in trade should never let a bill come
twice for payment, or a note under his hand stay a day after it is due,
that is to say, after the three days _of grace,_ as it is called. Those
three days, indeed, are granted to all bills of exchange, not by law,
but by the custom of trade: it is hard to tell how this custom
prevailed, or when it began, but it is one of those many instances which
may be given, where custom of trade is equal to an established law; and
it is so much a law now in itself, that no bill is protested now, till
those three days are expired; nor is a bill of exchange esteemed due
till the third day; no man offers to demand it, nor will any goldsmith,
or even the bank itself, pay a foreign bill sooner. But that by the way.
Bills of exchange being thus sacred in trade, and inland bills being (by
the late law for protesting them, and giving interest and damage upon
them) made, as near as can be, equally sacred, nothing can be of more
moment to a tradesman than to pay them always punctually and honourably.
Let no critic cavil at the word _honourably_, as it relates to trade:
punctual payment is the honour of trade, and there is a word always used
among merchants which justifies my using it in this place; and that is,
when a merchant draws a bill from abroad upon his friend at London, his
correspondent in London answering his letter, and approving his drawing
upon him, adds, that he shall be sure to _honour_ his bill when it
appears; that is to say, to accept it.
Likewise, when the drawer gives advice of his having drawn such a bill
upon him, he gives an account of the sum drawn, the name of the person
it is payable to, the time it is drawn at, that is, the time given for
payment, and he adds thus--'I doubt not your giving my bill due
honour;' that is, of accepting it, and paying it when it is due.
This term is also used in another case in foreign trade only, namely--a
merchant abroad (say it be at Lisbon, or Bourdeaux) draws a bill of £300
sterling upon his correspondent at London: the correspondent happens to
be dead, or is broke, or by some other accident the bill is not
accepted; another merchant on the Exchange hearing of it, and knowing,
and perhaps corresponding with, the merchant abroad who drew the bill,
and loth his credit should suffer by the bill going back protested,
accepts it, and pays it for him. This is called accepting it for the
honour of the drawer; and he writes so upon the bill when he accepts it,
which entitles him to re-draw the same with interest upon the drawer in
Lisbon or Bourdeaux, as above.
This is, indeed, a case peculiar to foreign commerce, and is not often
practised in home trade, and among shopkeepers, though sometimes I have
known it practised here too: but I name it on two accounts, first--to
legitimate the word honourable, which I had used, and which has its due
propriety in matters of trade, though not in the same acceptation as it
generally receives in common affairs; and, secondly, to let the
tradesman see how deeply the honour, that is, the credit of trade, is
concerned in the punctual payment of bills of exchange, and the like of
promissory notes; for in point of credit there is no difference, though
in matter of form there is.
There are a great many variations in the drawing bills from foreign
countries, according as the customs and usages of merchants direct, and
according as the coins and rates of exchange differ, and according as
the same terms are differently understood in several places; as the word
_usance_, and _two usance,_ which is a term for the number of days given
for payment, after the date of the bill; and though this is a thing
particularly relating to merchants, and to foreign commerce, yet as the
nature of bills of exchange is pretty general, and that sometimes an
inland tradesman, especially in seaport towns, may be obliged to take
foreign accepted bills in payment for their goods; or if they have money
to spare (as sometimes it is an inland tradesman's good luck to have),
may be asked to discount such bills--I say, on this account, and that
they may know the value of a foreign bill when they see it, and how far
it has to run, before it has to be demanded, I think it not foreign to
the case before me, to give them the following account:--
1. As to the times of payment of foreign bills of exchange, and the
terms of art ordinarily used by merchants in drawing, and expressed in
the said bills: the times of payment are, as above, either--
(1.) At sight; which is to be understood, not the day it is presented,
but three days (called days of grace) after the bill is accepted: (2.)
usance: (3.) two usance.[47]
Usance between London and all the towns in the States Generals'
dominions, and also in the provinces now called the Austrian Netherlands
[Belgium], is one month. And two usance is two months; reckoning not
from the acceptance of the bill, but from the date of it. Usance between
London and Hamburgh is two months, Venice is three months; and double
usance, or two usance, is double that time. Usance payable at Florence
or Leghorn, is two months; but from thence payable at London, usance is
three months. Usance from London to Rouen or Paris, is one month; but
they generally draw at a certain number of days, usually twenty-one
days' sight. Usance from London to Seville, is two months; as likewise
between London and Lisbon, and Oporto, to or from. Usance from Genoa to
Rome is payable at Rome ten days after sight. Usance between Antwerp and
Genoa, Naples or Messina, is two months, whether to or from. Usance from
Antwerp or Amsterdam, payable at Venice, is two months, payable in bank.
There are abundance of niceties in the accepting and paying of bills of
exchange, especially foreign bills, which I think needless to enter upon
here; but this I think I should not omit, namely--
That if a man pays a bill of exchange before it is due, though he had
accepted it, if the man to whom it was payable proves a bankrupt after
he has received the money, and yet before the bill becomes due, the
person who voluntarily paid the money before it was due, shall be liable
to pay it again to the remitter; for as the remitter delivered his money
to the drawer, in order to have it paid again to such person as he
should order, it is, and ought to be, in his power to divert the payment
by altering the bill, and make it payable to any other person whom he
thinks fit, during all the time between the acceptance and the day of
payment.
This has been controverted, I know, in some cases, but I have always
found, that by the most experienced merchants, and especially in places
of the greatest business abroad, it was always given in favour of the
remitter, namely, that the right of guiding the payment is in him, all
the time the bill is running; and no bill can or ought to be paid before
it is due, without the declared assent of the remitter, signified under
his hand, and attested by a public notary. There are, I say, abundance
of niceties in the matter of foreign exchanges, and in the manner of
drawing, accepting, and protesting bills; but as I am now speaking with,
and have confined my discourse in this work to, the inland tradesmen of
England, I think it would be as unprofitable to them to meddle with
this, as it would be difficult to them to understand it.[48]
I return, therefore, to the subject in hand, as well as to the people to
whom I have all along directed my discourse.
Though the inland tradesmen do not, and need not, acquaint themselves
with the manner of foreign exchanges, yet there is a great deal of
business done by exchange among ourselves, and at home, and in which our
inland trade is chiefly concerned; and as this is the reason why I speak
so much, and repeat it so often to the tradesman for whose instruction I
am writing, that he should maintain the credit of his bills, so it may
not be amiss to give the tradesman some directions concerning such
bills.
He is to consider, that, in general, bills pass through a number of
hands, by indorsation from one to another, and that if the bill comes
to be protested afterwards and returned, it goes back again through all
those hands with this mark of the tradesman's disgrace upon it, namely,
that it has been accepted, but that the man who accepted it is not able
to pay it, than which nothing can expose the tradesman more.
He is to consider that the grand characteristic of a tradesman, and by
which his credit is rated, is this of paying his bills well or ill. If
any man goes to the neighbours or dealers of a tradesman to inquire of
his credit, or his fame in business, which is often done upon almost
every extraordinary occasion, the first question is, 'How does he pay
his bills?' As when we go to a master or mistress to inquire the
character of a maid-servant, one of the first questions generally is of
her probity, 'Is she honest?' so here, if you would be able to judge of
the man, your first question is, 'What for a paymaster is he? How does
he pay his bills?'--strongly intimating, and, indeed, very reasonably,
that if he has any credit, or any regard to his credit, he will be sure
to pay his bills well; and if he does not pay his bills well, he cannot
be sound at bottom, because he would never suffer a slur there, if it
were possible for him to avoid it. On the other hand, if a tradesman
pays his bills punctually, let whatever other slur be upon his
reputation, his credit will hold good. I knew a man in the city, who
upon all occasions of business issued promissory notes, or notes under
his hand, at such or such time, and it was for an immense sum of money
that he gave out such notes; so that they became frequent in trade, and
at length people began to carry them about to discount, which lessened
the gentleman so much, though he was really a man of substance, that his
bills went at last at twenty per cent, discount or more; and yet this
man maintained his credit by this, that though he would always take as
much time as he could get in these notes, yet when they came due they
were always punctually paid to a day; no man came twice for his money.
This was a trying case, for though upon the multitude of his notes that
were out, and by reason of the large discount given upon them, his
credit at first suffered exceedingly, and men began to talk very
dubiously of him, yet upon the punctual discharge of them when due, it
began presently to be taken notice of, and said openly how well he paid
his notes; upon which presently the rate of his discount fell, and in a
short time all his notes were at _par_; so that punctual payment, in
spite of rumour, and of a rumour not so ill grounded as rumours
generally are, prevailed and established the credit of the person, who
was indeed rich at bottom, but might have found it hard enough to have
stood it, if, as his bills had a high discount upon them, they had been
ill paid too. All which confirms what I have hitherto alleged, namely,
of how much concern it is for a tradesman to pay his bills and
promissory notes very punctually.
I might argue here how much it is his interest to do so, and how it
enables him to coin as many bills as he pleases--in short, a man whose
notes are currently paid, and the credit of whose bills is established
by their being punctually paid, has an infinite advantage in trade; he
is a bank to himself; he can buy what bargains he pleases; no advantage
in business offers but he can grasp at it, for his notes are current as
another man's cash; if he buys at time in the country, he has nothing to
do but to order them to draw for the money when it is due, and he gains
all the time given in the bills into the bargain.
If he knows what he buys, and how to put it off, he buys a thousand
pounds' worth of goods at once, sells them for less time than he buys
at, and pays them with their own money. I might swell this discourse to
a volume by itself, to set out the particular profit that such a man may
make of his credit, and how he can raise what sums he will, by buying
goods, and by ordering the people whom he is to pay in the country, to
draw bills on him. Nor is it any loss to those he buys of, for as all
the remitters of money know his bills, and they are currently paid, they
never scruple delivering their money upon his bills, so that the
countryman or manufacturer is effectually supplied, and the time given
in the bill is the property of the current dealer on whom they are
drawn.
But, then, let me add a caution here for the best of tradesmen not to
neglect--namely, as the tradesman should take care to pay his bills and
notes currently, so, that he may do it, he must be careful what notes he
issues out, and how he suffers others to draw on him. He that is careful
of his reputation in business, will also be cautious not to let any man
he deals with over draw him, or draw upon him before the money drawn for
his due. And as to notes promissory, or under his hand, he is careful
not to give out such notes but on good occasions, and where he has the
effects in his hand to answer them; this keeps his cash whole, and
preserves his ability of performing and punctually paying when the notes
become due; and the want of this caution has ruined the reputation of a
tradesman many times, when he might otherwise have preserved himself in
as good credit and condition as other men.
All these cautions are made thus needful on account of that one useful
maxim, that the tradesman's _all_ depends upon his punctual complying
with the payment of his bills.
FOOTNOTES:
[46] [By factors, Defoe seems to mean the class of persons whom we now
name commission-agents.]
[47] [All bills and promissory notes, inland or foreign, payable in this
country, are allowed three days of grace beyond the actual period
expressed upon them; thus, a bill drawn at thirty days after date, is
payable only on the thirty-third day. If bills be not presented for
payment on the last day of grace, they cannot be protested, and
consitute only an evidence of the debt for legal recovery. If the last
day of grace be a Sunday, the bill is presentible on the Saturday
previous.]
[48] [In consequence of the great extension of commerce since the time
of Defoe, a short explanation of the principle and practice of drawing
foreign bills of exchange now seems necessary. Foreign bills of exchange
are used, in order to avoid the necessity of transmitting actual money
from one country to another. A merchant, for instance, in Nova Scotia,
is owing £100 to a manufacturer in Glasgow: he seeks out some one who is
a creditor to that amount to some person in Britain; we shall say he
finds a captain in the army who wishes to draw £100 from his agent in
London. To this captain the Nova Scotia merchant pays £100, and gets his
order or bill on the London agent, which bill he sends to the
manufacturer in Glasgow, and the manufacturer transmits the bill to
London for payment; any banker, indeed, will give him the money for it,
deducting a small commission. Thus two debts are liquidated, without the
transmission of a farthing in money. The demand for bills in foreign
countries to send to Great Britain, has the effect of raising them to a
premium, which is called the rate of exchange, and is a burden which
falls on the purchaser of the bill. Foreign bills of exchange drawn on
parties in Great Britain, have expressed upon them the number of days
after sight at which they are to be payable. Thus, a merchant on
receiving a foreign bill drawn at 'thirty days after sight,' hastens to
get it 'sighted,' or shown to the party on whom it is drawn, and that
party accepts it, at the same time marking the date of doing so. The
bill is then complete and negociable, and is presented for payment to
the acceptor at the end of the time specified, allowing the usual three
days of grace. Should the bill not be accepted on being 'sighted,' it is
a dishonoured bill, and is returned with a legal protest to the foreign
correspondent. To avert, as far as possible, the loss of foreign bills
by shipwreck, a set of three bills is drawn for each transaction, called
first, second, and third, of the same tenor. For example: 'Thirty days
after sight pay this my first bill of exchange, for the sum of £100
sterling; second and third of the same tenor being unpaid.' This first
bill is first sent, and by next conveyance the second is sent. Should
the first arrive safely, the second, on making its appearance, is
destroyed. The third is retained by the foreign correspondent till he
hear whether the former two have arrived at their destination, and is
sent only if they have been lost. On receiving whichever comes first, it
is the duty of the receiver to communicate intelligence of the fact to
the sender.]