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and the person to whom his rights are so transferred is called an indorsee. Bills are often indorsed when the interest in them would pass without such indorsement, but in many cases it is necessary to indorse a bill in order to pass an interest therein; as if the bill be payable to the drawer or his order, the drawer must indorse in order to transfer his interest, and if the bill be payable to C or his order, C must indorse.
The drawer and C would in these cases be called indorsers, and the persons taking from them indorsees.
When no such indorsement is necessary to transfer the interest in the bill, it is said to be payable to bearer; and a person transferring without indorsement is simply called the transferor, and the person who takes from him the transferee.
The holder is, in the words of Mr. Justice Byles, "the person in actual or constructive possession of the bill, and entitled at law to recover its contents from the parties to it."
2. A promissory note is a written promise by A to B, to pay to B, or to B or his order, a specified sum on demand, or at a certain time. The person giving the promise is said to be the maker of the note, and occupies a position resembling that of the acceptor of a bill; and the words transferor and transferee, indorser and indorsee, and holder, are applicable with reference to notes, the. same as to bills of exchange.
An ordinary bank note is a banker's promissory note. 3. Bills of exchange, being intended for the transfer and transmission to third parties of debts due by one man to another, the drawer is supposed to be the creditor of the drawee, who is presumed to have in his hands effects of the drawer which the latter is desirous of transferring.
An ordinary banker's cheque is a bill of exchange payable on demand.
It is therefore for the drawer to consult his convenience as to how he shall direct the drawee to pay the money (1), at what time, or (2), at what place, and (3), to whom.
For instance, the bill may be payable (1) at sight, six months after date or after sight; (2) in London, or at Drummond's bank; (3) to the drawer or his order.
Instead of directing the drawee to pay to the drawer or his order, the drawer may make the bill payable to a
third person (naming him), or to such person or his order, or to bearer.
If the bill is payable to the payee's order, the payee, in order to transfer his right in it, must indorse it, and the person to whom he gives it will take the money on the bill at maturity, by virtue of the order testified by the indorsement. If the bill be expressed to be payable to a person named without adding" or order," that person can still transfer it by indorsing it, unless it contain words prohibiting transfer, such as "pay C D only." Thus a bill payable to the drawer without "or order" would be negotiable.
If the indorsement be by simply writing the indorser's name, as is usual, the bill is then payable to bearer, and passes by delivery; though at each successive delivery an indorsement is often required for the security of the transferee.
The same rules apply where the bill is payable to the drawer or his order.
If the drawee is directed to pay " to bearer," the bill needs no indorsement to confer a title to the money, though indorsements are often given as the bill changes hands.
Promissory notes may be made payable in the same way as bills, and with the same results.
4. The acceptor is the person who is to be liable to the drawer on a bill (except an accommodation bill), so long as it remains in the drawer's hands, and is always the person primarily liable (a term to be presently explained, see chap. xiii); and when the drawer, by indorsement (which is in general necessary), transfers the bill to another, the drawer in his turn becomes liable, as well as the acceptor, to the holder of the bill, and so does every subsequent indorser, the security thus increasing with each indorsement."
The drawer is also liable upon every unaccepted draft of his which he transfers, for by so doing he makes an implied undertaking that upon presentment to the drawee it shall be accepted.
5. The maker of a note occupies a position similar to that of an acceptor of a bill, being the person primarily liable, and when the note is transferred by indorsement by the payee, the indorser likewise becomes liable to the holder of the note, as does every subsequent indorser.
(As to the nature of joint and joint and several notes, see chap. xx, sec. 1.)
As all these parties have different rights and liabilities, it will be convenient to treat those of each one separately; but before doing so it is necessary to make some general observations upon the power which different classes of persons have in law to bind themselves or others by becoming parties to bills or notes; for it is most important to every one who deals with these instruments to know the real position of those who may be liable to or with him.
Persons incurring such liability, whether on behalf of themselves or others, are said, in legal language, to Contract; and the power to do this will be the subject of the next chapter.
OF THE POWER OF PARTIES TO CONTRACT, AND THEREIN OF AGENCY AND PARTNERSHIP.
1. Importance of the Subject to those who have dealings with Bills.
2. Disqualification of Infants and Corporations. 3. As to Married Women.
4. Disqualification of Insane Persons, Idiots, and Persons Drunk.
5. Infants and Wives may be Agents.
6. Agents, how appointed.
7. Of authority to an Agent, divided into real (whether express or implied) and presumptive.
8. How to ascertain whether a man is authorised to act as Agent.
9. Of limited and general Agency.
10. Of presumptive Agency, whether limited or general. 11. Authority of general Agent presumed to continue. 12. How Agent can bind Principal, and how bind himself.
13. Rights of Principal and Agent respectively to sue. 14. Of Partnership, and the mutual Agency of
15. Of the various kinds of Partners, and how they can bind or be bound by one another.
16. Of Dissolution-how it affects the power of one Partner to bind another.
17. Miscellaneous matters connected with the above subjects.
1. Bills and notes are one kind of contract. The power to bind oneself by bills and notes is co-extensive with the capacity to contract.
It is easy to decide how a bill or note shall be made payable; but it is far more important to be able to know how far the persons who are to be parties to these instruments are by law capable of contracting, so as to bind themselves or others.
Every one who contemplates dealing with a bill or note should carefully consider whether those who are already, or are about to become, parties to the instrument are capable of binding themselves; or, if they sign as agents for others, whether they are capable of binding those others.
2. I will first mention the disqualifications attaching upon the person of a contracting party in his individual capacity. I say "upon his person," because there are certain classes of people who are by law wholly or partially incompetent to contract; and I say "in his individual capacity," because one who cannot bind himself may yet be an agent to bind another.
An infant, i. e. a person under full age, cannot bind himself or herself by a bill or note. If it be given for the price of necessaries he may be liable when of age on the consideration, but not on the instrument itself. If, however, he induced the other party to deal with him by pretending to be of age, he cannot set up the defence of infancy.
Corporations, in which term are included Joint Stock Companies, may or may not be capable of binding themselves by becoming parties to bills and notes. Their power to bind themselves depends generally on whether or not they are formed for purposes for which such instruments are required; in other words, whether they are trading companies. "A mining company, a cemetery company, a salvage company, an alkali works company, and a waterworks company, have been held non-trading companies."-Chalmers on Bill Act, 67.
The provision in "the Companies Act," which prescribes the mode in which companies are to subscribe bills and notes merely points out the way in which it is to be done by such companies as may lawfully do it, and does not enable any to do it who otherwise might not, and the B. of Exch. Act, 1882, does not extend the authority.
Non-trading companies established by statute or by charter cannot make themselves liable on bills or notes without being expressly authorized by the instrument of incorporation.
But where a bill is drawn or indorsed by an infant, minor, or corporation having no capacity or power to incur liability on a bill, the drawing or indorsement entitles the holder to receive payment of the bill and to enforce it against any other party thereto."-B. of Exch. Act, 1882, s. 22.
3. Married women suffered till lately, with certain exceptions, under an incapacity to contract; but now a married woman is "capable of entering into and rendering herself liable in respect of and to the extent of her separate property, on any contract, and of suing and being sued, either in contract or in tort or otherwise, in all respects as if she were a feme sole (single woman), and her husband need not be joined with her as plaintiff or defendant."-Married Women's Property Act, 1882, s. 1.
4. Insane persons are under disability to contract only while they are insane, unless they have been declared lunatics under a commission of lunacy, in which case the commission must be superseded before any valid contract can be made with them even during a lucid interval.
Idiots are persons who never have sufficient wits to. be of a contracting mind, so that although they may go through an exterior form of contracting, as by making a mark, yet no actual contract can be made with them.
Persons who are drunk, or whose mental faculties are by some accident materially impaired, whether for a long or a short time, are, during such states, incapable of contracting.
5. But, though infants cannot bind themselves, yet they may be agents for others so as to bind those others; and a married woman may not only herself contract, but may be an agent as well for strangers as for