it should have this characteristic of other property, viz., that one can tell by looking at it just what it is.

22. Manner of Transfer.-There are two usual modes of transferring commercial paper, (1) by delivery of the paper alone, (2) by the owner's writing his name upon the back and then delivering it. The latter is called indorsement.* Thus in forms 1 or 5, if Fay wishes to sell the -note to some third person, he writes his own name upon the back and delivers it. PAPER PAYABLE TO BEARER MAY BE TRANSFERRED BY DELIVERY ALONE. No indorsement is necessary, though it may be made. PAPER PAYABLE TO ORDER MUST BE INDORSED TO BE TRANSFERRED.† In other words, in paper payable to bearer there is no condition of negotiability as to its manner of transfer: if payable to order, the condition is indorsement.

23. Indorsements are of two kinds, in full and in blank. A full indorsement consists of the owner's name with an order to pay it to some particular person. A blank indorsement is the name without such order, and is usually the name alone, After a full indorsement the paper is still payable to order; the person only is changed. He must then indorse it if he wishes to transfer it, and he may indorse in full or in blank. After a blank indorsement the paper is payable to bearer. It is as if over the name were written "pay the within to the bearer." Thus an order note may become a bearer note, but the converse is not true; a note which is or has become payable to bearer

* In another sense the indorsement is the words written. The word is sometimes written endorse.

That is, and keep its negotiable character. It may be transferred without indorsement, like any other debt (p. 91, sec. 13), but in such case it is transferred as a debt or claim only, and not as negotiable paper, and is subject to all the conditions or defects to which it was subject in the hands of the person so transferring.

remains so, no matter what the subsequent indorsements are (forms 14, 15, 16).

Note to Teacher.-Draw up notes and have them indorsed by one scholar to another, in the two ways.

*

24. Time of Transfer.-But negotiable paper ceases to have its peculiar characteristics, at maturity, i.e., the last day of grace. Thereafter it becomes like any other debt or claim. NEGOTIABLE PAPER LOSES ITS NEGOTIABILITY AT MATURITY. This does not mean that it becomes invalid, but simply that one who receives it after it is due. gets only such rights as the one from whom he received it had. There are then two cases, (1) where the person transferring it after it is due has the right to enforce it, (2) where he has not. In the first case the one to whom he transfers it gets the right to enforce, in the second he does not.†

25. Consideration.-ONE WHO RECEIVES NEGOTIABLE PAPER, GIVING NO MONEY OR PROPERTY IN EXCHANGE FOR IT, GETS NO BETTER RIGHT TO ENFORCE IT THAN THE ONE FROM WHOM HE RECEIVES IT HAD.

If he gives no

consideration for it, he loses nothing by it. The thief or finder of a note, though payable to bearer, cannot enforce it.

*This is so as to all notes and drafts due in the future. As to demand notes, though the maker may be sued immediately, yet they remain negotiable for a short time, perhaps two or three months. As to checks, see p. 129, sec. 7.

Thus suppose form 1 to be an accommodation note: Fay cannot ever enforce it, as we have seen, but he can sell it to another person, and that person can enforce it; and therefore any one receiving it from the latter, whether before or after maturity, can also enforce it; but if Fay keeps it until February 7, 1882, neither he nor any one to whom he should afterward sell it could enforce it. Again, suppose the note was stolen from Fay (after he had indorsed it in blank), and the thief should sell it to a bank, the bank could enforce at if they took it before maturity, but not otherwise

26. Knowledge.- ONE WHO

RECEIVES

NEGOTIABLE PAPER, KNOWING AT THE TIME OF ANY INVALIDATING DEFECT, GETS NO BETTER RIGHT TO ENFORCE IT THAN THE

Thus if I buy a note

ONE FROM WHOM HE RECEIVES IT HAD. The purchase must not only be before maturity, and for good consideration, but it must be in good faith. from a thief knowing, or having reason to know, that it is stolen, I cannot make the maker pay me. So also, if I know it to be already paid, or that it was originally given for an illegal or fraudulent purpose. If, however, I do not hear of the defect until after I have bought it, I may enforce it. But the knowledge that it was an accommodation note is of no effect, and that kind of note is therefore an exception to this rule.

27. The Practical Rules to be drawn from this chapter are as follows:-(a) If we are taking a note from the maker its form is unimportant; the contract must have the seven requisites and that is all. (b) If we are buying one from some one not the maker, and wish to be sure that we can force the maker to pay it, to be safe we must make sure of one of two things, either (1) that the one from whom we are buying has himself the right to enforce it, or (2) that it is negotiable paper in form, and is transferred to us under all the other necessary conditions of negotiability. The absence of any one condition gives us only the rights had by the one from whom we receive it.

Note to Teacher.-The circumstances under which commercial paper may be bought and sold are, of course, infinite in variety, and only a few examples can be given in a book of this character. But it must be left to the individual teacher-and there is ample opportunity for it-to test the scholar's knowledge and understanding of the rules in the foregoing chapter, by stating cases likely to occur in actual life, and asking for their effect and why, or by having the scholar state a case which shall illustrate one or more of those rules.

CHAPTER XXIII.

DRAFTS AND BILLS OF EXCHANGE.

1. Draft.-A DRAFT IS A WRITTEN ORDER, SIGNED BY ONE PERSON, ORDERING ANOTHER PERSON, TO WHOM IT IS DIRECTED, TO PAY A CERTAIN SUM OF MONEY, AT A CERTAIN TIME, TO A THIRD PERSON (NAMED), OR TO HIS ORDER, OR TO THE BEARER. The following is a common form:

$1000.

New York, Sept. 13, 1881.

At sight pay to A. B. Pounyon & Co. or order, One thousand dollars, value received, and charge the same to account A. J. Jones.

of

To William J. Barber,

New Orleans.

The person ordering [Jones] is called the drawer, the one to whom it is directed [Barber] is called the person drawn upon, and the one in whose favor it is drawn, i.e., to whom the payment is directed to be made [Runyon & Co.] is called the payee.

2. A Bill of Exchange, in common language, is a draft, of which the drawer and the person drawn upon live in different countries, and which is therefore drawn in one country and paid in the other. In general, the rules governing drafts and bills of exchange are the same, and

we shall here use the word draft as meaning either of them. In legal language, in fact, they are both known as bills of exchange.*

3. Use.-Drafts came into use before notes, have been used now for several centuries, and have been of much benefit to commerce and thus to civilization. It is easily

seen that if certain to be paid, they represent like notes so much money, so much property, which may be safely and easily carried or sent from place to place. Thus, suppose Jones in New York owes Runyon & Co. of New Orleans $1000, and that Barber of New Orleans owes Jones $1000; if, now, Jones will draw and send to Runyon & Co. his draft upon Barber, both debts can be thus paid, while otherwise the money itself would have to be transported from New Orleans to New York and back again.

4. Kinds.—Like notes, drafts are made payable to order or to bearer (p. 106). So also they differ as to the time at which payment is to be made, being made payable "at sight," or "on demand," or ".... days after sight,” or ".... days after date," etc., according as the parties choose. Of course sufficient time should be allowed so that the draft may be presented to the person drawn upon before or when it becomes due. "At sight" and " on demand" mean when presented, i.e., when the person drawn upon sees the draft. (See p. 278 for some forms.)

5. Character.- -A note is a promise: a draft is an order. In the transaction in which a note is given, and also on the face of the note itself, there are originally but two parties, the maker and the payee. The contract is complete when

*Foreign bills are often drawn in triplicate; three alike, except that they are numbered first, second and third. If the first is lost while being sent for payment the second may be used. Only one is paid in any event (form 9).