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drawn at sight or to accept a time bill would not be considered dishonor. Custom does, however, consider it a dishonor to refuse to pay an accepted bill pending arrival of the merchandise. The custom would not have any bearing on the strict legal interpretation of the situation, inasmuch as the Cuban courts are extremely literal in adhering to the statute in their decisions.

The fact that the contract of sale provided for the inspection of the merchandise prior to acceptance or payment of the bill would have no effect on the bank, but might be shown to the court.

Where the merchandise has not arrived and the drawee claims a right of inspection, banks follow the practice of giving a reasonable extension of time. Accepted drafts are protested for nonpayment in any case, since this is necessary in order to maintain their legal value. It is to be noted, however, that a draft drawn in dollars, unless otherwise specified, is payable in Cuban currency and consequently exchange would be for account of the exporter in the United States. To avoid this drafts are generally stamped "Payable at the current rate of exchange at the collecting bank for demand drafts (or cable transfer) on New York (or, plus stamps, collection charges, etc.). Where "No Protest" Instructions Accompany the Bill of Exchange.

The fact that "no protest" instructions accompanied the bill of exchange does not reach the knowledge of the drawee and thus give him an opportunity to delay payment without danger of protest unless the words are written on the face of the bill itself.

Trade Acceptance Not in Common Use.

In this connection it may be pointed out that the trade acceptance now generally used in domestic transactions is an American development and quite possibly does not meet the description of a bill of exchange under Cuban law. While some exporters are using these forms in their Cuban business, no test case by Cuban courts has come to the attention of the division of commercial laws, and pending the judicial determination of this point it seems advisable to discourage the use of domestic trade acceptance forms for drawing upon Cuban buyers.

Negotiation and Transfer of the Draft.

Bills may be drawn to the order of the drawer or another and are negotiated by indorsement. They may be indorsed by holder's agent provided the agent has power of attorney and so states above his signature. The indorsement should state the date, the indorsee, and the consideration.

Bills may be drawn payable at sight, or one or more days or months after sight or date, or at a fixed or determinable date. They may also be drawn payable at a fair, in which way they are payable on the last day of the fair.

They may likewise be drawn payable at one or more usances. A usance is the time, according to Pothier (Contrat du Change, n. 15), which by the custom of certain countries is allowed for the payment of bills of exchange. The usance for bills drawn in the United States on Cuba is expressly established as 60 days.

All bills must be paid on the due date, or the first legal business day thereafter, before the setting of the sun, without grace.

The Aval

An institution not familiar in American and English legislation on bills of exchange is the "aval," or guaranty (pledge) by a person not a party to the bill, who, by placing his name on the back of the draft with a statement of his undertaking, becomes secondarily liable thereon under the conditions of his undertaking. The law says that "the payment of a bill can be secured by a written obligation independent of that contracted by the acceptor and indorser, known by the name of aval." An action on the aval is an action arising out of the draft, and, according to a court decision, is outlawed in three years after the due date of the draft to which it refers.

The aval may be general in its terms, in which case it is governed by the terms of the draft as to the time and place of payment, or it may be restricted to any time, place, amount, or person. The fact that a condition may be expressed in the undertaking of the aval does not in any manner affect the negotiability of the instrument, since the aval is a contract apart from the obligation imposed by the draft itself.

Attention may be called to the possible use which may be made of the aval as an added source of credit insurance. The provisions relating to its employment are sufficiently flexible to admit of practical application.

Presentation and Protest of Drafts.

Drafts, to retain their full effect in lawsuits, must be protested both for nonacceptance and nonpayment. Protest for nonacceptance does not exempt the holder from the duty of protesting for nonpayment. Not even the death of the drawee exempts the holder from this duty. Protest must be made before the sunset of the day following presentation.

Opinion in commercial circles is to the effect that the Cuban laws relating to protest of drafts are cumbersome and antiquated and far from being adequate under modern conditions of business. The cost is out of all proportion, due to the fact that the intervention of a notary is required as well as the execution of a very complicated procedure. Where notaries are available in the town, the cost may be $8 or $10 only, but if none are available it may sometimes rise to $100 to $500. Reference to the section of this bulletin describing the functions of notaries will help to give one an understanding of the formalities applied to protests.

A matter of some consequence in connection with the protest of drafts is the attitude of Cuban merchants toward it. Due to the fact that the holder of a protested draft may be in a position to embargo the business of the merchant and upset his affairs quite summarily by the employment of the executive action against him, it is a peculiarly dangerous instrumentality from the point of view of the debtor. It seems unjust to him that because he may have had some good reason to dishonor a particular draft that his whole credit and reputation should be imperiled. While, therefore, the drawer's only protection in case of dishonor is to protest, he must understand that in so doing he may sever relations with the debtor completely and must not expect future business with the same customer. This is a dilemma which must be solved by a consideration of the circumstances of each particular case.

If the drawer wishes to extend the time for payment of the draft, he may do so only by drawing a new bill or by entering into a formal protocolized contract to that effect. To extend the original draft results in impairing its force in law; it is no longer entitled to executive action, but becomes an ordinary debt, enforceable in the ordinary tedious, expensive way through the bringing of a "declarative" civil action. The acceptance of a new draft avoids these consequences. The execution of a protocolized contract serves to substitute the contract in the place of the bill, the contract being sufficient ground for the bringing of an executive action.

Subject Specially Considered in Other Bulletins.

The question of protest of drafts in Cuba and the other countries of Latin America has been comprehensively treated in a series of bulletins prepared by the division of commercial laws. Copies of the bulletins relating to Cuba, Nos. 112 and 113, are still available upon request to that division.

Right of Action on Dishonored Bills.

The code of commerce supplements the code of civil procedure with reference to the right of action which accrues to holders of bills of exchange, expressly providing that the action against the acceptor shall be executive and execution may issue upon the mere presentation to the court of the accepted bill-ex parte, as it were-it not being necessary to prove the signature of the acceptor unless he denies it at the time of protesting for nonpayment. Actions arising out of drafts must be brought within three years of date of dishonor, whether the draft was protested or not. Of the executive and declarative action, and the execution and embargo which may issue therefrom, more is said in another part of this bulletin.

Other Forms of Negotiable Instruments.

A libranza is a draft drawn on a merchant in the same city as the drawer; a vale is an i. o. u. or note of hand; a pagaré is a promissory note. When any of these relate to commercial dealings, and in case the last two are made out "to order," they are subject to all the rules applicable to bills of exchange, except the acceptance feature.

If a vale or a pagaré is not made out "to order," it is a simple promise to pay and is subject to the rules of the civil code or the commercial code according to the nature of the transaction which gave rise to it.

The law of checks is codified in the code of commerce, but does not differ greatly from the law of bills of exchange, except in a few particulars. Checks must be presented within five days in the same city or within eight days if drawn from another city. Hence American firms should not, as a rule, accept local checks in payment from Cuban customers, unless they can be cashed in Cuba within a week.

Letters of credit must contain two essential conditions: They must be made to a determined person and not to order; they must refer to a fixed any specified sum of money or to a number of unfixed sums the total of all of which must be comprised in a fixed and specified sum. Letters of credit may not be protested, and they may be annulled upon notice to the bearer and to the addressee. They

must be used within the time specified or, no time being mentioned, within one year of date. The bearer of the letter must reimburse the drawer promptly, and failing to do so he may be sued by executive action.

Transfer of Nonnegotiable Credit Instruments.

Nonnegotiable instruments may be transferred from one holder to another without consent of the debtor, it being only necessary to advise the debtor of the transfer. Subsequent to so advising him, the only legitimate payment and satisfaction of the debt is that which is made to the new holder. The transferor in this case guaranties the legitimacy of the debt and the identity of the debtor but not the solvency of the latter.

POWERS OF ATTORNEY

The agent of an American firm in Cuba requires a sufficient power of attorney in order to be able to perform many ordinary commercial transactions and also to comply with many administrative functions, such as recording contracts in the commercial register, withdrawing parcels and correspondence or cashing money orders at the post office when these are addressed to the firm's Cuban office instead of to the agent personally, but the most important use of this instrument is in the event of a suit at law. In order to bring suit or defend one on behalf of an American firm, a Cuban lawyer must show a power of attorney granted by the firm or its authorized agent. Importance of Instrument Must Not be Underestimated.

An incredible proportion of cases brought by American firms against Cuban customers are either obstructed temporarily or completely quashed on account of technical discrepancies in the power of attorney or its faulty execution. As every firm that carries on a large business in any part of the world may expect a certain number of cases in which it is necessary to resort to the courts, such firms may expect to make use of the power of attorney more or less frequently. In plain words, the instrument is a source of possible grave danger, and its importance should not be minimized. The cost of its preparation is exorbitant, but to try to save money at this point is undeniably penny-wise and pound-foolish.

Efforts have been made from time to time to procure remedial legislation, but until such legislation is promulgated and fully tested in the courts no leniency in the preparation of powers should be indulged or tolerated.

Travelers Should Bear Powers of Attorney.

Salesmen and others visiting Cuba on behalf of American firms should be provided with adequate powers of attorney, without which they will find themselves incapable of transacting many important matters which may arise during their sojourn in the island.

The power of attorney is the passport to the business world in most Latin American countries, and even though one is sole owner of his firm, or a managing partner, or a director or officer of a corporation exercising full powers at home, he should take with him to Cuba sufficient evidence of his power and authority.

Form of Document.

No special form of power of attorney is prescribed by law, and the principle that prevails is that if the power is in a form that is valid by the law of the country of origin it is also valid in Cuba. Uniformly, however, powers of attorney are made in Cuba according to a form which has been developed in the course of much time. As this form represents the result of vast experience, it should be followed as far as possible.

Forms prepared by Cuban notaries are likely to be very verbose and redundant. Much of this quasilegal verbiage can be pruned away, and the shorter the instrument is the less expensive it will be to prepare and use it. However, such pruning should be done only by an expert, for otherwise the instrument may be turned out with an essential requirement missing, and a power with a material error is worse than no power at all, because it may put the grantor at a disadvantage in dealing with his adversary. Printed forms should be avoided, and a special document should be prepared to fit each separate case.

There are in the United States a number of attorneys and law firms with experience in the preparation of documents for use in Cuba, and a list of these is on file in the division of commercial laws. The preparation of powers should be intrusted to such expert counsel; with such counsel the division is ready to cooperate in the drafting of powers.

Must Show Identity and Authority of Grantor.

The power begins with a statement somewhat as follows:

In the city of, county of, State of ---, United States of America, this first day of January, nineteen hundred and twenty-six, before me, a notary public in and for the county aforesaid, personally appeared John Doe, to me well known, of full age, merchant, residing in the city and State aforesaid, who, in the presence of the witnesses named at the end of this instrument, says (that he grants the power).

In case the power is granted by a manufacturer who owns all the firm it is sufficient for the notary to certify to that fact and to add that the grantor is in full exercise of his civil rights.

If it is granted by a partnership, both or all partners should ap pear, or if one only appears on behalf of the rest he should prove his right to do so by transcribing the partnership agreement with a reference to the clause under which he claims the right.

If it is granted by a corporation the matter is most complicated. It should be granted by the president of the corporation, who must not only prove his authority, but the existence of the corporation and its right to grant such powers. A power of attorney granted by a large American corporation to a Cuban agent, a copy of which is on file in the division of commercial laws, may serve as a model, and a brief description may be useful. This power begins in the usual manner, but before reaching the body of the power itself it contains a long introduction by the notary who certifies to the existence of the corporation after examination of a certified copy of its articles of incorporation. He transcribes literally the parts of the by-laws which refer to the powers of the president, followed by a translation into Spanish.

Next follows a transcript of the parts of the minute book of the corporation showing the election of the directors by the general