II. FORM

98. What a negotiable instrument must contain. An instrument to be negotiable (and not merely a common law contract) must conform to the following requirements.

1. It must be in writing and signed by the maker or drawer. A writing includes print, and the writing may be in pencil.

Examples: 1. One may sign in a trade or assumed name. Even the indorsement by figures 1, 2, 8 has been held sufficient.

2. Only the person who signs is liable. The signature "A. B., agent," or "C. D., treasurer," binds only A. B. or C. D. and not his principal, for these are mere terms of description. The signature should be "X. Y., by A.B., agent," or "X. Y. Co., by A. B., treasurer." By the custom of banks the signature "E. F., cashier," binds the bank whose name appears on the instrument.

3. A forged signature does not bind the one whose name is forged. No rights can be acquired by any holder under a forged signature.

2. It must contain an unconditional promise or order to pay a sum certain in money. A promissory note contains a promise. A bill of exchange, or check, contains an order. The point is that these must be unconditional.

Examples: 4. "I O U twenty dollars" is not a promise but a mere acknowledgment. So also, "Due you twenty dollars."

5. "Be so kind as to let the bearer have twenty dollars" be too civil to be regarded as an "order."

may, perhaps,

6. "I promise to pay to order of A. B. twenty dollars out of proceeds of Blackacre farm" is conditional and therefore nonnegotiable. There may not be proceeds from that farm sufficient to pay.

7. "Pay to order of A. B. twenty dollars and charge to account of Blackacre farm" is unconditional, because it merely indicates the fund from which reimbursement is to be made.

8. "Pay to the order of A. B. all the proceeds of Blackacre farm" is nonnegotiable because the sum is uncertain. But the law permits payment "with exchange" or with "costs of collection or attorney's fees in case not paid at maturity," although these may render the sum uncertain. It also allows payment by installments, with a provision that upon default in the payment of any installment the whole sum shall become due.

9. "Deliver to order of A. B. 100 bushels of wheat" is nonnegotiable because not payable in money.

10. The instrument may specify a particular kind of money, as gold coin, silver dollars, greenbacks, or a foreign money, as Mexican silver dollars. There has been much conflict as to whether instruments payable incurrent funds are negotiable, since current funds may include the promissory notes of banks (i.e. bank notes), which are themselves merely negotiable instruments. If payable in any kind of legal-tender money there could be no question; but current funds include more than legal-tender money, and courts have differed as to whether that phrase is the equivalent of money.

3. It must be payable on demand or at a fixed or determi✓nable future time,

Examples: 11. "On demand, pay, etc."; "At sight, pay, etc," are payable on demand. So also if no time for payment is expressed the instrument is payable on demand. Such instruments are due at once and become overdue after the expiration of a reasonable time.

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12. Thirty days after date"; "On or before Jan. 1, 1905 "; " Within one year after my death"; these are all fixed or determinable dates. “When A. B. is twenty-one is not, because A. B. may never reach that age. "Thirty days after sight, etc.," is determinable.

4. It must be payable to order or to bearer.

Examples: 13. "I promise to pay A. B. twenty dollars" is nonnego

tiable.

14. “I promise to pay A. B. or order twenty dollars" is negotiable when indorsed by A. B.

15. "I promise to pay the bearer twenty dollars" is negotiable without any indorsement.

16. "I promise to pay cash twenty dollars" is payable to bearer.

17. If the payee is known by the maker to be a fictitious person, the instrument is payable to bearer.

18. When an instrument payable to the order of A. B. is indorsed in blank by A. B. it is then payable to bearer. An indorsement is in blank when A. B. simply writes his name upon the back of the instrument.

19. An instrument may be made payable to the order of the maker, or drawer, or drawee, or two or more persons jointly.

5. If the instrument is a bill of exchange, it must name or otherwise indicate the drawee with reasonable certainty.

Examples: 20. "To Mobile, Alabama," is not a bill because the

drawee is neither named nor indicated.

21. "To the owner of the steamer Dorrance" is sufficient because the drawee is indicated, though not named.

99. What a negotiable instrument must not contain. The rule and the exceptions upon this point may be stated as follows.

1. Rule. Subject to the exceptions enumerated below, a negotiable instrument must not contain a promise or an order to do any act in addition to the payment of money.

Examples: 1. "I promise to pay to the order of A. B. fifty dollars and also deliver to his order 100 bushels of wheat," is nonnegotiable. Pay to A. B. or order fifty dollars and also deliver to him my horse Billy B.," is nonnegotiable.

2. "

2. Exceptions. The exceptions to this rule are given below. (a) The instrument may give the holder an election to require something to be done in lieu of the payment of money. In such case the maker promises the payment of money and has no election to do anything else. The holder may require the payment of the money, but he may if he chooses take something in place of it.

Example 3. "I promise to pay to the order of A. B. fifty dollars, or at his election deliver to him 100 bushels of wheat," is negotiable.

(b) The instrument may authorize the sale of collateral securities in case of nonpayment at maturity. The note given to a bank that lends money on collateral security usually contains a provision for the sale of the securities in case of default in payment.

(c) The instrument may authorize the confession of judgment upon nonpayment at maturity. Judgment notes are not used in some states, but where they are in use the Negotiable Instruments Law regards them as negotiable.

(d) The instrument may waive the benefit of any law intended for the advantage or protection of the maker unless such waiver is forbidden by the statute creating the exemption. In some states it is allowable to insert a clause waiving the benefits of homestead and exemption laws.

100. Nonessentials. There are certain things which may or may not appear in a negotiable instrument, and their presence or absence will not affect its negotiability.

1. Statement of consideration. A negotiable instrument need not state that any value was given. It is usual to insert the words "for value received," but this is not necessary to its validity, and the instrument has a presumptive consideration without the use of these or equivalent words. In some states there are special statutes requiring that the consideration shall be stated in negotiable instruments given for patent rights, and these statutes must be observed. An instrument is not rendered nonnegotiable merely because it states the consideration, as, for instance, if it reads, "In payment for one horse I promise to pay, etc."

2. Date. A negotiable instrument need not be dated. If it is issued undated, the true date, which is the date when issued, may be inserted by any holder. The insertion of a wrong date binds prior parties in favor of a holder who afterwards takes the instrument for value and without notice of the error. It is always best to date a negotiable instrument in order to avoid. difficulties.

3. Place. A negotiable instrument need not state the place where it is drawn nor the place where it is payable. It is, of course, best to insert the place and the date, but these are not essentials.

4. Effect of seal. A sealed instrument is generally nonnegotiable, but the seal of a corporation or municipality is regarded as part of the signature and does not affect the negotiability of commercial paper or negotiable bonds. The Negotiable Instruments Law extends this doctrine to private seals; but this is probably limited to the case where there is merely a signature followed by a seal, and might not extend to a case where there is a full recital of the seal, as where the instrument reads, "In witness whereof, I have hereto affixed my hand and seal." Negotiable bonds are usually sealed.

101. Effect of blanks. If an instrument is issued with blanks, a person who takes it has notice that it is to be filled up, and is put upon inquiry as to how it is to be filled. Any holder may fill the blanks in accordance with the authority given; if he fills them in excess of that authority, he cannot recover upon

the instrument. But if he fills them in excess of the authority and then transfers the completed instrument to a holder for value and without notice, the prior parties are liable to such holder. It is better that one who puts out an incomplete instrument should suffer loss than that the innocent purchaser should suffer it. A space which the writing does not completely fill, as the space for the amount, is not a blank if something be written in it.

Examples: 1. A. B. indorses C. D.'s note with the amount left blank, and authorizes C. D. to fill it up for an amount necessary to renew another note then due; this amount is in fact $240. C. D. fills up the note for $1000 and discounts it at a bank which knows nothing of these facts. A. B. is liable to the bank as indorser for $1000.

2. A. B. draws and delivers to C. D. a check with the amount left blank, and authorizes C. D. to write in an amount not exceeding $100. C. D. writes in $500 and the bank pays the check. A. B. must suffer the loss.

3. A. B. draws and delivers to C. D. a check for $2 upon a printed form thus: "Two... ..Dollars." C. D. writes in the word “hundred ” and changes the figures to correspond: “Two hundred. Dollars." The bank pays C. D. $200. This is alteration, not filling a blank. The loss is that of the bank, although some states say that A. B. may be estopped to set up the alteration if he has by his negligent manner of drawing the check "invited" alterations. The general rule is that the alteration destroys the instrument; but the Negotiable Instruments Law allows a holder in due course to recover upon it for the original amount, and under this law the bank could charge A. B.'s account with $2.

102. Delivery. Ordinarily a negotiable instrument must be delivered in order to be valid. As between immediate parties, such as maker and payee, indorser and indorsee, this rule is absolute; but as between a prior party, as maker, and a remote purchaser for value without notice, a valid delivery by the maker to the payee is conclusively presumed if the instrument was completed by the maker but not if it was incomplete.

Examples: 1. A. B. makes a promissory note payable to the order of C. D. and leaves it on his desk. C. D. takes possession of it without A. B.'s consent. C.D. cannot recover against A. B. because there was no delivery.

2. In the above case C. D. indorses the note and transfers it to E. F., who is a holder in due course. E. F. may recover against A. B. The case would be the same if A. B. locked the instrument in his desk or safe and C. D.