3. On or before a fixed or determinable future time specified therein. 4. On or at a fixed period after the happening of a specified event, which is certain to take place, though the time of the happening be uncertain. 181. For the payment of money only. Rule: The instrument must require the payment of money. This means gold, silver, treasury notes or national bank bills; the latter, although not legal tender, have been legalized as national currency. The following are not negotiable: 1. A promise to pay C, or order, $100.00, in cotton or in work and labor. 2. A promise to pay in currency of a foreign country. 3. "Pay C, or order, the accrued rent," though the rent is payable in money. 4. "Pay C, or order, $100.00 in United States bonds." Rule: Notes or drafts payable out of a particular fund are not negotiable drafts or notes, because payment is contingent on the adequacy of the fund. The words "out of" are usually relied upon to show such a contingency. The following are not negotiable: 1. "Pay C, or order, $100.00 out of the money in your hands. belonging to the D Co." 2. "Pay C, or order, $100.00 out of the money arising from the sale of my land." Rule: An absolute order to pay, coupled with a direction to the drawee to reimburse himself out of a particular fund, or show to what account it is charged, is negotiable, because the fund is not the source of payment. The following are negotiable: 1. "Pay C, or order, $100.00, and take the same out of our share of the grain when sold." 2. "Pay C, or order, $100.00 on account of money advanced by me for the Roe Co." 182. Delivery. Rule: Delivery by the maker or acceptor is essential to fix his responsibility. There must be a transfer of the possession of the instrument. B, who is indebted to C, makes a note for the amount, payable to C. B dies, and the note is afterwards found among his papers. C has no right to this note, and if given to him, cannot enforce payment. Under certain conditions, however, a note may be good without delivery. If a blank instrument properly signed is issued with authority to fill it out, no further delivery is necessary. If an instrument be delivered in trust to a third party to be delivered by him subject to a condition, it is called an escrow. When negotiable instruments are delivered in escrow, they differ from non-negotiable paper in this, that if delivered contrary to instructions to a bona fide holder all parties are bound to such holder. C, the holder of a draft, endorses it especially to D in order that he may get it discounted for him. D, in a breach of trust, negotiates the draft to E. If E takes the draft bona fide he acquires a good title, and can sue all the parties thereto. If he does not so take it, he cannot sue C; and if he sues the acceptor the latter may set up as a defense that the draft is C's. Delivery is presumed from possession of the paper by payee or holder and that delivery was made at the time of the date of the instrument. Such presumption, however, may be rebutted. QUESTIONS 1. What are the essential requisites of negotiable instruments? 2. Is an oral contract for the payment of money negotiable? 3. Is an instrument payable for the happening of an uncertain event negotiable? 4. What are the words of negotiability? 5. What does certainty as to amount mean? 6. What does "determinable future" time mean? 7. Must a negotiable instrument require the payment of money? 8. Is a note payable out of a particular fund negotiable? 9. Is delivery essential to the negotiability of a note? 10. What is a delivery in escrow? CASES (GIVE REASONS FOR YOUR ANSWERS) 1. "Thirty days after date I promise to pay to the order of A, Three Hundred Bushels of potatoes. Value received." Signed Is this a negotiable promissory note? Is this instrument assignable? 2. "Ten days after date I promise to pay to B $100.00." Signed B assigns the note to C. Can C recover of A? 3. "One year after date I promise to pay to the order of B $500.00. Value received." B endorsed the note in blank to C. a set-off, because B owed him $200.00. C sued A on the note. A claimed 4. An instrument reads: "There is due A $25.00. Value received." 6. "I promise to pay A $100.00 within ten days after his marriage to B.” Is this instrument negotiable? Signed .C...... 7. "For value received I promise to pay A $100.00 within ten days after the death of B." Is this instrument negotiable? Signed .C...... 8. A promised to pay B $100.00 in United States bond's. Is such a note negotiable? 9. A made a promissory note in iavor of B in which he promised to pay B $100.00 out of A's crop of oats. Is the note negotiable? 10. A gave B a promissory note in which he agreed to pay B one hundred Mexican silver dollars. Is the note negotiable? 11. A made a promissory note in favor of B. Before it was delivered A dropped it in the street. C found the note and sold it to D for a valuable consideration. D had no knowledge that A had lost the note. Can D collect the note from A? CHAPTER XVI ADDITIONAL STIPULATIONS 183. Additional stipulations not affecting negotiability. Having treated of the essential requisites of negotiable paper, there yet remains to be considered a practice which has become quite common in the United States within the last quarter of a century of embodying in notes provisions which: 1. Authorizes the sale of collateral securities in case the instrument be not paid at maturity; or, 2. Authorizes a confession of judgment if the instrument be not paid at maturity; or, 3. Waives the benefit of any law intended for advantage or protection of the obligor (one obligated); or, 4. Gives the holder an election to require something to be done in lieu of payment of money. 184. The Negotiable Instrument Law provides that an instrument otherwise negotiable, containing any of the above provisions, is to be regarded as negotiable. Before the adoption of this act it was usually held by the courts that these additional stipulations destroyed the negotiability of the paper, because they have a tendency to encumber the paper, which, in order that it may circulate with freedom among business men and supply the want for which it was created, should be free from conditions and contingencies and contain only the bare promise for the payment of a certain sum of money absolutely and at all events. In former years the practice of inserting these provisions was very limited, but in recent years it has become a common custom, and it is to meet this practice that the former rulings of the courts were changed. We herewith submit a number of forms to illustrate how such notes are usually drawn. They may be worded in many different ways. NOTES WAIVING EXEMPTIONS $2,500.00 Richmond, Va., Sept. 1, 19—. Ninety days after date I promise to pay to the order of James W. Hammond Two Thousand Five Hundred 00/100 Dollars, at First National Bank, without offset, value received, I hereby waive the benefit of the Homestead Exemption as to this debt. WILLIAM R. WILL. 185. Waiving exemption. Rule: The security which the law gives to every creditor is that if the debtor does not pay his creditor the latter may, by obtaining a judgment, have the property of the debtor sold and the proceeds of sale applied on the debt. But in all the states the legislatures thereof have made provisions whereby a certain amount of property of the debtor is exempt from attachment and cannot be sold to pay his debts. The value of property exempt varies in the different states from $100.00 to $2,500.00. While the law gives to every debtor this protection, yet he may waive or give up this right and allow his creditor to take every dollar's worth of his property. The above form illustrates the wording of a note whereby the maker or debtor gives up the right which the law gives him of keeping a part of his property. 186. Judgment note. A note wherein the maker gives the holder a power of attorney, authorizing him to appear in court and obtain a judgment against the maker for the amount, is called a judgment note. This is a very severe form of contract, and should, if possible, be avoided under all circumstances. The following form is one quite generally used in Pennsylvania. It illustrates not only a judgment note, but also homestead exemption and payment of collection fees. Judgment notes are not permitted in the State of New York. |