BILL OF

See also:

• EXCHANGE

EXCHANGE  , a form of negotiable instrument, defined below, the history of which, though somewhat obscure, was ably summed up by Lord Chief Justice Cockburn in his judgment in Goodwin v . Robarts (1875), L.R. ro Ex. pp . 346-358 . Bills of exchange were probably invented by Florentine Jews . They were well known in England in the middle ages, though there is no reported decision on a bill of exchange before the year 1603 . At first their use seems to have been confined to foreign bills between English and foreign merchants . It was afterwards extended to domestic bills between traders, and finally to bills of all persons, whether traders or not . But for some time after they had come into general employment, bills were always alleged in legal proceedings to be drawn secundum usum et consuetudinem mercatorum . The foundations of modern English law were laid by Lord Mansfield with the aid of juries of London merchants . No better tribunal of commerce could have been devised . Subsequent judicial decisions have developed and systematized the principles thus laid down . Promissory notes are of more modern origin than bills of exchange, and their validity as negotiable instruments was doubtful until it was confirmed by a statute of Anne (1704) .

Cheques are the creation of the modern

system of banking . Before 1882 the English law was to be found in 17 statutes dealing with isolated points, and about 2600 cases scattered over some 300 volumes of reports . The Bills of Exchange Act 1882 codifies for the United Kingdom the law relating to bills of exchange, promissory. notes and cheques . One peculiar Scottish rule is preserved, but in other respects uniform rules are laid down for England, Scotland and Ireland . After glancing briefly at the history of these instruments, it will probably be convenient to discuss the subject in the order followed by the act, namely, first, to treat of a bill of exchange, which is the original and typical negotiable instrument, and then to refer to the special provisions which apply to promissory notes and cheques . Two salient characteristics distinguish negotiable instruments from other engagements to pay money . In the first place, the assignee of a negotiable instrument, to whom it is transferred by indorsement or delivery according to its tenor, can sue thereon in his own name; and, secondly, he holds it by an independent title . If he takes it in good faith and for value, he takes it free from " all equities," that is to say, all defects of title or grounds of defence which may have attached to it in the hands of any previous party . These characteristic privileges were conferred by the law merchant, which is part of the common law, and are now confirmed by statute . Definition.—By § 3 of the act a bill of exchange is defined to be " an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or deter-minable future time a sum certain in money to or to the order of a specified person, or to bearer."' The person who gives the order is called the drawer . The person thereby required to pay is called the drawee . If he assents to the order, he is then called 1 This is also the definition given in the United States, by § 126 of the general act relating to negotiable instruments, prepared by the conference of state commissioners on uniform legislation, and it has been adopted in the leading states .

the acceptor . An

acceptance must be in writing and must be signed by the drawee . The mere signature of the drawee is sufficient (§17) . The person to whom the money is payable is called the payee . The person to whom a bill is transferred by indorsement is called the indorsee . The generic term " holder" includes any person in possession of a bill who holds it either as payee, indorsee or bearer . A bill which in its origin is payable to order becomes payable to bearer if it is indorsed in blank . If the payee is a fictitious person the bill may be treated as payable to bearer (§ 7) . The following is a specimen of an ordinary form of a bill of exchange: loo LONDON, Ist January 1901 . Three months after date pay to the order of Mr J . Jones the sum of one hundred pounds for value received .