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BILL OF EXCHANGE

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Originally appearing in Volume V03, Page 941 of the 1911 Encyclopedia Britannica.
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BILL OF 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.
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