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:—
- £100London, 1st January 1901.
- Three months after date pay to the order of Mr J. Jones the sum
of one hundred pounds for value received.
Brown & Co.
- To Messrs. Smith & Sons, Liverpool.
The scope of the definition given above may be realized by comparing it with the definition given by Sir John Comyns’ Digest in the early part of the 18th century:—“A bill of exchange is when a man takes money in one country or city upon exchange, and draws a bill whereby he directs another person in another country or city to pay so much to A, or order, for value received of B, and subscribes it.” Comyns’ definition illustrates the original theory of a bill of exchange. A bill in its origin was a device to avoid the transmission of cash from place to place to settle trade debts. Now a bill of exchange is a substitute for money. It is immaterial whether it is payable in the place where it is drawn or not. It is immaterial whether it is stated to be given for value received or not, for the law itself raises a presumption that it was given for value. But though bills are a substitute for cash payment, and though they constitute the commercial currency of the country, they must not be confounded with money. No man is bound to take a bill in payment of debt unless he has agreed to do so. If he does take a bill, the instrument ordinarily operates as conditional, and not as absolute payment. If the bill is dishonoured the debt revives. Under the laws of some continental countries, a creditor, as such, is entitled to draw on his debtor for the amount of his debt, but in England the obligation to accept or pay a bill rests solely on actual agreement. A bill of exchange must be an unconditional order to pay. If an instrument is made payable on a contingency, or out of a particular fund, so that its payment is dependent on the continued existence of that fund, it is invalid as a bill, though it may, of course, avail as an agreement or equitable assignment. In Scotland it has long been the law that a bill may operate as an assignment of funds in the hands of the drawee, and § 53 of the act preserves this rule.
Stamp.—Bills of exchange must be stamped, but the act of 1882 does not regulate the stamp. It merely saves the operation of the stamp laws, which necessarily vary from time to time according to the fluctuating needs and policy of the exchequer. Under the Stamp Act 1891, bills payable on demand are subject to a fixed stamp duty of one penny, and by the Finance Act 1899, a similar privilege is extended to bills expressed to be payable not more than three days after sight or date. The stamp may be impressed or adhesive. All other bills are liable to an ad valorem duty. Inland bills must be drawn on stamped paper, but foreign bills, of course, can be stamped with adhesive stamps. As a matter of policy, English law does not concern itself with foreign revenue laws. For English purposes, therefore, it is immaterial whether a bill drawn abroad is stamped in accordance with the law of its place of origin or not. On arrival in England it has to conform to the English stamp laws.
Maturity.—A bill of exchange is payable on demand when it is expressed to be payable on demand, or at sight, or on presentation or when notice for payment is expressed. In calculating the maturity of bills payable at a future time, three days, called days of grace, must be added to the nominal due date of the bill. For instance, if a bill payable one month after sight is accepted on the 1st of January, it is really payable on the 4th of February, and not on the 1st of February as its tenor indicates. On the continent generally days of grace have been abolished as anomalous and misleading. Their abolition has been proposed in England, but it has been opposed on the ground that it would curtail the credit of small traders who are accustomed to bills drawn at certain fixed periods of currency. When the last day of grace is a non-business day some complicated rules come into play (§ 14). Speaking generally, when the last day of grace falls on Sunday or a common law holiday the bill is payable on the preceding day, but when it falls on a bank holiday the bill is payable on the succeeding day. Complications arise when Sunday is preceded by a bank holiday; and, to add to the confusion, Christmas day is a bank holiday in Scotland, but a common law holiday in England. When the code was in committee an attempt was made to remove these anomalies, but it was successfully resisted by the bankers on alleged grounds of practical convenience.
Acceptance.—By the acceptance of a bill the drawee becomes the principal debtor on the instrument and the party primarily liable to pay it. The acceptor of a bill “by accepting it engages that he will pay it according to the tenor of his acceptance,” and is precluded from denying the drawer’s right to draw or the genuineness of his signature (§ 54). The acceptance may be either general or qualified. As a qualified acceptance is so far a disregard of the drawer’s order, the holder is not obliged to take it; and if he chooses to take it he must give notice to antecedent parties, acting at his own risk if they dissent (§§ 19 and 44). The drawer and indorsers of a bill are in the nature of sureties. They engage that the bill shall be duly accepted and paid according to its tenor, and that if it is dishonoured by non-acceptance or non-payment, as the case may be, they will compensate the holder provided that the requisite proceedings on dishonour are duly taken. Any indorser who is compelled to pay the bill has the like remedy as the holder against any antecedent party (§ 55). A person who is not the holder of a bill, but who backs it with his signature, thereby incurs the liability of an indorser to a holder in due course (§ 56). An indorser may by express term either restrict or charge his ordinary liability as stated above. Prima facie every signature to a bill is presumed to have been given for valuable consideration. But sometimes this is not the case. For friendship, or other reasons, a man may be willing to lend his name and credit to another in a bill transaction. Hence arise what are called accommodation bills. Ordinarily the acceptor gives his acceptance to accommodate the drawer. But occasionally both drawer and acceptor sign to accommodate the payee, or even a person who is not a party to the bill at all. The criterion of an accommodation bill is the fact that the principal debtor according to the instrument has lent his name and is in substance a surety for some one else. The holder for value of an accommodation bill may enforce it exactly as if it was an ordinary bill, for that is the presumable intention of the parties. But if the bill is dishonoured the law takes cognizance of the true relations of the parties, and many of the rules relating to principal and surety come into play. Suppose a bill is accepted for the accommodation of the drawer. It is the drawer’s duty to provide the acceptor with funds to meet the bill at maturity. If he fails to do so, he cannot rely on the defence that the bill was not duly presented for payment or that he did not receive due notice of dishonour. If the holder, with notice of the real state of the facts, agrees to give time to the drawer to pay, he may thereby discharge the acceptor.
Holder in due Course.—The holder of a bill has special rights and special duties. He is the mercantile owner of the bill, but in order to establish his ownership he must show a mercantile title. The bill must be negotiated to him, that is to say, it must be transferred to him according to the forms prescribed by mercantile law. If the bill is payable to order, he must not only get possession of the bill, but he must also obtain the indorsement of the previous holder. If the bill is payable to bearer it is transferable by mere delivery. A bill is payable to bearer which is expressed to be so payable, or on which the only or last indorsement is an indorsement in blank. If a man lawfully obtains possession of a bill payable to order without the necessary indorsement, he may obtain some common law rights in respect
