of it, but he is not the mercantile owner, and he is not technically the holder or bearer. But to get the full advantages of mercantile ownership the holder must be a “holder in due course”—that is to say, he must satisfy three business conditions. First, he must have given value, or claim through some holder who has given value. Secondly, when he takes the bill, it must be regular on the face of it. In particular, the bill must not be overdue or known to be dishonoured. An overdue bill, or a bill which has been dishonoured, is still negotiable, but in a restricted sense. The transferee cannot acquire a better title than the party from whom he took it had (§ 36). Thirdly, he must take the bill honestly and without notice of any defect in the title of the transferor,—as, for instance, that the bill or acceptance had been obtained by fraud, or threats or for an illegal consideration. If he satisfies these conditions he obtains an indefeasible title, and can enforce the bill against all parties thereto. The act substitutes the expression “holder in due course” for the somewhat cumbrous older expression “bona fide holder for value without notice.” The statutory term has the advantage of being positive instead of negative. The French equivalent “tiers porteur de bonne foi” is expressive. Forgery, of course, stands on a different footing from a mere defect of title. A forged signature, as a general rule, is a nullity. A person who claims through a forged signature has no title himself, and cannot give a title to any one else (§ 24). Two exceptions to this general rule require to be noted. First, a banker who in the ordinary course of business pays a demand draft held under a forged indorsement is protected (§ 60). Secondly, if a bill be issued with material blanks in it, any person in possession of it has prima facie authority to fill them up, and if the instrument when complete gets into the hands of a holder in due course the presumption becomes absolute. As between the immediate parties the transaction may amount to forgery, but the holder in due course is protected (§ 20).
Dishonour.—The holder of a bill has special duties which he must fulfil in order to preserve his rights against the drawers and indorsers. They are not absolute duties; they are duties to use reasonable diligence. When a bill is payable after sight, presentment for acceptance is necessary in order to fix the maturity of the bill. Accordingly the bill must be presented for acceptance within a reasonable time. When a bill is payable on demand it must be presented for payment within a reasonable time. When it is payable at a future time it must be presented on the day that it is due. If the bill is dishonoured the holder must notify promptly the fact of dishonour to any drawer and indorser he wishes to charge. If, for example, the holder only gives notice of dishonour to the last indorser, he could not sue the drawer unless the last indorser or some other party liable has duly sent notice to the drawer. When a foreign bill is dishonoured the holder must cause it to be protested by a notary public. The bill must be noted for protest on the day of its dishonour. If this be duly done, the protest, i.e. the formal notarial certificate attesting the dishonour, can be drawn up at any time as of the date of the noting. A dishonoured inland bill may be noted, and the holder can recover the expenses of noting, but no legal consequences attach thereto. In practice, however, noting is usually accepted as showing that a bill has been duly presented and has been dishonoured. Sometimes the drawer or indorser has reason to expect that the bill may be dishonoured by the drawee. In that case he may insert the name of a “referee in case of need.” But whether he does so or not, when a bill has been duly noted for protest, any person may, with the consent of the holder, intervene for the honour of any party liable on the bill. If the bill has been dishonoured by non-acceptance it may be “accepted for honour supra protest.” If it has been dishonoured by non-payment it may be paid supra protest. When a bill is thus paid and the proper formalities are complied with, the person who pays becomes invested with the rights and duties of the holder so far as regards the party for whose honour he has paid the bill, and all parties antecedent to him (§§ 65 to 68).
Discharge.—Normally a bill is discharged by payment in due course, that is to say, by payment by the drawee or acceptor to the holder at or after maturity. But it may also be discharged in other ways, as for example by coincidence of right and liability (§ 61), voluntary renunciation (§ 62), cancellation (§ 63), or material alteration (§ 64).
Conflict of Laws.—A bill of exchange is the most cosmopolitan of all contracts. It may be drawn in one country, payable in another, and indorsed on its journey to its destination in two or three more. The laws of all these countries may differ. Provision for this conflict of laws is made by § 72, which lays down rules for determining by what law the rights and duties of the various parties are to be measured and regulated. Speaking broadly, these rules follow the maxim Locus regit actum. A man must be expected to know and follow the law of the place where he conducts his business, but no man can be expected to know the laws of every country through which a bill may travel. For safety of transmission from country to country bills are often made out in sets. The set usually consists of three counterparts, each part being numbered and containing a reference to the other parts. The whole set then constitutes one bill, and the drawee must be careful only to accept one part, otherwise if different accepted parts get into the hands of different holders, he may be liable to pay the bill twice (§ 71). Foreign bills circulating through different countries have given rise to many intricate questions of law. But the subject is perhaps one of diminishing importance, as in many trades the system of “cable transfers” is superseding the use of bills of exchange.
A cheque “is a bill of exchange drawn on a banker payable on demand” (§ 73). For the most part the rules of law applicable to bills payable on demand apply in their entirety to cheques. But there are certain peculiar rules Cheques. relating to the latter which arise from the fact that the relationship of banker and customer subsists between the drawer and drawee of a cheque. For example, when a person has an account at a bank he is, as an inference of law, entitled to draw on it by means of cheques. A right to overdraw, can, of course, only arise from agreement. The drawer of a cheque is not absolutely discharged by the holder’s omission to present it for payment within a reasonable time. He is only discharged to the extent of any actual damage he may have suffered through the delay (§ 74). Apart from any question of delay, a banker’s authority to pay his customer’s cheques is determined by countermand of payment or by notice of the customer’s death (§ 75). Of recent years the use of cheques has enormously increased, and they have now become the normal machinery by which all but the smallest debts are discharged. To guard against fraud, and to facilitate the safe transmission of cheques by post, a system of crossing has been devised which makes crossed cheques payable only through certain channels. The first act which gave legislative recognition to the practice of crossing was the 19 and 20 Vict. c. 95. That act was amended in 1858, and a consolidating and amending act was passed in 1876. The act of 1876 is now repealed, and its provisions are re-enacted with slight modifications by §§ 76 to 82 of the Bills of Exchange Act 1883. A cheque may be crossed either “generally” or “specially.” A cheque is crossed generally by drawing across it two parallel lines and writing between them the words “& Co.” When a cheque is crossed generally it cannot be paid over the counter. It must be presented for payment by a banker. A cheque is crossed specially by adding the name of the banker, and then it can only be presented through that particular banker. A cheque, whether crossed generally or specially, may further be crossed with the words “not negotiable.” A cheque crossed “not negotiable” is still transferable, but its negotiable quality is restricted. It is put on pretty much the same footing as an overdue bill. The person who takes it does not get, and cannot give a better title to it, than that which the person from whom he took it had. These provisions are supplemented by provisions for the protection of paying and collecting bankers who act in good faith and without negligence. Suppose that a cheque payable to bearer, which is crossed generally and with the words “not