Page:Harvard Law Review Volume 32.djvu/601

NOTES 565 ment. Such a condition is a mere incident to collection, which does not impair negotiability. But a second class of conditions, relating to extrinsic facts, does impair negotiability. For example, the instrument may be payable out of a particular fund. Payment need not be made in full unless the specified fund is adequate, so that the instrument is not payable at all events and is not negotiable.^^ Such a construction could hardly be given to international cotton drafts, which are clearly not payable out of the proceeds of the cotton, but must be met regard- less of a fall in the market.^^ If these drafts throw the loss on the pre- senting bank because of a condition, that condition must relate to the genuineness of the attached bill of lading. It would be odd if the words on the Knight, Yancey and Company draft imported such a condition when they do not mention the bill of lading at all, but it was urged that they describe cotton, and so might be taken as requiring its existence. Such a condition would not be one of the first class just discussed, for it does not concern the surrender of collateral on acceptance. The bill of lading was the collateral given when the draft was issued, not the cotton; the document and not the cotton was to be handed to the drawee on acceptance. The cotton is an outside fact, and a condition relating to it would consequently render the draft non-negotiable, so that a bond fide purchaser woidd be subject to all sorts of equitable de- fenses and not merely to defects in the bill of lading. Such a result would indeed startle American and English bankers in view of the enormous number of such drafts. Drafts in similar language have re- peatedly been held negotiable.^' The reference to the cotton simply earmarks the bill of exchange, makes it correspond to the bill of lading, informs the drawee that shipping documents for the goods described are to be surrendered on acceptance, and mentions the source from which he may expect to reimburse himself. It indicates that the draft is drawn to carry out a cotton transaction and is not a finance or accom- modation draf t.^ The principal case reaches a sound mercantile result in holding that this very frequent reference to the goods in bills of Bank, 91 U. S. 92 (1875); Lanfear v. Blossman, i La. Ann. 148, 155 (1846); 30 Harv. L. Rev. 514. 21 Negotiable Instruments Law, § 3; Munger v. Shannon, 61 N. Y. 251 (1874). In Lowery v. Steward, 25 N. Y. 239 (1862), this draft was held payable out of a fund: "Please pay ... on account of 24 bales cotton shipped to you, as per bill of lading, by steamer Colorado, enclosed to you in letter." The court, however, took the terms of the letter into consideration. Hence the decision is of no authority in Guaranty v. Hannay. See [1918] 2 K. B. 641, 643; Whitney v. Eliot, 137 Mass. 3';i, 355 (1884). ^ [1918] 2 K. B. 637, 656, 667. Similar provisions in produce drafts have been held not to be an equitable assignment of the goods in Robey v. Oilier, L. R. 7 Ch. App. 69s (1872); In re Entwhistle, L. R. 3 Ch. D. 477 (C. A. 1876); Brown v. Kough, L. R. 29 Ch. D. 848 (C. A. 1884). Contra, National Bank v. Merchants' Bank, 91 U. S. 92, 95 (1875) semble. ^ Martin v. Brown, 75 Ala. 442 (1883) — "charge same to a/c of 502 bales of cotton per steamer /."; Bank of Guntersville v. Jones, 156 Ala. 525, 46 So. 971 (1908) — "charge to account of one bale of cotton, bill of lading attached;" Whitney v. Eliot, 137 Mass. 351 (1884) — "Charge the same to account of 250 bbls. meal ex schooner A"; Waddell v. Hanover, 48 N. Y. Misc. 578, 97 N. Y. Supp. 305 (1905), — "400 c/a R. L. No. 3362 via A. R. R. B. L. direct," meaning eggs. See cases in note 22. Contra, Lanfear v. Blossman, i La. Ann. 148 (1846), sernble — "Bill of lading of 344 LB. cotton per P. attached hereto." « Pickford, L. J., in [1918] 2 K. B. 636.