We now arrive at an epoch when a new form of security for money, namely, goldsmiths' or bankers' notes, came into general use. Holding them to be part of the currency of the country as cash, Lord Mansfield and the Court of King's Bench had no difficulty in holding in Miller v. Race, 1 Burrows 452, that the property in such a note passes, like that in cash, by delivery, and that a party taking it bona fide, and for value, is consequently entitled to hold it against a former owner from whom it has been stolen.

In like manner it was held, in Collins v. Martin, 1 Bos. & P. 648, that where bills indorsed in blank had been deposited with a banker, to be received when due, and the latter had pledged them with another banker as security for a loan, the owner could not bring trover to recover them from the holder. Both these decisions, of course, proceeded on the ground that the property in the bank note payable to bearer passed by delivery, that in the bill of exchange by indorsement in blank, provided the acquisition had been made bona fide.

A similar question arose in Wookey v. Pole, 4 Barn. & Ald., 1, in respect of an exchequer bill, notoriously a security of modern growth. These securities being made in favor of blank or order, contained this clause, "if the blank is not filled up, the bill will be paid to bearer." Such an exchequer bill having been placed, without the blank being filled up, in the hands of the plaintiff's agent, had been deposited by him with the defendants, on a bona fide advance of money. It was held by three judges of the Queen's Bench-(Bayley, J., dissentiente)-that an exchequer bill was a negotiable security, and judgment was therefore given for the defendants. The judgment of Holroyd, J., goes fully into the subject, pointing out the distinction between money and instruments which are the representatives of money and other forms of property. "The courts," he says, "have considered these instruments either promises or orders for the payment of money, or instruments entitling the holder to a sum of money as being appendages to money, and following the nature of their principal." After referring to the authorities, he proceeds: "These authorities show that not only money itself may pass, and the right to it may arise, by currency alone, but, further, that these mercantile instruments, which entitle the bearer of them to money, may also pass, and the right to them may arise, in like manner, by currency or deliv

ery.

These decisions proceed upon the nature of the property (ie., money) to which such instruments give the right, and which is in itself current, and the effect of the instruments, which either give to their holders, merely as such, a right to

receive the money, or specify them as the persons entitled to receive it."

Another very remarkable instance of the efficacy of usage is to be found in much more recent times. It is notorious that, with the exception of the Bank of England, the system of banking has recently undergone an entire change. Instead of the banker issuing his own notes in return for the money of the customer deposited with him, he gives credit in account to the depositor, and leaves it to the latter to draw upon him, to bearer or order, by what is now called a "check." Upon this state of things the general course of dealing between bankers and their customers has attached incidents previously unknown, and these, by the decisions of the courts, have become fixed law. Thus, while an ordinary drawee, although in possession of funds of the drawer, is not bound to accept, unless by his own agreement or consent, the banker, if he has funds, is bound to pay on presentation of a check on demand. Even admission of funds is not sufficient to bind an ordinary drawee, while it is sufficient with a banker; and the money deposited with a banker is not only money lent, but the banker is bound to pay it when called for by the draft of the customer. See Pott v. Clegg, 16 Mees. & W., 321. Besides this, a custom has grown up among bankers themselves of marking checks as good for the purposes of clearance by which they become bound to one another. Though not immediately to the present purpose, bills of lading may also be referred to as an instance of how general mercantile usage may give effect to a writing which without it would not have had that effect at common law. It is from mercantile usage, as proved in evidence, and ratified by judicial decision in the great case of Lickbarrow v. Mason, 2 Term. R. 63, that the efficacy of bills of lading to pass the property in goods is derived.

It thus appears that all these instruments, which are said to have derived their negotiability from the law merchant, had their origin, and that at no very remote period, in mercantile usage, and were adopted into the law by our courts as being in conformity with the usages of trade; of which, if it were needed, a further confirmation might be found in the fact that according to the old form of declaring on bills of exchange, the declaration always was founded on the customs of merchants. . . .

$318. The History of Negotiable Instruments.-Lord Cockburn here states the orthodox learning on the subject of the history of negotiable instruments as a part of Anglo-American

law.' The later part of this history is quite clear-how the rules originated in the custom of merchants, how they were at first applicable only to foreign bills of exchange, later to inland bills and promissory notes, how originally they were applicable only to mercantile transactions and later to all transactions drawn up in the requisite form. As to the earlier history, however, the state of scholarship in Lord Cockburn's day was not. such as to permit him to speak with authority. In the first place, he draws the erroneous conclusion from the fact that the first case in the English books, that is to say, in the books recording the decisions of the king's courts, bears the date 1603, that negotiable instruments were hardly known in England at an earlier date. As a matter of fact, they were well known to merchants in the thirteenth century and the reason for their absence from the king's courts prior to Lord Cockburn's day is simply that there were special courts already in existence in which merchants' cases were normally adjudicated. Furthermore, his indirect reference to Malynes' Lex Mercatoria is misleading. Far from stating that bills of exchange were unknown in England, that learned merchant is careful to give the forms in use for such bills of exchange between London and Amsterdam (at page 393 of the original edition, 1622). The third part of his work (pp. 378-501 of the original edition) is devoted to "exchanges for moneys by bill of exchange."

Cockburn mentions the use of such instruments by the Italian bankers in the Middle Ages. Just how they came to be of use in Medieval Europe we do not know, but it is interesting that documents of indebtedness were unknown to Roman law, except in the form of syngraphs and chirographs used by Greek bankers. On the other hand, in the Orient, they had reached a high state of development before the date of the Twelve Tables. In Babylon the records of the great banking house of Egibi of the sixth and following century B. C. show that documents of credit of the nature of promissory notes, together with such practices as endorsement, the drawing of checks on banks and the like were highly developed. Compare

Cf. §3, supra, for further details.

Kohler, Allgemeine Rechtsgeschichte (1914), page 64. It has been suggested as a possibility that documents of credit were introduced into Europe by the Jewish money lenders of the Middle Ages. If so, it is likely that the Jews copied the banking system of Babylonia, where their legal literature was developed to its highest point in the first six centuries A. D. The Hebrew word for bill or note (Shetar, the word from which, according to Blackstone, the Star Chamber got its name) is like many other legal and commercial terms in Neo-Hebrew of Babylonian origin.

$319. From A. M. Kidd, 2 Cal L. Rev. 377: The Law Merchant and California Decisions.-"England before and for a long time after the Norman Conquest was not a commercial country. Contractual relations did not play a prominent part in daily life, and the law of contract, therefore, existed only in a rudimentary stage. It took centuries to develop the modern theory of a contract by simple agreement between the parties.1 Commercial growth required not only the enforcement of business agreements, but also the assignability of the contract created. This notion of assignability also grew slowly. The idea that 'A,' who had become bound to 'B,' could, without his own consent, become bound to 'C,' was a difficult one to grasp. The history of the severity of execution on delinquent debtors must have left its mark as a part of the race experience. 'A' might be willing to take the risk of default in dealing with 'B,' but not in dealing with 'C' There were also technical difficulties in connection with the form that such an assignment. should take. There was nothing to be visibly and openly transferred, until it became common to put contracts in the form of a document and to regard the contract as embodied in the document. Commercial development, however, demanded the assignability of contracts. It took a court of equity to work out the process in England, aided perhaps by the fact that the early English law operated very favorably to creditors but the method is unimportant-the result is that assignability of con

'Pollock and Maitland, History of Eng. Law, vol. II, 184. *Loyd, 62 Univ. of Pa. Law Rev. 354.

"Pollock and Maitland, History of Eng. Law, vol. II, p. 226, Jenks in Select Essays in Anglo-American History, vol. III, p. 65.

tract is today the rule. The obligor can always protect himself, if he wishes, by expressly providing that the contract shall not be assigned and by using apt words to accomplish that purpose.*

The merchants in England, many of them foreigners, with whom contract was a part of their daily business, worked out independently the assignability of contracts, and, for certain instruments, an assignability free from equities which the obligor could have set up against the assignor and free from infirmities in the title of intermediate holders. These two characteristics are commonly called 'negotiability.' Negotiability, however, has never been extended to ordinary contracts, and this is in accord with modern ideas. An ordinary contract is assignable, not negotiable. Commercial paper, like bills and notes, however, is an instrument of credit, performing in part the functions of money, and must, therefore, like money, pass freely from hand to hand. The intention of the parties is that the instrument shall have the additional value which comes from the bona-fide purchaser taking free and clear of equities. An ordinary contract, however, is made to be performed, not assigned. Assignment is not usually contemplated, and it is, therefore, better to require the assignee to find out, at his peril, whether the obligor has a defense, than to facilitate dishonesty by permitting one who has obtained a contract by fraud to assign it free from such defenses. The business man who buys an ordinary contract knows that he is getting nothing more than the right of his assignor. It is a question not of principle, but of policy, like the corresponding law of chattels. In London the law of market overt prevails. A purchaser from a shop gets title whether the shopkeeper owned the goods or not. In Germany a purchaser at public auction is protected. The French law also favors the purchaser.' In the United States it is considered better that the honest purchaser should occasionally lose

'Dollar v. Internatl. Banking Corp. (1909), 10 Cal. App. 83, 101 Pac. 34.

"Ency. of the Laws of Eng., vol. IX, p. 3; Hargreave v. Spink (1892), 1 Q. B. 25; see Clayton v. LeRoy (1911), 2 K. B. 1031. "German Civ. Code, §§929-935.

'French Civ. Code, §§2279-2280.