the property than that theft should be encouraged by affording a ready market for stolen goods.

It is the mechanical theory of law that Westminster Hall must give law to Lombard Street; that business is made for the law and not the law for business. It is, of course, true that the judge cannot in all cases give effect to the desires of the commercial world. It is the function of courts to examine the agreements of business men and the usages of business to see whether they accord with the general welfare, and to forbid such dealings with property and such contracts as are inimical to the public good. The courts have, accordingly, prohibited perpetuities, created an equity of redemption, forbidden contracts in restraint of trade, and, in a multitude of cases, have exercised their proper authority in adjusting the interests of the individual or groups of individuals to the interest of the social whole. In this matter of the negotiability of bonds, all classes, bankers, brokers, investors, desire negotiability, and have assumed it in their transactions. If title is to be proved in each case, it creates a difficulty for the investor and a risk for the bank. The bank is less likely to lend and must charge a higher interest rate. As the ancient judges, with little or no help from legislation, worked out a theory of contracts, a theory of assignability, and a law of bills and notes to meet the expanding commercial needs, so the modern judges, in nearly every jurisdiction, have continued to meet changing conditions according to the spirit of the common law by giving effect to new forms of instruments, as created by business men. Accordingly, bonds are nearly everywhere held negotiable."

§320. From M. D. Chalmers. A Treatise on the Law of Bills of Exchange, Promissory Notes and Checks. Introduction."The results of this formation of the law of bills and notes by custom are instructive. A reference to Marius' treatise on Bills of Exchange, written about 1670, or Beawes' Lex Mercatoria, written about 1720, will show that the law, or perhaps rather the practice, as to Bills of Exchange, was even then pretty well defined. Comparing the usage of that time with the law as it now stands, it will be seen that it has been modified in some important

respects. Comparing English law with French, it will be seen that, for the most part, where they differ, French law is in strict accordance with the rules laid down by Beawes. The fact is, that when Beawes wrote, the law or practice of both nations on this subject was uniform. The French law, however, was embodied in a Code by the 'Ordonnance de 1673,' which is amplified but substantially adopted by the Code de Commerce of 1818. Its development was thus arrested, and it remains in substance what it was 200 years ago. English law has been developed piecemeal by judicial decision founded on custom. The result has been to work out a theory of bills widely different from the original. The English theory may be called the Banking or Currency theory as opposed to the French or Mercantile theory. A Bill of Exchange in its origin was an instrument by which a trade debt, due in one place, was transferred in another. It merely avoided the necessity of transmitting cash from place to place. This theory the French law steadily keeps in view. In England bills have developed into a perfectly flexible paper currency. In France a bill represents a trade transaction; in England it is merely an instrument of credit. English law gives full play to the system of accommodation paper; French law endeavors to stamp it out. A comparison of some of the main points of divergence between English and French law will show how the two theories are worked out. In England it is no longer necessary to express on a bill that value has been given, for the law raises a presumption to that effect. In France the nature of the value must be expressed, and a false statement of value avoids the bill in the hands of all parties with notice. In England a bill may now be drawn and payable in the same place (formerly it was otherwise, see the definition of bill in Comyn's Digest). In France the place where a bill is drawn must be so far distant from the place where it is payable, that there may be a possible rate of exchange between the two. A false statement of places, so as to evade this rule avoids the bill in the

"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."

hands of a holder with notice. As French lawyers put it, a Bill of Exchange necessarily presupposes a contract of exchange.' In England (since 1765) a bill may be drawn payable to bearer [though formerly it was otherwise.] In France it must be payable to order; if it were not so, it is clear that the rule requiring the consideration to be expressed would be an absurdity. In England a bill originally payable to order becomes payable to bearer when indorsed in blank. In France an indorsement in blank merely operates as a procuration. An indorsement, to operate as a negotiation, must be an indorsement to order, and must state the consideration; in short, it must conform to the condition of an original draft. In England, if a bill be refused. acceptance, a right of action at once accrues to the holder. This is a logical consequence of the currency theory. In France no cause of action arises unless the bill is again dishonored at maturity; the holder, in the meantime, is only entitled to demand. security from the drawer and indorsers. In England a sharp distinction is drawn between current and overdue bills. In France no such distinction is drawn. In England no protest is required in the case of an inland bill, notice of dishonor alone being sufficient. In France every dishonored bill must be protested. Grave doubts may exist as to whether the English or the French system is the soundest and most beneficial to the mercantile community, but this is a problem which it is beyond the province of a lawyer to attempt to solve."

$321. From Zechariah Chafee, Jr., Acceleration Provisions in Time Paper. 32 Harv. L. R. 747, 749.-"The conflict between mercantile understanding and judicial decision may have farreaching consequences in the business world. The cases are not unanimous against negotiability, and the legal problem of the effect of these acceleration provisions in collateral time paper is still unsettled. It is therefore worth while to examine the rules of the law of negotiable instruments which are said to be violated by these provisions, and the application of those rules to still other types of paper, which also have a fixed date for payThis rule is said to be now obsolete, but the Code remains unal'See Stewart v. Hodges (1692), 12 Mod. 36.

tered.

ment but mature earlier upon the happening of some event. It will then be possible to determine whether the bank form of promissory notes and the chattel notes are rendered not negotiable by their acceleration clauses.

A negotiable instrument is a substitute for money. It was first used to aid in the payment of money at distant points, and the international bill of exchange still serves that purpose. an addition to money it increases the purchasing medium in circulation. For instance, if many people did not pay their monthly bills by checks, more specie or paper money would be needed in circulation, and economically as well as practically there is often not enough money to go round. The manufacturer who cannot obtain cash from his customers insists upon a note or accepted bill instead, which he can immediately discount at his bank and turn into money for his pay roll. The bank in turn rediscounts the bill or note with the Federal Reserve Bank, which makes it part of its reserve for the issue of more money in the form of bank notes. Like money a negotiable instrument is intended to have a definite value and to be taken almost at sight, free from the need of investigation into outside facts and unaffected by the claims of former owners, even if it was stolen or lost. When genuine, it ought to serve as the equivalent of money, except for the distant maturity and the risk of insolvency of private persons and their legal incapacity.

Anything so closely related to money and circulating almost as rapidly must be plainly distinguishable from the ordinary non-transferable written contract, just as a five-dollar gold piece is distinguishable from uncoined gold. Therefore, business custom has established several 'formal requisites' for a negotiable instrument, which adapt it for quick circulation and give it an unmistakable label. Although the law usually cares little about the form of a contract and looks to the actual understanding of the parties who made it, the form of a negotiable instrument is essential for the security of mercantile transactions. The courts ought to enforce these requisites of commercial paper at the risk of hardship in particular cases. A business man must be able to tell at a glance whether he is taking commercial paper or

not. There must be no twilight zone between negotiable instruments and simple contracts. If doubtful instruments are sometimes held to be negotiable, prospective purchasers of queer paper will be encouraged to take a chance with the hope that an indulgent judge will call it negotiable. On the same principle, if trains habitually left late, more people would miss trains. than under a system of rigid punctuality.

A few careless persons must be sacrificed so that the world at large will know just what the rule is and regulate its affairs accordingly. Consequently, as Chief Justice Emery puts it:1

Commercial paper has long been governed by special rules which, while designed to ensure justice, are also designed to ensure the free and safe use of an indispensable commercial agency. The commercial world needs and seeks for the plain workable rule rather than for the somewhat abstract right in each case.

It must not be forgotten, however, that these rules of certainty are not mathematical formulæ evolved out of the pure reason of the judges, but are business requirements created by business needs and susceptible of modification with changing commercial conditions. Law is made for business, not business for law. While the influence of custom on legal principles has sometimes been exaggerated,' the history of negotiable instruments leaves no doubt that the courts have based the governing principles upon actual commercial practice, though modifying it when it seemed unreasonable or out of accord with general considerations of justice. Judge Amidon remarks with his refreshing common sense:*

'Neal v. Coburn, 92 Me. 139, 145, 42 Atl. 348 (1898).

J. C. Carter, Law, Its Origin, Growth, and Function; criticized by J. C. Gray, The Nature and Sources of the Law, §§598-641.

Goodwin v. Robarts, L. R. 10 Ex. 337 (1875); 2 Campbell's Lives of the Chief Justices, 407, and note, London, 1849.

"Cudahy Packing Co. v. State National Bank, 134 Fed. 538, 542-43 (C. C. A., 8th, 1904). For presentations of a similar view as to corporate bonds, see 2 Machen on Corporations, §1734 ff. Edelstein v. Schuler (1902), 2 K. B. 144; Mercer County v. Hacket, 1 Wall. (U. S.), 83, 95 (1863), per Grier, J.: "A mere technical dogma of the courts or the common law cannot prohibit the commercial world from inventing or using any species of security not known in the last century.