CHAPTER XXXIV PROMISSORY NOTES $197. Definition A note is described and defined by the Uniform Negotiable Instruments Law as follows: I. It is a written promise without condition, By the maker to another, or to the maker's order, 3. To pay a sum certain in money to order or to bearer, 4. On demand at a fixed or determinable future time. § 184.-A negotiable promissory note within the meaning of this act is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand or at a fixed or determinable future time a sum certain in money to order or to bearer. Where a note is drawn to the maker's own order, it is not complete until indorsed by him. § 198. Liability of Maker The liability of the maker of a promissory note may vary in nine different ways as follows: 1 1 1. Where the note is signed with his name by another 1 C. P. A. Problems, Vol. I, page 235. This differentiation of liability is farfetched and even fantastic. It is brought in here only because required to answer a question actually asked. 3. Where he signs and delivers the note without consideration and it subsequently comes into the hands of a holder in due course, he is liable. 4. Where his signature is forged by the party who seeks to enforce it, he is not liable. 5. Where his liability is sought to be enforced by one to whom it was negotiated for value by the party forging his signature, he may set up that the instrument was forged even against a holder in due course. 6. Where the instrument sued on is not dated, does not state that it is given for value, and does not specify the place where it is drawn or the place where it is payable, he is liable. 7. Where the holder of the note has, without the assent of the maker, changed its date, he is not liable on the note either in its present or its original form. Alteration of date is a material alteration. 8. Where the holder of the note has, without the assent of the maker, changed its place of payment, he is not liable. Place of payment is a material term of the note. 9. Where the holder of the note has unintentionally marked it cancelled, he is liable, provided the holder can prove that the cancellation was unintentional. The burden of proof is on the holder. $199. Interest The holder of a note on which interest is payable at fixed periods need not protest or take any action in case of default of interest payments. He may simply wait until the principal is due and then proceed to collect the whole amount of the note. The legal rate of interest at the place where payment is to be made will determine the rate if not specified in the note. $ 200. Demand Notes If an indorser on a demand note is to be held, payment must be demanded within a reasonable time; the maker will be bound even if demand is not made for a very long time. The only limitation protecting the maker is that imposed by the Statute of Limitations. It is held that the statute begins to run from the time a cause of action accrues. In the case of a demand note, this is from the time the note is delivered by the maker to the payee. § 201. Effect of Renewal If a new note is taken in exchange for an unpaid one, it operates only as a suspension of the old debt, not as an extinguishment of it, unless by special agreement. In case the new note is not met, the old note may be sued upon. This is true whether or not the old note is retained by the creditor. If a gift is made of a promissory note payable to the order of the donee, and he should indorse it and transfer it to an innocent holder for value, it would be good. The donee could not collect by suit himself because he would be met by the defense of no consideration. If the note were made payable to the donor's order and he indorsed it in blank, the immediate party who received it and gave no value in return could not enforce payment of the note. REVIEW QUESTIONS 1. If a note is given to A and the donor dies, can A collect? If A has discounted the note at the bank can the bank collect? 2. What are the essentials of a promissory note? 3. The holder of a demand note failed to present it for two years. Then the maker had vanished. Could the holder collect from the indorsers? 4. What are nine different ways in which a note may be issued or handled, and the varying liabilities of the maker in each case? CHAPTER XXXV BILLS OF EXCHANGE AND ACCEPTANCES1 $203. Definition § 126.-A bill of exchange is an unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a certain sum in money to order or to bearer. An inland bill is one drawn and payable within the state. Any other is a foreign bill. A bill of exchange when accepted becomes an acceptance. A draft is an order to pay money-it includes bills of exchange, checks and all other forms of orders to pay money. § 204. Liability of Maker, Drawer, and Acceptor The maker of a draft is called the drawer. He is analogous to the maker of a note. The maker of a promissory note engages to pay the note he issues according to its tenor and admits the existence of the payee and his capacity to indorse. The drawer of a draft assumes the same liability, if it is not paid by the drawee and the necessary proceedings on dishonor are taken. A draft may be presented to the drawee before payment to make sure that he will accept its obligations. § 205. Acceptance § 132. The acceptance of a bill is the signification by the drawee of his assent to the order of the drawer. The acceptance must be in writing and signed by the drawee. It 1 For forms see Chapter CIII, Forms 42-44. |