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Since the paper must be unconditional on its face, a promise to pay, if a certain event has already happened before the note is delivered, is not a promissory note, although the specified event had really occurred before the making of the promise (19). Nor will the subsequent happening of a named contingency make the instrument a bill or note after that time. On its face the instrument is still conditional. “An instrument payable upon a contingency is not negotiable, and the happening of the event does not cure the defect” (20).
§ 14. Promise or order to pay out of particular fund is conditional. If A sells B a mine, and takes in payment a written promise by B to pay “out of the proceeds” of the ore to be mined, such promise is clearly a contingent obligation and not a note, because there may never be any proceeds (21). So, if an employee draws an order on his employer, directing a payment to be made out of the salary to become due the employee, the order is not a bill. The salary may never become due (22).
But if a depositor, having two accounts with a bank, draws a check on the bank, “Please pay A, or order, $100 and charge account No. 1,” it is a negotiable instrument. The order is not in terms conditional upon the existence of money in the bank to the credit of the depositor, but is an imperative direction to the bank to pay A, or order, $100. The words “charge account No. 1,” are simply an indication to the bank of the account to which the check is
(19) Ames' Cases on Bills & Notes, Vol. II, 828.
to be charged after it is paid. The fact that the bank might not pay the check, if the depositor's account was not good, does not make the order conditional on its face, and the face of the instrument is controlling in determining its negotiability.
$ 15. Same (continued). This rule is illustrated in Redman v. Adams (23), where the following order was held a bill:
“Castine, Jan. 5, 1860. For value received please pay to order of G. F. and C. W. Tilden forty dollars, and charge same against whatever amount may be due me for my share of fish caught on board schooner “Morning Star,” for the fishing season of 1860.
Frank R. Blake. To Messrs. Adams & Co.
Accepted to pay.-Adams & Co."
The court said: “The order requires the drawees to pay to the order of G. F. and C. W. Tilden the sum of forty dollars, absolutely and without contingency. A means of reimbursement is indicated to the drawees in the words appended, “and charge the same against whatever amount may be due me for my share of fish, etc.,' but the payment of the order is not made to depend upon his having any share of fish, nor is the call limited to the proceeds thereof."
An instrument in which A promises B“to pay $50 of the $100 which I owe you" is not conditional upon the ex
(23) 51 Me. 429.
istence of the debt, for the face of the instrument assumes its existence. It is very different from a promise to pay $50 of the $100 I owe you, if I owe anything. Upon this reasoning the following was held a bill:
“Mr. Brigham, Dear Sir: You will please pay Elisha Wells $30, which is due me for the two-horse wagon bought last spring, and this may be your receipt.”
The order was an absolute one to pay a debt stated to be due. If it in fact appeared that Brigham did not owe the drawer of the order, still the order would be absolute on its face (24).
$ 16. Statement of consideration does not make instru. ment conditional. The statement of the consideration for for which the instrument was given does not make it conditional upon the consideration stated having been performed. Thus in Mabie v. Johnson (25), in consideration of a machine and a warranty thereof, of which warranty there was in fact a breach when the note was delivered, Johnson gave his note as follows:
“Guilford, Nov. 29, 1870. For one Hinckley knitting machine warranted I promise to pay J. H. Wells or bearer $30 one year from date with use."
Part of the consideration was the warranty, which was not fulfilled, yet this fact did not make the note conditional on its face, and the instrument was held a promissory note.
(24) Wells v. Brigham, 6 Cush. 6. (25) 8 Hun, 309 (N. Y.).
The result would of course have been different, if the paper had read, “For one Hinckley knitting machine, if as warranted, I promise," etc.
Nor does the statement of a consideration to be performed after the note is delivered, make it conditional upon the consideration being performed. Again there is nothing in the words of the note making it conditional. Upon this ground the following instrument was held a promissory note (26):
'Chicago, Mar. 5, 1887. On July 1, 1887, we promise to pay D. Dalziel, or order, the sum of three hundred dollars, for the privilege of one framed advertising sign, size inches, one end of each of one hundred and fifty-nine street cars of the North Chicago City Railway Co., for a term of three months, from May 15, 1887.
Siegel, Cooper & Co.”
The most striking example of the rule that to deprive a negotiable instrument of its character as such, the condition must appear within its four corners, is the case of Jury v. Barker (27), in which a note in this form
“London, 29th Oct., 1857. I promise to pay to Mr. J. C. Saunders or his order, at three months after date, the sum of one hundred pounds, as per memorandum of agreement.
Henry John Barker. Payable at 105 Upper Thames Street, London.”
(26) Siegel v. Chicago Bank, 131 III, 569. (27) Ellis, B. & E. 459.
was held a promissory note. The effect of the words “as per memorandum of agreement” will not charge any purchaser of the note with notice of the agreement referred to or subject him to any defenses based upon its provisions.
The N. I. L. (27a) codifies the rules applied in these cases in these words:
Sec. 3. An unqualified order or promise to pay is unconditional within the meaning of this act, though coupled with:
1. An indication of a particular fund out of which reimbursement is to be made, or a particular account to be debited with the amount; or
2. A statement of the transaction which gives rise to the instrument.
But an order or promise to pay out of a particular fund is not unconditional.
§ 17. Promise or order must be certain in amount payable at maturity. The defendant's written promise to pay plaintiffs, or order, 13 pounds on demand for value received with interest at 5 per cent." and all fines according to rule" is not a promissory note, because of the uncertainty as to the sum due on the instrument (28). A stipulation for interest at a given rate, however, does not make the sum payable uncertain; for, taking the data on the face of the note, i. e., the date the principal sum is due,
(27a) The Negotiable Instruments Law will be abbreviated “N. 1. L.” in this article.
(28) Ayrey v. Fearnsides, 4 Meeson & Welsby, 168.