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of rules, however general and incomplete, defining the relations to one another and to third persons of the parties to them, and this would lead us to suppose that there must have been such a body of rules, worked out by some one and in some way, which was usually observed by persons dealing with bills. In fact, this was the case. The merchants, whose needs had called into existence the bill and the note, evolved, by their habitual mode of dealing with them, a commercial custom which established the rights and duties of parties to that kind of commercial contract.

§ 2. Decisions of courts adopt mercantile usage into common law. In how great detail mercantile usage had provided rules, how far the mercantile usage of England differed from that on the Continent, and how the observance of these rules was enforced before resort was had to the common law courts, are questions which do not concern us. But it is clear, that, when the common law courts were first called upon to decide cases arising upon bills and notes, they found these customary rules, more or less completely covering the questions presented, ready to be adopted in toto by them as a rule of decision, or to be applied in a modified form, or, if the courts saw fit, to be rejected. The courts did, for the most part, adopt the mercantile usage as a basis for their decisions; thereby transforming, precept by precept, what hitherto had been mere usage into positive law. Thus, the so-called “custom of merchants” or the law merchant, relating to bills and notes, became part of the common law.

$ 3. Bills and notes are transferable obligations. It is not surprising, therefore, to find that the part of the law

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dealing with bills and notes is based upon conceptions quite antagonistic to the ordinary working principles of the common law. One of these is the conception of a bill of exchange or a promissory note as a kind of property which may be transferred by its owner to another. The quality of transferability is one of the qualities described when we say that bills and notes are negotiable. But are not all kinds of property transferable! Let us see. A may transfer his horse to B by a voluntary act of delivery, coupled with an intention to make B the owner. A may transfer his land, or an interest therein, by the intentional delivery of a deed, evidencing the transfer to B. But suppose X is indebted to A on a promise, either oral or in writing, to pay A $100, and A wishes to transfer the obligation to B, may he do so? This question was answered originally by the common law and the equity courts in the negative (3). A debt, or a chose in action, was not transferable property. There was no way in which A could divest himself of his right against X, except of course by the release of X, which results in the extinguishment of the right itself. Now consider the case where X is indebted to A on his promise contained in a promissory note or bill of exchange. Is the obligation of X transferable ? If it is a common law debt, it is not transferable, as we have just seen. But it is not that. It is a mercantile obligation, originally deriving its force and effect from mercantile usage, and by that usage it was transferable (4). Thus,

(3) Sheppard's Touchstone, 240; Hammond v. Messenger, 9 Simon, 327. For the present law regarding assignment of ordinary contracts see Contracts, $8 101-14, in Volume II of this work.

(4) Miller v. Race, 1 Burrow, 452.

after the recognition of the law merchant by the common law, we find two kinds of legal obligations: the one, the untransferable, unassignable, common law debt; and the other, the obligation embodied in the bill of exchange or promissory note, which has the quality of transferability as completely as horses, or other tangible personal property, or land.

§ 4. Practical consequences of bills and notes being transferable. The quality of transferability is of the greatest practical consequence, and is one of the peculiarities which makes bills and notes of value as instruments of trade and of credit. If X buys land of A, giving A his note for $1000 in payment, and it transpires that A did not have the title so that X gets nothing, the failure of the consideration for which the note was given gives X a perfect defence against A's action on the note, because it would be unjust to allow A to enforce it. Suppose, however, A had sold the note to B, who had bought it in good faith, has X the same defence against B that he had against A! What was X's defence against A! Not that there was no note, for the intentional execution of the note by X is admitted, but that it was unjust for A to enforce the obligation. Certainly this objection cannot be raised to B's recovery. He owns the obligation of X, and, since he purchased it without notice of X's defence against A, there is no reason in law or in morals why B may not enforce the right against X he has lawfully acquired.

$5. Same: Tllustrations. If X, instead of giving his note for the land, had made a simple promise to A to pay for it, the result would be different. Of course X has his defence against A, but, if A attempts to sell his right against X to B, who has no notice of X's defence, what are B's rights? We have seen that a common law obligation is not transferable. Clearly then the attempted transfer vests in B no rights against X. Notwithstanding the sale, X's obligation to pay still runs to A. The only effect of the attempted transfer was to make B A's agent to collect the money, or to bring an action in A's name as plaintiff against X (5). Since the obligation is still A's and its enforcement is by him as plaintiff, X's defence, that it is unjust for A to proceed against him, continues available, notwithstanding the attempted transfer, the only practical consequences of which were to give B the right to use A's name, and to keep the proceeds of the debt, if any were realized (6).

That the difference between B's positions, in the two cases just discussed, depends upon the fact that the note is transferable or negotiable property, and that the common law debt is not, is made more clear by a case where X is induced, by fraud and deceit of A, to sell A his horse or his land, and thereafter A resells the property to B, who buys in good faith. Horses and land are transferable property, and the intentional transfer of X made A the owner of the property transferred. Since he has become owner through the fraud practiced on X, the courts com

(5) Almost everywhere today B might bring action in his own name as plaintiff. This result is obtained by statutes, which, although they change the procedure, do not clash with the rule stated in the text that choses in action are not transferable.

(6) Barrow v. Bispham, 11 N. J. L. 110.

pel him on obvious grounds of justice to return the property. But, if B has innocently purchased the property from A and thereby become the owner, there would be no justice in depriving B of his rights of ownership, and he is allowed to keep the property. The same result is reached in this case as in the case of the bill or note, for the reason that in both cases we are dealing with transferable property (7).

§ 6. How bills and notes may be transferred. Bills and notes are unique, then, in that they represent obligations to pay money which are as transferable as goods or land. They possess, however, another quality quite as peculiar as that of transferability, which determines the manner in which they may be transferred. The usual mode of transferring title to goods is by a voluntary delivery, i. e., voluntary actual transfer of the goods, coupled with an intention to make the transferee the owner. The common mode of transferring land is by a voluntary delivery of a deed, with an intention to vest title in the grantee. A mere delivery or an involuntary change in the actual possession of the goods or of the deed, without an intention to pass title, would be ineffective. For example, A, with force and without X's consent, takes X's horse out of his possession-steals it. The physical act of taking possession is just as complete as if X had given his consent to it, but A does not become the owner because the necessary element of intention is absent (8). The same would be true if A stole from X a deed reciting a transfer of

(7) Rowley v. Bigelow, 12 Pick. (Mass.) 306. (8) Dame v. Baldwin, 8 Mass. 518.

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