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paid forthwith, B might immediately bring an action against A on the original debt. Is there any implied promise on the part of the creditor who takes such an instrument not to sue his debtor? It seems there is not, and yet the courts hold that the instrument is binding, whether it be the note of the debtor himself or a third person (30). The result of all these decisions is summed up in the N. I. L. as follows (31) :
“An antecedent or pre-existing debt constitutes" consideration; "and is deemed such whether the instrument is payable on demand or at a future time."
The real explanation of the cases, holding a note taken on account of a debt to be binding, is that no consideration is necessary for a bill or note. But the courts and the N. I. L. first force the common law requirement of consideration upon negotiable instruments, and then give a fanciful interpretation to simple business transactions in order to comply with it. Another and more striking instance, where an obligation on a negotiable instrument is held binding without a consideration, although the courts and N. I. L. profess to require one, is the case where A, being indebted to C, draws a bill of exchange on B, who is under no obligation whatever to A, ordering B to pay $100 to C. A delivers the bill to the payee. Upon presentation by C of the order to B, he, as an act of friendship or business accommodation, "accepts," i. e., promises to pay the in
(30) Childs v. Monins, 2 Broderip & B., 450; Sison v. Kidman, 3 Manning & Gr. 810. But see Strong v. Sheffield, 144 N. Y. 392, for an exception to this rule in New York and some other states.
(31) Sec. 25.
strument. Clearly in this case neither A nor C has surrendered or promised to surrender any legal right, yet it is well settled law that B is liable on his acceptance (32).
$ 61. Examples of consideration. Of course, wherever, as in the case of an instrument accepted in absolute extinguishment of an existing debt, there really is a consideration for the maker's, or indorser's, or acceptor's promise, viewed as a simple common law promise, the instrument is enforceable. Thus, where the creditor receiving a negotiable instrument in fact promises to refrain from suing on the debt until the instrument matures, or, at the request of the debtor, actually refrains from suit, the instrument is binding (33). Or, if A loans money to B and takes B’s note or a third party's note as collateral security for the loan, the advance of money by A is a consideration for the note of either B or X (34). Or, if A holds B's note as collateral security for B's debt, A's surrender of the note in exchange for X's note substituted as collateral security for the debt, is a consideration for X's note (35). Or, if A gives his note to B in exchange for B's note to A, the giving of each note is a consideration for the other (36).
$ 62. Moral consideration. As the N. I. L. says that any consideration sufficient to support a simple contract may be the consideration for a negotiable instrument, we find
(32) Commercial Bank v. Norton, 1 Hill, 501.
(33) Mansfield v. Corbin, 2 Cush. 151; Russell v. Bassett, 79 Conn. 709.
(34) Black v. Bank, 96 Md. 399; Metropolitan Co. v. Springer, 90 N. Y. Supp. 376; Mersick v. Alderman, 77 Conn. 634.
(35) Allentown Bank v. Clay Co., 217 Pa. 128. (36) Milius v. Kaufman, 93 N. Y. Supp. 669.
the anomalous doctrine of "moral consideration" recognized in the law of negotiable instruments. So, if A gives his note to B for a debt which is barred by the statute of limitations, or by A's discharge in bankruptcy, or voidable on the ground of A's infancy or insanity, A's note is enforced against him on the same theory as his simple promise to pay would be in such cases (37). See Contracts, $$ 58-60, in Volume II of this work.
$ 63. Presumption of consideration. Although a consideration is necessary for a negotiable instrument, the plaintiff in an action on a bill or note does not need to prove that he gave one. Absence of consideration is a “matter of defense” which the defendant must prove in order to defeat the action.
“Every negotiable instrument is deemed prima facie to have been issued for a valuable consideration; and every person whose signature appears thereon to have become a party thereto for value” (38).
SECTION 3. ACCEPTANCE OF BILLS.
$ 64. Drawee not bound unless he accepts. If A, complying with the requirements as to form, draws a bill of exchange on B, payable to C, and delivers it to the payee, the act of A in drawing and delivering the instrument imposes no liability on the drawee, B. If B is not indebted to A this is obvious. If B is indebted to A, B's duty to pay runs to A, and A cannot impose on B a new duty, i. e., one
(37) Mill v. Van Trees, 50 Cal. 547; Wislizenus v. O'Fallon, 91 Mo. 184; Bank v. Sneed, 97 Tenn, 120.
(38) Neg. Inst. Law, sec. 24.
to pay to a third person, C. But A can assign his claim to C, thereby empowering C to collect the debt. Does the bill operate as an assignment? This is a question of A’s intention, and the form of the bill which is an unconditional order to pay a definite sum of money certainly seems to preclude its interpretation as an assignment, i. e., an authority to collect the sum, if any, due from the debtor. Thus the N. I. L. provides:
Sec. 127. A bill of itself does not operate as an assignment of the funds in the hands of the drawee available for the payment thereof, and the drawee is not liable on the bill unless and until he accepts the same.
It is the formal act of acceptance of a bill by the drawee from which his obligation to pay arises.
$ 65. Form of acceptance. Oral acceptance.
“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" (39).
An oral acceptance is not binding under the statute
$ 66. Acceptance written on the bill. The normal and proper mode of acceptance is one written on the bill itself. Any words written on the face or back of the instrument signifying the drawer's assent to the order are sufficient, provided they are coupled with the drawer's signature. For example, "Accepted,” “Presented,” “Seen,”
(39) Neg. Inst. Law, sec. 132.
“Payable at X Bank,” or an order by the drawee on his agent to pay, preceded or followed by the drawer's signature, are good forms of acceptance. So also is the signature of the drawee without more, on the theory that the holder is authorized to write an acceptance over the signature (40). An acceptance written on the bill, however, does not impose an obligation on the acceptor until he has re-delivered the bill to the holder, or notified him of the fact of acceptance. “«Acceptance' means an acceptance completed by delivery or notification” (41).
§ 67. Extrinsic written acceptance. Although the N. I. L. requires the acceptance to be in writing, thereby depriving an oral acceptance of validity, the acceptance to be binding need not be written on the bill. For example, an acceptance by telegraph is sufficient, if the message is filed or delivered in writing (42). But an extrinsic written acceptance is peculiar.
"Where an acceptance is written on a paper other than the bill itself, it does not bind the acceptor, except in favor of a person to whom it is shown, and who, on the faith thereof, receives the bill for value” (43).
In consequence, if the purchaser of a bill of exchange which had been accepted by telegraph did not take it in reliance upon the written message, he would have no action against the drawee.
(40) Spear v. Pratt, 2 Hill, 582.