Putnam's Handy Law Book for the Layman

by Albert Sidney Bolles

The statute declares that a promissory note must be in writing and signed by the maker or drawer; that it must contain an unconditional promise or order to pay a certain sum of money on demand, or at a fixed future time to order or to bearer. And if the note is addressed to a drawee he must be named or indicated with reasonable certainty. A note may be written payable with interest or by stated installments, or with exchange, or with costs of collection, or an attorney's fee in case payment shall not be made at maturity.

An unqualified order or promise to pay is unconditional within the meaning of the law even though it indicates a particular fund from which it is to be paid, or a statement of the transaction on which the note is based. Thus the indorsement of the words "per contract" on the back of a note written at the time of its execution does not affect its negotiability.

A note payable at a fixed future time may be at a fixed period after date or sight, or on or before a fixed future time specified therein, or on or at a fixed period after the occurrence of a specified event which is certain to happen, though the time of happening be uncertain. A note that is payable on a contingency is not negotiable, and the happening of the event does not cure the defect. Likewise a note which contains an order or promise to do any act in addition to the payment of money is not negotiable. To this rule, though, are some exceptions. Thus a note may be negotiable that authorizes the sale of collateral securities that have been delivered to the holder if the note is not paid at maturity. But a note stating that the title to property for which it is given shall remain in the payee, and that he shall have the right to declare the money due and take possession of the property whenever he may deem himself insecure "even before the maturity of the note," is not negotiable.

Again, the validity and negotiable character of a note is not affected by the fact that it is not dated, or does not specify the value given or the place where it is drawn, or the place where it is payable, or bears a seal, or designates a particular kind of current money in which payment is to be made. Furthermore, a note is payable on demand when it is thus stated, or is payable at sight or on presentation. Also an overdue note accepted or indorsed is regarded as payable on demand, so far as the maker is concerned.

A note may be drawn payable to the order of a specified person, or to him or his order, or it may be drawn payable to the order of a payee who is not the maker, drawer or drawee, or it may be drawn payable to the order of the drawer or maker, or to the drawee, or to two or more payees jointly, or to one or some of several payees, or to the holder of an office for the time being.

Again, a note is payable to the bearer when it is thus expressed, or to a person named therein or bearer, or when it is payable to the order of a fictitious or non-existing person, and the fact is known to the person making it so payable, or when the name of the payee does not purport to be the name of any person, or when the only or last indorsement is an indorsement in blank. On one occasion funds were deposited in a bank in the name of a federal disbursing agent under treasury regulations that "any check drawn by a disbursing office upon moneys thus deposited must be in favor of the party by name to whom payment is to be made and payable to order." The disbursing officer fraudulently drew checks payable to fictitious payees and cashed them under forged indorsements of the fictitious payees' name. The court held that the checks were not payable to bearer and that the bank was not protected in paying them.

A note is not invalid for the reason only that it is ante dated or post dated, provided this is not done for an illegal or fraudulent purpose. The person to whom it is delivered acquires the title from the date of delivery. If a note expressed to be payable at a fixed period after the date is issued undated, or the acceptance of such a note is ante dated, the holder may insert the true date of issue or acceptance. Nor does the insertion of the wrong date avoid the note in the hands of a regular subsequent holder. More generally, when a note is wanting in any particular material, the holder or possessor has the authority to complete it by filling up the blanks. This authority extends to every incomplete feature of the note and may be used for inserting the date, amount, name of the payee, and time and place of payment. When authority is conferred on another to fill blanks it must be strictly followed. If a note is drawn payable with interest at the rate of __ per cent, it draws interest at the legal rate, although the blank is not filled. The presumption that a note was completed before it was signed and not afterwards does not arise in a note written in several inks and by different hands. And the purchaser of a note with an unfilled blank is put on inquiry respecting the authority of a person entrusted with an incomplete note. Thus A signed blank forms of notes and left them with his attorney, but with no authority to complete and issue them until instructed. The attorney filled them up without further instructions and issued them to a person who knew they had been signed, that the attorney had a power of attorney to act for A, but did not attempt to read or otherwise ascertain its terms. A was not prevented from denying the validity of the notes. In another case a person who signed a number of notes in blank as to date, payee and amount, and left them in his desk in his office, whence they were stolen, filled in and indorsed to B for value before maturity and without notice of any defects, was nevertheless not liable on them. When therefore an incomplete instrument has not been delivered it cannot be completed and negotiated without authority, and if it is, it is not a valid contract in the hands of any holder as against the person whose signature was placed thereon before delivery.

Every contract on a negotiable note is incomplete and revocable until its delivery. As between the immediate parties, and also a remote party other than a holder in due course, the delivery, in order to be effectual, must be made either by the authority of the party making, drawing, accepting or indorsing as the case may be. The delivery may be shown to have been conditional, or for a special purpose only, and not for the purpose of transferring the property of the note. But where the note is in the hands of a holder in due course, a valid delivery thereof by all parties prior to him is conclusively presumed.

When the language of a note is ambiguous the following rules of construction are applied: (a) if there is a discrepancy between the words and figures in expressing the amount, the words control, if the words are ambiguous or uncertain, reference may be had to the figures to fix the amount; (b) if the note provides for paying interest without specifying the date from which it is to run, the interest runs from the date of the note, if this is undated, from the issue of it; (c) if not dated a note will be considered as dated from the time of issue; (d) if there is a conflict between the written and printed provisions, the former will prevail; (e) if it is doubtful whether the instrument is a bill or note, the holder may elect which it shall be; (f) it is not clear in what capacity the person making the note intended to sign he is to be deemed an indorser; (g) when a note containing the words "I promise to pay" is signed by two or more persons, they are deemed to be jointly and severally liable thereon.

The signature of any party may be made by a duly authorized agent. No particular form of appointment is necessary for this purpose, and the authority of the agent may be established as in other cases of agency. If, however, one signs as agent without disclosing his principal, he is personally liable. Thus, a husband signed a note in his own name without adding more. As he had disclosed no principal, he was personally bound, and his wife, for whom he claimed to have signed the note, was not liable. The maker of a note added to his signature, "Pastor of St. Frances' church." This was regarded as his personal note, all besides his name were words merely of description. A person signed a note thus: "Estate of William R. Clark by William R. Clark, Jr., Trustee." As he was not authorized to borrow on behalf of the trust and give a note as trustee, he was individually liable notwithstanding the form of the note.