ANALYSIS.
| Place—Portland, Maine. | |||
| Date—October 1, 1883. | |||
| Time—Thirty days. | |||
| Subject matter: | Note—Promise to pay, | $200. | |
| Bill—Order to pay, | |||
| Consideration—“Value received.” | |||
| Parties: | NOTE. | John Roe, maker. | |
| John Ray, payee. | |||
| BILL. | Drawer, Richard Roe. | ||
| Drawee, John Roe. | |||
| Payee, John Ray. | |||
After acceptance of the bill by John Roe, the drawee, he is placed in the same position, as regards it, that John J. Roe is in, as regards the note, that is, each becomes primarily liable for its payment.
Now, in actual business, notes and bills similar to those here given become important factors as a medium of exchange, being recognized as such by virtue of their negotiability, and proving acceptable as such when the parties thereto are of unquestioned financial ability.
What is the ear-mark of negotiability?
A note or bill payable to John Ray, “simply this and nothing more,” is not negotiable, but payable to a certain person, with no power to transfer the same, at least not to make it negotiable. To make it a negotiable instrument we should place after John Ray’s name the words (as found included in parenthesis in forms given), either “or bearer” or “or order.” This done, the note or bill would be of transferable quality, or negotiable, that is, would be payable to John Ray, or to him who should by chance gain its possession, if the words used be “or bearer:” if “or order” then payable to John Ray or to any holder, providing John Ray had so ordered it paid, by indorsement. Thus it is clearly evident that these evidences of debt, which is really the significance of commercial paper, answer the requirements, in a restricted sense, of money, and serve as the consideration for settlement in a great many of the transactions involving sale and exchange, incident to business enterprises. We must utter here a word of caution in regard to receiving negotiable paper; which is, not to accept of it after maturity, since notes and bills are presumably paid at the time when they become due, and one taking them after that time, must remember he takes them subject to this possibility, or possible existing equities between or among the original parties.
Negotiability, the outgrowth of indorsement, makes it necessary to give some explanation regarding the character of an indorser, or what his position and liabilities are.
An indorser is one who writes his name on the back of a note or bill, either for the purpose of transfer, or of assuming liability thereon, and frequently for both.
We shall mention three kinds of indorsement. Special indorsement, indorsement in blank, and, as applicable to both, indorsement without assuming liability, or without recourse. And first, if John Ray, payee named in bill or note, delivers possession of the same to John Smith, at the same time writing on the back of it, “Pay to John Smith or order, John Ray,” he thereby transfers by special indorsement. After transfer made in this manner, John Smith, or any one to whom he may give the power by indorsement, may collect of the original promisor, i. e., the maker of note or acceptor of bill, the amount due by clear evidence of the paper itself. Not only does this indorsement secure transfer of ownership, but also creates liability, for John Ray by it, without the addition of a restricting or denying clause (which we shall refer to later), agrees to personally attend to the payment, if the parties primarily liable fail to do so.
Again, an indorsement in blank is the simple writing of the name, in this instance, John Ray’s, by him of course, on the back of the note or bill, which, there being deducible from such indorsement no special directions, would make it payable to any one into whose possession it might come. Either of these indorsements accomplishes a transfer, and at the same time attaches to John Ray the liability of an indorser. Now, if John Ray sought to avoid such liability, he would write over his signature, “Without recourse to me.” This would secure transfer simply. An indorsement made by one not mentioned in the note or bill would be for additional security of payee, and would generally be in blank, placing the indorser in same responsibilities as assumed by John Ray in the two instances above mentioned and grouped. So much for the parties, which we now leave to consider briefly the time element, which is the hope of the payee, the specter, ever the cause of unpleasant forebodings to the promisor.