CHAPTER VII.

DISCHARGES.

Discharges in General.

defined.

Art. 230. A bill is discharged when all rights of Discharge action thereon are extinguished. It then ceases to be negotiable, and if it subsequently comes into the hands of a bonâ fide holder for value without notice he acquires no right of action on the instrument.1

ILLUSTRATION,

C. is in possession of a bill which has been discharged, e.g., by payment in due course, or by an alteration. He indorses it to D., who indorses it to E. E. cannot sue either C. or D. as indorsers. He can only recover from D. the amount he paid for the bill, and D. in like manner can recover what he paid from C.2

NOTE. A right of action on a bill must be distinguished from a right of action which a party to a bill may have arising out of the bill transaction, but wholly independent of the instrument. The former can be transferred by negotiating the instrument, the latter cannot. The former is extinguished by the discharge of the instrument, the latter may or may not be so. For example, if one of three joint acceptors pays a bill, it is discharged; but he personally has a right of contribution from his co-acceptors. If an accommodation acceptor pays a bill it is discharged, but he has a

3

1 Harmer v. Steele (1849), 4 Exch. 1 Ex. Ch. ; Burchfield v. Moore (1854), 23 L. J. Q. B. 261.

2 Burchfield v. Moore, suprà; Cf. Burbridge v. Manners (1812), 3 Camp. at 194, payment; Cundy v. Marriott (1831), 1 B. & Ad. 696, stamp.

3 Harmer v. Steele (1849), 4 Exch. at 14; see the converse, Houle v. Baxter (1802), 3 East. 177.

defined.

Discharge personal right of action for indemnity. If an acceptance be given for a debt, and the acceptance is paid, both the debt and the bill are discharged. Discharge of Parties.-Again, the discharge of a bill must be distinguished from the discharge of one or more of the parties thereto, e.g., the acceptor may be discharged by a discharge in bankruptcy while the drawer and indorsers are only liberated to the extent of the dividends or composition received by the holder; or a particular indorser may be discharged by want of notice of dishonour, while the drawer and other indorsers remain liable; or again, an indorser may be discharged as regards a particular party, but not as regards subsequent parties.2

Discharge

when laws

conflict.

Art. 231. When laws conflict the validity and effect of a discharge is (in general) determined by the lex loci contractus of the party sought to be charged.3 Cf. Art. 60.

ILLUSTRATIONS.

1. Bill accepted at Leghorn payable there. By the old law of Leghorn an acceptor could procure the cancellation of his acceptance if he had not at maturity received funds from the drawer. An acceptor so discharged at Leghorn cannot be sued in England.*

2. Bill drawn in the United States (and issued there) on a person in England is dishonoured by non-acceptance. The drawer cannot be sued in England if he has been discharged in America under the Bankruptcy law there in force.5

3. Bill for 1007. drawn and issued in Demerara but accepted and payable in England. At the time the bill matures the holder owes the acceptor 1007. According to Demerara law this operates as a discharge of the bill (by compensatio). The drawer is discharged."

4. Accommodation bill drawn and issued in Austria, but accepted and payable in England is dishonoured. The holder receives from

1 Re Joint Stock Discount Co. (1870), 10 L. R. Eq. 11; Re Jacobs (1875), 10

L. R. Ch. 211, composition under Act of 1869.

2 Cf. O'Keefe v. Dunn (1815), 6 Taunt. 315; see e.g., Art. 191.

3 Cf. Ellis v. McHenry (1871), 6 L. R. C. P. at 234.

4 Burrows v. Jemino (1726), 2 Stra. 733.

5 Potter v. Brown (1804), 5 East, 124; Cf. Symons v. May (1851), 6 Exch. 707.

6 Allen v. Kemble (1848), 6 Moore P. C. 315; Cf. Wilkinson v. Simson (1838), 2 Moore P. C. 275; Compensatio is recognised as a discharge in all countries where civil law prevails. See further on that subject Nouguier §§ 1053-1060; French Code Civil, Arts. 289-299.

the drawer in Austria a smaller sum in satisfaction of the bill. Discharge This, according to Austrian law, is a valid discharge. A subsequent indorser cannot sue the acceptor in England.'

He can

5. Bill drawn, accepted, and payable in England. The acceptor is made bankrupt and receives his discharge in Australia. be sued on the bill in England.2

when laws conflict.

3

Payment in due course.

in due course a

Art. 232. A bill is discharged by payment in due Payment course, that is to say, by payment in accordance with Arts. 234 to 236.

NOTE. Satisfaction in general.-No definition of payment is attempted, for "payment" is not a technical term. The holder of a bill is entitled to receive money (Cf. Arts. 10, 36), but when the time of payment comes he may, if he chooses, receive satisfaction in any other form. Any satisfaction which would operate as a discharge in the case of an ordinary contract to pay money is equally effectual in the case of a bill. Willes, J., seems to think this principle hardly wide enough having regard to the rule (Art. 239) that accord without satisfaction in some cases suffices." Completion of Payment.-Payment by a banker to a private individual is complete, and the property in the money passes to the payee when the money is laid on the counter. As regards what constitutes complete and irrevocable payment between banker and banker where there is a clearing-house, see the special verdict in Warwick v. Rogers; where there is no clearing-house, see Pollard v. Bank of England. Proceeding for Costs.-Where the holder of

8

1 Ralli v. Dennistoun (1851), 6 Exch. 483, 36th plea and judgment at 493. 2 Bartley v. Hodges (1861), 30 L. J. Q. B. 352.

3 Morley v. Culverwell (1840), 7 M. & W. at 182, Parke, B.

4 See per Maule, J., Maillard v. Argyle (1483), 6 M. & Gr. at 45.

See e.g., cases discussed on this basis. Cripps v. Davis (1843), 12 M. & W. 159, agreement to set off another debt; Sibree v. Tripp (1846), 15 M. & W. 23, negotiable bill for less amount; Ford v. Beech (1848), 11 Q. B. 852, Ex. Ch. agreement to suspend; Ansell v. Baker (1850), 15 Q. B. 20, merger; Belshaw v. Bush (1851), 11 C. B. 207, bill of third party; Woodward v. Pell (1868), L. R. Q. B. 55, debtor taken in execution; Cf. Art. 251.

6 Cf. Cook v. Lister (1863), 32 L. J. C. P. at 126; Abrey v. Cruz (1869),5 L. R. C. P. at 44.

7 Chambers v. Miller (1862), 32 L. J. C. P. 30.

8 Warwick v. Rogers (1843), 5 M. & G. 340.

9 Pollard v. Bank of England (1871), 6 L. R. Q. B. 623.

discharge.

in due

course a

Payment a bill sues concurrently two or more of the parties thereto and is paid by one of them he may still proceed against the others for costs incurred. Presumption of Payment. It seems that there is a presumption of payment in the case of a bill or note which is 20 years old quite apart from the Statute of Limitations.

discharge.

Part

payment.

Tayment, by whom.

Art. 233. Part payment of a bill in due course operates as a discharge pro tanto.3

NOTE. AS to part payment by the drawer or an indorser, sec Art. 234, Expl. 2. Under German Exchange Law, Art. 38, the holder cannot refuse part payment, but this is clearly not English law. Cf. Arts. 39 and 158, and 206.

Art. 234. Payment in order to operate as a discharge of the bill must be made by or on behalf of the drawee or acceptor.5

ILLUSTRATIONS.

1. A bill is accepted by three joint acceptors (not partners). One of them pays it at maturity. The bill is discharged and cannot be again negotiated. It is immaterial that the acceptor who paid accepted the bill for the accommodation of the other two.

2. A bill accepted payable at a bank and indorsed in blank by C. is sent to D. to collect. D. improperly discounts it. To regain possession, D. goes to the acceptor's bankers, pays in the amount of the bill, and asks to have the bill given up to him, when the holder has been paid. This is done. The bill is not discharged. C. can sue the acceptor.7

D.

3. C. is the holder of a dishonoured bill indorsed in blank. pays the amount and costs to C. in order to get the bill and sue

1 Randall v. Moon (1852), 21 L. J. C. P. 226, as explained by Cook v. Lister (1863), 32 L. J. C. P. at 127; London and Sub. Bank v. Walkinshaw (1872), 25 L. T. N. S. 704.

2 Cf. Brown v. Rutherford (1880), 14 Ch. D. 687, C. A.

3 Graves v. Key (1832), 3 B. & Ad. 313; Cf. Cook v. Lister (1863), 32 L. J. C. P. at 125, Willes, J.; French Code. Art. 126; German Exchange Law, Arts. 38, 39.

4 Wilkinson v. Simson (1838), 2 Moore P. C. at 287, Parke, B.

5 Callow v. Lawrence (1814), M. & S. at 97, Ld. Ellenborough ; Jones v. Broadhurst (1850), 9 C. B. at 181, Cresswell, J.

6 Harmer v. Steele (1849), 4 Exch. at 13, 14, Ex. Ch. ; Cf. Bartrum v. Caddy (1838), 9 A. & E. 275, note on demand paid by accommodation maker. 7 Deacon v. Stodhart (1841), 2 M. & Gr. 317; Thomas v. Fenton (1847), 5 D. & L. 28, see at 38; Cf. Walter v. James (1871), 6 L. R. Ex. 124.

on it. C. parts with the bill under the impression that D. has Payment, paid it on behalf of the acceptor. The bill is not discharged. D. by whom.

can sue the drawer.1

4. A joint and several note is paid at maturity by one of the makers. The note is discharged."

Explanation 1.-Payment of an accommodation bill by the person accommodated is deemed to be a payment made on behalf of the acceptor, and operates as a discharge.3

ILLUSTRATION.

A bill is accepted for the accommodation of the drawer. The drawer negotiates the bill, and then takes it up at maturity. Subsequently he re-issues it. The holder cannot sue the acceptor, for the bill is discharged.*

NOTE.-See Art. 99, defining "accommodation bill." The discharge may be supported on the ground adopted by Willes, J., that the person accommodated pays as the acceptor's agent, or on the ground that the bill has been paid by the principal debtor. Cf. Art. 245, as to principal and surety, and Art. 134, n., equities attaching to overdue bill.

Explanation 2.-Subject to Expl. 1, payment by the drawer or indorser of a bill, as such, is not a discharge of it, but is merely a purchase thereof, remitting him to his former rights against antecedent parties, and enabling him, if the form of the bill permit, to re-issue and further negotiate it.

6

1 Lyon v. Maxwell (1868), 18 L. T. N. S. 28.

2 Beaumont v. Greathead (1846), 2 C. B. 494.

3 Cook v. Lister (1863), 32 L. J. C. P. at 127, Willes, J., see also Lazarus v. Cowie (1842), 3 Q. B. 459, criticised but followed in Jewell v. Parr (1853), 13 C. B. 909, apparently approved, Parr v. Jewell (1855), 16 C. B. 684 at 709, Parke, B., Ex. Ch.; Jones v. Broadhurst (1850), 9 C. B. at 181 and 189; Ralli v. Dennistoun (1851), 6 Exch. 483, 36th plea and judgment at 493; Strong v. Foster (1855), 17 C. B. at 222; Re Oriental Bank (1871), 7 L. R. Ch. at 102.

4 Lazarus v. Cowrie, suprà; Cf. Art. 230, discharge defined.

6 Jones v. Broadhurst (1850), 9 C. B. 173; Kemp v. Balls (1854), 10 Exch. 607; Woodward v. Pell (1868), 4 L. R. Q. B. 55.

6 Cf. Duncan Fox & Co. v. N. & S. Wales Bank (1880), 6 App. Cas. at 17, per Ld. Blackburn.