Cheques. Promissory notes. Requisites of bills and notes. Privileges of a bill. the bill in the event of the drawee not accepting and paying, vide §§ 54, 55. Cheques are bills of exchange drawn on a banker, payable to bearer or to order, and, subject to the provisions of §§ 60, 74, and 82, are regulated by the same rules as other bills. Promissory notes, though distinct documents in point of form, are in their essentials identical with bills of exchange, and may be described as bills in which the drawer and acceptor are the same person. The contract of the maker of a note is an engagement to pay the payee the sum in the note. The Act defines the formal requisites of a bill in § 3, and those of a note in § 83. A document which complies with these definitions is a bill or note, although the parties have described it by a different name. It is entitled to the privileges, and subject to the disadvantages attached by law to bills and notes. The privileges are :-(1.) A bill or note, whether in re mercatoria or not, is probative if signed by the parties liable thereon, without any of the statutory requirements as to authentication. Bills do not require to be signed in the presence of witnesses, and the signatures of a party to them may be adhibited by any person by or under authority of the party, vide § 91. (2.) Bills and notes are negotiable. They pass from holder to holder, either by delivery if payable to bearer, or by indorsement and delivery if payable to order. An assignation is implied by such delivery or indorsement of the holder's rights in the bill. In addition, the holder not merely acquires the right to sue in his own name on the bill, but he may also enforce the bill against all parties liable thereon, without being exposed to a challenge of his title as defective on grounds which would be fatal to a claim at the instance of the person from whom he has taken it, or to defences available to prior parties among themselves, provided that he has acquired the bill in such circumstances as to come within the definition of a holder in due course, as given in § 29. The privilege of negotiability also includes that of being able to give a valid discharge to the person paying the holder in due course, and of being able, though the holder's own title be defective, to attached to bills. The disadvantages attached by law to bills and notes are, Disadvantages (1.) Inland bills and notes, with certain exceptions in favour of bills payable on demand and bank notes issued by bankers licensed to issue such notes, must be written on stamped paper, and if not so written are null. An unstamped inland Prior contracts. Letters of credit. bill cannot be after-stamped, except in the case where a bill or note has been written on paper bearing an impressed stamp of sufficient amount but improper denomination. Foreign bills cannot be negotiated or paid without affixing adhesive stamps of sufficient amount, vide 33 & 34 Vict. c. 97, § 51. (2.) Bills and notes, with the exception of bank notes, prescribe in six years from and after the term at which they become exigible, and the holder thereafter is limited to writ or oath in establishing the debt on the bill. (3.) The holder loses his right of recourse against the drawer and prior indorsers, for payment of the sum in the bill, which the drawee has failed to pay, if he has omitted to take the steps and give the notices which the Act makes necessary, vide §§ 39-52. The Bills of Exchange Act does not deal with the contracts to draw, accept, or indorse bills, nor with the documents in which these contracts are expressed. The principles applicable to the interpretation and enforcement of these contracts are widely different from those enacted by this Act with reference to bills and notes. The stringent requirements of the Act as to the form and negotiation of bills, have not been found necessary in regard to the writings embodying these contracts; and, on the other hand, some of the privileges attached to bills do not belong to them. The most important of the writings relating to these preliminary contracts are letters of credit, which play an important part in modern commerce, and have enabled parties to use bills of exchange in circumstances when, without such documents, their use would have been difficult if not impossible. A short account of the law applicable to them may not be out of place in this introduction. Pothier, in his "Traité du Contract de Change," pt. ii. art. 2, § 3, thus describes letters of credit, and the obligations to which they give rise :-" Il y a," he says, "une espèce de rescription qu'on appelle lettre de crédit par laquelle un marchand ou banquier mande à son correspondant dans un autre lieu de compter à la personne dénominée dans la lettre l'argent dont elle temoigne avoir besoin. On donne ces sortes de lettres de crédit à des personnes qui voyagent, pour qu'elles n'aient pas la peine de porter trop d'argent avec elles. Ces lettres sont quelquefois illimitées, quelquefois limitées à une certaine somme. Elles ne contiennent qu'un seul mandat, par lequel celui qui a écrit la lettre charge celui à qui elle est adressée de compter la somme à la personne denominée. Le porteur de la lettre n'est point censé se charger de recevoir, il n'use de la lettre que selon son besoin, et autant que bon lui semble, et il ne contracte d'obligation qu'en recevant l'argent, qui est l'obligation du contrat de prêt, qui se fait par la numération qui lui est faite de l'argent." Letters of credit are, then, mandates, by which authority is given to a correspondent to pay to a particular person either a sum named, or any sum up to a certain amount, or any sum which he may require. They may, however, be expressed in many different ways, and subject to qualifications other than those relating to the amount to be advanced. In the first place, they may be either general or special. A general letter is addressed to no person either named or described, but contains a request to any one to whom the letter may be shown to give credit to the person in whose favour the letter is conceived. Such letters are sometimes in the form of a request to cash the drafts of the named holder or payee drawn upon the granter of the letter. Sometimes the letter is addressed to the grantee, and contains an undertaking to accept or pay bills drawn by him. Where the amount for which bills may be drawn is limited in the letter of credit, there is generally a memorandum desiring the persons who take bills drawn on the granter to indorse the amount of the bills so drawn on the letter of credit. The object of this is to prevent the holder making use of the letter after he has exhausted his credit, and is for the prevention of fraud on the public, and not on the granter; for the granter is only liable to the extent of the credit given by him, and the failure to indorse will not render him liable to innocent third parties who have been induced to advance money after the credit has been exhausted. The order of presentation to the granter will decide what drafts he must honour, under his obligation in the letter of credit, in cases where the amount of the credit has been exceeded, and the sums have not been indorsed on the letter. Special letters, on the other hand, are addressed to particular persons, or to a number of persons successively, or to a class of persons―e.g., the correspondents of a bank. No one else is entitled to give credit on such letters, and if any one not named or described cashes drafts upon the granter of the letter, he takes his risk of the drawer not putting the banker in funds to meet the draft; while, if the person to whom the letter is addressed cashes the holder's drafts, the granter is bound to accept and pay them, although the drawer may have become bankrupt, because the granter has engaged to accept the drafts, which he has allowed to be drawn in terms of the letter of credit. Letters of credit are also according to their tenor described as open credits, document credits, marginal credits, and circular notes. Open credits do not express any qualification of the right of the payee to obtain cash for his drafts. Qualifications are often inserted, and most frequently by way of a proviso that the drafts are only to be cashed when drawn for the price of goods, and when presented with bills of lading and other shipping documents referring to these goods attached. Such letters are called document credits, and the banker who issues them has not necessarily any funds of the drawer in his hands. The banker's profit lies in the discount upon which his correspondent cashes the drafts, or in the commission he charges for accepting the drafts so drawn, and his security against loss is the holding of the bill of lading and policy of insurance, which are forwarded to him by his correspondent with the draft for acceptance. Marginal credits, or marginal bills as they are sometimes called, are in the form of a bill of exchange addressed to some banker, the signature, sum, and date being left blank. In the margin is a note requesting the person to whom the bill may be presented to cash the bill of exchange, which he will find alongside of the note, and to the extent of a sum named. Circular notes are letters of credit accommodated to the requirements of travellers. They are addressed to the correspondents of the banker abroad, who are named in |