of money one or two years from date given, in settlement for credit claims due, and on which demand for payment 99 had been made. The United States note or "greenback" was originally a species of emergency currency in the nature of a contract for the delivery of gold or silver coin "on demand." It was understood, however, at the time of issue, that the demand would not be met until the Government had the necessary gold and silver in the Treasury with which to meet it. The result was that the notes did not pass "at par" with gold or silver, but were received at a discount proportionate to the estimates of value based upon them by those receiving these promises. COMMERCIAL CREDIT FUNDS Commercial credit or contracts for the future delivery of money are frequently given and received in transactions with merchants, as between those using them they answer every purpose as "funds." The practise allows merchants. to make sales and customers to make purchases. Under such credit arrangements a customer may order goods of a house "on credit" and make "settlement" for the credit at a future time. The promise to pay is unwritten; it may be made by tacit understanding. Some memorandum of the transaction is usually taken at the time, although it may be left entirely to the memory of the parties without any form of entry. A large part of the mercantile business of the country is conducted in this way. When one opens an account at a store he may make definite arrangements to have all purchases "charged "—that is, entered on the books -statements to be made and settled on the first of each month. When the customer is well known, however, and his ability to pay is undoubted by the merchant, he may order goods without any previous arrangement. In this case it will be tacitly understood that the purchaser of goods will pay the account when demand is made. One may go to a grocer and say, "Please send out a barrel of No. 2 Pearl flour." The merchant will deliver the flour and charge the price to purchaser's account on his books. The contract for payment is just as well understood as if a definite formal arrangement had been made. A manufacturer usually has many such arrangements with laborers, material men, and business houses with which he deals. So a retail merchant will deal on similar funding arrangements with wholesalers, and wholesalers with producers. This form of credit is not transferable except by special agreement, and can not pass current in the community. It answers as funds only to the one with whom the contract for future delivery is made. In all lines of mercantile business "the books" will show a large number of current credits-that is, the regular customers will have an understanding that all orders will be honored to a certain amount, settlements to be made at Current credits. stated intervals. The goods purchased in this way become the property of purchasers as absolutely as if money had been paid for them. Goods are exchanged for credit on open account. The merchant has a right to enforce the collection of the claim in the same manner as if a promissory note had been given. It often happens that two merchants, or a manufacturer and a merchant, may each wish to run an account with the other. In this case each will make entry of goods purchased, and at the end of the month or year settlement will be made by exchange of statements of account and the payment of the balance due. Mutual credit. CHAPTER IV INSTRUMENTS OF TRANSFER OF CREDIT FUNDS EVERY purchase and sale involves an exchange in possession and ownership. Money funds when used in exchange are passed from hand to hand. Many forms of credit funds, however, do not admit this method of transfer. For the purpose of making transfer of credit funds, several classes of instruments have come into vogue, each adapted to some special use or to the transfer of some special form of credit funds. The customer's check. The most common form of instrument used for the transfer of credit funds is the "customer's check." A $10,000 credit account is purchased at a bank by a customer for the purpose of making current purchases and payments. He then buys a stock of goods for $1,000. In exchange for the goods the customer of the bank transfers $1,000 of his credit account to the one from whom the goods were purchased. To do this he draws his check for the amount. A "customer's check" is a sight draft on a bank for the payment of the amount of money stated therein, to a third 66 person, on account" of the maker. It differs Form and significance from ordinary commercial drafts in that it is of a "custom- drawn against an account purchased of a banker for the very purpose of drawing against it; the bank is therefore bound to honor the check when presented. The check need not be in any prescribed form; it may be written on a blank sheet of paper, with a er's check," pencil or entered on the printed forms of a bank. It is for the sake of convenience and uniformity that banks provide blank checks for the customers. These blanks are usually bound and given out to the regular customers of the bank in book form. Each check usually has a stub," or short end, which is left in this book after the 66 check itself has been torn out, on which memoranda may be entered for the convenience of the customer-it assists him in keeping a record of the transfers made by him, and of the amount of such credit fund still remaining at the bank against which checks may be drawn. As before stated, no particular form is necessary, and a lead-pencil will serve as well as ink. The bona-fide intention of the one owning the fund or account is all that it is necessary for the bank to know. But certain rules should be followed as a matter of convenience to the bank and precaution to the drawer. In writing and signing checks good black ink should be used. How to make Date of check. Checks should be dated, but the absence of the date does not warrant a bank refusing to cash them. While a note executed on Sunday is not good in many jurisdictions, a check so dated is valid. A postdated check does not make the bank liable for payment if presented before the date entered. Checks should never be issued under an arrangement with the holders that they will not present them till a subsequent |