CHAPTER XV.

Notes-Endorsements-Drafts-Bills of Exchange-Notary Presentation— Protest-Notice of Protest-Checks-Course of Check through a Bank -Cashiers' Checks-Certificates of Deposit-Letters of Credit-Table Showing U. S. Treasurer's Valuation of Foreign Coins-Table Giving Weight of Alloyed and Pure Metal of Units of Value of Principal Countries.

Notes. A note is a written or a partly printed and written promise made by one or more persons to pay to one or more persons, named or unnamed, a certain sum of money at a given date.

Bouvier's Law Dictionary defines a note as "A written. promise to pay a certain sum of money, at a future time, unconditionally." This definition, however, does not seem so comprehensive and explicit as that first given. And as we are dealing with notes as negotiable instruments, we will only consider them when drawn in such form as to hold the maker thereof, for the amount stated in such note, of which the very first element is that the note shall have been given for value, hence all notes should read "Value received."

The following is the form of note generally used:

It is a well recognized principle of law that a note given without consideration cannot be enforced by a person having knowledge of that fact, but a note given, though without consideration, may be enforced by an innocent holder, who purchased the same for a consideration.

Notes may be drawn by any number of persons, payable to one or more persons, and are transferable by endorsement.

Notes may be endorsed in some nine different ways, each imposing a different liability upon the endorser or endorsers thereof. The different kinds of endorsements are stated with much brevity and clearness by Mr. Bolles in his work on Practical Banking, which we take the liberty of quoting.

"An endorsement may be (1) in full, or (2) in blank; it may be (3) absolute, or (4) unconditional; it may be (5) restrictive; it may be (6) without recourse on the endorser; and there may be (7) joint endorsements of the instrument, (8) successive endorsements, and (9) irregular ones. An endorsement in full mentions the name of the person in whose favor it is made, and to whom, or to whose order the sum described in the note is to be paid. An endorsement in blank consists simply of the name of the endorser written on the back of the instrument. The receiver of a negotiable instrument endorsed in blank, or any bond fide holder of it, may write over it an endorsement in full to himself, or to another, or any contract consistent with the character of an endorsement, but he could not enlarge the liability of the endorser in blank by writing over it a waiver of any of his rights, such as demand and notice.' By an absolute endorsement the endorser binds himself to pay on no other condition than the failure of the prior parties to do so, and of due notice to him of their failure, while a conditional endorsement contains some other condition to the endorser's liability. An endorsement may be so worded as to restrict the further negotiability of the instrument; it is then called a restrictive endorsement. The words

' for collection,' which are frequently written on notes that are put in a bank to be collected render the endorsement restrictive. The endorser in such a case may prove that he is not the owner of the note, and did not mean to give a title to it or its proceeds when collected. Such an endorsement merely makes the endorsee agent for the endorser in collecting the note. The sixth kind is a qualified endorsement, or endorsement without recourse. This consists in writing the words 'without recourse,' or 'at the endorsee's own risk' on the back of the note. The endorser is then a mere assignor of the title to the note, and is relieved of all responsibility for its payment. A joint endorsement is made when a note is payable to several persons who are not partners. Successive endorsements are those made by several persons on a note, the legal effect of which is to subject them as to each other in the order they endorse. The endorsement imparts a several and successive, and not a joint obligation. Lastly may be mentioned irregular endorsements, which may originate in various ways. But in all cases an endorser guarantees the genuineness of all the preceding endorsements."

It may be well to add that, in the use of irregular endorsements, a person placing his name upon the back of a negotiable note or bill is presumed, in law, to have intended to become liable as second endorser, and that on the face of the paper, without explanation, he is regarded as second endorser and therefore not liable to the payee, who is supposed to be the first endorser. The explanation required is that such endorsement was made for the sole purpose of giving the maker credit with the payee.

Drafts.-A draft is a written order drawn by one or more persons in favor of one or more persons on a third person or persons for a specified amount payable at a named date.

On the next page is given the usual form:

"$1000.

"NEW YORK, January 10, 1893.

"Ten days after sight pay to the order of John Doe

The principal distinction between a check and a draft is that a draft is generally drawn on some person or corporation residing or doing business in a different place from that in which the drawer resides, and is dependent for its payment upon the acceptance of the person against whom it is drawn, and who may decline to accept or pay it, and no criminal liability would attach to the drawer, whereas a check is drawn only against a deposit of money or a previously agreed credit, and the drawer of which, should there be no funds to meet it, renders himself liable to criminal prosecution, or the bank or banker refusing to pay such check if there are funds, to a civil action for damages for the injury to the drawer's credit and reputation.

After a draft is accepted it becomes a promise to pay on the part of the acceptor, and he can be held thereon as on a note.

Drafts constitute the most common form of domestic exchange and are purchased by both individuals and banks for that purpose.

They may be transferred to another by the person in

whose favor they are drawn, by indorsement in any of the different forms given in regard to notes.

When these drafts are drawn against a person to whom merchandise has been sold or consigned they are known as commercial bills. They sometimes take the name of the produce which they are drawn against; thus we have "cotton bills" drawn against the sales of cotton, and so

on.

The persons selling or consigning the merchandise draws his draft against the buyer or consignee, and with the order for the merchandise, and the warehouse certificate or bill of lading attached to such draft (technically known as "the papers "), offers the same for sale to his bank, which purchases the same at the market rate of exchange on the place at which the draft is payable, less interest on the amount of the draft from the date of its purchase to its maturity, which is deducted from the amount paid over. The draft is then sent to its place of payment for collection, and when collected the amount is either remitted or credited to the bank. The same bank will also sell exchange on the city at which its draft is payable, but at a higher rate than it will purchase at, as no bank can afford to sell exchange as cheap as it will buy it.

The dealings in domestic exchange are confined almost entirely to banks, whereas dealings in foreign exchange are conducted almost entirely through private houses, known as Dealers in Exchange.

Bills of Exchange.-The chapter on exchange is designed to give the principles governing exchange, rather than the machinery by which such exchange is effected. Hence it is necessary to say a few words about the papers commonly used in the purchase and sale of exchange.

First will be considered bills of exchange, which are used almost exclusively in foreign exchange, and of which the following is the general form: