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lading were taken out by Burnham, Williams & Co. in favor of them

selves-i. e., they

shipped the consignment by the

steamer Orizaba to

their own order, and had five copies of the bill of lading made out. At

the same time duplicate ninety-day drafts were drawn,

and an insurance



policy was chased from Lloyds to protect the property against loss. These the invoices, the bills of lading, the insurance policy, and the two draftswere taken to Brown Brothers & Co. for discount. Satisfactory arrangements having been made for the sale of the bills, Burnham, Williams & Co. indorsed and assigned them all over to

Brown Brothers & Co.; that is, they executed a contract or bill of sale to Brown Brothers & Co., with instructions "that if the said bill be accepted, the bills of lading are to be given up to the Peruvian Corporation, Ltd., without prejudice," but "if the Peruvian Corporation, Ltd., declines to accept," then Brown Brothers & Co. were authorized to retain the

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MAY 9 - 1902 190

We have this day sold to Brown Brothers & Cor
London England dutel

MAY 9-1902

for 4259.7/10 Merting against a strofement of Locomotive


pri 5/5 Orizaba

2 for Mollends

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us foep. Bill Lading to order herewith our agreement with Brown Brod
Philadelphia is that if said Bill accepted, the Bill of Lading
to be given up to The Beruvian Coperation hd. without prejudice to
your skum upon tes
of the penisian Corporation
in the event of the Bill not being paid at maturity but
Feline to accept, then you are hereby,
thorized to retain the Bill of Lading, and to place the suid material
at any time in the hands of your Brokers for sale at your discretion and to charge
all expenses including, cons for sale and guarantee and to apply the proceeds
in or towards payment of the Bill for account of "Whom it may concern,

Yours respectfully,
Jurnaum, Williams & Co.

bill of lading and to place the said material at any time in the hands of their brokers for sale at their discretion, and to charge all expenses, including commissions for sale and guaranty, and to apply the proceeds on or toward payment of the draft for account of whom it may concern. In negotiating a documented bill, it is necessary that all copies of drafts and documents be turned over to the party buying it, otherwise a stranger having duplicates might forestall the owner and defraud the parties in interest. It is to be noted that the collateral here given was in the nature of security for "acceptance," only. After acceptance, the only contracts remaining were the credit contract, or promise to pay on the part of the Peruvian Corporation, Ltd., and the personal security of Burnham, Williams & Co. and

their indorsers for payment of the credit contract ninety days after acceptance.


The indorsements and other collateral contracts of security attached to drafts make these instruments of high commercial value. In the negotiating of fordrafts used eign bills, such precautions are taken that one as funds. house doing several millions of this kind of business per annum has the phenomenal record of having lost only $600 during forty years of dealing. By sale of his draft on New York, the St. Louis merchant is enabled to obtain funds with which to pay for grain sold. On receipt of the grain by the New York merchant, he may at once trans-ship it to a Liverpool customer, and on his bills of lading draw for the amount. By sale of this he obtains funds with which to meet the St. Louis draft. The Liverpool merchant meets the draft on him by drawing on a Belfast brewer, who settles the draft on him by a bill on a New York importer of Irish stout. These international drafts or bills are settled by setting one off against another. Americans having accounts to meet in London, buy drafts against England, and Englishmen having American accounts to meet will buy drafts against New York. These secured bills, in their capacity as instruments for the collection of funds due " on account," come to serve in the capacity of funds for the payment of other accounts and avoid the necessity of shipping money from place to place in payment of credit obligations.

Non-payment and protest.

Drafts which are not paid at the time for which acceptance is made, or which are not accepted, may be protested. In fact, this is the usual custom when instructions are not given to the contrary. The protest of a bill puts on its face notice of its dishonor, and thereafter it ceases to serve as funds. No one will receive it in payment. It will be returned to the party drawing it, and he will be required to make good the amount, and pay all costs and expenses. When the drawer does not

wish to incur the expense of protest, he will have printed or attached to the end of the draft a detachable slip with the words, "No protest. Tear this off before presenting." This is in the nature of private advice to one presenting. Except as between the most reputable houses, such drafts are not taken as readily in exchange for the reason that the very instruction itself may cast suspicion on the value of the paper.



THE credit instruments thus far described are those commonly used as a means of obtaining funds for current use-i. e., for commercial transactions; they are generally referred to as short-time or commercial paper. When funds are desired for more permanent use quite a different arrangement must be made. Instead of the credit being due on demand, or in thirty, sixty, or ninety days, it is made payable in five, ten, twenty, or perhaps fifty years. This precludes the use of accounts; it makes necessary a definite or formal written contract-one which will place the terms and amount promised beyond all question. In form, all the instruments used for long-time credit transactions are in the nature of a promissory note. The credit contract itself does not differ from the commercial note except as to time of maturity; the essential difference between longtime and short-time paper is found in the contract of security given. One can make a conservative business Form of long-time credit.

judgment of the value of a promise to deliver money thirty or sixty days hence; in this the personal ability of the one offering his credit for sale to obtain funds with which to redeem it, and questions of integrity, can be determined with practical certainty. The incidents and accidents of life, and the shifting fortunes of business, however, make uncertain all judgments. of personal condition to deliver funds twenty years hence; judgment as to the value of a contract for the delivery of

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