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PROMISSORY NOTES,

RAFTS. AND

CHEQUES

f^rww.

l^^l^^yi

Cy^i^^"^^^

^TPromissory
ftND BILLS

iMotes,

OF eXCHftNGe.
KNOW

WHAT

BUSINESS MAN SHOULD REGARDING THEM.


BY

J.

W. JOHNSON,

F.

O.A.,

Author of "Johnson's Joint Stock Company Book-Keeping," Joint Author of "The Canadian Accountant," Principal Ontario Business College, Belleville, and First
Vice-President

Chartered

of the Institute of Accountants of

Ontario.

PUBLISHED BY ONTARIO BUSINESS COLLEGE.


BELLEVILLE, Ont., Canada.

REVISED AND ENLARGED.

BELLEVILLE
Printed for Ontario Business College,
iS93-

PREFACE.

In the Oniario Business College, Belleville, the Author has for the

last

seven-

teen years been lecturing upon and teaching such subjects as this book treats of

and as a Practical Accountant and Business


in daily association with

Man

has been

for

twenty-seven years

them.

The book was

primarily prepared for the Students

of the College, and

is

one of a
its

series covering the

whole ground of Commercial

Papers.

The faithful

study of

contents, even by those not having the advantages

of the lectures and blackboard work in the class room, and the practical work in
the College, will prove helpful in doing business.

Before being printed in


edition

its

present form, the

matter contained in the

first

was published

in

the September and October numbers of the Educational

yournal, Toronto, iSSS.

The

fifth

edition has been prepared

since

the passing by the

Dominion

Parliament of an Act relating to Bills of Exchange,


Notes, cited as the "
Bill

Cheques and Promissory

of

Exchange Act,

1S90,''

and the necessary changes


Act have been made
in this

and additions consequent upon the


edition.

jjassing of the

J.

W. JOHNSON.

Ontario Business College.


Belleville, 1S93.

S^EntereJ according to Act of the Farliament of Canada, in the year

One Thousand
0/ Agri-

Eight Hundred and Eighty-Eight, by


culture.]

J. IV. fohnson, at the

Department

Introductory.
It is desirable that

a business

man

should have some knowledge


its

of the principles of law, particularly in

application to

commerce,
it

and more

especially in

relation to Bills

and Notes.

Ignorance of
or defending

can never be successfully urged in prosecuting


action.

an

COMMON LAW
is

the unwritten law that has

come

to us by tradition,

custom, and

the decisions of the courts, based on well-known general usage, and

common-sense

principles of justice.

STATUTE
is

LAW
made from time
to time

the written law, or Acts of Parliament,


its

by

the Legislatures, and


law.

enactments wholly over-rule the

common

l"he History of Bills of

Exchange and Promissory Notes shows

how

the usages of merchants, bankers, and traders

became the comdisputes arose in

mon

law in regard to these instruments.

When

connection with them, the courts simply required that the general
usage

among merchants and bankers should be


it

proved, and this

being judicially ascertained,

received the sanction of legal decision,

and consequently became incorporated into the


legal

common
is

law.

These

decisions, again, as

precedents became the basis of other de-

cisions.

This law-making power of merchants

known

as the

Law-merchant (Lex mercatoria)


which the courts of justice are bound to know and recognize.
controlling effect

The
the

of the Law-merchant

is

well

illustrated in

transfer of

Notes and

Bills

from one person to another.

By

the rule
in

of the ancient

common

law,

no property that was not actually

possession (or that could be reduced into possession) could be transferred.


Bills

and Notes only express the

legal right to possession of

money

in the future.

But merchants had established the custom of

transferring Bills of

Exchange by delivering from hand


Bill,

to hand, or right

by writing a name on the

which not only transferred the

of action, but created an unwritten conditional contract of guarantee to

any one who might be the lawful holder.

Not only did the Law-

merchant thus overcome the general principles of the

common

law,

but to some extent the Statute of Frauds (explained further on) was

surmounted.

Another

illustration of the

Law-merchant

is

seen in the exemption

of Bills and Notes from the ordinary rules that apply to contracts and the law of evidence.

Contracts.
Promissory Notes and
of contracts.
mercial
life

Bills of

Exchange are the commonest forms


into the

They

enter

more than any other

daily

com-

of the people of any civilized country and into the trans-

actions between the various nations of the world.

When men
deed of

enter into other forms of contracts


etc.

such
usually,

as

those
in-

represented by deeds, mortgages, bonds,

they

and

necessity, resort to a trained solicitor for direction

and guid-

ance, but in giving

and receiving notes and

bills,

the individuals con-

cerned should be able, without recourse to a lawyer, or even to a


banker, to deal intelligently and safely with them, under
circumstances.
all

ordinary

This work in

its

earlier editions has

imparted practical knowledge

of Bills and Notes to hundreds of students and business men, and to


other classes of the
as
it is,

community

that have to deal with them; written,


its

by a practical business man, and having as

basis practical

experience and observation, and not mere theory or technicality.

5
"While
it is

desirable, as has

been said before, that a

reliable soliciBills

tor should

be a person's guide in making other contracts than


yet there are certain

and Notes,

fundamental principles relating to

contracts in general that should be universally known.

There are

Two Kinds

of Contracts.

Contracts are divided into two classes, which are


contracts

known

as Simple

and

Specialty contracts.

Simple contracts may be made either


Specialty contracts must not only
seal.

by word of mouth or in writing.

be

in writing, but

must likewise be under


is

A
party

consideration, that

to say,

an equivalent offered by the one


is

and accepted by the


seal.

other,

essential

in every contract

not

under

When

sueing upon a simple contract the consideration


this

must

in general

be proved, but

would not be necessary when en-

forcing a specialty contract.

The Statute of Frauds.


There are some simple contracts which the law requires
writing.

to be in

The

Statute of Frauds^ pissed in the reign of Charles II.


is still

(1676) which

in force in

Canada

(as all
is.

English
unless

common
it

law,

and

all

applicable statute law, prior to 1791,

has been set

aside by Canadian legislation), requires that a verbal promise shall

not be sufficient in certain cases, but that the agreement or

some memorandum The

of

it

shall be in writing, and be signed by the

party to be charged therewith, or by

some one authorized

to sign for

him.
I.

principal cases are: a

Where

man

promises to pay the debt of another person, or

answer

for his

default.

For example, a
for

man

steps into your


sell

store
to

and
the

says, " I will

be responsible
If,

goods you may

John Smith

amount of $50.00."

in

your ignorance of the law, you did

not cause the guarantor to put the agreement in writing, even though

you could bring a dozen people

to swear to the verbal statement,

you

would have no
claim,

legal

hold

upon him, nothing beyond the moral


of

and

that

might not be

any value.

2.

To

enforce the sale or purchase of goods to the value of over

$40.00, the contract must be in writing, unless there has been a part
of the purchase
it

money paid upon

it,

(otten called earnest money'i be

ever so small, or a partial delivery and acceptance

of the goods,

even the smallest portion of them.


3.

Where an
estate.

executor or administrator promises to be liable out of

his

own

4.

When

an agreement
if

is

made which

is

not to be performed within


to serve

a year.

For instance,
for

you engaged with a man

him

as a

book-keeper
less
it

two years, the agreement would not be binding, unin writing.

was made

All contracts affecting


tract to

land or any interest in land, such as a con;

purchase, must be in writing


in land,

but instruments that are

in-

tended to pass an estate


be not only
in

such as deeds and mortgages, must


seal.

writing, but

under

lease for

any term not


term beyond

more than
three years

three years
it

may be made
in writing

verbally, but for a


seal.

must be

and under

What
A
that
seal in this case

Constitutes a Seal.
or distinctive mark,

means any adhesive thmg,


seal,

you may adopt as your

and attach

to the instrument.

Who
Any person
mind,
is

are Competent to
of either sex

Make a
A

Contract.

who

is

twenty-one years old, and of sound

competent to make a contract.


is,

person

who

is

under the

age of twenty-one years

in

the eyes of the law, an infant, and in-

capable of making a contract.


sion that a

Many

persons are under the impres-

woman
(a

is

of age at eighteen.

This

is

a mistake.

A mmor
or her

person under age) could not engage in business on his


it

own

account, but

would be competent

for a

minor

to con-

tract for necessaries suitable for his or her station in

life.

contract with a corporation (say a joint stock

company
and
to

or muni-

cipality)

must be within the scope of


seal

its

charter,

be binding
re-

must have the corporation

attached.* This would not be

quired in connection with promissory notes and

bills

of

exchange,
its

.issued or drawn, indorsed or accepted in the ordinary course of


business.

An

agent

may

contract for his principal within the scope of his


is

authority, which

usually conferred by an instrument

under

seal,

called a

Power of Attorney.
and binding contract may be made by correspondence or
All that
it.

valid

telegram.

is

required

is

an

offer

and an unconditional

ac-

ceptance of

Letters sent by you that are intended to constitute a

contract, should be copied into your copying press book,

and those

you

receive in

such connetion should be carefully

filed for reference.

When
Simple contracts

Contracts are Outlawed.


outlawed after
six

for debts not referring to land are

years from the date of maturity, or from the date of the last

payment
affect-

on account, or from the


ing land ten years,

last written

acknowledgment; contracts
seal,

and personal covenants under


note

twenty years.

For instance,
be outlawed

(i) a

made April
if,

5th 1893, at three months, would


in the

after July 8th, 1899,


it,

meantime, no payment had


in

been made upon


reference to
it.

or no written

acknowledgment had been given

(2)

The land secured by

a mortgage upon which no

payment had been made

for 10 years, or regarding

which no written

acknowledgment had been given within


at

that time,

would be released
covenants for
for

the expiration of that period.

(3)

The

personal

payment on the same mortgage would not be outlawed


years,

twenty

Canadian Legislation,
In the year

1890 the Parliament

of

Canada enacted a

Statute
legis-

known
lation

as the "Bills of

Exchange Act, i8go," by which previous


Bills of

and decisions respecting Promissory Notes,


codified.

Exchange

and Cheques have been

PROMISSORY NOTES AND BILLS OF EXCHANGE.


Promissory Notes.

person has become indebted to you either for goods sold or


to his debit in

work done, and you have duly placed the amount


ledger; but
to

your

you

find that

it

will

be

much more advantageous


in

to

you

have

this

resource or asset of your business

another form, so

you obtain from your debtor


your
to
draft.

his promissory note, or get

him

to accept

Should you desire that the amount owing to you be paid


to

some one

whom you

are indebted, then 5fou will


in

draw the

draft

payable to his order.


tion
is

Your object

obtaining the written obliga-

three-fold:
It is in
itself

1st.

an evidence of the debt, requiring no confirma-

tion (unless the signature be challenged) nor proof of the consideration given for
it,

nor the production of the original entry.

2nd. It fixes a definite time, and usually a stated place, for the pay-

ment, so that the holder, when

it

falls

due, will not have the trouble


holder.

of hunting up the maker, nor the

maker of finding the


at

The

former havmg provided the funds

the place where he promised to

pay

it,

the

holder has

simjjly to

present

it

there

and obtain the

amount, a matter of much convenience


3rd.
It is

to both parties.
after indorsing

an instrument upon which,

it,

you may

borrow money from a bank or private lender


counting.
security,

This

is

called dis-

In other words, by the

medium

of the
capital,

bill

or note as

you obtain the use of other people's

paying for the


is

loan a discount from the face of the instrument, which


interest, in

the simple
it

advance, upon the whole amount for the time

has to

run.

Definition of a Promissory Note.

promissory note
to another,

is

an unconditional promise in writing made by

one person

signed by the tnaker, engaging to pay on


ti}ne,

demand
^

or at a fixed or determinable future


to the

a sum certain in money

to,

or

order

of,

specified person, or to bearer.

determinable future time means in connection with a note or

draft:

(a) At
(b)

sif^ht,

or at a fixed period after date or sight.

On
is

or at a fixed period after the occurrence of a specified event


to

which

certain

happen, though the time of happening may be

uncertain.

An
a
bill

instrument expressed to be payable on a contingency


or note,

is

not

and the happening of the event does not cure the

defect.
If a

note or draft

is

issued undated, any holder

may

insert

therem

the date of issue or acceptance.

promissory note

is

inchoate and incomplete until delivery there-

of to the payee or bearer.

Parties to a Note.

The person who


maker
if
;

gives a

note

is

called the drawer, promissor,


it

or
;

the person in
his

whose favor

is

drawn

is

called the payee

he signs

name upon

the back for the purpose of transferring or


if

guaranteeing
to

it,

he becomes the indorser, and


it

he names the person

whom

he transfers

the latter

is

called the indorsee; either of

these, or

anyone

in possession of a note,

may be

called the holder.

Forms
Notes may be made
(r)

of Notes.

non-negotiable, (2) negotiable by indorse-

ment

(3) negotiable without indorsement.

The

first is

made payable
may

to the individual only,

and can only be transferred by assignment,


offsets

which carries with tween the original

it all

and

legal defences that


is

exist beis

parties; the

second

payable to order, and

10
transferred by the indorsement of the holder completed by delivery,

which makes the indorser

liable for
is is

payment

in

the event of the


is

maker

failing to pay; the third

payable to bearer, and

transferred

by delivery, just
in a

as a bank note

passed from hand to hand.


is

Where,

note payable to order, the payee or indorsee

wrongly desigbill

nated, or his

name

is

mis-spelt,
fit,

he may indorse the

as therein

described, adding,

if

he thinks

his proper signature.


it

note

may

be transferred either before or after


maturity the assignee
is

is

due.

When

taken before

not affected

\>y

any circumstances, of which

he had no notice, existing between the antecedent parties to the note.

When
all

received after maturity, the assignee takes the note subject to

the equitable rights existing between the parties.

A
$100.00

Non-Negotiable Note.
Belleville, October 26, 1893.

Three months
at the

after date I

promise to pay

to

William McCabe, only,

Bank

o(

Montreal here, the sum of One Hundred Dollars, for

value received.

John Smith.

A
$387.80

Note Negotiable by Indorsement.


Toronto, October
I

26, 1893.

Five months after date


Wills the

promise to pay to the order of E. A.


Dollars, at the

sum

of Three

Hundred and Eighty-Seven -100

Canadian Bank of Commerce

in Toronto, for value received.

John Smith,

A
$50.00

Note Negotiable without Indorsement.


Hamilton, October
I

26, 1893.

Thirty days after date


at

promise to pay William Green or bearer,


for value received.

my

office in

Hamilton, the sum of Fifty Dollars

John Smith.

11

A Note Payable on
$35.00

Demand.
Oct. 26, 1893.

Montreal,
for value received, I

On demand
B. Robinson,

promise to pay to the order of W.

tlie

sum

of Thirty-Five Dollars.

John Smith.

Where

a note payable on

demand has been

indorsed,

it

must be

presented for payment within a reasonable time of the indorsement


if it

be not so presented, the indorser


is

is

discharged.

In determining what

a reasonable time, regard shall be

had

to

the nature of the instrument, the usage of trade, and the facts of the
particular case.

A
$75.00
Six

Joint and Several Note.


Belleville, October 26, 1B93.

months

after
S.

date

we

jointly

and

severally promise to pay to

the order of
office of the

G. Beatty the

sum

of Seventy-Five Dollars, at the

Dominion Bank

in Belleville, for value received.

Henry Brown, John Smith,


James G. Leonard.

Where

a note runs
it is

" I promise to pay,"


to

and

is

signed by two or

more persons,

deemed

be their joint and several note.


all

The

holder of a joint and several note has recourse against


Protest
is

the

makers, individually and collectively.


dishonor,
to sue,
if

not necessary on

there be

no indorser on

it.

Should the holder be obliged


parties, that

and recover the amount from one of the

party

would have recourse against the others for their proportions.

The

order in which the names appear makes no difference in the liability;


the position of joint and several makers being altogether different

from that of indorsers.

A
reads,
"

Joint Note
of "we jointly and
severally."'

we

jointly" instead

When
for the

suing upon a joint note you have to


to

make
is

all

the makers parties

the action.

The

joint

and

several

the

better form

holder, because any

maker can be sued

individually.

12

The Rights of a Third Party


No

in

a Negotiable Note.

arrangement between the maker and payee of a negotiable

note can affect the right of a third party to collect

who acquired

the

instrument
ity,

in

due

course, that

is

to say, in

good

faith,

before matur-

for valuable consideration.

The Rights of an Assignee of a Non- Negotiable Note.


In transferring by assignment a non-negotiable note, (the form
"
I
is
:

hereby assign
"

all

my

right, title

and

interest in the within note to

and the signature of the assignor) the assignor cannot

trans-

fer to

the assignee
Ellis

more than he himself

possesses,

for

example,

Henry

gave John Wilson a non-negotiable note


it

for

$300.

Wilit

son assigned

to Alex.

Thomson.

After

it

was given, and before

was assigned, Wilson became indebted

to Ellis in the

sum

of $100,

and

this

amount

Ellis

has the right to set off against the note


it

when

the assignee,

Thomson, presents

for

payment.

Had

it

been a

transfer of a negotiable instrument, payable to bearer or order, the

maker would have been bound


irrespective of the

to

pay the third party the

full

amount,

debt which the payee owed him.

This example

illustrates the difference

between a negotiable and a non-negotiable

note.

An Accommodation Note
is

one on which a person lends


to

his

name

as an indorser to enable the

maker

borrow money upon

it.

It flatters

some men's
if

vanity to be

told that such

and such a bank would discount a note


the back of
tor
it,

they would

put their

name on
liability

and

in a

moment

of weakness they

assume a
freed
that

another which, very often, they can only be

from by paying.

To

indorse and borrow


is

money upon

a note
is

one holds against a debtor


risk

a totally different matter, and

assuming no
tracted.

beyond what was incurred when the debt was con-

Form

of an

Accommodation Note.
to indorse

William E. Brown has obtained John Smith's consent

a note on which he (Brown) proposes to borrow money, or intends

13
to give to a creditor

who

is

pressing him

for security

for

a debt.

Such a note

is

not drawn to the order of the lender or creditor, but to

that of the indorser, that he

may be

held as

first

security after the

maker.

Belleville, October 26, 1893.

$150.00

Three months

after

date

promise to pay to the order of John


of

Smith, at the Canadian

Bank

Commerce

here,

the

sum of One
Brown.

Hundred and
To

Fifty Dollars, for value received.

William
be indorsed on back

E.

John Smith.

A
Where
was holder of it may apply

Lost Note.
before
it is

a note has been lost

overdue, the person

who
him

to the drawer to give him another one of the

same

tenor, giving security to the drawer, if required, to indemnify


all

against
shall

persons whatever, in case the


If the drawer,

bill

alleged to have been lost


as aforesaid, refuses to

be found again.

on request

to give such duplicate note, he

may be compelled

do

so.

In any
that

action or proceeding

upon a

bill,

the court or a judge


u{),

may order

the loss of the instrument shall not be set

provided an indemnity

be given to the satisfaction of the court or judge against the claims of

any other person upon the instrument

in question.

Discrepancy Between
Where
and there
words
is

Words and

Figures.

the
is

sum payable

is

expressed in words and also in figures,

a discrepancy between the two, the

sum denoted by

the

the

amount payable.

Not

Invalidated.
it

note

is

not invalid by reason only that


it

is
is
it

ante-dated or postto say, a note

dated, or that

bears date on a Sunday.


it

That
;

need

not necessarily be dated the day


or dated forward.

was made

can be dated back

In dating back or dating forward, the instrument

might inadvertently be dated on a Sunday.

While such

a note

would

u
not be void,
a
it

is

well to

keep

in

mind

that a note actually

made on

Sunday would be

void.

A
A

Holder
is

in

Die Course.
who has taken
it,

holder in due course

a holder

a note or

bill,

complete and regular on the face of


tions,
(a)

under the following condi-

namely

That he became the holder of


it

it

before

it

was overdue, and


if

without notice that


the fact
(^)

had been previously dishonored,

such was

That he took the instrument


it

in

good

faith

and

for value,

and

that at the time

was negotiated
person

to

him he had no notice of any deit.

fect in the title of the

who

negotiated

The
when

title

of a person

who

negotiates an instrument
bill,

is

defective

he obtained the note or


fear,

or the acceptance thereof, by fraud,

duress or force and


consideration, or

or other unlawful means, or for an illegal

when he

negotiates

it

in

breach of

faith,

or under

such circumstances as amount to fraud.

A
to in

holder, whether for value or not,

who

derives his

title

to a bill or

note through a holder in due course, and

who

is

not himself a party

any fraud or

illegality affecting

it,

has

all

the rights of that holder


all

due course

as regards the acceptor

and

parties to the bill or

note prior to that holder.

Note Given
Every
bill

for

a Patent Right.

or note, the consideration of which consists, in whole or

in part, of the
est,

purchase

money

of a patent right or of a partial inter-

limited geographically or otherwise, in a patent right, shall have

written or printed prominently

and

legibly across

the face thereof,


;"

before the

same

is

issued, the

words "given

for a patent right

and

without such words thereon such instrument and any renewal thereof
shall

be void, except

in the

hands of a holder

in

due course without

notice of such consideration.

15

The

indorsee or other transferee of any such instrument, having

the words aforesaid so printed or written thereon, shall take the same
subject to any defence or
set-off"

in respect of the

whole or any part

thereof which would

have existed between the original parties.


sells or transfers,

Every one who


ery,

issues,

by indorsement or deliv-

any such instrument not having the words "given for a patent

right" printed or written in

manner

aforesaid across the face thereof,

knowing the consideration


whole or
in part, of the

of such instrument to have consisted, in


right, or of a paris

purchase money of a patent

tial interest, limited geographically or otherwise, in a patent right,

guilty of a

misdemeanor, and

liable to

imprisonment or

fine.

Altering a Note.

Where
assent of

a note,
all

bill

or acceptance
it

is

m.aterially altered without the

parties liable,

is

voided, except as against a party

who

has himself made, authorized or assented to the alteration, and sub-

sequent indorsers.
Provided, that where a
alteration
is

bill

has been materially altered, but the


bill is in

not apparent, and the

the hands of a holder in


it

due course, such holder may


been
altered,

avail himself of the bill as if


it

had not
original

and may enforce payment of

according to

its

tenor.

The

following alterations

are material, namely, any alteration of

the date, the

sum
bill

payable, the time of payment, the place of payment'


or note has been accepted or

and where a
erally,

made payable

genr.r

the addition of a place of payment without the acceptor's

maker's assent.

Legal Rate of Interest.


The
rate ot interest that

can be legally collected upon an overdue


rale
is

note, or any debt,

on which the
It is

not fixed by agreement,

is

six

percent per annum.

important,

when drawing

a note, that

is

to

bear a higher rate than

six percent., that

the words "As well


If these

.\fter

AS BEFORE MATURITY UNTIL PAID" be inserted.

words or words

16
to the s.ime effect, are
at the

not inserted, the note would bear interest

higher rate

till

maturity, but after that only at the legal rate.

There

is

no usury law

in this country,

nor

is it

desirable that there

should be.
to the

Money,

like

any other commodity,


it

will

bring for

its

use

owner

usually just what

is

worth, considering the risk run


If a lender
is

and the demand and the supply.


rate of interest
ofifer,

content with a

fair

he can readilly find borrowers with good security to


find customers, too,

and the grasping man can


a-

who

will

profulfil-

mise
ment.

high rate of interest, but offer poor security for the

Days of Grace.
The custom among merchants
has established the practice, which

is recognized in law, of allowing three

days of grace upon

all

promis-

sory notes, drafts, and bills of exchange not payable on demand.

No

time

bill is legally

due

until the days of grace

have expired.

In prethat ot

paring to meet your

own

paper, or in presenting for

payment

your customers,, bear

this fact in
bill

mind, and be careful when entering


to

the due dates in your


illustrate:

book

add the three days of grace.

To

note given at three months from October 26th would

not

fall

due

till

January 29th.
fall

A
till

note given at ninety days from Oc-

tober 26th would not

due

January 27lh.

Power
It is

of Attorney.
managing accountants the
draw cheques, and genis

customary
to

for firms to grant to their

power

draw

bills,

sign notes, accept


financial business.

drafts,

erally transact their

This authority

conveyed
It
it

and exercised under a document


be special or general
limited
to act

called a

Power

of Attorney.

may
to a

special
;

in confining the exercise of

number

of acts

general by the conveyance of the authority

for the firm

in carrying

on
is

its

ordinary financial operations.

The

usual

way

for a

person
is,

who

acting under a power of attorney

to sign business

papers

to sign the firm

name, and place

his

own

17
underneath, with the words "per pro" or
thus
:

letters

"p. p." before

it,

J. C.

per pro

Morgan & Co., W. Johnson. J.

The

abbreviations stand for the phrase " by procuration."

signature by procuration operates as notice that the agent has


is

but a limited authority to sign, and the principal

only

bound by

such signature

if

the agent in so signing was acting within the actual

limits of his authority.

Where

a person signs a note or

bill

as drawer, indorser, or acceptor, that

and adds words

to his signature, indicatmg

he signs

for

or on

behalf of a principal, or in a representative character, he


sonally liable thereon
;

is

not per-

but the mere addition to his signature of words


filling

describing

him

as

an agent, or as

a representative character,

does not exempt him from personal

liability.

When
A
ity,

a Note Becomes Outlawed.


six years after the

bill

or note

becomes outlawed

date of matur-

or after the date of the last

payment on account,
is,

or after the last

written acknowledgment.

That

the holder of such a note cannot


sets

recover upon

it

if

the maker,

on being sued,

up

in

defence the

Statute of Limitations, which was passed in the twenty-first year of

the reign of

King James

I.,

to limit the time allowed to

parties to

commence
tries

their suits, so as to shorten litigation.


is

In

all

civilized

coun-

some period

prescribed by statute with this view.

An

instru-

ment approaching the legal, though not the moral, end of its existence

may be brought back

to

infancy and have


letter,

its life

renewed, by the
in writ-

holder obtaining say, in answer to a


ing of the debt from the

an acknowledgment

maker

of the note.

Indorsements.
The
act of writing the

name upon

the back of an instrument


it

is

called indorsing, which has two effects;


sible for

makes

the indorser respon-

payment

in the

event of the maker failing to pay at maturity,


that
is

and

it

makes an instrument

payable to order, transferable.

18

The forms

of indorsement

commonly
as

in use are (taking a note pay:

able to the order of

John Jones

an example)

Indorsement
which has the
indorsed
in

in Blank, Specifying
John Jones,

no Indorsee, as
bill

effect

just described.

When

a note or

has been

blank, any holder

may

convert the

bhnk indorsement
himself or

into a special indorsement, by writing

above the indorser's signature a


of,

direction to pay the

bill

or note to, or to the order

some

other person.

Indorsement

in full or Special

the Indorsee to
Pay

Whose

Indorsement Specifying Order it is to be Payable, as


William Black

to the order of

John Jones,
which makes the indorser responsible and the instrument negotiable
only after
it

has been indorsed by the indorsee, William Black.

Qualified Indorsement.
Without recourse
to

me,

John Jones,
which relieves the indorser of responsibility, and simply makes the
instrument transferable.

Restrictive Indorsement.
Pay
to Richard

Brown John Jones,

only

which makes the indorser responsible, but confines the payment


the indorsee.

to

Other forms of qualifying indorsement are used, such as

that

placed on cheques payable to order sent by a clerk to the bank to be

deposited to the firm's credit

For deposit only.

John Beatty & Co.


The
qualifying words render
it

impossible for the person making

the deposit to draw the money.

Indorsements are often made to serve as


I

receipts, as, for

example,

draw a cheque payable

to S. Jones, or order, instead of to S.

Jones or

19
bearer, because,
if

drawn

to order,

Jones must sign his name on the

back before he can receive payment.

On

paying and receiving back

a note payable to order that has not been transferred, and conse-

quently not indorsed, you should have the payee indicate that he had
held
it,

or you could prove nothing by

it.

Have him

indorse

it

and

immediately cancel the indorsation.


should be cancelled and
filed

Notes that have been retired

away

like receipts.

The Order of Indorser's


The
holder of a note upon which there
is

Liability.
an indorser or several

indorsers has equal recourse against any of

them (provided they have


at maturity.

been duly notified of non-payment) and the maker

If

he

should be obliged to sue and should recover from the maker, that

would discharge
indorser, that

all

the indorsers

should he recover from the

first

man would have


;

recourse against the maker, but not

against subsequent indorsers


dorser, that indorser

should he recover from the second


all

in-

would have recourse against


indorser and the maker.
If

that preceded
to

him, namely the

first

you should have

become an

indorser on a note along with other indorsers, you will see

the importance of placing your

name

last.

Guarantee.

You may
Your

guarantee the payment of a note as follow;:

" I

hereby

guarantee the payment of the within note," and sign your


liability is

name
re-

beyond

that of an indorser,

and you would not be

lieved for want of presentation, nor for want of notice of dishonor.

Where
1.

to Present a Note for Payment.


is

Where

a promissory note
it

in the

body of

it

made payable

at a

particular place,

must be presented

for

payment

at that place.

But

the maker

is

not discharged by the omission to present the note for


that
it

payment on the day


fied in the

mature-.

If

no place of payment

is

speci-

body of the
render
t!ie

note, presentment for

payment

is

not necessary

in order to
2.

maker

liable.

Presentment

for

payment
;

is

necessary in order to render the in-

dorser of a note liable

20
3-

Where

a note

is

in the

body of
is

it

made payable

at

a particular

place,

presentment

at

that place
])lace

necessary in order to render an


is is

indorser liable: but

when a

of payment

indicated by way of
sufficient to

memorandum

only, presentment at that place

render
if suffi-

the indorser liable, but a presentment to the


cient in other respects, shall also suffice.

maker elsewhere,

The Proceeding's to be taken on the Non-payment of a Note Having an Indorser.


It is

of the

first

importance to understand what should be done

in

the event of a note, having an indorser, b^ing dishonored at maturity.

The

maker's

liability is absolute,

but the indorser's

is

conditional on

his receiving notice of

non-payment.

note that

may be regarded
is

as perfectly

good before maturity, not because the drawer


it

reliable,

but because the indorser upon

is

financially sound,
if

may,

after

it

has become due, be practically worthless,


the indorser have not been taken.

the proper steps to hold


it

Having presented

at the place

named by
the holder

the drawer for


is

its

payment, and payment being refused,


in

bound

to notify the indorser, immediately,


will

order to

have recourse against him, This

be best accomplished by handing

the instrument to a Notary Public to be protested.

The

notary

will

make
he

demand

for the

payment, and, being answered


it

"No Funds,"
demand
;

will write
will,

out a protest, inserting in

the answer to his

and

not later than the following business day, mail a notice of

protest to the

known address

of the indorser or indorsers, from the

nearest post office to the place at which the note was payable.
protest will cost the holder, in the Province of Ontario,
fifty

The
cents,

and each notice


will

twenty-five cents

and the postage, which charges he

be entitled to collect from any of the parties to the note, as well

as legal interest from the date of maturity. protest with the note
in

The production

of the

court will be sn^citnt pritna facie evidence

upon which

to sue

an indorser.

In this Province, notaries are appointed without special examinations by the Ontario
ever.

Government.

They

are usually attorneys, howis

In the Province of Quebec, the notarial


in

a distinct profession,

as

it is

Irance.

21

When
protested,

a dishonored note or

bill

is

authorized or required to be

and the
bill

services of a notary cannot be obtained at the


is

place where the


in the place

dishonored, any justice of the peace resident


bill,

may
shall

present and protest such

and give

all

necessary

notices,
thereto.

and

have the necessary powers of a notary

in respect

Waiving
By
waiving
protest an

Protest.
it

indorser renders

unnecessary for the


is

holder to have an instrument protested.


fore maturity,

This

usually done,
:

if

be-

by the indorser writing the words on the back


" Presentation

and Protest Waived."

John Jones.
If at maturity
:

" I

hereby accept notice of non-payment and waive protest

"

Protest

John Jones. may be waived by letter or telegram, should


at the

the indorser

be absent from the place of payment

date of maturity.

There
there
is

is

no necessity

to protest

a dishonored note
for six

upon which
years after

no indorser; the maker can be held

maturity.

Noting.

When
time,
it

a
is

bill

or note

is

required to be protested within a specified


it

sufficient that

has been noted for protest before the


;

expiration of the specified time

and the formal protest may be

extended

at

any time thereafter as of the date of the noting.

Paying or Making Partial Payments upon Notes. When you pay a note or renew one, be sure that you get it back,
and,
if it

has not been done already, cancel

it,

by writing "cancelled"

or " paid" across the face,


indorser's names,
still

and run a pen through the maker's and


it

and thus render

valueless.
it,

If the

payee should
it,

be the holder, he should, before returning


written evidence

indorse

or place
it,

some

upon

it

that he

had been
it.

in possession of

otherwise you could prove nothing by


in

Put cancelled notes away


at

packages as you should receipts, for production

any time when

necessary.

The importance

of receiving back notes that have been paid was

made

very apparent to

me

by a circumstance

tliat

came under my
them

observation recently.

A man

borrowed a sum of money upon two


at a bank.

notes from a lender, and he, in turn, discounted

At the date of maturity the drawer duly appeared and tendered

payment

to t!:e

man

from

whom
for

he borrowed, who accepted


not

it

and

gave a receipt.

His excuse

producing and returning the


it

notes was that they were in the bank, and


for

was inconvenient
at

to

go

them, but he promised to send them

an early day.

In less

than a week he " skipped out " without returning the notes, and of
course the maker had to pay the amount to the bank, as well as the
notarial charges incurred in protesting them.

Retail dealers,

who

have

to ask for renewals

from wholesale houses, are often careless


It
is

about receiving back their old notes.


cases in

not difficult to recall


after the failure

which such paper has turned up

in

banks

of a wholesale concern,

and the easy-going dealer had

to

pay

them.

When
is

making

partial

payments upon notes, see that the payment

properly acknowledged on the back of the instrument, and take a

separate receipt as well.

THE BOOK-KEEPING IN CONNECTION WITH NOTES.


Any
v.'ri'.ten

obligation to pay

money not under


Receivable, and

seal

is

termed

in

business by the

holder a
Payable.

Bill

by the maker or
in the

acceptor a

Bill

*In book-keeping the accounts

ledger with these are called, respectively. Bills Receivable account

and

Bills

Payable account.

Bills

Receivable account

is

made

Dr.

when

other people's notes and acceptances are received, and credited


are disposed
of.

when they

The

difference, or balance,

between the

two sides should correspond with the notes on hand, and the account
closes,

by balance, unless
it

all

the notes have been disposed

of,

when,

of course,
Bills

will

be simply ruled and footed.


is

Payable account

credited

when you
or,

issue a note or accept


as the

draft,

and debited when you redeem

word

is,

retire

these obligations.
*

The

difference

between the

two sides should

No

business

man

Accounts with

Bills

should omit to keep a Bill Book in addition to the Ledger Receivable and Bills Payable.

23
correspond with the obligations outstanding, and the account closes,
to balance, unless
all

the notes have

been paid, when,


it

like Bills

Receivable account under like circumstances,


footed.

will

be ruled and

The mere

novice in book-keeping

will

understand and be

able to deal with these accounts when, in the case of Bills Receivable,

they are simply received and disposed


Payable,

of,

and, in the case of Bills

when they

are simply issued and redeemed.

But

in the

event of

Notes Having to be Renewed,


more
two.
difficulty
will

be experienced.

shall

take an exam])le or

note of $300 received from F. Spencer was duly debited to

Bills Receivable,

and

his

account was credited.


I

It

stood

at
it

the
at

debit of Bills Receivable until

disposed of
I

it

by discounting

the

Bank of Commerce, when

made

the

bank debtor

for the

proceeds, discount debtor for the difference between the proceeds

and the face of the note, and credited


the whole amount.

Bills

Receivable account with


renewal of the note,

My

customer asks

for a

and

consent.
is

The renewal
the

for three
it

months, and the interest


$305.20.
I

is

to

be added to

new
it

note,

making
to

pay the old note by cheque,

send

back

Spencer, and get the

new

one.

Entries for the

cheque given

to

pay the note

Bills

Receivable

To Bank
This entry places the note where
it

$300 $3
was before
it

was dicounted,

and

is

the same that would

be

made by an
when

endorser, under any

circumstances, paying a note for a maker, except

when

the

maker
to

was considered
Loss

financially worthless,

it

would be charged

&

Gain.

Entries for the Renewal.


Bills

Receivable Dr To Bills Receivable


" Interest

$305 20

$300 00
5
:

20

The

maker's entry for the same transaction would be

Bills

Payable Dr
"
Bills

$300 00

Interest

520
Payable

To

$305 20

24

Partial Renewals.

Brown renews for you half the amount of a note for $500.00 due You pay $250 cash, and to-day. give a new note for half the amount of the old one and interest

i.

Your

entry

Bills

Payable
cash
Bills

Dr..

$ c. 500 00
3

Interest
j

"

50

To
"
2.

$250 00
Payable
:

25350

on renewal, $3.50.

His entry

Bills

Cash
'

Receivable Dr 253 50 " 250 00


Bills

To
Brown renews tor you half the amonnt of a note for $600.00,
due
l)ein<4
3.

Receivable

500 00
3

Interest

Your
*'

entry

Bills

Payable Dr. .600 00


"
.
.

to-day.

You

pay

$303.00,

Interest

3 00

half the amount, plus the

To Cash
"
4.

interest

on renewal, and you


for half the

give

Bills

Payable
:

303 CO 300 00

new note

amount of

His entry

the old one.

Bills

Receivable Dr. 300 00


"
Bills

Cash

To
"

Receivable

303 00 600 00
3 00

Interest

\Vhere a cash book


put

is

kept, of course the cash

would have
i

to

be
as

through
:

it.

In that case the entries for No.

would be

follows

CASH CREDIT.

By

Bills

Payable.

For
92,

part

payment on No.
Bill

renewed

as per Journal

and
JOURNAL.
Bills

Book.

250 00

Payable Dr. .250 00


"
. .

Interest

3 50

To

Bills

Payable

253 50

"^Lien Notes.
Lien
notes
are

now

frequently

given

by

people

purchasing

agricultural implements, pianos, organs, sewing machines, etc.

A Common Form
to

of Lien Note.
189
,

Belleville,

I promise 1S9 Co., (Li.mited), or order at their Office, in Belleville, for value received Dollars, with interest at Seven per cent., and at the rate of Ten per cent, interest after date of maturity. I further agree to furnish security satisfactory to you at any time if required. If I fail to furnish such security when demanded, or should I sell or otherwise dispose of the land or personal property I am now possessed of, then this note is to become due and payable forthwith and you may retake possession of the article for which this note is given without process of law, and sell it by public or private sale, but the taking

pay

On the first day of The G. & J. Brown Man'fg.

selling of said article shall not relieve me of my liability for any balance of the purchase price still unpaid after such sale. The title and right to the possession of the property for which this note is given shall remain vested in The G. & J. Brown Man'fg. Co., (Limited), until this note or any obligation given therefor is paid.

and

hereby acknowledge having

this

day received a copy of

this note.

Lot

Con

Township

P.
J3

O. Address

Witness
-Ji

^ < An Act
chattels
It

c S 3 tC

of the Ontario Legislature respecting conditional sales of


into force
that

came

on the

first

of January, 18S9.
is

provides

such

an instrument as the above


it

valid

as

against subsequent purchasers of the article for which


if at

was given,

the time possession was given to the bailee


bailor or

it

had the name

and address of the manufacturer,


printed,
thereto.

vendor of same painted,

stamped or engraved thereon, or otherwise plainly attached


of the article can

Any proposed purchaser


to receive within five days

demand and

is

entitled

from the manufacturer, bailor or vendor,

claiming ownership,

full
;

information respecting the amount due and

the terms of payment


'Attention
Legislation.
is

and

if

he refuse to give such information, he


Lien Notes are dealt with under Provincial

drawn

to the tact that

26
will

be

liable to a fine of $50.

The
to

inquiry

may be made by
sent,

letter,

giving the
will

name and address

which a reply may be


information

and

it

be

sufficient if

the reply giving the

be made by
'

registered letter within five days.


If possession be taken of the article for breach of condition
it

may

be redeemed within twenty days, by

full

payment of the amount due


goods taken were sold or
$30.00, they shall not be

and the cost of taking possession.


bailed originally for a greater
sold,

If the

sum than

when

seized for breach of condition, without five days notice to

the bailee or his successor in interest, by personal service of notice,


or leaving
it

at his residence or last

known

place of abode in Ontario,

or sent by registered letter seven days before said five days will elapse, addressed to

the time

when

the

the last

known

post-office

address in Canada of the bailee or his successor in interest.

copy of the receipt note must be


of the

left

with the bailee at the


or within twenty days

time of the execution


thereafter.

instrument,

The

manufacturer,

bailor

or

vendor

may

file

copy of the
in

instrument with the Clerk of the County Court of the county

which the bailee resided


within ten days from
its

at the

time of the conditional

purchase

execution, and thereby relieve himself from


See Ontario Statutes, 18S8, Cap.

some of the

provisions of the Act.

I.

o. u.
by a borrower to a lender as for
Montreal, April 28th, 1893.

Is a

memorandum
:

of a debt given

example

Mr. A.

B.,

I.

O. U.

Ten

Dollars.

C. D.
It
is

not a promissory

note,

but

is

valuable evidence

of the

existence ot the debt.

2T

DRAFTS, OR INLAND BILLS OF EXCHANGE.

bill

of exchange

is

an unconditional order

in writing,
it,

addressed
requiring
at a fixed

by one person to another, signed by the person giving


the person to

whom

it is

addressed to pay on demand, or

or determinable future time, a

sum

certain in
;

money

to,

or to the

order

of,

a specified person, or to bearer


bill is

An
(a)

inland

bill

which

is,

or on the face of

it

purports to be,

both drawn and payable within Canada, or


resident
therein.

(/')

drawn within
bill
is

Canada upon some person


foreign
bill.

Any

other

Nearly
differ,

all

that has

been said

of notes is applicable to drafts

they

however, in form and in other respects.


originating

A
is

note

is

a promise

to

pay,

with

the

debtor

a draft

an order to pay,
to the debtor.

originating with the creditor,

and addressed by him

There are three


it;

parties to a draft
in

the drawer, the


it

one that draws


\\\q.

the/ajw, the one

whose favor

is

drawn;

drawee, the

one on

whom

it is

drawn,

who becomes
same

the acceptor.

The

acceptor

of a draft stands in the

same

position as the

maker of

a note,

and

the drawer of a draft stands in the

position as the
bill,

first

indorser

of a note.

To

be held

for a

dishonored

notice of dishonor must

be sent to the drawer not


This
will

later

than the next following business day.


it

be best accomplished by handing

to a

Notary Public to
such notice
is

be protested.
given
is

Any drawer

or indorser to

whom

not

discharged.

The Theory of Exchange.


In commerce, an " Exchange " means
transferring to
to

pay your creditor by


else.

him a debt owing

to

you by some one

28

The

following example will illustrate both the theory and practice

of exchange.

You

will

observe
:

that

three

parties

and two debts

are necessary to an exchange

Robinson

&

Johnson,

Belleville, are

indebted to John Lovell

&

Son, Montreal,

who

desire that they shall pay at ten days' sight the


&:

amount

to

R. Miller, Son

Co., to

whom John

Lovell
:

&

Son are

indebted, and to effect this they draw the following

Draft.
$500.00

Montreal, January
after sight,

8th, 1S93.

Ten days
the the

pay to the order of * R. Miller, Son


Dollars, for value received,

&

Co.,

sum
same

of Five

Hundred

and charge

to the account of

tJoHN LovLL

&

Son.

To

Robinson

&

Johnson,

Ontario Business College,


Belleville.

''Payee.

fDrawer.

Drawee.

To make

the draft
it,

bindmg upon Robinson


will

&

Johnson they
:

will

have to accept

which they

do by writing across the face

Accepted January \oth, 1893, payable at the

Canadian Bank of Commerce,

Belleville.

Robinson 6^ Johnson.
After which
it

is

called an acceptance.

Robinson

&

Johnson are

now
on a
of

in the

same

position as

if

they had

made

a promissory note,
as the
first

and John Lovell


note.
It is
;

&

Son are

in the

same position

indorser

customary to allow the drawee to choose the place

payment

in this case

Robinson

&

Johnson name the Bank of


at ten

Commerce,

Belleville.

If the draft

were drawn

days' date

instead of ten days' sight, there would be no necessity to place the

date of acceptance upon

it.

In the former case the maturity would


latter
it

be reckoned from the day the draft was drawn, in the

is

reckoned from

sight.

29

The drawer
Lovell

of a draft

may be both drawer and


to
collect
for

payee.

If

John

&

Son desired

themselves

the

amount of

Robinson
order.

&

Johnson's debt, they would draw ihe draft to their

own

The
follows

entries
:

of

the parties to the foregoing draft would be as

John Lovell & Son's would be


R. Miller,

R. Miller, Son

&

Co., Dr.

\
f

To Robinson &
Bills

Johnson.

Son

&

Go's.

would be
Robinson & Johnson's would be

Receivable, Dr. To John Lovell


Lovell

&

Son.

John

To

Son, Dr. Bills Payable.

&

Further Illustration of "Exchange."


Here
is

a farther illustration of " Exchange," given by Macleod,


will readily

one that any person

understand

You
The

are travelling in an omnibus.


is fifty is

The
cents,

fare

is

twenty-five cents.
to the

smallest change you have

which you hand

conductor.

Another passenger

desirous of paying his fare, and

has twenty-five cents in his hand ready to hand over.


tells

The conductor
this

him

to

pay

it

to

you,
is

which he does.

By

means the

conductor's debt to you

paid by the transfer to you of the other


is

passenger's debt to him, and thus considerable trouble

saved.
as that

The

principle

of exchange here
for, as

is

precisely
see, if

the

same

involved in the draft,

you

will

you study the matter,

John Lovell

&

Son

are in the

same

position as the conductor of the

omnibus, and pay their debt to R, Miller, Son


to that firm the debt

&

Co. by transferring

owing to them by Robinson

&

Johnson, just

as the conductor paid his debt to you by causing the other passenger
to pay

you the sum he owed the conductor.

The Acceptor's
The
acceptor of a
that
bill,

Liability.

by accepting
will

it

Engages
acceptance.

he

pay

it

according

to

the

tenor

of his

30

The Drawer's
The drawer
of a
bill,

Liability.

by drawing

it

Engages that on due presentment


according to
its

it

shall

be accepted and paid


will
it,

tenor,

and

that

if it is
is

dishonored he

compenprovided

sate the holder or

any indorser who

coni])elleQ to

pay

that the requisite proceedings

on dishonor are duly taken.

The Indorser's Liabihty.


The
indorser of a
that
its
bill,

by indorsing

it

Engages

on due presentment
tenor,

it

shall

be accepted and paid


will

according to

and

that

if it is

dishonored he

compensate
it,

the holder or a subsequent indorser

who

is

compelled to pay

provided that the requisite proceedings on dishonor are duly taken.

Where a

Bill is

Dishonored,

Who May

Recover and

What.
In case of dishonor the holder

may

recover from any party liable


to

on the

bill,

and the

drawer who has been compelled

pay the

bill

may

recover
to

from the acceptor, and an indorser who has been


pay the
bill

compelled

may

recover from the^acceplor or from the

drawer, or from a prior indorser


(i)

The amount

of the bill
if

(2) Interest

thereon from the time of jiresentment for payment,


bill

the

bill is

payable on demand, and from the maturity of the


;

in

any other case


(3)

The expenses

of noting and protest.

Drafts sent for acceptance or collection through a

bank

will

be

protested

if

dishonored, unless instructions to the contrary have been

given, or a slip be pinned to the draft with the words printed or

written
senting."

upon

it

"

Not

to be protested

take this off before pre-

You may

often succeed in collecting from a slow customer


draft,

by the medium of a
a cent.

when dunning

letters

would

fail

to

produce
attach

When

drawing on a doubtful customer, be sure

to

31
the "

No

pretest,"

for the

reason

that

if

your

draft

should

be

returned dishonored and protested, you will have to pay the notarial
charges yourself.

Definition

and Requisites
bill
is

of Acceptance.

The acceptance

of a

the signification hy the drawee of his

assent to the order of the drawer

An

acceptance

is

invalid

unless

it

complies with the following

conditions, namely
(a)
It

must be written on a
signature of the

bill

and be signed by the drawee.


without
additional

The mere
sufficient
{/')

drawee

words

is

It

must not express that the drawee

will

perform his promise


;

by any other means than the payment of money

Where
mis-spelt,

in a bill the

drawee

is

wrongly designated or his

name
if

is

he may accept the

bill

as therein described, adding,

he

thinks

fit,

his proper signature,

or he

may

accept

by

his

proper

signature.

When

bill is

duly presented for acceptance, and

is

not accepted

on the day of presentment or within two days


presenting
it

thereafter, the person

must

treat

it

as dishonored
lose his

by non-acceptance.
of recourse

If he

does not, the holder

shall

right

against the

drawer and indorsers.

When

bill is

dishonored by non-acceptance, an immediate right

of recourse against the drawer and indorsers accrues to the holder,

and no presentment

for

payment

is

necessary.

A
1.

Bill
it

must be Duly Presented

for

Payment.

If

is
;

not so presented, the drawer and indorsers shall be

discharged
2.

bill

is

duly presented for payment which


following rules
:

is

presented in

accordance with the


(a)

Where

the

bill is
it

not payable on demand, presentment must

be

made on

the day

falls

due

32
(/^)

Where

the

bill is

payable on demand, then presentment must


its

be

made

within a reasonable time after


liable,

issue, in order to

render

the drawer
in order to
(i)

and within a reasonable time


;

after its

indorsement,

render the indorser liable

Presentment must be made by the holder or by some person

authorized to receive payment on his behalf, at the proper place,


as hereinafter defined, either to the person
as payer, or to his representative or

designated by the
to

bill

some person authorized

pay

or refuse

payment on

his behalf,

if,

with the exercise of reasonable


;

diligence, such person can there be found


(d)
(i)
is

bill is

presented

at the

proper place
is

Where

a place of
;

payment

specified in the bill

and the

bill

there presented
(2)

Where no

place of payment
is

is

specified, but the address of


bill,

the drawee or acceptor

given in the

and the

bill is

there pre-

sented
(3)

Where no
bill is

place of payment
at

is

specified

and no address

given,

and the
ness
if

presented
if

the drawee's or acceptor's place of busiif

known, and

not, at his ordinary residence,


if

known

(4)

In any other case,

presented
if

to

the drawee or acceptor


last

wherever he can be found, or


of business or residence.

presented at his

known

place

Where

a bill

is

presented

at

the proper place, and, after the exerto

cise of reasonable diligence,

no person authorized

pay or refuse
to the

payment can be found


or acceptor
is

there,

no further presentment

drawee

required.

Where
any
city,

the place of

payment

specified in the bill or acceptance


is

is

town or

village,

and no place therein

specified,

and the

bill is

presented at the drawee's or acceptor's

known
it

place of busiis

ness or

known

ordinary residence therein, and


bill is

there

no such

place of business or residence, the

presented

at the post office,

or principal post office in such city, town or village, such present-

ment

is

sufficient.

S3

Bank Commission
The banks
drawee
usually charge }( of

for Collecting.
fur

i%

making

collections.

If

you

wish to draw for a debt, say of $200, in this


is

province,
draft

and the
would be

to pay the e>:change, the


If the

amount of your

$200.50.
,

drawee resides

in a distant part of the


tell

Dominion,

or in the United States,


tion will be,

and you cannot

what the cost of collec-

as the draft will

have to pass through several banks

before presentation, and each be paid a commission, add the words


after the

amount

in the

body of the

draft,

'

with exchange."

Kinds of Drafts.
There are three kinds of drafts, namely, Time, Sight and Demand,

Time

drafts are those that are intended to

run a certain time after

date or after acceptance.


sight

The
is,

only difference between a draft at


that

and a

draft

on demand

on the former the drawee can


is

take three days of grace, and the latter

payable on presentation.
of

When
the
sight.

you desire

to give the

drawee a definite number


he accepts
it,

days for
after

payment of a
If

draft after

draw so many days


time
is

you draw so many days

after date the

fixed for the

payment, irrespective of the date of acceptance.

For example, to

give the drawee ten actual days from sight, draw at seven days' sight;
to give

him four days, draw

at

one day's

sight,

and so

on.

The

days
will

named and
mature

the three days of grace

make

the time the draft

after sight.

'Accommodation Draft ("Kite


It is

Flying").
fails,

not an unusual thing

when an

extensive wholesale house


retail

to hear of
It will

numerous

failures

among

dealers in the
latter

same

line.

be found that disaster has come upon the


freely.
fair

because they
:

have lent their names to the former too


doing a
retail

To

illustrate

business in Belleville with a

amount of

capital,

am my

largest creditor being

John Ulank

&

Co., of Toronto,

They have They


$500,

placed

me

under obligation by renewing


Better for

my

paper occasionally, and

otherwise indulging me.


vwite

me

that they

had

not.
for

and ask me

to accept their dralt at three


12.

months

*See "Accommodation Note," page

3i

beyond the amount

that

owe them, giving the excuse

that they
in the

have to buy a large amount of exchange to remit to England

coming week, or they have heavy duties


of

to pay,

and they remind

me

the help they have given

me

in the past.

Being of a grateful

turn,

and believing

that the house of Blank it Co. could not be


I

otherwise than sound,

consent, and duly accejil

tlie

draft,

hoping

that I shall not be called

upon again

to

accommodate them with my


retire
I

name.

At the end of the three months they duly


it

my

accept-

ance and return

to

me, as

knew

they would.

am

surprised,

however, in a few days by a request to accept two more drafts of

$50c each,
I

for their

accommodation.
for

Similar excuses are given,

and

assume an obligation of $1000,

which

receive

no

value.
folly,

As
until

time goes on similar requests continue, and so does

my

my name
fail

is

upon

their

paper for a sum larger than

my

capital.
it

They

with this

paper under discount at the bank, and as


to

would be

impossible

forme

pay

it

and discharge

too have to make an assignment.

my legitimate obligations, I An accommodation jjarty is liable


it is

on the

bill

to a holder for value;


bill,

and

immaterial whether, when


to

such holder took the


tion party or not.

he knew such party


I

be an accommodaaccept

Need

add the caution


is,

never
is

accommo-

dation drafts,

or, as

the expression

"

fly

kites " for

any one.

The

man who accepts an accommodation draft the man who endorses an accommodation
on the maker
;

in a worse position than

note.

The

latter

can come

but the other, being the primary debtor, will only

have an equitable right over against the estate of the

man whom he

accommodated.

Obtaining Assistance by Draft to Retire an Acceptance or Note.

A
Co.,

business

man

is

frequently in such a position as the following


for

His acceptance (or note)


of Montreal,
in
will
fall

$600.00 in favor of John Allen


four days hence at the
it is

&
of
;

due

Bank

Montreal

Kingston. All he can raise towards paying

$300.00

so he writes

them

the following letter

35

Kingston, June
Messrs. John Allen

g,

1893.

&

Co.,

Montreal.
Gentlemen,
acceptance
$300, and
I

I regret that I shall

not be able to pay in


instant.

full

my
is

in

your favor due on the 13th

All I can raise


to

request that you will kindly permit

me

draw on you

at sight for the balance,

$300, for which you

may draw back upon me

at ten days, with interest

and exchange.
Yours
faithfully,

RICHARD ROE.
He
receives the following reply
:

Montreal, June

10, 1893.

Mr. Richard Roe, Kingston

Dear

Sir.

Your

letter of the

gth

inst.

is

received,

and

in 'reply

we hereby authorize you

to

draw on us

at sight for

$300, to

assist

you

to retire your acceptance in our favor,


w'e shall

due June

T3th.

As requested,
interest

draw back upon you

for that

amount, adding

and

exchange.

Yours

faithfully,

JOHN ALLEN &


The
count
letter of authority to

CO.

draw the

draft will

be shown by Roe to

the manager of the bank, with the request that the bank will disit.

He

consents.

Roe draws

the following draft

Kingston, June
$300.00.

13, 1893.

At

sight,

for value

received, pay to

the

order of the

Bank of
to

Montreal the sum of three hundred


account of

dollars,

and charge

the

RICHARD ROE.
To
Messrs. John Allen

&

Co.,

Montreal.
(N. B.

Roe might draw the draft to

his

own

order and indorse

it

over to the

bank.)

Roe has

the draft discounted, and leaves the proceeds, $299.25, to

his credit in the bank.

Tohn Allen

v'v:

Co.

retire ihe draft

by check on presentation.

The
Roe
is

interest and cost of collecting the draft they draw back u])on

$1.50

so they draw

upon him

at ten days' date for

$301.50.

Entries.
Roe's entry when he draws
the draft on Allan.
)

r.ank Dr. $299.25. Discount Dr. 75. To John Allan & Co.$3oo.oo.

Allan's entry

when they

retire

(^

R. Roe, Dr. $300.00.

Roe's draft by check.


Allan's entry

To Bank
R. Roe, Dr. $1.50.

$300.00.

when they charge


the interest and

\
(

Roe

with

exchangeonthe draft to be drawn at ten days.


Allan's entry

To
|

interest,

$i-5o.

when they draw


at

(^

Bills

on Roe

10 days.

To

Rec. $301.50 R. Roe.


<S:

$301.50.
"

Roe's entry when he accepts


Allan's draft at ten

John Allan
Interest

Co., Dr. $300.00.


1.50.

>
)

days' date.

To

Bills Payable, $301.50.

The

note to retire which assistance was obtained, was duly charged

to Roe's account in the

Bank, and he made


Payable, Dr.

Bills

$6oc.oo.

To Bank
and when he
retires the

600.00
of

acceptance

$301.50 he
$301.50.

will

make

Bills

Payable

To Bank,

$301.50.

A
is

Bank Draft
is

medium by which
money
draft payable

a remittance

made.

You

desire to send or

carry

to a distance in a

way

that will be safe.

Buy from

bank a

on demand,

at the i^lace desired, to

your order,
It

or to that of the person for


cost

whom
cent,

the

money

is

intended.

will

you a quarter of one per


at

more
it is

than the fare,

and

will

be

cashed

par at the branch or bank


is

drawn upon.
it

If the draft
Bill of

drawn upon a foreign country,

is

called a Foreign

Exchange.

37

FOREIGN BILLS OF EXCHANGE.


Bills of

Exchange were rot known

to

the ancients.

We
It is

have
pro-

records, however, of their use in the fourteenth century.

bable that a

Bill

of Exchange was in

its

origin nothing

more than a

letter of credit

from a merchant

in

one country
to

to his debtor, a

merchant

in another, requesting
letter,

him

pay the debt to a third per-

son who carried the


debtor resided.

and was

travelling to the place

where the

This
ly

mode

of making payments was found by exjjerience extremeall

convenient for

parties

to the creditor,
;

for

he could thus

col-

lect his
facility

debt witliout trouble, risk or expense


of payment was an equal
letter,

to the debtor, for the

accommodation
in

to

him

to the

bearer of the

who found himself

funds in a foreign country,

without the danger and incumbrance of carrying specie.

At

first,

perhaps, the letter alluded to

many

other things besides


all

the order to pay

money
left

but

it

was gradually disencumbered of


it

other matters, was

open, and the paper on which

was written
assignee

gradually assumed the size and form


was,

now

in use.

The

perhaps,
it

desirous to

know beforehand whether


jjay
it,

the party to
it

whom
him
ances.

was addressed would


purpose
;

and sometimes showed

to

for that

his consent to

pay was the origin of accept-

Foreign Exchange Explained.


The
theory and nature of inland exchange

have been

fully set

forth at pages

27,28 and

29,

and

I shall
:

now explain Foreign Exchange


I

by the following practical illustrations

am

a produce commission

merchant

in

Montreal, and have received

from the

firm of

John
I

Lord

&:

Co.,

London, England, an
it

order for a quantity of wheat.

have shipped trom the

on board the steamship " Parisian," and have obtained


agent (or the master or purser) the
I
bill of

vessel's

lading

duly signed (in which


order, as
it is

have had the wheat consigned to


I

my own
value

not yet paid for) and


is

have also insured


for

it.

The

of the wheal

two thousand

pounds,

which

have John

3S

Lord
I

&

Go's, authority to
bill

draw a

bill

on them

at three days' sight.


:

draw the

of exchange

upon them
I

in the following set

St.

Montreal.
Exchange
Three days
for ^^{^2000.

April 15, 1S93.

after sight of this first of

exchange (second and third

of the same tenor and date unpaid), pay to the order of myself the

sum

of

Two Thousand Pounds

Sterling,

for

value

received,

and

charge the same to the'account of


J.

W. Johnson.

To

Messrs. John Lord


7

&

Co.,
St.,

New Broad
London,
E.

C, England.

2nd.

Montreal,
Exchange
Three days
for

April 15, 1893.

^2000.
second of exchange
to
(first

after sight of this

and third

of the same tenor


the

and date unpaid), pay

the order of myself,


for

sum

of

Two Thousand Pounds


to the

Sterling,

value received,

and charge the same

account of
J.

W. Johnson.

To

Messrs. John Lord


7

&

Co.,
St.,

New Broad

London, E. C, England.
3rd.

Montreal,
Exchange
Three days
for

April 15, 1893.

^2000.
exchange
(first

after sight of this third of

and second

of the same tenor and date unpaid), pay to the order of myself,
the

sum

of I'wo

Thousand Pounds
to the

Sterling, for value

received,

and charge the

same

account of
J.

W. Johnson.

To Messrs. John Lord & Co., 7 New Broad St.,


London, E. C, England.
I

have now exchange

for sale, created

by the export of the wheat,

39

and the consequent debt


where
I

to

me

of John Lord

&

Co.

I shall
it

sell

it

can obtain the highest price, and have offered

to several
offer,
viz.:

bankers; the Bank of Montreal having


4.87 (* that
is

made
I

the best

to say $4.87 for

each pound),
it

dispose of the

bill

of

exchange
I

to that institution, indorsing

to the order of the to the

Bank, and

also indorse
it

the

bill

of lading over

Bank, and likewise

assign to

the policy of insurance.


or the debt owing

The Bank having bought exchange on London,


to

me
in

there,

is

now

in a position to

j-^//

exchange on London.

Here

are a dozen Montreal merchants desirous of paying debts that they

owe

London, and knowing

that the

Bank has exchange

for sale

they will save the trouble and expense of transmitting bullion (gold
or silver) by buying bills

drawn by the Bank of Montreal on

its

Lon-

don agent

for the various

sums

that they

may

require,

and

to the

order of the persons to

whom
its

they are indebted, until the two thousis

and pounds, representing the export of the wheat,


the bank, in order to meet
to a larger

exhausted.

If
bills

customer's demands, should issue


it

amount than

the two thousand pounds,

could make one

remittance in coin to cover the overdraft.


ever, this

In actual practice, howfor

would not be necessary

for
in
if

any one day's transactions,

the bank has other funds available

London, or

if

not, has credit,


its

which

is

just as good.

However,

the overdraft on

London

cor-

respondent continued, the bank would require periodically to remit


coin, or

buy exchange from some other bank


will see

to remit.

You

from the above how large international transactions

are conducted,

and many

acts of

exchange accomplished, by a single


of value, lUUs of
it

transfer of specie.

Gold
it,

is

the

common denominator
The wheat

Exchange represent
not the actual

and gold could be obtained for them, but


of exchange.

is

medium

that I exported paid


is

for the importations of a

dozen merchants, which

practically barter,
for

where equivalent quantities of goods are made to pay


*The par

each other.

of Sterling Exchange is $4,867^, or 9>^ % over the old par, which The rate of exchange is the price at which it is being bought and sold daily. The Bank bought as above at $4.87 (above par) and sold say at $4.88.

was $4.44

4-9.

40

From
bank

the transactions in exchange mentioned as occurring in one

in ]Montreal, let

your mind dwell on the hundreds of similar

transactions that are occurring daily in the great cities of the continent, in connection with
its

exports and imports, and you will under-

stand when you

read in the papers

"that bullion has been shipped

from England to America


is

" (or vice versa) tiiat

one such transmission

the single settlement in coin for thousands of international transac-

tions,

whereby

freight charges, insurance


if

and actual

loss of gold, that

would be involved

each one had to ship gold to meet his indi-

vidual debts, are avoided.

Bills in

Set.
exchange, (see

Three, or

at

least two, bills are issued in a set of

page 38,) each part of the


reference to the
bill,

set
;

being numbered, and containing a

01

her parts

the whole of the parts constitute one


the others are void.

and one

part

havmg been paid


more than one

The

original

object of issuing
different

bill

was that they might be sent by


presented
v.-ere

conveyances, and whichever one was


first

to

the

drawee

was paid.

When

the ocean

mails

carried

by

sailing vessels, delays

were

freciuent.

vessel bearing the

second

of exchange, altl;ough sailing two weeks later than the one by which

the

first

was

sent,

might reach

its

destination at an earlier date than


it

the other.

The

punctuality ot the ocean mails now, renders


bill

usually

unnecessary to remit more than one

of the

set.

LETTER OF CREDIT.
Colonial Bank, Barbados,
Messrs.
^V. 1
,

26th January, 1893.

Brown Brothers

&

Co.,

Agents Colonial Bank,

New
Dkar Sirs, You are hereby
tion, of

York.

authorized to cash the Gold Drafts, without deduc-

Mr. Belfield

Grannum on Mr.

E. T.

Grannum

of this Island,

at

30 days'

sight, to the

extent of $520, say Five

Hundred and

41

Twenty
from

Dollars,

this Credit to

remain

in

force for three

months

date.

The

Messrs. Grannuni's signatures were sent you


I

last year.

am, Dear

Sirs,'

Yours

faithfully,

F. J.

Howell,
Manager.

This places Mr.

Grannum

in

the position to obtain funds from

Brown

Bros.,

New

York, to the amount

named

,on the credit of the

Colonial Bank, Barbados.

Circular Letters of Credit


are issued by

some banks
bill

for use

by

travellers.

They

are

more con-

venient than a

of exchange, because

money can be obtained

upon them

in various countries.

The

identification of the person to


is

whose order a

circular letter ot credit

drawn
the

is

established by

l;is
it.

signature on the margin, certified

by

banker

who

issued

^Vhere he
submit

is

an entire stranger, to prove

his identity,

he has only to

his signature for

comparison with that which he signed upon

the margin.

CHEQUES ON A BANK.
A
cheque
is

bill

of exchange drawn on a bank, payable on de-

mand.

Form.
Stub,
No. 1,053.
No. 1,053.
Belleville, Ont.,

June 2nd, 1S93.

To

the Canadian

Bank

of

Commeice,
)

June 2nd, 1893,


In favor of Geo. Ritchie

(Belleville

Branch
fe

&

Co.

Pay Messrs. Geo. Ritchie


Seventy-five

Co., or order.
dollars.

$75-50
In
full

50/100
(in full of

of Account to date.

$75-50

Ace. to date.)

ROBINSON & JOHNSON.

42
In the above example Robinson
in the

&

Johnson have funds on deposit


at

branch of the Rank of

Commerce

Belleville,

and desiring

to pay

George Ritchie

&

Co. the amount of their account, give them

a cheque for $75.50. a


receipt
it

The
paid,

checiue

drawn

as

above

will

serve as

when
is

it

is

and received

back

from

the

bank,
it

because
given

payable to the order of the payee, names what

was

for,

and must be indorsed


it,

by

Geo. Ritchie
ir.

&

Co.

before

they can transfer

or

draw the money on

Accepted Cheques.
On
it

receiving a cheque from the drawer, the payee should present


for acceptance,
is

at

once to the bank

and within a reasonable time


the officer

for

payment.

The

ledger keeper
it.

who

accepts

it,

and

the teller the one

who pays

Indorsing Cheques.

A
way

cheque payable
is

to bearer

is

negotiated by delivery

one paysafest

able to order
is

negotiated by indorsement and delivery.


all

The

to

make

cheques ])ayable to order.

See indorsements at
it

pages 17 and 18.

Do

not indorse a cheque until you present


indorse
it

for
it,

payment, when you


indorse
it

will

in

blank.

If

you

transfer

in

full.

Numbering Cheques,
Number
knowing
numbered,
your cheques so that you

may have
;

the satisfaction of

that they have

been returned

preserve them, consecutively


at

in packages, so that

you can produce them

any time.

Checking the Bank Account.


Leave your pass book
to be balanced.
in the

bank on the

last

day of each month


it

About the 2nd or 3rd of the new month


(after
is

will

be

handed

to

you

you
right),

have signed an acknowledgment

that

the balance

shown

together with the cheques, notes and

acceptances that have been paid and charged to your account up to


the end of the previous month.
b.ilance in the

You

will

sometimes find that the


in

bank pass-book and the balance

your books do not

43
agree.

In this event find what cheques are missing by noting the


that are absent, refer to the corresponding stub
will find (unless
is

numbers
and you

numbers,

mistakes have been made) that the

sum

of

the absent cheques

the difference.

The

absent cheques had not

been presented

for

acceptance when the pass-book was


in

made up

you had credited the bank with them

your books, but they had

not then been charged by the bank to your account, hence the discrepancy.

Keep Daily Track


It is a

of your

Bank Balance.
business

most unpleasant experience


given a cheque in good

for a reputable
faith, to

man

when he has

have

it

returned with

the remark, " no funds."


sustain
''

Men who

have no financial reputation to


persistent creditors off tem-

don't care,"

and frequently put

porarily by drawing

cheques which they know there are no funds to


wants to

meet.

man who

know

daily

how

his

balance stands,
posted closely,

and who cannot keep the bank account

in the ledger

can keep track of the bank transactions on the back of the stubs
of his cheques as follows
:

The

balance this morning was $920.70.

$100. $57.20, $60.30

Three cheques were issued

to-day, Nos.

129.

130.

131.

The proceeds

of a note discounted

amount

to $430.20.

deposit was

made

to-day of $600.
last

On

the back of the stub of the


Balance over.

cheque issued write

44

Rate of Exchange on Cheques


Cheques presented
at

any other branch of the bank than that

in

which the drawer's funds are on deposit, are subject to a deduction


for

exchange of ^^ of i%.

You

should therefore make your cheque


if
it

for the

amount of

the debt and the exchange,


If
is

is

to

be paid

at

another branch.

you

keej) a fair balance with

your banker on

which no

interest

allowed, he
at

may

grant you the concession of


it

marking your cheques payable


presented
for

par at the branch where

will

be

payment.

Precaution Against Fraud.


Draw your cheques
In the example
is

so that
at

they
41,

cannot

be raised or altered.
observe that there

given

page
left

you

will

no

unfilled
if

space

to the
Zl)

of the written amount, and the


close

fraction (or

no fraction

follows

up

to

it

on the

right.

Neither on one side nor the other can any word be added.
fail

If

you

to observe such a precaution,

and by your carelessness


will

invite

fraud,
loser.

and

it

should succeed, you, and not the bank,

be the

Identifying Strangers on Cheques.


Take
care,

when

identifying

payee on a cheque or draft to

enable him to draw money, that you do not incur responsibility.

For

example

John Jones,

whom you
underneath

know, wants you to identify him

on a cheque or
ed.

draft payable to his order that has not


it
;

been accept" Identified

He
and

indorses

his signature
this,

write,

by,"

sign your name.


;

Doing

you only

certify that

he

is

John Jones

but

if

you simply indorse your name under


lie

his,

you
but

would guarantee both the man and the money.


I

may

say, "

cannot get the money on personal identification only;" your reply


be,

would

"well,

let

it

be sent for collection,


identifying

decline to incur any

responsibility

beyond

you."

You may

not

get

up a

reputation as an " obliging fellow," but you will have the satisfaction

of knowing that you are

safe.

Grossed Cheques.

When
crossed.
I.

it

is

intended that a cheque shall not be negotiable,

it

is

Where

cheque bears across


" bank
"

its

face an addition of

(a)

The word

between two

parallel
;"

transverse lines,
or

either with or without the words " not negotiable

{/>)

Two

parallel transverse
"
;

lines

simply, either with or without

the words " not negotiable

That addition constitutes a


generally.
2

crossing,

and the cheque

is

crossed

Where

a cheque bears across

its

face an addition of the

name
tliat

of a bank, either with or without the

words " not negotiable,"


is

addition constitutes a crossing, and the cheque

crossed specially,

and

to that bank.

A cheque may
3.

be crossed generally or specially by the drawer.


is

Where

a cheque

uncrossed, the holder

may

cross

it

generally

or specially.

4.

Where

cheque

is

crossed generally, the holder

may

cross

it

specially.

5.

Where

a cheque

is

crossed generally or specially, the holder

may add
6.

the words "not negotiable." a cheque


is
it

Where
may

crossed specially, the bank to which


specially, to

it

is

crossed

again cross

another bank

for

collection.

7.

WHiere an uncrossed cheque, or a cheque crossed generally,

is

sent to a

bank

for collection,

it

may

cross

it

specially to

itself.

8.

crossed checpie

may be

re-opened or uncrossed by the drawer,

writing between the transverse lines,

and

initialing

the

same, the

words " pay cash."

46

Book-Keeping Entries

for Cheques.

When you deposit in the bank, you make the Bank Dr. to Cash. When you draw a cheque, credit the bank and debit the person to whom, or the account for which, When you has been issued.
it

receive a cheque,

make Cash

Dr.
it.

to the

person from whom, or the

account for which, you received

Cheques may
It
is

either be journalized or put through the cash book.


to credit

not

necessary

each cheque

singly.

The cheques
in

issued in a day or a the bank.

week or a month may be credited

one sum

to

Four cheques were issued

to-day, journalize

them from

the stubs as shown on page 47.

Important Points

in

Receivable and
You.
I

Bills

Connection with the Payable Accounts.


above accounts
at

Bills

will

find analyses of the

pages 22 and 23.

wish to emphasize here, and draw the student's special attention to

the point, that

when you
(the

retire

your notes or acceptances, you should


less

never charge

Bills

Payable account with more or

than the face


;

of the instrument

amount

credited

when
else

issued)
is

and
less

that

when

a note or acceptance ac^ainst

some one

disposed

of, Bills

Receivable account should never be credited with more or


the face of the instrument (the amount debited

than

when

received).

Examples.
You pay your
interest $5.00.

note,

face

$500 and

Bills

ENTRIES. Payable Dr $500.00


"'

Interest

5.00

To Cash
$600, before maturity, and get a discount of $10 oft".

505.00

You pay

note,

face

Bills

Payable Dr

600.00
590. CO

To Cash
" Discount

10.00

You receive paymsnt $300 and interest $4.00.

of a note, face

Cash Dr

To
"

Bills

Receivable.

..

Interest

304.00 300.00 4.00

You receive less than the face of a note when disposing of it ; face $700, discount allowed $10.00.
If

Cash Dr
Discount

690.00

Dr
Receivable

10.00

To

Bills

700.00

you carefully observe the^e instructions, you will find that the difference between the two sides of liills Payable account will always agree with the notes outstanding and the difference between the sides of Bills Receivable account will always agree with the notes on hand. When issuing a note (or acceptance) bearing interest, the entry is just the same as if it were not. because the interest is a matter for the future.
;

47

o o

48

QUESTIONS FOR REVIEW.

INTRODUCTORY.
the

What Law

is

Common Law?

What

is

Statute

relating to Bills of

Exchange grown
as
?

Law? From what has What is the Law?


illustrations of

making power of merchants i<nown

Give two

the controlling effect of the Law-merchant.

What

are the

commonest forms

of contracts?

Name
in

the two

kinds of contracts.

Simple Contracts must Specialty Contracts be made ? What is essential

How may

be made?

How
?

every Con-

tract ?

When
this

sueing on a simple contract what must be proved

Does

requirement apply to a Specialty Contract?

What

is

the

Statute uf Frauds and

when was
in

it

passed
;

It

requires that certain

simple contracts shall be

writing

name make

the principal cases.

What What
a
to

contracts must be not only in writing, but be under seal?


is

a seal

Who

are competent to

a contract

What

is

minor?

What must
binding?

be attached to a contract with a corporation

make

it

How

is

authority conferred
is

upon an agent?
?

In making a contract by correspondence wl.at

required

When
Statute

do contracts become outlawed

What

is

the

called which codified the laws relating to Bills

Dominion and Notes ?

QUESTIONS FOR REVIEW.

NOTES.
State the three reasons that

against a debtor.

make it desirable to hold Explain the term " discounting a note."

a note

Give a
notes

definition of a Promissory Note.

What
to

is

meant by a determinable
note.
?

future

time?
?
;

transferred
tiable note
tiable

Name the parties When may notes be

How
;

are

transferred

Explain a negoa note nego;

a noie negotiable without indorsement

by indorsement.

note negotiable

Give the form of a non-negotiable note by indorsement a note negotiable without


;

in-

49

dorsement
the

a note payable on

demand

a joint

and

several note.

Explain a joint and several note.


rifijhts

Explain a Joint Note.


?

What

are

of a third party in a negotiable note


?

What

are the rights

of an assignee of a non-negotiable note


note.

Explain an accommodation

Give an example, and

state

why

it is

of the indorser

and not
?

to the order of the lender.

made payable to the order What may be done


figures,

in regard to a lost note ?

Discrepancy between words and

which
note.

is

payable
is

Name

circumstances that do not invalidate a


?

What
?

a holder in due course


.-*

What must be done on


is

note given for a patent right


note

What

the effect of altering a

Explain what

is

meant by the
"

legal rate of interest.

what circumstances would you insert the woids, "as


AS

Under well after


?

BEFORE MATURITY UNTIL PAID


is

in

a note bearing interest


?
?

What

a usury law ?

What

are days of grace


fall

When
due
?

would a
a a

note drawn 3 months from October 26

due
fall

When would
What
is

note drawn at ninety days from October 26

power of attorney
per pro stand
are
its

How
When
?

does the holder of a power of attorney


?

sign business papers for his principal


for ?

What

does the abbreviation

does a note become outlawed

the Statute of Limitations


effects ?

What

is

the act of indorsing?


in blank,

Explain indorsement

What is What and wnat may the


?

holder do?
restrictive

Explain indorsement in
;

full; qualified

indorsement;

indorsement

indorsement for deposit only.


a note
?

How

could

you prove the payment of


liability ?

What

is

the order of indorsers'


a note be

Explain guarantee on a note.


?

Where should
?

presented for payment

What

are the proceeding to be taken to


at

hold indorsers on a note not paid


notary cannot be obtained,
is

maturity

If the services of a

who may perform

his functions ?
is
it

What
noting?

waiving

protest

Give examples.
there
is

Why

unnecessary to
is

protest a note on which

no indorser?
it ?

What

How

should partial payments be acknowledged on notes


note,

When
?

you have paid a


is

what should you do with


?

When

renewing

your note, what should you receive


a
bill

What

is

bill

receivable

What

payable

In book-keeping what are the accounts represent?

ing notes called

Analyse the

bills

receivable

and

bills

payable

accounts.

Give the entries of the maker having a note renewed.


Give the
Explain a Lien note.
is

Give the entries of the holder when renewing a note.


entries of each for partial renewals.
legislature deals with lien notes ?

Which

What

an

I.

O. U.

QUESTIONS FOR REVIEW.

DRAFTS.
Give a definition of a Draft or Inland
Bill.

Explain the difference


parties

between a note and a


draft ?

draft.

How many

are

there

to a

Name

them.
?

Explain

each one's position.

Which one
same

accepts the draft


position as the

What
the
bill

party to an acceptance stands in the


?

maker of a note
first

What

party to a draft stands in

the

same

position as

indorser on a

note

To
?

hold the
Explain

drawer of a dishonored
the theory of exchange.
or i)ersons

what must be done, and when

Give an example of a draft with three firms

and two debts concerned.


sig/it
?

How

is

draft payable ten

days after

accepted

How

is

a draft payable

ten

days after

ddfe accepted
draft

From what

date do you reckon the maturity of a

drawn ten days

after sight ?

From what

date do you reckon

the maturity of a draft drawn ten days after date?


called after
it

What

is

a draft

has been accepted

Under what circumstances


?

are the
is it

drawer and payee of a draft the same person

To whose
time
draft.

order

made payable
payee's

Give the drawer's entry

for a

Give the

entry.

Give the

drawee's entry.
liability.

Give an

illustration of

exchange.

State the acceptor's


liability.

State the drawer's liability.

State the mdorser's

In case of dishonor,
drat't is

who may

recover,
?

and what ?

What

will

be done when a
if

dishonored

How
is

may

protest be avoided

desired
is

Give definition and requisites of


for

acceptance.

Explain what

due ijresentment

payment.
?

What

the usual rate of bank commission for collecting drafts

How
tell

will

you ensure the collection of a definite sum when you cannot

how

much

the

exchange

will

be?

Name

the

three

kinds

of drafts.

Explain eich.
matter

To
it

give a person four clear days to pay a draft, no

how
him

long

may

take to reach him,


?

how would you draw


?

it ?

To

give
?

fifteen
is

days

To

give

him three days


? ?

To

give no
is

time

What

an accommodation draft

What

expression

used

to describe this

method of

raising

money

How would

you proceed

51
to obtain assistance by draft to retire an acceptance or note
is

What
is

the object of a bank draft

What
?

does par

mean?
its

When
?

draft called a foreign bill of

exchange

What was

origin

Give

an

illustration of

foreign

exchange.
?

How many
is

bills

are usually

issued in a set of exchange

Why

more than one issued?


?
is

Give

the form of the


third
?

first bill

in a set of

exchange
?

The second

The

What

is

letter

of credit

What

a circular letter of

credit ?

QUESTIONS FOR REVIEW.

CHEQUES.
Give a definition of a cheque.

Give a form.

How

is

a cheque
act of the

drawn

in

order that

it

may

serve as a receipt?
?

What

payee would prove payment

Explain what
it ?

is

an accepted cheque.
officer

What
pays
is

officer of the
it

bank accepts

What

of the bank
?

How
?

is

cheque payable

to

bearer negotiated

How
should
?

cheque payable

to order negotiated ?

When

should you indorse


?

cheque

Why

should cheques be
?

numbered

How

cheques be preserved

How

should you check the bank account

If a discrepancy exists

between the pass book, when balanced, and


?

your account, how do you find the cause

State a simple

method
the rate

of keeping daily track of your balance in bank.


of

What
charged
?

is

exchange charged on cheques


at

When

is

it

Cheques
you take
a payee
?

payable

par at
against

another
fraud
?

branch,

explain.

How

will

precaution

How
?

would you

identify
for

What

are

crossed

cheques

Give journal entries

cheques.

Put checjues through the cash book.


connection with
Bills

State two important points in


Bills

Receivable and

Payable accounts.

ONTARIO BUSINESS COLLEGE


MOST WIDELY ATTENDED BUSINESS COLLEGE
IN

AMERICA.

TWENTY-FIFTH YEAR.

B.

ROBINSON,

J.

W. JOHNSON,

F.

C. A, Principals.

COLhVTRIES REPRESENTED

BY THE STUDENTS.

South America, DEMERARA (BRITISH


TRINIDAD, BARBADOS, ST. VINCENT, ANTIGUA,

GUIANA).

The West Indies.

BERMUDA.
TURK'S ISLAND,

GRENADA,

Newfoundland,
ST. JOHN'S.

FORTUNE

BAY.

Canada,
PRINCE EDWARD ISLAND,

NEW BRUNSWICK,
QUEBEC,

NOVA

SCOTIA,

ONTARIO

(every county),

MANITOBA,
ASSINIBOIA,

ALBERTA, BRITISH COLUMBIA.

United States,
MAINE,

NEW HAMPSHIRE, NEW YORK (City and


PENNSYLVANIA, MINNESOTA,

State),

MASSACHUSETTS, VERMONT, MICHIGAN,


ILLINOIS,

WISCONSIN,
TP:XAS,

MONTANA,
CALIFORNIA,

NEVADA,
The high
standing and reputation o f

DAKOTA, WASHINGTON.
Ontario Business College, Belleany similar institution, and the success of its

ville, by which it secures an attendance unefpUed in have been attained by the thoroughness of its worlc
graduates.

Send

for Circulars.

"THE CANADIAN ACCOUNPANT,"


By the Principals of Ontario Business College.

10th

EDITION
book
ot

NOW IN

PRESS,

This
is

is

the text

Ontario Business College. Belleville.

It

the most comprehensive and practical,


all

and most

easily

understood

of

the

advanced works

on

Book-keeping and Accounts pubin

lished,

and has a wider demand than any similar book published

the English language.

It

covers the ground of Book-keeping by Double and Single Entry,


Papers,

Business Forms and

Banking,

Business

Correspondence,

Commercial Law,

Practical Computation, etc., etc.,

and

illustrates

and explains Counting House Work, and innumerable


Transactions, not dealt with in any similar book.

Business

Extensive practical experience in office work in Canada and the

United

States, practice as public accountants,

and the management

of the largest and most successful Business College in the


are

Dominion

among
is

thg qualifications of the Authors.

It

the

best

Text

Book

for

the

Teacher

and

Student of

Accounts,

It is

the best

Book of Reference

for the Practical

Accountant and

Extensive Business Man.

It is

Mine

of Business

Knowledge

for the

Country Merchant.

336 Octavo Pages.

Price $2.00 post paid.

Address,

ROBINSON & JOHNSON,


Ontario Business College, Belleville, Ont., Canada.

JUST PUBLISHED.
THE SIXTH EDITION OF

croiin^soisr's
iBi
B'S'
cr.

AV".

cromsrsoKT, f.
is

-^.

The

first

portion of the work

devoted to the laws affecting Joint


tlicni.

Stock Companies, and to the methods of form-ng

The second

portion of the work illustrates

in

a comprehensive

manner the system of properly recording the

transactions throughout

a year, and arriving at the accurate results, auditing and presenting

statements of the business of a Joint Stock Company, by methods

which the author has matured from long practical knowledge and
experience as an accountant and auditor in large business centres,

and

later

as a teacher of accounts.
is

In

addition to
are

this,

much

valuable information

given,

and explanations

made

regarding

technical matters specially appertaining to Joint Stock Companies.

Since the

first

edition was published the author has

had the most

gratifying evidence
that the

from

all

parts of

Canada and
it

the United States,


foi

work has proved

to

be what

was intended

an
its

efficient

aid

and

instructor in conducting the office

work of

Joint Stock
to
is

Company.

The

sale of the

book now extends from the Atlantic

the Pacific throughout both countries.

The evidence

of

merit

the
for

fact
it.

that

six editions

have been issued to meet the demand

In the present edition, as

in

previous ones,

new and

practical

subjects have been added, and others enlarged upon.

The work

contains 135 octavo pages.

Price $1.25, post paid.

ADDRE.SS,

ROBINSON & JOHNSON,


Ontario Business College,

"~"

Belleville,

Ont.