S. 29. this section "does not relate at all to the stamp which a bill has to bear." 1

The question whether an original party to a bill or note can be a holder in due course has been raised but not decided.2 In Herdman v. Wheeler 2 it was held, without deciding whether the payee of a promissory note may be a holder in due course or not, that he cannot have the benefit of the proviso to section 20, because that proviso requires that the instrument shall have been, not issued, but negotiated, to the holder in due course. This ratio, which would not apply very conveniently to section 64, seems to have been unnecessary. In a question between immediate parties, it is of no practical importance whether the holder is a holder in due course or not, for, though he is, he does not hold the bill free of personal defences available to the immediate party. The only case in which it might be of importance to decide whether or not an original party can be a holder in due course is that of the payee of a bill not payable to the drawer's order, for in that case the payee is a remote party in relation to the acceptor.

3

See ss. 14 and 36 (3).

d As to dishonour, see ss. 43, 47, and 36 (5), and as to notice see n.h, infra.

e See s. 90.

f That is to say, a holder in due course must be a holder for value.4

g See s. 31.

h For this purpose "notice and knowledge mean not merely express notice, but knowledge or the means of knowledge to which the party wilfully shuts his eyes." 5 If the holder suspects that there is some defect in the title and avoids taking means open to him of ascertaining whether there

1 Hitchcock v. Edwards, 1889, 60 L.T. N.S. 636; see s. 13, n.c.

2 Cf. opinions in Lewis v. Clay, 1897, 67 L.J. Q.B. 224, 77 L.T. N.S. 653, and in Herdman v. Wheeler [1902], 1 K.B. 361,

3 Ss. 38 (2), 21 (2).

4 See ss. 27 (1, 2), 30 (2).

5 May v. Chapman, 1847, 16 M. & W. 355, 361.

is or not, he will be held to have acted dishonestly, and to be
in the same position as if he had been informed of the defect.1
It is enough that the holder knows or suspects that there is
some defect of title, though he does not know what it is. "If
a man, knowing that a bill was in the hands of a person who
had no right to it, should happen to think that perhaps the
man had stolen it, when
he had obtained it by
false pretences, I think that would not make any difference
if he knew that there was something wrong about it and
took it. If he takes it in that way he takes it at his
peril." 2

3

i This list is not to be taken as exhaustive. Failure of consideration, or breach of a condition affecting the delivery of the bill or an agreement amounting to a discharge,5 is a defect of title or personal defence available against an indorsee who is not a holder in due course."

j See s. 2.

9

Fraud is a machination or contrivance to deceive, and obligations induced by it are voidable. "There is in such obligations apparently consent and engagement, but not such as the party defrauding is allowed to rely on."7 The obligation of a party to a bill may be obtained by fraud, or a bill may be fraudulently completed, or altered.10 If a person is fraudulently induced to become a party to a bill he is liable, subject to the provisions of section 30 (2), to a holder in due course. But if he is fraudulently induced to sign a bill without the knowledge that he is doing so or the intention to become a party to such a document, he is no more liable than if his name had been forged.11 A young man was induced,

1 Jones v. Gordon, 1877, 2 A.C. 616; Fowlie v. Barnett and Co., 1867, 5 S.L.R. 134; Raphael v. Bank of England, 1855, 17 C.B. 161; 25 L.J. Č.P. 33; London Joint Stock Bank v. Simmons [1892], A.C. 201, pledge of negotiable bonds.

2 Jones v. Gordon, 1877, 2 A.C. 616, per Lord Blackburn, 628.

Ferguson, Davidson, and Co. v. Jolly's Trustee, 1880, 7 R. 500; Agra and Masterman's Bank v. Leighton, 1866, L. R. 2, Ex. 56; Wallace and Brown v. Robinson, Fleming, and Co., 1885, 22 S.L.R. 830.

S. 29.

S. 29. by the assurance that he was merely witnessing a deed of a very private nature, to sign certain bills without even seeing them. In an action on one of these bills, in which for another reason the pursuer was unsuccessful, the Lord Chief-Justice of England said:-"I desire to say that, even if the plaintiff were 'holder in due course,' it would in my judgment make no difference in the result. . . . In plain reason must it not be said that the use to which the defendant's signature was applied was in substance and effect a forgery, whether or not it amounted to the criminal offence of forgery?" 1

S. 30.

Presumption of value and good faith.

1 Force or fear, such as will overpower a mind of ordinary firmness, or such as, applied to a person of weaker age, sex, or condition, will produce the effect of overpowering violence on a firmer mind, annuls engagements. It was formerly held in Scotland, contrary to the English rule,3 that a bill extorted by violence was of no effect even in the hands of an onerous indorsee. This section makes an exception, subject to s. 30 (2), in favour of holders in due course.

m E.g., by theft.

n See s. 27, n.a formerly held to be indorsee.5

Bills granted for gaming debts were null even in the hands of an onerous

• For example, a breach of trust.

P A., in fraud of his partners, draws a bill in his firm's name, and indorses it to B., who has no knowledge. of the fraud, and is a holder in due course. B. indorses it to C., who knows of A.'s fraud but is not a party to it. C. can recover from the firm.7

30. (1.) Every party whose signature appears on

1 Lewis v. Clay, cit.

2 Bell's Prin. 12.

3 Duncan v. Scott, 1807, 1 Campbell, 100.

4 Willocks v. Callender, 1767, M. 1519; Wightman v. Graham, 1787, M. 1521; Thomson, 62.

5 Bell's Prin. 36 (4), 325.

6 Thomson v. M'Lauchlane, 1823,

2 S. 497, (n.e. 439).

7 May v. Chapman, 1847, 16 M. & W. 355.

a bill is prima facie deemed to have become a party thereto for value.a

(2.) Every holder of a bill is prima facie deemed to be a holder in due course; but if in an action on a bill it is admitted or proved that the acceptance, issue, or subsequent negotiation of the bill is affected with fraud, duress, or force and fear, or illegality, the burden of proof is shifted, unless and until the holder proves that, subsequent to the alleged fraud or illegality, value has in good faith i been given for the bill.k

a See s. 27. This presumption may be overcome by parole proof.1 Bills sometimes contain the words "value received," or "value in account," but this in no way affects either the application or the contradiction of the legal presumption. These words are generally taken to imply, when the drawer and the payee are different people, that value has been received from the payee by the drawer, and when the bill is payable to the drawer's order, that value has been received from him by the drawee.3

A bill may for convenience contain a statement of the particular consideration for which it is drawn, but must not be so expressed as to be conditional.4

b See s. 2.

c See s. 29. This presumption may be overcome by parole proof.5

d See ss. 2 and 38.

e See s. 29, n.k

f See s. 29, n.1

g See s. 29, n.m, n, o.

As to the ratio of this provision, see Lord Blackburn in M'Lean v. Clydesdale Banking Co., 1883, 11 R. (H.L.) 1,6;

1 S. 100.

2 Thomson, 54; Wilson v. Loder, 1848, 10 D. 560.

3 Thomson, 53; Byles, 98.

4 S. 3 (3).

5 S. 100.

S. 30.

S. 30. 9 A.C. 95, 110. This sub-section does not affect the rules as to caution in suspensions.1

S. 31.

Negotiation of bill.

i See s. 90.

k This sub-section, which comes in place of 19 and 20 Vict. c. 60, s. 15, repealed by this Act, has been held to mean that the holder must prove not merely that value has really been given, but that it has been given without notice of the fraud. The holder need not himself have given value.3

4

A. being in possession of bonds, assumed to be negotiable instruments, the property of B., theftuously pledged them for his own purposes with C. Subsequently he obtained them from C. in exchange for a cheque which he knew to be valueless, and restored them to B. C., on the cheque being dishonoured, claimed the bonds. Neither B. nor C. knew of the fraud. It was held that B. must be presumed to have received back the bonds in discharge of A.'s obligation to return them, and therefore that B. was a holder in due course of the bonds, and entitled to retain them.5 This decision has been judicially criticised as "far-fetched and strained."6

Negotiation of Bills.

b

31. (1.) A bill is negotiated a when it is transferred from one person to another in such a manner as to constitute the transferee the holder of the bill.c (2.) A bill payable to bearer is negotiated by delivery.d

(3.) A bill payable to order is negotiated by the indorsement of the holder completed by delivery.

(4.) Where the holder of a bill payable to his order transfers it for value without endorsing it, the

1 Renwick v. Stamford Banking Co., 1891, 19 R. 163.

2 Tatam v. Haslar, 1889, 23 Q.B.D. 345; see as to the rules formerly prevailing in Scotland and England respectively Thomson, 202, Byles, 146.

3 S. 27 (2).

4 See p. 232, infra.

5 London and County Banking Co. v. London and River Plate Bank, 1888, 21 Q.B.D. 535.

6 Walker v. Sturrock, 1897, 35 S.L.R. 26, per Lord Kincairney.