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Promissory Notes

.A.N1D

Bills of Exchange.

WHAT A BUSINESS MAN SHOULD KNOW
REGARDING THEM.

I ■ ■ • BY < , • •

J. W. JOHNSON, RCA.,

Author of "Johnson's Joint Stock Company Book -Keeping,"

Joint Author of "The Canadian Accountant," Principal

Ontario Business Colleoe, Belleville, and one

of the Examiners for the Institute of

Chatrred Accountants of

Ontario.

PUBLISHED BY ONTARIO BUSINESS COLLEGE.
BBLLBVILLB, Ont., Canada.

SIXTH EjDITIOliT.

Revised and Enlarged.

BELLEVILLE:

PRINTED AT THE DAILY INTELLIGENCER OFFICE, FRONT STREET.

1895.

1* R E F A C K.

In the Ontaiio Business College, Belleville, the Author has for the last nine-
teen years, been lecturing upon, and teaching such subjects as this book treats of
and as a Practical Accountant and Business Man has been for twenty-nine years
in daily association with them. The book was primarily prepared for the Students
of the College, and is one of a series covering the whole ground of Commercial
Papers. The faithful study of its contents, even by those not having the advantages
of the daily 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 its present form, the matter contained in the first
edition was published in the September and October numbers of the Ediicationil
Jotitnal, Toronto, 1888.

The fifth and sixth editions have been prepared since the passing by the
Dominion Parliament of an Act relating to Bills of Exchange, Cheques and
Promissory Notes, cited as the " Bills of Exchange Act, 1890," and the necessary
changes and additions consequent upon the passing of the Act have been made in
these editions.

J. W. JOHNSON.
Ontario Business College, )
Belleville, 1895. \

[ Entered according to Act oj the Parliament of Canada, in the year One
Thousand Eight Hundred and Eighty • Eight, by J. IV. Johnson, at the
Department of Agriculture.]

\^\\

Introductory.

HK Act of the Imperial Parliament of the Empire, known as
" The British North America Act " is the written Constitution
of Canada, which brought the Dominion into existence, on the first
of July, 1867. That Act fiivto to the Dominion Parliament alone
the right to legislate upon the subject of Promissory Notes, Bills of
Exchange and Cheques.

In the year 1890 the Parliament of Canada enacted a statute
known as the "Bills of Exchange Act, 1890," by which previous
legislation and decisions respecting Promissory Notes, Bills of
Exchange and Cheques have been codified.

^«.

It is desirable that a business man should have some knowledge
of the principles of law, particularly in its application to commerce,
and more especially in relation to Bills and Notes. Ignorance of it
can never be successfully urged in prosecuting or defending an
action.

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. It has been appropriately
called " Judge-made Law."

STATUTE LAW

is the written Law, or Acts of Parliament, made from time to time
by the Legislatures, and its enactments wholly over-rule the Common
Law.

The History of Bills of Exchan^^c and Promissory Notes, showi
how the usages of merchants, bankers, and traders became the
Common Law in regard to these instruments. When disputes arose
in conection with them, the courts simply retiuircd that the general
(X- usage among merchants and bankers should be proved, and this
being judicially ascertained, it received the sanction of legal
decision, and consequently became incorporated into the Oommon
Law. These legal decisions, again, as precedents became the baris
of other decisions. This Law-making power of merchants is known
us the ♦

^ Law-Merchant (Lex Mercatoria),

which the courts of justice are bound to know and recogni/e. 'I'he

controlling effect of the Law-Merchant is well illustrated in the

transfer of Notes and Hills from one person to another. Ily the rule

/ of the ancient Common Law, no property that was not actually in

I possession (or that could be reduced into possession) could be

(* -^ ' transferred. Bills and Notes only express the legal right to possession

j of money in the future. But merchants had established the custom

' of transferring Bills of Exchange by delivering from hand to hand,

\ or by writing a name on the Bill, which not only transferred the

right of action, but created an unwritten conditional contract ot

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 lh.it apply to contracts
• and the Law of evidence.

Contracts.

^ Promissory Notes and Bills of Exchange are the commonest

forms of Contracts. They enter more than any other into the daily
commercial life of the people of any civilized country, and into the
transactions between the various nations of the world.

C-T^

)

When men enter into other forms of Contracts— such ns those
represented by deeds, mortgages, bonds, etc.— they usually, and
mdccd of necessity, resort to a trained "iolicitor for direction and
guidance, but in giving and receiving Notes and Hills, the individuals
concerned should be able, without recourse to a lawyer, or even to a
banker, to deal intelligently and safely with them, under all ordinary
circumstances.

Written, as it is, by a practical business man, and having as its
basis practical experience and observation, and not nure theory or
tcclinicality, this work has imparled practical knowledge of IJills and
Notes to thousands of students and business men, and to other
classes of the community that have to deal with them.

While it is desirable, as has betn said before, that a reliable
solicitor should be a person's guide in making other Contracts than
Hills and Notes, yet there are certain fundamental principles relating
to Contracts in general that should be universally known.

There are Two Kinds of Oontracts.

CtMJtracts are divided into two classes, which are known as Simple \
Contracts and Specialty Contracts.

Simple Contracts may be made either by word of mouth (called ^
parole) or in writing. The writing is not the Contract ; it is the
evidence that testifies what the Contract was.

Specialty Contracts must not only be in writing, but must likewise ,c
be under seal.

A consideration, that is to say, an equivalent offered by the one ^
parly and accepted by the other, is essential in every Contract not
under seal. When suing upon a Simple Contract the consideration ^
must in general be proved, but ^his would not be necessary when f
enforcing a Specialty Contract. )

Notes and Bills are excepted from the general rule that requires ct
the consideration to be proved on Contracts not under seal.

A consideration may be good or valuable, and need not be money V^

or goods ; it may be to do or refrain from doing. Marriage is an
example of a good consideration in a Contract.

A Simple written Contract is duly made when it is signed and
delivered; a Specialty Contract is duly made when it is signed, sealed
and delivered.

The Statute of Frauds.

There are some simple contracts which the law rc<|uires to be in
writing. The Statute of Frauds, passed in the reign of (Iharles II.
(167C), which is still in force in Canada (as all English common law,
and all applicable Statute law, prior to ijQr, is, unless it has been set
aside by Canadian legislation), reciuircs that a verbal promise shall
not be sufficient in certain cases, but that the agreement or some
memorandum 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.
The principal cases are :

1. Where a man promises to pay the debt of another person, or
answer for his default. For example, a man steps into your store
and says, " I will be responsible for goods you may sell John Smith,
to the amount of $50.00 " If, 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 peonle to swear to the verbal statement,
you would have no legal hold upon him, nothing beyond the moral
claim, and that might not be of 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 money paid upon it, (often called earnest money) be
it ever so small, or a partial delivery and acceptance of the goods,
even the smallest portion of them.

3. Where an executor or administrator promise; to be liable out
of his own estate.

4. When an agreement is made which is not to be performed
within a year. For instance, if you engaged with a man to serve him

as a book-keeper for two years, the agreement would not be binding,
unless it was made in writing. Again, a contract to supply goods or
furnish labor or material at a certain price would not be binding on
either of the parties to a verbal contract for a longer deflnite period
than one year.

All contracts affecting land or any interest in land, such as a
contract to purchase, must be in writing ; but instruments that are
intended to pass an estate in land, such as dee ds and mortgages,,
must not only be in writing, but under seal. A)eas e for any term j)
not more than three years may be made verbally, but for a term
bcyood three years It must be in writing and under seal.

What Oonstitutes a Seal.

A Seal in this case means any adhesive thing, or distinctive mark, ^
that you may adopt as your Seal, and attach to the instrument.

Who are Oompetent to make a Oontract.

Any person of either sex who is twenty-one years old and of (•
sound mind, is competent to make a (Contract. A person who is
under the age of twenty-one years is, in the eyes of the law, an infant,
and incapable of making a Contract. Many persons are under the
impression that a woman is of age at eighteen. This is a mistake.

A minor (a |)erson under age) could not engage in business on i
his or her own acconnt, but it would be competent for a minor to
Contract ior necessaries suitable for his or her station in life.

A Contract with a corporation (say a joint stock company or
municipality) must be within the scope of its charter, and to be "^
binding must have the corporation seal attached. This would not
be required in connection with Promissory Notes and Bills of
Exchange, issued or drawn, indorsed or accepted in the ordinary
course of its business.

An agent may Contract for his principal within the scope of his ^
authority, which is usually conferred by an instrument under seal,
called a Power of Attorney.

'?<

The authority conferred by I'ower of Attorney is called " Procura
tion." When fiigninK by Procuration (Hay an accountant HiKninif a
chc({ue, drawing a draft, accepting a draft, indorsing, etc.,) sign thus;
RoHiNsoN & Johnson,

per |)ro. W. J, Osborne,
(or p. p.)
It is done n little more formally in such an instrument as a deed

or mortgage, as

John Jonis,

by his attorney, Richard Roe.
A /alid and binding Contract may be made by corregjKindence or
telegram. All that is rci|uired is an offer and an unconditional
acceptance of it, An offer that has not been accepted can be
withdrawn. Letters sent by you that arc intended to constitute a
Contract, should be copied into your copying press book, and those
you receive in such connection should be carefully filed for reference.

The words " Without Prejudice," added to a written offer mean
that the letter cannot afterward be used in evidence against the party
writing the letter and using the words; and in negotiations for a
compromise, if not concluded on the basis offered, the matter reverts
back to the original position as though no neu;otiations had occurred.

When Contracts are Outlav^ed.

/ Simple Contracts for debts not referring to land are outlawt;^ after
six years from the date of maturity, or from the date of the last

\ payment on account, or from the last written acknowledgment ;
Contracts affecting land, ten years ; and personal covenants under
seal, twenty years. For instance, (i) a Note made April 5th. 1893,
at three months, would be Outlawed after July 8th, 1899, if, in the
meantime, no payment had been made upon it, or no written
acknowledgment had been given in reference to it. (2) The land
secured by a mortgage upon which no payment had been made for
10 years after maturity, or regarding which no written acknowledg-
ment had been given within that time, would be released at the
expiration of that period. (3) The personal covenants for payment
on the same mortgage would not be Outlawed for twenty years.

PROMISSORY NOTES AND BILLS
OF EXOHANQE.

Promissory Notes.

A person has bcrome indebted to you cither fur ^oods sold or
work done, and you have duly placed the amount to his debit in
your lcd(;er ; but you find that it will be much more advantageous to
you to have this resource or asset of your business in another form,
80 you obtain from your debtor his I'romissory Note, or get him to
accept your draft. Should you desire that the amount owing to you
be paid to some one to whom you are indebted, then you will draw
the draft i)jiyable to his order. Your object in obtaining the written
obligation is three-ftSm :

jist. It is in itself an evidence of the debt, .cquiring no confirmation
(unless the signature be challenged) nor proof of the consideration
given for it, nor the i)roduction of the original entry.

and. It fixes a dtfinite tim e, and usually a stated place, for the
payment, so that the holder, when it falls due, will not have the
trouble of hunting up the maker, nor the maker of finding the
holder. The former having provided the funds at the plaq^ where
he promised to pay it, the holder has simply to present it there and
obtam the amount, a matter of much convenience to both parties.

3rd. It is an instrument upon which, after indorsing it, you may \
bojTow^jnone^ from a bank or private lender. This is called
discounting. In other word?, by the medium of the Bill or Note as
security, you obtain the use of other people's capital, paying for the
loan a discount from the face of the instrument ; which is the simple
interest, in advance, upon the whole amount for the time it has to
run, including the days of grace.

Deflcition of a Promissory Note

A Promissory Note is an unconditional promise in writing made
by one person to another, signed by the maker, engagin^i to pay on
demand or at a fixed or determinable future time, a sum certain in
money, to, or to the order of, a specified person, or to beater.

A determinable future time means in connection with a Note or
draft :—

(a) At sifiht, or at a fixed period after date or sight.

(b) On or at a fixed period after the occurrence of a specified
event which is certain to happen, though the time of happening may
be uncertain.

An instrument expressed to be payable on a contingency is not
a Bill or Note, and the hapiJening of the event does not cure the
defect.

If a Note or Draft is issued undated, any holder may insert therein
the date of issue or acceptance.

A Promissory Note is inchoate and incomplete until delivery
thereof to the payee or bearer.

Parties to a Note.

The pjerson who gives a Note is called the Drawer, Prom issor, or
^Laksr ; the person in whose favor it is drawn is called the Payee ;
if he signs his name upon the back for the purpose of transferring
or guaranteeing it, he becomes the Ind^ ser, and if he names the
person to whom he transfers it, the latter is called th e Indorse e ;
either of these, or anyone in possession of a Note, may be called a
Holder.

Forms of Notes.

Notes may be made (i) non-negotiable, (2) negotiable by indorse-
ment, (3) negotiable without indorsement. The first is made payable
to the individual only, and can only be transferred by assignment,
which carries with it all offsets and legal defences that may exist

between the original parties ; the second is payable to order, and is
transferred by the indorsement of the holder completed by delivery
which makes the indorser liable for payment in the event of the
maker failing to pay; the third is payable to bearer, and is transferred
by delivery, just as a Bank Note is passed from hand to hand.
Where, in a Note payable to order, the payee or indorsee is wrongly
designated, or his name is mis-spelt, he may indorse the Bill as
therein described, adding, if he thinks 6t, his proper signature. A)
Note may be transferred either before or after it is due. When taken
before maturity the assi{^nee is not affected by any circumstances,
of which he had no notice, existing between the antecedent parties
to the Note. When received after maturity, the assignee takes the
Note subject to all the eciuitable rights existing between the parties.

A Non-Negotiable Note.

$100.00 Belleville, October 26, 1895.

Three months after date I promise to pay- to William McCabe,

only, at the Bank of Montreal here, the sum of One Hundred

Dollars, for value received.

John Smith.

A Note Negotiable by Indorsement.

.^387.80 Toronto, October 26, 1895.

Five months after date I promise to pay to the order of E. A.
Wills the sum of Three Hundred and Eighty-Seven y"^ Dollars, at
the Canadian Bank of Commerce in Toronto, for value received.

John Smith.

A Note Negotiable withov^ Indorsement.

$50.00 Hamilton, October 26, 1895.

Thirty days after date I promise pay to William Green or bearer,
at my office in Hamilton, the sum of Fifty Dollars, for value received.

John Smith.

13
A Note Payable on Demand.

$35.00 Montreal, Oct. 26, 1895.

On demand, for value received, I promise to pay to the order of

VV. B. Robinson, the sum of Thirty-Five Dollars.

John Smith.

Where a note payable on demand has been indorsed, it must he
presented for payment within a reasonable time of the indorsement ;
if it be not so presented, the indorser is discharged.

In determining what is 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 Joint and Several Note.

$75,00 . Bellevili.k, October 26, 1895.

Six months after date we jointly and severally promise to pay to
the order 01 S. G. Bealty the sum of Seventy-Five Dollars, at the
office of the Dominion Bank in Belleville, for value received.

Henry Brown,
John Smith,
James G. Leonard.
Where a Note runs *' I promise to pay," and is signed by two or
more persons, it is deemed to be their joint ajid several note.

The holder of a joint and several note has recourse against all the
makers^ individually and collectively ; from any of whom he is
entitled to collect the full amount. Protest is not necessary on
dishonor, if there be no indorser on it. Should the holder be obliged
to sue, and recover the amount from one of the parties, that parly
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 or joint makers being
altogether different from that of indorsers. See the eflect of indorsing
and the position of indorsers, beginning at page 19.

A Joint Note.

reads, " we jointly " instead of ** we jointly and severally." When
suing upon n joint note you have to make nil the makers parties
to the action. The joint and several is the better form for the
holder, because any maker can be sued individually.

The Rights of a Third Party in a Negotiable Note.

No arrangement between the maker and payee of a Negotiable
Note can alTcct the right of a Third Party to collect who acquired
the instrument in due course, that is to say, in good faith, before
maturity, for valuable consideration.

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

In transferring by assignment n Non-Negotiable Note, (the form
is : "I hereby assign all my right, title and interest in the within Note

to " and the signatnre of the assignor) the assignor cannot

transfer to the assignee more than he himself possesses,- - for
example, Henry Ellis gave John Wilson a Non-Negotiable Note for
$300. Wilson assigned it to Alex. Thomson. After it was given,
and before it 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 when the assignee, Thomson, presents it for payment.
Had it been a transfer of a negotiable instrument, p.iyable to beai.r
or order, the maker would have been bound to pay the third party
the full amount, irrespective of the 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 his name as an indorser to en^tble the
maker to borrow money upon it. It flatters some men's vanity to be
told that such and such a bank would discount a Note if they would
put their name on the back of it, and in a moment of weakness they
assume a liability for another which, very often, they can only be
freed from by paying. To indorii. and borrow money upon a Note

that one holds against a debtor is a totally difTercnt matter, and is
assuming no risk beyond what wa^ incurred when the debt was
contracted.

Form of an Accommodation Note.

William E. Brown has obtained John Smith's consent to indorse
a Note on which he (Brown) proposes to borrow money, or intends
to give 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. The payee of a Note must be the first indorser.

1^150.00 Helleville, October 26, 1895

Three months after date I promise to pay to the order of John
Smith, ai the Canadian Bank of Commerce here, the sum of One
Hundred and Fifty Dollars, for value received.

William E. Brown.

To be indorsed on back
John Smith.

A Note to be Paid after Death.

The question is often asked whether a Note made payable after
death is good. It has all the essentials, being an unconditional
promise to pay money at a determinable future time (death is a
certain event). The legality of such a Note will depend upon the
object for which it was given. If it was given for a bona fide debt
it would be perfectly c;ood ; but if it was intended to take the place
of a will it would be illegal.

A Lost Note.

Where a Note has been lost before it is overdue, the person who
was holder of it may apply to the drawer to give him another one of
the same tenor, giving security to the drawer, if required, to indemnify
him against all persons whatever, in case the Bill alleged to have
been lost snail be found again. If the drawer, on request as

aforesaid, refuses to give such duplicate note, he may be compelled
to do so. In any action or proceeding upon a Bill, the court or
a judge may order that the loss of the instrument shall not be set
up, 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 Words and Figures.

Where the sum payable is expressed in words and also in figures,
and there is a discrepancy between the two, the sum denoted by the
Words is the amount payable.

Not Invalidated.

A Note is not invalid by reason only that it is ante-dated or
post-dated, or that it bears date on a Sunday. That is to say, a
Note need not necessarily be dated the day it was made ; it can be
dated back or dated forward. In dating back or dating forward, the
instrument might inadvertently be dated on a Sunday. While such
a Note woald not be void, it is well to keep in mind that a Note
actually made on a Sunday would be void.

A Holder in Due Course.

A Holder in Due Course is a Holder who has taken a Note or
Bill, complete and regular on the face of it, under the following
conditions, namely : —

(<i) That he became the Holder bf it before it was overdue, and
without notice that it had been previouly dishonored, if such was
the fact ;

{J>) That he took the instrument in good faith and for value,' and
that at the time it was negotiated to him he had no notice of any
defect in the title of the person who negotiated it.

The title of a person who negotiates an instrument is defective
when he obtained the Note or Bill, or the acceptancco thereof, by
fraud, duress, or force and fear, or other unlawful means, or for an

illegal consideration, or when he negotiates it in breach of faith, or
under such circumstances as amount to fraud.

A 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 to any fraud or illegality affecting it, has all the rights of that
Holder in due course as regards the acceptor and all parties to the
nill or Note prior to that Holder.

Note given for a Patent Right.

Kvery Hill or Note, the consideration of which consists, in whole
or in part, of the purchase money of a Patent Right, or of a partial
interest, 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 "(liven 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.

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.

Every one who issues, sells or transfers, by indorsement or
delivery, 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 of such instrument to have
consisted, in whole or in part, of the purchase money of a Patent
Right, or of a partial interest, limited geograhically or otherwise, in a
Patent Right, is guilty of a misdemeanor, and liable to imprisonment

or fine.

Altering a Note-
When a Note, Bill or acceptance is materially altered without the
assent of all parties liable, it is voided, except as against a party who
has himself made, authorized or assented to the alteration, and
subsequent indorsers.

Provided, that whore a Dill has been materially altered, but the
niteratinn is not apparent, and the Bill is in the hands of a holder in
due course, such holder may avail himself of the Bill as if it had not
been altered, and may enforce payment of it according to its original
tenor.

The following alterations are material, namely, any alteration of the
date, the sum payable, the time of payment, the place of payment,
and where a Bill or Note has been accepted or made payable
generally, the addition of a place of payment without the acceptor's
or maker's assent.

Legal, Rate of Interest

The rate of Interest that can be legally collected upon an overdue
Note, or any debt, on which the rate is not fixed by agreement, is
six per cent, per annum. It is important, when drawing a Note, that
is to bear a higher rate than six per cent., that the words " As well
AFTER AS BEFORE MATURITY UNTIL PAID " be inserted. If these
words, or words to the same effect, are not inserted, the Note would
bear Interest at the higher rate till maturity, but after that only at
the U'gal rate.

There is no usury law in this country, nor is it desirable that there

should be. Money, like any other commodity, will bring for its use

to the owner usually just what it is worth, considering the risk run

and the demand and the supply. If a lender is content with a fair

rate of Interest he can readily find borrowers with good security to

offer, and the grasping man can find customers, too, who will promise

a high rate of Interest, but offer poor security for the fulfilment.

'0
Days of Grace.

The custom among merchants has established the practice, which
is recognized in law, of allowing three Days of Grace upon all
Promissory Notes, Drafts, and Bills of Exchange not p.iyable on
demand. No time Bill is legally due until the days of grace have
expired. In preparing to meet your own paper, or in presenting for

payment that of your ruslonicrs, l)e.'ir this fact in mind, and be
careful when entcrinj; the due dates in your Bill Book to add the
three days of urarc. To illustrate : A Note given at three months
from October 26th would not fall due till January 29th. A Note
given at ninety days from October 26th, will fall due January 27th.

On the first of January, iSys, the State of New York did away
with Days of (irace upon Bills and Notes made within that State.
Kach State legislates for itself in this matter. In Canada the
Dominion Parliament alone can do so, thus insuring uniformity
throughout all the Provinces.

Power of Attorney.

It is customary for firms to grant to their managing accountants
the power to draw Bills, sign Notes, accept Drafts, draw Chcijues,
and generally transact their financial business. This authority is
conveyed and exercised under a document called a Power of
Attorney. It may be special or general — special in confining the
exercise of it to a limited number of acts ; general by the conveyance
of the authority to act for the firm in carrying on its ordinary
financial operations. The usual way for a person who is acting
under a Power of Attorney to sign business papers is, to sign the
firm namC; and place his own underneath, with the words " per pro.'
or letters " p. p." before it, thus :

J. C. MORC.AN & Co.,

per pro J. W. Johnson.

The abbreviations stand for the phrase " by procuration."

A signature by procuration operates as notice that the agent has
but a limited authority to sign, and the i)rincipal is 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,
and adds words to his signature, indicating that he signs for or on
behalf of a principal, or in a representative character, he is not per-

1{)

snnnlly liable thereon ; but the mere addition to his signature of words
describing him as an aRent, or as fdlinj^ a representative (harartcr,
does not exempt him from personal liability.

When a Note Becomes Outlawed.

A Bill or Note becomes outlawed six years after the date of matur-
ity, or after the date of the last payment on account, or after the last
written acknowledgment. That is, the holder of such a note cannot
recover upon it if the maker, on being sued, sets 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 their suits, so as to shorten litigation. In all civilized
countries some period is prescribed by statute with this view. An
instrument approaching the legal, though not the moral, end of its
existence may be brought back to infancy and have its life renewed,
by the holder obtaining say, in answer to a letter, an acknowledgment
in writing of the debt from the maker of the Note.

Indorsements.

The act of writing the name upon the back of an instrument is
called indorsing, which has two effects ; it makes the indorser respon-
sible for payment in the event of the maker failing to pay at maturity,
(|)rovided that due and legal notice of non-payment be given to the
indorser as explained beginning at page 22), and it makes an instru-
ment that is payable to order, transferable. The forms of indorse-
ment commonly in use are (taking a note payable to the order of
John Jones as an example) : —

Indorsement in Blank, Specifying no Indorsee, as

John Jones,

which has the effect just described. When a Note or Bill has been
indorsed in blank, any holder may convert the blank indorsement
into a special indorsement, by writing above the indorser's signature
a direction to pay the Bill or Note to, or to the order of, himself or
some other person.

Indorsement in full or Special Indorsement Specify-
ing the Indorsee to Whose Order it is
to be Payable, as

I'ay to thu order of William lilack.

JOMN JoNBR,

which makes the indorscr rcsponNible and the instrument negotiable
only after it haH been indorsed by the indorsee, William lilack.

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 only.
John Jones,

which makes the indorser responsible, but conflnes the payment to
the indorsee.

Other forms of qualifying indorsement are used, such as taat
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 Beattv & Co.

The qualifying words render it impossible for the person making
the deposit to draw the money.

Indorsements are often made to serve as receipts, as, for example,
I draw a Cheque payable to 8. Jones, or order, instead of to S.
Jones, or 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 consecjueiitly 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. N jics that have
been retired should be cancelled and filed away li!<e receipts.

The Order of Indorser's Liability.

The holder of a Note upon which there is an indorser or several
indorsers h.is equal recourse against any of them (provided they have
been duly notified of non-payment) and the maker at maturity. If
the holder should be obliged to sue, and should he recover from the
maker, that would discharge all the indorsers ; should the holder
recover from the first indorser, that indorser would have recourse
against the maker, but not against subset |ucnt indorsers ; should
the holder recover from the second indorser, that indorser would
have recourse against nil that preceded him, namely, the first
indorser and the maker. If you should have to become an indorser
on a Note along with other indorsers, you will see the importance of
placing your name last.

Guarantee.

You may guarantee the payment of a Note as follows : "I

hereby guarantee the payment of the within Note," and sign your

name. Your liability is beyond that of an indorser, and you would

not be relieved for want of presentation, nor for want of notice of
dishonor.

Where to Present a Note for Payment.

1. Where a Promissory Note is in the body of it made payable at
a particular place, it must be presented for payment at that place.
But the maker is not discharged by the omission to present the Note
for payment on the day that it matures. If no place of payment is
specified in the body of the Note, presentment for payment is not
necessary in order to render the maker liable.

2. Presentment for payment is necessary in order to render the
indorser of a Note liable.

3. Where a Note is in the body of it made payable at a particular
place, presentment at that place is necessary in order to render an

indorNcr linlilc ; l>iit when a place of pnyiiicnt i^ indiralcd by wny of
mctiiorandutn only, jircHcnttncnt at that place is sunicicnt to render
the indurNcr liable, but .1 pretcntnicnt to the maker elsewhere, if
MutVicient in other rcHpectn, shall also siifTK-e.

Tho Proceedings to be taken on the Non-payment
of a Note Having an Indorser.

It is of the first iiii|u)rtance to understand what is to be tlone in
the event of a Note, having an indorscr, being dishonored at maturity.
/'//(■ ffiii/i'ir's liiihlily is ttAso/ii/t; Init the indoner's is (onditional t>»
his tt(eivi»g notice of tion pityiiient. A Note that may be regarded
as perfectly good before maturity, not because the drawer is reliable,
but because the indurser upon it is fmancially sound, may, after it
has become due, be practically worthless, if ihe proper steps to hold
the indorscr have nut been taken. Having presented it at the place
named by the drawer for its payment, and j)ayment bein^ refused,
the holder is bound to notify the indorscr, immediately, in order to
have recourse against him. This will be best accoiri|)lished by hand-
ing the instrument to a Notary Public to be protested. The notary
will make a demand for the payment, and, being answered " No
Funds," will write out a protest, inserting in it the answer to his
demand ; and he will, not later than the following buisness 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 pay-
able. The protest will cost the holder, in the Province of Ontario,
fifty cents, and each notice twenty-five cents and the postage, which
charges he will be entitled to collect from any of the parties to the
Note, as well as legal interest from the date of maturity. The pro-
duction of the protest with the Note in court will be sufficient pnma
facie evidence upon which to sue an indorser.

In this Province, notaries are a|)pointed without special examina-
tions by the Ontario Government. They are usually attorneys, how-
ever. In the Province of Quebec, the notarial is ;i 'iistinct profession,
as it is in France.

When a dishonored Note or Dill it nuthori/cd or rc(|uircd to be

prolt'Ntcd, and lliu Ncrvi( c> of a notary cannot bu obtained at tliu

plurc where the Hill ia dishonored, any justice of the peace reitidctit

in the place may i>reiicnt and protest such Hill, and ^ive all necessary

notices, and shall have the necessary powers of a notary in respect

thereto.

Waiving Protest.

Hy Waiving Protest an indorser renders it unnecessary for the
holder to have an instrument protested. This is usually done, if
before maturity, by the indorser writing; the words on the back :

" I'resentation and I'rotest W.iived."
John Jonks.
If at maturity :

"I hereby accept noti< e of non payment and waive protest,"

John Jonks.

Protest may be waived by letter or tele(;ram, should the indorser
be absent from the place of payment at the date of maturity.

There is no necessity to protest a dislumored Note upon which

there is no indorser ; the maker can be held for six years after

maturity.

Noting.

When a Hill or Note is required to be protested within a specified
time, it is sufficient that it 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, and run a pen through the maker's and
indorsees names, and thus render it valueless. If the payee should
still be the holder, he should, before returning it, indorse it, or place
some written evidence upon it that he had been in possession of it,

otherwise you could prove nolhinp; by it. Put cancelled Notes away
In packages as you should receipts, for production at any lime when
necessary.

The importance of receiving back Notes that have been paid was
made very nppnrent to me by a circumstance that came under my
observation recently. A man borrowed a sum of money upon two
Nutes from a lender, and he, in turn, discounted them at a bank.
At the date of maturity the drawer duly appeared and tendered
payment to the man from whom he borrowed, who accepted it and
gave a receipt. His excuse for not producing and returning the
Notes was that they were in the bank, and it was inconvenient to go
for them, but he promised to send them at 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
about receiving back their old Notes. It is not difficult to recall
cases in which such paper has turned up in banks after the failure
of a wholesale concern, and the easy-going dealer had to pay them.

When making partial payments upon Notes, see that the payment
is properly acknowledg* i by indorsement on the back of the mstru-
ment. Take a separate receipt as well.

Example: Received, August 28th, 1895, the sum of fifty dollars,
on the within note.

THE BOOK-KEEPING IN CONNECTION
WITH NOTES.

Any written obligation to pay money not under seal is termed in
business by the holder, a Bill Receivable, and by the maker or
acceptor, a Bill Payable. In Book-keeping the accounts in the
ledger with these are called, respectively. Bills Receivable account

* No business man should omit to keep a Bill Book in addition to the Ledger
Accounts with Bills Receivable and Bills Payable.

H-.^

and Bills Payable account. Bills Receivable account is made Dr.
when other i)cople's Notes and acceptances are received, and
Credited when they are disposed of. The difference, or balance,
between the two sides should correspond with the Notes on hand,
and the account f lose, by balance, unless all the Notes have been
disposed of, when, of course, it will be simply ruled and footed.

Bills Payable account is credited when you issue a Note or accept
a Draft, and debited when you redeem or, as the word is, retire
these obligations. The dliTerence between the two sides should
correspond with the oblij^'ations outstandinf;;, and the account closes,
to balance, unless all the Notes have been paid, when, like Bills
Receivable account under like circumstances, it will be ruled and
footed. The mere novice in book-keeping will understand and be
able to deal with these accounts when, in the case of l>ills Receivable,
they are simply received and disposed of, and, in the case of Bills
Payable, when they are simply issued and redeemed. But in the
event of

Notes having to be Renewed,

more difficulty will be experienced. I shall take an example or two.
A Note of $300 received from I*". Spencer was duly debited to Bills
Receivable, and his arrount was credited. It stood at the debit of
Bills Receivable until I disposed of it by discounting it at the Bank
of Commerce, when I made the bank debtor for the proceeds*
discount debtor for the difference between the proceeds and the
face of the Note, and credited Bills Receivable account with the
whole amount. My customer asks for a renewal of the Note and I

consent.

The renewal is for three months, and the interest is to be added

to the new Note, making it $305.20. I pay the old Note by Cheque*

send it back to Spencer, and get the new one. Entries for the

Cheque given to pay the Note :

Bills Receivable . $300

To Bank $300

I f

This entry places the Note where it was before it was discounted,

and is the same that would be made by an indorser, under any

circumstances, paying a Note for a maker, except when the maker

was considered financially worthless, when it would be charged to

Loss and Gain.

Entries for the Renewal.

Bills Receivable, Dr *3o5 2^

To Bills Receivable S300 00

'l"o Interest 5 20

The maker's entry for the same transaction would be :

Bills Payable, Dr $300 00

Interest " 5 20

To Bills Payable S305 20

Partial Renewals.
Brown renews for you half the
amount of a Note for $500.00 due
to-day. You pay $250 by Check,
and give a new Note for half the
amount of the old one and inter-
est on renewal, I3. 50.

7. Your entry ;
Bills Payable Dr. ..$500 00

Interest Dr 350

To Bank .^250 00

To Bills Payable 253 5°

Brown renews for you half the
amount of a Note for $600.00,
due to-day. You pay I303.00 by
Check, being half the amount,
plus the interest on renewal, and
you give a new Note for half the
amount of the old one.

2, His entry:
Bills Receivable Dr.$253 50

Cash Dr 250 00

To Bills Receivable. . . $500 00
To Interest 3 50

J. Your entry :
Bills Payable Dr. . .$600 00
Interest Dr. 3 00

To Bank $303 00

To Bills Payable 300 00

4. His entry :
Bills Receivable Dr. $300 00

Cash Dr 303 00

To Bills Receivable. . . 8600 00
To Interest 3 00

Where a Cash Book is kept, of course the cash would have to be
put through it. In that case the entries for No. i would be as
follows : -
Dr. CASH. j CASH. Cr.

To Bank for Check ; By Bills Bayahle. I'or

No. — S250 00 part payment on No. 92,

renewed as per Journal

and Bill Book |i25o 00

JOURNAL.

Bills Payable Dr.. .!!?2 5o 00

Interest Dr 3 50

To Bills I'ayable !?253 50

Important Points in Connection with the Bills
Receivable and Bills Payable Accounts.

You will find analyses of the above accounts at pages 24 and 25.
I wish to eniphasi/e here, and draw the student's special attention to
the point, that when you retire your Notes and Acceptances, you
should never charge Bills Payable account with more or less than
the face of the instrument (the amount credited when issued) ; and
that when a Note or Acceptance against some one else is disposed of,
Bills Receivable account should never be credited with more or less
than the face of the instrument (the amount debited when received).

Examples.

Vou pay your Note, face .S500 ami
interest li?5.oo.

You pay a Note, face !i?6oo, before
maturity, and get a discount of $10 off.

You receive payment of a Note, face
.$300 and interest $4.00.

You receive less than the (ace of a
Note when disposing of it ; face .^700,
discount allowed .i?io.oo.

F.NTRIRS.

;ji5oo 00
5 00

Hills l'.iyal)le Dr..

Interest Dr..

To Cash . . .

Bills Payable Dr 600 00

To Cash

To Discount

Cash Dr 304 00

To Bills Receivable. .
To Interest

Cash Dr 690 00

Discount Dr 10 00

To Bills Receivable. .

ij^os 00

590 00
10 00

300 00
4 00

700 00

If you carefully oljserve these instructions, you will find that the difTerence
between the two sides of Bills Payable .account will always agree with the Notes
outstanding : and the diflerence 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 bearing interest,
because the interest is a liability of the future, not yet matured.

*Lien Notes-
Lien Notes are now freciuently given by people purchasing
agricultural implements, pianos, organs, sewing machines, etc.

Read over the following form carefully. You will observe that
the article upon which the Lien (claim) Note has been given remains
the property of the seller, until the whole of the purchase money has
been paid. Consequently, when buying n second hand instrument,
such as those mentioned above, one should inquire carefully whether
there is a Lien Note upon it.

A Oommon Form of Lien Note.

u
a

i §

X <

«.

HKI.I.IA'II.I.K,

189

On tlic I'list (l;iy of I Jig , I promise

to pay TiiK G. iS: J. JJkown Man'ku Co., (Limited), or order, al

their OHice in Belleville, fur value received

Dollars, with interest at Seven per cent., and at the rate of Ten per
cent, interest after date of maturity. I further ai^tce to furnish
security satisfactory to you at any time if re(|uircd. 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 (;iven without
process of law, and sell it by public or private sale, but the taking
and 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 ri(;ht to the possession of the jtroperty for which this Note is
given shall remain vested in TiiK G. & J. Hrown Man'h; Co ,
(Limited), until this Note or any obligation given therefor is paid.

I hereby acknowledge having this day received a copy of this
Note,

Lot Con Township

P. O. Address.
Witness

An Act of the Ontario Legislature respecting conditional sales of
chattels came into force on the first of January, 1889.

It provides that such an instrument as the above is valid as
against subsequent purchasers of the article for which it was given,

•Attention is drawn to the fact that Lien Notes are dealt with under Provincial
Legislation.

if at the time possession was given to the bailee, it had the name
and address of the manufacturer, bailor or vendor of same painted,
printed, stamped or engraved thereon, or otherwise plainly attached
thereto.

Any proposed purchaser of the article can demand and is entitled
to receive within five days from the manufacturer, bailor or vendor,
claiming ownership, full information respecting the amount due and
the terms of payment ; and if he refuse to give such information, he
will be liable to a fine of .^50. The inquiry may be made by letter,
giving the name and address to which a reply may be sent, and it
will be sufficient if the reply giving the information 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
and the cost of taking possession. If the goods taken were sold or
bailed originally for a greater sum than $30.00, they shall not be
sold, 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 kn'^wn place of abode in Ontario,
or sent by registered letter seven days before the time when the
said five day;? will elapse, addressed to the last known post-office
address in Canada of the bailee or his successor in interest.

A copy of the receipt note must be left with the bailee at the
time of the execution of the instrument, or within twenty days
thereafter.

The manufacturer, bailor or vendor, may file a copy of the
instrument with the Clerk of the County Court of the county in
which tlie bailee resided at the time of the conditional purchase
within '.en days from its execution, and thereby relieve himself from
some of the provisions of the Act. — See Ontario Statuics, j8C8,
Cap, ig.

A Lien Note is not an Ordinary Promissory Note.

According to a recent decision given in Ontario, a Lien Note is
not an ordinary I'romissory Note and consc(iiiently it is nonncKOli-
able. The lien condition takes it out of that category. It can be
transferred by assignment, like an ordinary contract, and would
be subject to any off-sets and legal defences that existed between the
original parties,

I. o. u.

Is a memeniorandum of a debt given by a borrower to a lender, as

for example : —

Montreal, April 28th, 1895,

Mr. A. B., I. O. U. Ten Dollars.

C. I).

It is not a Promissory Note, but is valuable evidence of the
existence of the debt.

DRAFTS, OR INLAND BILLS OF
EXCHANGE.

A Bill of Exchange is an unconditional order in writing, addressed
b 01 -on to another, signed by the person giving it, recjuiring

'■". MirKot. i. .horn it is addressed to pay on demand, or at a fixed
ui fi'ju ■ni;'^ 'V future time, a sum certain in money to, or to the
Older 01, a spc ified person, or to bearer.

An Inland Bill is a Bill which is, or on the face of it purports to be,
(a) both drawn and payable within Canada, or (/') drawn within
Canada upon some person resident therein. Any other Bill is a
foreign Bill,

Nearly all that has been said of Notes is applicable to drafts ; they
differ, however, in form and in other respects. A note is a promise
to pay, originating with the debtor ; a draft is an order to pay

Ll,

originating with the creditor, and addressed by him to the debtor.
There are three parties to a draft — the dratver, the. one that draws
it ; the payee, the one in whose favor it is drawn ; the dr.nvce, the
one on whom it is drawn, who becomes the acceptor. The acceptor
of a draft stands in the same |)osition as the maker of a note, and
the drawer of a draft stands in the same position as the first indorser
of a note. To hold the Drawer for a dishonored bill, notice of
dishonor must be sent to the drawer not later than the next following
business day. This will be best accomplished by handing it to a
Notary Public to be protested. Any drawer or endorser to whom
such notice is not given is discharged.

The Theory of Exchange.

In commerce, an " Exchange " means to pay your creditor by
transferring to him a debt owing to you by some one else.

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 8th, 1895.

Ten days after sight, pay to the order of * R. Miller, Son & Co.,
the sum of Five Hundred Dollars, for value received, and charge
the same to the account of

tJoHN Lovell & Son.

To I Robinson & Johnson,

Ontario Buisness College,
Belleville.
"" Payee t Drawer I Drawee.

:\'2

'I'o make the Draft bindinj; upon Robinson it Johnson they will
have to accept it, which they will do by writing across the face :

Accepkd January lofh, iSq^, payable at the
Canadian Bank of Copnmtrce^ Belleville,

Robinson &* Johnson,

After which it is called an acceptance. Robinson & Johnson are
now in the same position as if they had made a Promissory Note,
and John Lovell it Son are in the same positicm as the first indorser
on a Note. It is customary to allow the drawee to choose the place
of payment ; in this case Robinson & Johnson name the Bank of
Commerce, IJelleville. If the Draft were drawn at ten 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
be reckoned from the day the draft was drawn, in the latter it is
reckoned from si^jht.

The drawer of a Draft may bt both drawer and payee. If John
Lovell & Son desired to collect for themselves the amount of
Robinson & Johnson's debt, they would draw the Draft to their own
order.

The entries of the parties to the foregoing Draft wonld be as
follows : —

John Lovell & Son's
would be

R. Miller, Son & Co.'s
would be

Robinson & Johnson's
would be

f R. Miller, Son it Co., Dr.

I To Robinson it Johnson.

Bills Receivable, Dr.

To John Lovell it Son.

{

J John Lovell & Son, Dr.
1 To Bills Payable.

Further Illustration of " Exchange."

Here is a further illustration of " Exchange," given by McLeod,
one that any person will readily understand :

You are travelling in an omnibus. The fare is twenty-five cents.
The smallest change you have is fifty cents, which you hand to the

conductor. Another passenger is desirous of paying liis fare, and
lias twenty-five cents in his hand ready to hand over. '1 lie conductor
tells him to pay it to you, which he docs. Hy this means the
conductor's debt to you is paid by the transfer to you of the other
passenger's debt to him, and thus considerable trouble is saved.

The principle of Exchange here is precisely the same as that
involved in the Draft, for, as you will see, if you study the matter.
John I.ovell & Son arc in the same position as the conductor of the
omnibus, and pay their debt to R. Miller, Son & Co. by transferring;
to that firm the debt owing to them by Robinson & Johnson, just
as the conductor paid his debt to you by causing the other passenger
to |)ay you the sum he owed the conductor.

The Acceptor's Liability.

The acceptor of a Bill, by accepting it —

Engages that he will pay it according to the tenor of his
acceptance.

The Drawer's Liability.
The Drawer of a Bill, by drawing it —

Engages that on due presentment it shall be accepted and paid
.according to its tenor, and that if it is dishonored he will compensate
ihe holder or any indorser who is compelled to pay it, provided that
the requisite proceedings on dishonor are duly taken.

The Indorser's Liability.

The Indorser of a Bill, by indorsing it —

Engages that on due presentment it shall be accepted and paid
according to its tenor, and that if it is dishonored he will compensate
the holder or a subsequent indorser who is compelled to pay it,
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 parly liable
nn the Itill, and the drawer who has been compelled to pay the Hilt
may recover from the acceptor, and an indorser who has been
compelled to pay the Hill may recover from the acceptor or from the
drawer, or from a prior indorser —

(i) The amount of the Hill ;

(3) Interest thereon from the time of presentment for piyment, if
the Bill is payable on demand, and from the maturity of the Bill 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 upon it: " Not to be protested ; take this off before present-
ing." You may often succeed in collecting from a slow customer by
the medium of a Draft, when dunning letters would fail to produce
a cent. When drawing on a doubtful customer, be sure to attach
the " No Protest," 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 of Acceptance.

The Acceptance of a Bill is the signification by 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 Bill and be signed by the drawee.
The mere signature of the drawee without additional words is
sufficient ; but it is customary to write the word accepted above the
signature ;

(f') It niiisl not express that the drawee will perform his promise
liy any other means than the payment of money.

Where in a Dill the drawee is wrongly designated or his name is
mis-spelt, he may accept the Kill as therein described, addinK, if he
thinks fit, his proper signature, or he may occcpt by his proper
signature.

When a Hill is duly presented for acceptance, and is not acccptai
on the day of pmentment or nnthin two days thenaflif, the f>cni>n
latest ntins; it must treat it as dishonored by non acceptance. // he
does not, the holder shall lose his ri),'ht of recoiose nf^ainst the
draiver and indorsers.

When a Hill 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 Bill must be Duly Presented for Payment.

1. If it is not so presented, the drawer and indorsers shall be
discharged.

2, A Bill is duly presented for payment which is presented in
accordance with the following rules :—

(a) Where the Bill is not payable on demand, presentment must
be made on the day it falls due ;

(l>) Where the Bill is payable on demand, then presentment must
be made within a reasonable time after its issue, in order to render
the drawer liable, and within a reasonable time after its indorsement,
in order to render the indorser liable ;

(c) 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 designated by the Bill
as payer, or to his representative or some person authorized to pay
or refuse payment on his behalf, if, with the exercise of reasonable
diligence, such person can there be found ;

:ir,
(tl) A Hill is |irt'iii'»lctl :if the proper place.

(i) Where a place of payment is Npccirifil in the Hill ami the Mill
is them presented ;

(i) Where no place of payment is sitecificd, hut the address of
the drawee or acceptor is K>vcn in the Hill, and the Bill is there
presented ;

(5) Where no place of payment is specified and no address ^iven,
and the Hill is presented at the drawee's or acceptor's place of
business, if known, and if not, at his ordinary residence, if known ;

(4) In any other case, if |>resented to the drawee or acceptor
wherever he can be found, or if presented at his last known place of
business or residence.

Where a liill is presented at the proper place, and after the
exercise of reasonable diligence, no person authorized to pay or
refuse payment can be found there, no further presentment to the
drawee or acceptor is required.

Where the i)lace of payment specified in the Bill or Acceptance is
any city, town or village, and no place therein is specified, and the
IJill is presented at the drawee's or acceptor's known place of
business or known ordinary residence therein, and if there is no such
place of business or residence, the IJill is presented at the post office,
or principal post office in such city, town or village, such presentment
is sufficient.

Bank Oommission for OoUecting.

The banks usually charge ^ of 1% for making collections. If
you wish to draw for a debt, say of §200, in this province, and the
drawee is to pay the exchange, the amount of your Draft would be
iit2oo.5o. If the drawee resides in a distant part of the Dominion,
or in the United States, and you cannot tell what the cost of
collection will be, 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 exchanor."

37
Kinds of Drafts.

'I'licru arc ihrvc kimU of Drnfti, natncly, Tinic, Si^lit and
Demand. Time Drafts arc those thnt arc intended to run a certain
lime after date or after acceptance. 'V\\c only difTerencc between a
Draft at Si(;ht and n Draft on Demand is, that on the former the
drawee can take three days of grare, and the latter is payalile on
presentation. When you desire to ^ive the drawee a defmite numlier
of days for the payment of a Draft after he occepts it, draw so many
days alter Hi^ht. If you draw so many days after date the time is
fixetl for the payment, irrespective of the date of acceptance. Kor
example, to ^ive the drawee ten actual days from si^ht, draw at seven
days' si^ht ; to give him four days, draw at one day's sight, and so on.
'I'he days named and the three days of ^ra^e make the tune the
Draft will mature after sight.

* Accommodation Draft ("Kite FJying").

It is not an unusual thing when an extensive wholesale house fails,
to hear ol numerous failures among retail dealers in the same line.
It will lie found that disaster has come upon the latter because they
have lent their names to the former too freely. To illustrate : I ant
doing a retail business in Uellcville with a fair amount of capital, my
largest creditor being John Hlank iS: (!o,, of Toronto. They have
placed me under obligation by renewing my paper occasionally, and
otherwise indulging me. Uetter ior me that they had not. 'I'hey
write and ask me to accept their Draft at three months for S500,
beyond the amount that I owe them, giving the excuse that they
have to buy a large amount of exchange to remit to ICngland in the
coming week, or they have heavy duties to pay, and they remind me
of the help they have given me in the past. Heing of a grateful
turn and believing that the house of lUank & Co. could not he
otherwise than sound, I consent, and duly accept the Draft, hoping
that I shall not be called upon again to accommodate them with my
name. At the end of the three months they duly retire my Accept-

•See "Accommodation Note," page 13.

ance and return it to njc, as I knew they would. I am surprised,
however, in a few days by a rc(iuest to accept two more Drafts of
;^5oo each, for their accommodation. Similar excuses are given, and
I assume an obligation of I looo, for which I receive no value. As
time goes on similar requests continue, and ro does my folly, until
my name is upon their paper for a sum larger than my capital.
They fail with this paper under discount at the bank, and as it
would be impossible for me to pay it and discharge my legitimate
obligations, I too have to make an assignment. An accommodation
party is liable on the Bill to a holder for value ; and it is immaterial
whether, when such holder took the Bill, he knew such party to be
an accommodation party or not. Need I add the caution — never
accept Accommodation Drafts, or, as the expression is, "fly kites"
fjr any one. The man who accepts an Accommodation Draft is in a
worse position than the man who indorses an Accomodation Note.
The latter can come on the maker ; 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 business mat. i frequently in such a position as the following :

His Acceptance (or Note) for $600.00 in favor of John Allen
& Co,, of Montreal, will fall due four days hence at the Bank of
Montreal in Kingston. All he can raise towards paying it is
$300.00 ; so he writes them the following letter :

Kingston, June 9, 1895.
Messrs. John Allen & Co.,
Montreal.

Gentlemen, — I regret that I shall not be able to pay in full my
Acceptance in your favor due on the 13th instant. All I can raise is
$300, and I request that you will kindly permit me to 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.

3!)
He receives the following reply : —

Mr. Richard Roe,

Kingston,

Montreal, June lo, 1895,

Dkar Sir, — Your letter of the 9th 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, due June 13th. As requested,

we shall draw back upon you for that amount, adding interest and

exchange.

Yours faithfully,

JOHN ALLEN & CO.

The letter of authority to draw the Draft will be shown by Roe to
the manager of the Bank, with the recjuest that the bank will
discount the draft. He consents. Roc draws the f(jllowing Draft :

$300.00.

Kingston, June 13, 1895.

At sight, for value received, pay to the order of the Bank of

Montreal the sum of three hundred dollars, and charge to the

account of

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
l)ank. )

Roe has the Draft discounted, and leases the proceeds, $299.25,
to his credit in the bank.

John Allen & Co. retire the Draft by Check on presentation.

The interest and cost of collecting the Draft which they draw back
upon Roe is ^1.50 ; so they draw upon him at ten days' date for
830T.50.

; I

Entries.

Roe's entry when he draws the | Bank, Dr $299 35

Draft on Allen. > Discount, Dr.. 75

) To John Allen & Co. $300 00

Allen's entry when they retire \ R. Roe, Dr. . . $300 00

Roe's Draft by Check. J To Bank. . . $300 00

Allen's entry when they charge \

Roe with the interest and ( R. Roe, Dr. . . l$i 50

exchange on the Draft to [ To Interest $1 50

be drawn at 10 days. }

Allen's entry when they draw ) Bills Rec. ..$301 50

on Roe at 10 days. j To R. Roe.. .^301 50

Roe's entry when he accepts \ John Allen & Co., Dr,$3oo 00

Allen's Draft at ten days' \ Interest, Dr i 50

date. ) To 1- ills Payable. . $301 50

The Note to retire which assistance was obtained, was duly
charged to Roc's account in the Bank, and he made

Bills Payable, Dr. .$600 00
To Bank .S600 00

and when he retires the Acceptance of I301.50 he will make

Bills Payable $301 50

To Bank $301 50.

A Bank Draft

is a medium by which a remittance is made. You desire to send or
carry money to a distance in a way that will be safe. Buy from a
Bank a Draft payable on demand, at the place desired, to your
order, or to that of the person for whom the money is intended. It
will cost you a quarter of one per cent, more than the face, and will
be cashed at par at the branch or Bank it is drawn upon.

If the Draft is drawn upon a foreign country, it is called a Foreign
Bill of Exchange.

Buying a Bank Draft and Making Entries for it.
When buying a Draft from a Bank, you make out a "requisition"

on the rortn the Bank supphes, stating the amount, and where and
to whose order you desire it to be made payable, and sign it. Hand
the re([uisition to the teller with a Check or cash for the amount of
the Draft and the exchange, which is usually J<( of i%.

Entries, Example 1.

You owe The Ames, Holden Co. of Montreal, I200.00 and remit
to them a Draft bought from the Bank of Commerce, Belleville, for
that amount, the exchange costing 50 cents (^ of 1%). You give a
Check for $200.50 in payment for the Draft and exchange. Your
journal entry is :

The Ames, IloUIen Co., I>r.
lixchanjje (or Interest) "
To Bank

$200

00
50

.$200

Put through the Cash Book the entries would be

Dr.

CASH.

CONTRA.

Cr.

To Bank for Check

No.—...,

$200

By The Ames, Ilolden
Cu. remitted Bank
Draft in settlement.

By Exchange on above
Draft

$200

(

Example No. 2.

We will suppose that you deduct a cash discount of 5% from the
amount of the account owing The Ames, Holden Co. and remit a
Bank Draft in settlement for .$190.00, for which you pay $190. +.47
exchange = $190.47 by Check. Your journal entry is :

The Ames, Holden Co., Dr. . .

To Discount

To Bank

$200

? 9
190

53
47

-OR-

The Ames, Holden Co., Dr. ,
Exchange, lit

To Discount

To Bank

$200

00
47

$ 10
190

00
47

Put through the Cash Book the entries would be either
/Jr. CASH. CONTRA.

Dr.

Bank

for C heck

No.-

To Discount 5% off The
Ames, Holden Co's
o/c. less X% cost of
Draft

«I90
9

47
53

By The Ames. Hoklen
Co. remitted Bank
Draft in settlement.

$200

-OR-

CASH.

CONTRA.

Cr.

To Bank for Check
No

To Discount 5% off
The Ames, Holden
Co.'s a/c

I190

By The Ames, Holden
Co. remitted Bank
Draft in settlement.

By Exchange on above
Draft....

$200

FOREIGN BILLS OF EXCHANGE.

Bills of Exchange were not known to the ancients. We have
records, however, of their use in the fourteenth century. It is probable
that a Bill of Exchange was in its origin nothing more than a letter
of credit from a merchant in one country to his debtor, a merchant in
another, requesting him to pay the debt to a third person who
carried the letter, and was travelling to the place where the debtor
resided.

This mode of making payments was found by experience extremely
convenient for all parties — to the creditor, for he could thus collect
his debt without trouble, risk or expense ; to the debtor, for the

facility of payment was an c(|ual accommodation to him ; to the
bearer of the letter, who found himself in funds in a foreign country,
without the danger and incumbrance of carrying specie.

At first, perhaps, the letter alluded to many other things besides
the order to pay money ; but it was gradually disencumbered of all
other matters, was left open, and the paper on which it was written
gradually assumed the size and form now in use. The assignee
was, perhaps, desirous to know beforehand whether the party to
whom it was addressed would pay it, and sometimes showed it to
him for that purpose ; his consent to pay was the origin of Accept-
ances,

Foreign Exchange Explained.

The theory and nature of inland Exchange have been fully set
forth at pages 30, 31 32 and 33, and I shall now explain Foreign
Exchange by the following practical illustrations : I am a produce
commissijn merchant in Montreal, and have received from the firm
of John Lord & Co., London, England, an order for a quantity of
wheat. I have shipped it on board the steamship " Parisian," and
have obtained from the vessel's agent (or the master or purser) the
Bill of Lading duly signed (in which I have had the wheat consigned
to my own order, as it is not yet paid for) and I have also insured it.
The value of the wheat is two thousand pounds, for which I have
John Lord & Go's, authority to draw a Bill on them at three days'
sight. I draw the Bill of Exchange upon them in the following set :

ist.

Montreal, April 15, 1895.
Exchange for ;^2ooc.

Three days 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

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

London, E. C, England.

J. W. Johnson.

2nd.

Montreal, April 15, 1895.
Exchange for jCsooo.

Three days after sight of this jccond of Exchange (first and third
of the same tenor and d; 'e ui y pay to the order of myself, the
sum of Two Thousand Poi > .
charge the same to the account of

mg, for value rccerved, and
J. W. Johnson.

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

London, E. C, England.

3rd.

MoNTREAi,, April 15, 1S95.
Exchange for ^^2000.

Three days after sight of this third of Exchange (first and second
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 & Co.,
7 New Broad St.,

London, E. C, England.

I have now Exchange for sale, created by the export of the wheat,
and the consequent debt to me of John Lord & Co. I shall sell it
where I can obtain the highest price, and have offered it to several
bankers ; the Bank of Montreal having made the best offer, viz :
4.87 (*lhat is to say, .$4.87 for each pound), I dispose of the Bill of
Exchange to that institution, indorsing it to the order of the Bank,
and I also indorse the Bill of Lading over to the Bank and likewise
assign to it the policy of insurance.

The Bank having bought Exchange on London, or the debt owing
to me there, is now in a position to sell Exchange on I^ondon. Here

*The par of Sterling Exchange is 14.865^^, or 9^% over the old par, which
was $4.44 4-9. 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.

are a dozen Montreal merchants desirous of paying debts that they
owe in London, and knowing that the Hank has Exchange for sale
they will save the trouble and expense of transmitting bullion (gold
or silver) by buying Bills drawn by the Hank of Montreal- on its
London agent for the various sums that they may rcipiire, and to
the order of the persons to whom they are indebted, until the two
thousand pounds representing the export of the wheat, is exhausted.
If the bank, in order to meet its customers' demands, should issue
IJills to a larger amount than the two thousand i)ounds, it could make
one remittance in coin to cover the overdraft. In actual practice,
liowever, this would not be necessary for any one day's transactions,
for the Hank has other funds available in London, or if not, has
credit, which is just as good. However, if the overdraft on its
London correspondent continued, the Bank would require periodical-
ly to remit coin, or buy Exchange from some other Bank to remit.
An estimate of the cost of sending a million dollars in gold across
the Atlantic is given at page 46.

You will see from the above how large international transactions
are conducted, and many acts of Exchange accomplished, by a single
transfer of specie. Gold is the common denominator of value, Bills
of Exchange represent it, and gold could be obtained for them, but it
is not the actual medium of Exchange. The wheat that I exported
paid for the importations of a dozen merchants, which is practically
barter, where equivalent quantities of goods are made to pay for
each other.

From the transactions in F^xchange mentioned as occurring in one
Bank 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
understand when you read in the papers "that bullion has been
shipped from England to America" (or vice versa) that one such
transmission is the single settlement in coin for thousands of
international transactions, whereby freight charges, insurance and

; I

actual loss of nold, that would he involved if each one had to ship
^old to meet his individual debts, arc avoided.

The Oost of Shipping Gold from New York
to England.

The cost, as estimated in New York City, for shipping a million
dollars in gold to England, to meet overdrafts, or in settlement
between bankers, is as follows :

Loss of Interest, 8 days,

• * 500

Insurance,

900

Freight,

• «075

Cooperage, Cartage, etc,

This amounts to slightly more than a fourth of 1% on a million.
'I'here would also be a slight loss from abrasion.

Buying a Bill of Exchange on London, and
Making Entries for it.

You are making a remittance by Bill of J-'xchangc to the firm of
Leaf, Sons & Co., London, England, to meet an Acceptance of
yours, due at their office in London two weeks hence, for j(^2oo.
The rate is 10^ (that is io^% over the old par of Exchange, 4. 44 J.
4.44JX 200 = 888.88 and 888 88+io>6 of 888.88 = 8978.87, which
is the amount the Bill will cost you). As the rate includes the Bank
commission you will give your Check for $978.87 in payment for the
Bill, and your entry will be :

Bills Payable, Dr 8978 87

To Bank 8978 87

When you accepted the Draft for jC2oo, you probably niade the
entry in blank, as follows :

Leaf, Sons & Co., Dr.

To Bills Payable.
Accepted their Draft at 60 days'
sight for ;i^2oo, payable at their
office in London, B. P.— due.

The reason why the figures are not carrricd out is that you cannf»t
tell how much the Uill will cost, as the rate of Exchange isronstanily
fluctuating. Carry out the figures when you remit and know the
cost.

In the event of closing the books before remitting for a Sterling
Acceptance, and conse(juently before knowing what it will cost, it is
customary to anticipate some rate and if the actual cost dffers from
it, make a journal entry to adjust it. For example, you anticipated
the rate of the above acceptance at qJ-^ and carried out ^97,5.33, but
it cost actually when remitting #978.87. In addition to the entry—

' liills Payable, l)r....!B978 87

To Bank .$978 87

you will require to make another entry to adjust the difference as
follows :

Discount, I)r $^ 54

To Bills Payable.. #5 54

and give explanation.

Bills in a Set.

Three, or at least two, Bills are issued in a set of exchange, (see
pages 43 and 44 each part of the set being numbered, and containing
a reference to the other parts ; the whole of the parts constitute one
Bill, and one part having been paid the others are void. The
original object of issuing more than one Bill was that they might be
sent by different conveyances, and whichever one was presented to
the drawee first was paid. When the ocean mails were carried by
sailing vessels, delays were frequent. A vessel bearing the second of
exchange, although sailing two weeks later than the one by which
the first was sent, might reach its destination at an earlier date than
the other. The punctuality of the ocean mails now, renders it usually
unnecessary to remit more than one Bill of the set.

LETTER OP CREDIT.

A merchant on this Hide of ihc Atlantic goin|{ to Knglnnd to
liurclinsc goods and wishing to pay spot cash and secure the cash
discount, as well as save the cost of remitting, will carry with liim a
Letter of Credit. The Letter of Credit is issued by his banker in
('anada upon a Hank say in London, and authorizes the Uank in
London to cash Checks or Drafts of the payee named in the Letter of
Credit up to the limit stated in it. Or a Letter of Credit might
convey from a Jiank to its agent in another country, as in the example
below, authority to cash Drafts up to the limit named, of one
individual upon another, the individual upon whom the Drafts are to
be drawn, being a depositor of the liank that issued the Letter of
Credit.

Colonial Bank, JUruauos, W. L, 26th January, 1895.

Messrs. Brown Brothers & Co.,

Agents Colonial Bank,
New York.
Dear Sirs, —

You are hereby authorized to cash the (lold Drafts, without
deduction, of Mr. Belfield Grannum on Mr. E. T. Grannum of this
Island, at 30 day.s' sight, to the extent of I520, say Five Hundred
and Twenty Dollars, this Credit to remain in force for three months
from date.

The Messrs. Grannums' signatures were sent you last year.

I 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 Lettors of Credit

art; JHsucd by some banks for use by travellers. They arc more
convenient than a Kill of Kxchange, bi-caiisc nu)ney can be obtained
upon ilieui in various countries. The identification of the person to
whose order a Circular Letter of Credit is drawn is established by
his si|4naturc on the margin, certified by the banker who issued it.
Where he is an entire stranger, to prove his identity, he has only to
submit his signature for comparison with that which he signed upon
the margin.

CHEQUES ON A BANK.

A Che(iue is a Bill of Exchange drawn on a Bank, payable on
demand,

Form.

Stijh,

No. 1,053.

June 2n(l, 1895,

In favor of Geo. Ritchie .S:
Co.

In full of Account to dale.

No. 1,053. nclieviilc, Ont., June and, 1.S95.

To the Canadian Hank of Commerce,
(Helleviile Branch.)
V,\y Messrs. (leo. Ritchie .S: Co., or order.

.Seventy-five 50/100 dollars.

§75-50 (in full of Account to date.)

ROBINSON & JOHNSON.

In the above example Robinson iS: Johnson have funds on deposit
in the branch of the Bank of Commerce at Belleville, and desirini;
to pay George Ritchie & Co. the amount of their account, give them
a cheque for $75.50. The cheque drawn as above will serve as
a receipt when it is paid, and received back from the bank,
because it is payable to the order of the payee, names what it was
given for, and must be indorsed by George Ritchie & Co. before
they can transfer it, or draw the money on it.

m
Accepted Oheques.

On receiving n Che(]tic from the drawer, the payeu should pronrnt
it at onre to the Bank for Acceptance, and within a rcaionahle time
fur payment, The ledger keeper is the odiccr who accepts it, and
the teller the one who pays it.

Indorsing Oheques.

A Che(iue payable to bearer is negotiated by delivery ; on? |)nv.
able to order is negotiated by indorsement and delivery. I'hc safest
way is to make all Chc'iues payable to order. See indorsements nt
pages 19, 20 and 21. Do not indorse a Chc4uc until you present it for
payment, when you will indorse it in blank. If you transfer it,
indorse it in full. If your name is misspelt indorse as it is written,
then add your proper signature. ,

Numbering Oheques

Number your Cheques so that you may have the satisfaction ot
knowing that th<»v have been returned ; preserve them, consecutively
numbered, in packages, so that you can produce them at any time.

The Bank Account.

My experience as an accountant and auditor has convinced me
that it is always the better way to show dealings with a Bank through
a Ledger Account ; transactions are more easily traced, and not only
is there less liability to error, but there is less opportunity for fraud.

The debtor side of the Bank Account shows deposits, discounts,
and collections ; the Credit side withdrawals (either by Check or
Draft) and the Notes and Acceptances which you made payable at
the Bank, and which have been charged to your Account at maturity.
If the Dr. side is the larger, the difference is the amount on deposit ;
if the Credit side is the larger, the difference is the amount overdrawn
The Account closes either to or by balance.

Checking the Bank Account.

Leave your pass book in the bank on the last day of each month
to be balanced. About the 2nd or 3rd of the new month it will be

haiulftl III ymi (iftcr >«m havi; sinntU an arknowlitdgmcnt ihat
the balance shown is iii{ht), toucthcr with ihc (!hc(|iics, Notts ami
A* teptanrcs that Ivivu been p.iid and charged to your Aci ount up t«>
the end of the previous month. You will somciimus find that the
b.tlaiu c in the Hank pass book and the balance in your books do not
aKrov. In this event find what Che<|ues are niiisinK by noting the
numbeis that are absent, refer to the corresponding stub nuntlicrs,
and you will find (unless mistakes have been made) that the sum of
'le ab>«ent chctiucs is the difTcrencc. The absent chc(iues had not
cen presented for acceptance when the passbook was made up ;
you had credited the bank with them in your books, but they hnd
not then been chari^ed by the bank to your account, hence the
discrepancy.

Keep Daily Track of Your Bank Balance.

It is a most unpleasant experience for a reputable business man
when he has given a che<iuc in good faith, to have it returned with
the remark, *' no funds," and possibly notarial chart^es to pay. Men
who have no fmancial reputation to sustain " don't care," and
fretpicntly put persistent creditors ofT temporarily by drawing cheques
which they know there are no funds to meet. A man who wants to
know daily how his balance stands, and who cannot keep the bank
account in the ledger posted closely, can keep track of the bank
transactions on the back of the stubs of his cheques as follows : —

'I'he balance this morning was 1^920.70.

!?ioo. !?S7.2o, $60. 30
Three chc(iues were issued to-day, Nos. 129. 130. 131.

The proceeds of a note discounted amount to $430.20.
A deposit was made to-day of $600.
On tho back of the stub of the last chetjue issued write

linlance over,

Deduct
Che(|ues Nog, 129.

130.
>3i.

Add
Proceeds of discount,
Deposit,

Present balance,

$l(X3.00

57.20

60. 30

430-20

600. CXI

^920.70

2'7So

$703.20

1030,20
?«733-40

A man will not, unless he designs to do it, issue cheques for which
there are no funds if he attends accurately to this matter each day.

Rate of Exchange on Cheques.

Cheques presented at any other branch of the Uank 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
for the amount of the debt and the Exchange, if it is to be paid at
another branch. If you keep a fair balance with your banker on
which no interest is allowed, he may grant you the concession of
marking your Cheques payable at par at the branch where it will be
presented for payment.

Precaution Against Fraud
Draw your Cheques so that they cannot be raised or altered.
In the example given at page 49, you will observe that there is no
unfilled space to the left of the written amount, and the fraction

(or if no fraction —) follows close up to it on the right. Neither
100

on one side nor the other can any word be added. If you fail to
observe such a precaution, and by your carelessness invite fraud,
and it should succeed, you, and not the bank, will be the loser.

Identifying Strangers on Cheques.
Take care, when identifying a payee on a Cheque or Draft to
enable him to draw money, that you do not incur responsibility.
For example ; John Jones, whom you know, wants you to identify
him on a Cheque or Draft payable to his order that has not been
accepted. He indorses it ; underneath his signature write, "Identified
by," and sign your name. Doing this, you only certify that he is
John Jones ; but if you simply indorse your name under his, you
would guarantee both the man and the money. He may say, "but
I cannot get the money on personal identification only ; " your reply
would be, "well, let it be sent for collection, I decline to incur any
responsibility beyond identifying 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 it is intended that a chcHjue shall not be negotiable, it is
crossed.

1. Where a cheque bears across its lace an addition of: —

(ii) The word " bank " between two parallel transverse lines,
either with or without the words " not negotiable," or

{/') Two parallel transverse lines simply, either with or without
the words "not negotiable ; "

That addition constitutes a crossing, and the Cheque is crossed
generally.

2. Where a Cheque bears across its face an addition of the name
of a bank, either with or without the words *'not negotiable," that
addition constitutes a crossing, and the Cheque is crossed specially,
and to that bank.

A Cheque may be crossed generally or specially by the drawer.

3. Where a Checjue is uncrossed, the holder may cross it generally
or specially.

4. Where a Cheque is crossed generally, the holder may cross it
specially.

5. Where a Cheque is crossed generally or specially, the holder
may add the words "not negotiable."

6. AVhere a cheque is crossed specially, the bank to which it is
crossed may again cross it specially, to another bank for collection.

7. Where an uncrossed Cheque, or a Cheque crossed generally, is
sent to a bank for collection, it may cross it specially to itself

8. A crossed Cheque may be ro-opened or uncrossed by the
drawer, writing between the transverse lines, and initialing the same,
the words "pay cash."

Book-Keeping Entries for Cheques.
When you deposit in the bank, you make the bank Dr. to Cash.
WMien you draw a Cheque, credit the bank and debit the person to
whom, or the account for which, it has been issued. When you
receive a Cheque, make Cash Dr. to the person from whom, or the
account for which, you receive it.

Cheques may either be journalized or put through the cash book.
It is not necessary to credit each Cheque singly. The Cheques
issued in a day or a week or a month may be credited in one sum to
the bank. Four Cheques were issued to-day, journalize them from
the stub as shown on page 54.

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QUESTIONS FOR REVIEW.

I NTRODUCTORY.

What is the British North America Act ? When did it come into '^^^
force? What Parliament has the power to deal with Bills and J^'^^'^'-''
Notes? What is the Dominion Statute called which codified the - ^-t-
laws relating to Bills and Notes ? What is Common Law ? What - ^ cL
is Statute Law ? From what has the Law relating to Bills of -o-a^
Exchange grown? What is the Law-making power of merchants v-^
known as ? Give two illustrations of the controlling effect of the // - c
Law-merchant.

Name the two ^t'^

What are the commonest forms of Contracts?
kinds of Contracts. How may Simple Contracts be made ? How
must Specialty Contracts be made? What is essential in every c^
Contract? When suing on a Simple Contract what must be e.
proved ? Does this requirement apply to a Specialty Contract ? f
What is the exception to the general rule with respect to Notes and 'x
]}ills ? When is a Simple Written Contract duly made? When is J- '
a Specialty Contract duly made? What may a consideration be?- ■^■- (v
What is the Statute of Frauds and when was it passed ? It requires
that certain Simple Contracts shall be in writing ; name the principal -4 ,' ■»■ ^^)
cases. What Contracts must be not only in writing, but be under - ^^
Seal ? What is a Seal ? Who are competent to make a Contract ? - t . <^
What must be attached to a Contract with a i- "^
How is authority conferred upon - ?-f
In making a Contract by-*-C^-
correspondence what is required? What do the words "Without -f^
Prejudice" mean ? When do Contracts become outlawed } - \~(^

What IS a mmor ?

corporation to make it binding ?

an agent ? How does the agent sign ?

QUESTIONS FOR REVIEW.

NOTES.

f il -v-T.)

State the three reasons that make it desirable to hold a note

a- a

against a debtor. Explain the term "discounting a note." (live a
definition of a Promissory Note. What is meant by a determinable ^

future time? Name the parties to a note. How are notes

II- (^

transferred ? When may notes be transferred ? Explain a nego-
tiable note ; a note negotiable without indorsement ; a note
negotiable by indorsement. Give the form of a non-negotiable note ;
a note negotiable by indorsement ; a note negotiable without
indorsement ; a note payable on demand ; a joint and several note.
Explain a joint and several note. Explain a Joint Note. What are
the rights of a third party in a negotiable note ? What are the rights
of an assignee of a non-negotiable note ? Explain an accommodation
note. Give an example, and state why it is made payable to the
order of the indorser and not to the order of the lender. Is a note
good that is made payable after death ? What may be done in
regard to a lost note ? Discrepancy between words and figures,
which is payable? Name circumstances that do not invalidate a
note. What is a holder in due course ? What must be done on a
note given for a patent right ? What is the effect of altering a
note ? Explain what is meant by the legal rate of interest. Under
what circumstances would you insert the words, " as well after
AS BEFORK MATURITY UNTIL PAID " in a note bearing interest ?
What is a usury law? What are days of grace? When would a
note drawn 3 months from October 26 fall due? When would a
note drawn at ninety days from October 26 fall due ? What is a
power of attorney ? How does the holder of a power of attorney
sign business papers for his principal ? What does the abbreviation
per pro stand for ? When does a note become outlawed ? What is

the Statute of Limitations ? What is the act of indorsing ? What
are its effects ? Explain indorsement in blank, and what may the
holder do ? Explain indorsement in full ; (jualified indorsement ;
restrictive indorsement ; indorsement for deposit only. How could
you prove the payment of a note ? What is the order of indorsers'
liability? Explain guarantee on a note. Where shotild a note be
presented for payment ? What are the proceedings to be taken to
hold indorsers on a note not paid at maturity ? If the services of a
notary cannot be obtained, who may perform his functions ? What
is waiving protest ? Give examples ? Why is it unnecessary to
protest a note on which there is no indorser ? What is noting ?
How should partial i)ayments be acknowledged on notes? When
you have paid a note, what should you do with it ? When renewing
your note, what should you receive ? What is a bill receivable ?
What is a bill payable? In book-keeping what are the accounts
representing notes called? Analyse the bills receivable and bills
payable accounts. Give the entries of the maker having a note
renewed. Give the entries of the holder when renewing a note.
Give the entries of each for partial renewals. State two important
points in connection with bills receivable and bills payable accounts.
Explain a Lien Note. Is a Lien Note negotiable ? Which
Legislature deals with Lien Notes ? What is an I. O. U. ?

QUESTIONS FOR REVIEW.

DRAFTS.

Give a definition of a Draft or Inland Bill. Explain the difference
between a Note and a Draft. How many parties are there to a
Draft? Name them. Explain each one's position. Which one
accepts the Draft ? What party to an acceptance stands in the same
position as the maker of a note ? What party to a draft stands in
the same position as the first indorser on a note? To hold the

drawer of a dishonored bill what must be done and when ? Explain
the theory of exchange. Give an example of a draft with three firms
or persons and two debts concerned. How is a draft payable ten
days after sight accepted ? How is a draft payable ten days after
date accepted ? From what date do you reckon the maturity of a
draft drawn ten days after sight ? From what date do you reckon
the maturity of a draft drawn ten days after date ? What is a draft
called after it has been accepted ? Under what circumstances are
the drawer and payee of a draft the same person ? To whose order
is it made payable ? Give the drawer's entry for a time draft. Give
tlie payee's entry. Give the drawee's entry. Give an illustration of
exchange. State the acceptor's liability. State the drawer's liability.
State the indorser's liability. In case of dishonor, who may recover
and what ? What will be done when a draft is dishonored ? How
may protest be avoided if desired ? Give definition and requisites of
acceptance. Explain what is due presentment for payment. What
is the usual rate of bank commission for collecting drafts ? How
will you insure the collection of a definite sum when you cannot tell
how much the exchange will be ? Name the three kinds of drafts.
Explain each. To give a person four clear days to pay a draft, no
matter how long it may take to reach him, how would you draw it ?
To give him fifteen days ? To give him three days ? To give no
time ? What is an accommodation draft ? What expression is used
to describe this method of raising money? How would you proceed
to obtain assistance by draft to retire an acceptance or note ? What
is the object of a bank draft ? What does par mean ? Entries
when buying a bank draft ? When is a draft called a foreign bill of
exchange ? What was its origin ? Give an illustration of foreign
exchange. How many bills are usually issued in a set of exchange ?
Why is more than one issued ? Give the form of the first bill in a
set of exchange ? The second ? The third ?. What is the cost of
shipping gold from New York to England ? Entries when buying a
bill of exchange on London ! What is a letter of credit ? What is
a circular letter of credit ?

QUESTIONS FOR REVIEW.

CHEQUES.

(Jive a definition of a cht'cjue. Ciivc a form. How is a cheque
drawn in order that it m.iy serve as a receipt ? What act of the
payee would ])rove payment ? Explain what is an accepted chccjue.
What officer of the bank accei^ts it ? What ofiicer of the bank
pays it? How is a cheque payable to bearer negotiated? How
is a cheque payable to order negotiated ? When should you indorse
a cheque ? Why should cheques be numbered ? How should
che(iues be preserved? Analyse the bank account. How should
you check the bank account ? If a discrepancy exists between th«;
pass book, when balanced, and your account, how do you find the
cause? State a simple method of keeping daily track of your
balance in bank. What is the rate of exchange charged on cheques ?
When is it charged ? Cheques payable at par at another branch,
explain. How will you take precaution .igainst fraud? Huw
would you indentify a payee ? What are crossed cheques ? Give
journal entries fo cheques. Put chcciues through the cash book.

(Irti

THE CANADIAN ACCOUNTANT,"

By the Prinoipals or Ontario ButiNCts Collcoe.

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