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cash anywhere within a reasonable distance of the money centre upon which they are drawn. Bankers' drafts on New York would, under ordinary financial conditions, be considered cash anywhere in the United States. A draft on a foreign bank is usually called a BILL OF EXCHANGE.
[Illustration: A cheque for the purchase of a draft.]
Cheques have come to be quite generally used for the payment of bills even at long distances. If a business man desires to close an important contract requiring cash in advance he sends a bank draft, if at a distance, or a certified cheque, if in the same city. If he desires simply to pay a debt he sends his own personal cheque. Bank drafts are quite generally used by merchants in the West to pay bills in the East. A draft on New York bought in San Francisco is cash when it reaches New York, while a San Francisco cheque is not cash until it returns and is cashed by the bank upon which it is drawn. In the ordinary course of business cheques are considered cash no matter upon what bank drawn. The bank receiving them on deposit gives the depositor credit at once, even though it may take a week before the value represented by the cheque is in the possession of the bank.
[Illustration: A bank draft.]
All wholesale transactions and a large proportion of retail transactions are completed by the passing of instruments of credit--notes, cheques, drafts, etc.; a part only of the retail trade is conducted by actual currency-bills and "change." Banks handle the bulk of these transferable titles and deal to a very small extent--that is, proportionally--in actual money. The notes, drafts, bills of exchange, and bank cheques are representative of the property passing by title in money from the producers to the consumers. A small proportion--perhaps six or eight per cent.--of these transactions is conducted by the use of actual bank or legal-tender notes. This trade in instruments of credit amounts in the United States to fifty billions of dollars yearly.
VII. PROMISSORY NOTES
[Illustration: Ordinary form of promissory note.]
A PROMISSORY NOTE is a written promise to pay a specified sum of money. At the time of the note's issue--that is, when signed and delivered--two parties are connected with it, the maker and the payee. The maker is the person who signs or promises to pay the note; the payee is the person to whom or to whose order the note is made payable. NEGOTIABLE in a commercial sense means transferable, and a negotiable note is a note which can be transferred from one person to another. A note to be made negotiable must contain the word bearer or the word order--that is, it must be payable either to bearer, or to the order of the payee. A NON-NEGOTIABLE note is payable to a particular person only. A note may be written on any kind of paper, in ink or pencil. It is wise, however, to use ink to prevent changes. All stationers sell blank forms for notes which are easily filled in.
The samples of notes which appear in this lesson are selected simply to illustrate to students the fact that there are a great many special forms of notes in common use. The wording differs slightly in different States.
The DATE of a note is a matter of the first importance. Some bankers and business men consider it better to draw notes payable at a certain fixed time, as, "I promise to pay on the 10th of March, 1897." The common custom is to make notes payable a certain number of days or months after date. A note made or issued on Sunday is void. The DAY OF MATURITY is the day upon which a note becomes legally due. In several of the States a note is not legally due until three days, called DAYS OF GRACE, after the expiration of the time specified in the note.
[Illustration: A promissory note filled out on an engraved blank.]
The words VALUE RECEIVED, which usually appear upon notes, are not necessary legally. Thousands of good notes made without any value consideration are handled daily.
The PROMISE TO PAY of a negotiable note must be unconditional. It cannot be made to depend upon any contingency whatever.
Notes that are made in settlement of genuine business transactions come under the head of regular, legitimate business paper. An ACCOMMODATION note is one which is signed, or indorsed, simply as an accommodation, and not in settlement of an account or in payment of an indebtedness. With banks accommodation paper has a deservedly hard reputation. However, there are all grades and shades of accommodation paper, though it represents no actual business transaction between the parties to it, and rests upon no other foundation than that of mutual agreement. No contract is good without a