Sec. 4. Checks

"A check Is a bill of exchange drawn on a bank, payable on demand."4

A check may be called a kind of a bill of exchange. It differs from other bills of exchange in these particulars:

(1) It is drawn on a bank or banker.

(2) It is payable on demand; bills are either payable on demand or at a fixed or determinable future time.

(3) It is drawn by one who thereby asserts that he is a depositor in the bank or with the banker and that he has funds there sufficient to cover the check.

Checks are as far as possible governed by the same rules which govern bills of exchange.

4. Uniform Negotiable Instruments Act, Sees. 185-189 (Appendix A).

(b) Special forms of the above instruments.

Sec. 5. Certificates Of Deposit

A certificate of deposit is an instrument issued by a bank reciting a deposit of a certain sum of money, payable on demand or at a fixed time. It is negotiable, if drawn properly, being a form of promissory note.

Banks issue certificates of deposit, bearing interest, and payable either on demand or at a time fixed. They are negotiable if containing the elements of negotiable paper, for the simple reason that they are then negotiable promissory notes. Therefore we may say that a negotiable certificate of deposit is a promissory note made by a bank to the order of its depositor.

Sec. 6. Bonds

A bond Is an evidence of Indebtedness issued by a municipal, public or private corporation payable at a date certain and is negotiable when drawn In accordance with the rules governing commercial paper.

A bond is an instrument evidencing the indebtedness of a corporation, issued under the seal thereof, usually referring to some mortgage or trust deed given to secure the debt whereof it is the evidence. If it contains sufficient words of negotiability and is not clogged with any condition or stipulation rendering it conditional or uncertain, it is negotiable for the reason that it is then a promissory note.

Bonds are of two sorts:

(1) Registered bonds: or bonds which are transferable by registration of the name of the transferee on the books of the company where the payee's name is registered. Their negotiability is said to be temporarily withdrawn.

(2) Coupon bonds: or bonds to which are attached interest coupons to be clipped off and presented for payment when due. These coupons are usually in form and effect promissory notes, and may circulate as such before or after due, independent of the main instrument. Coupon bonds are negotiable.

Bonds are issued in series. They are usually secured by a mortgage in the form of a trust deed, to a certain person, who represents the bond holders as trustee.

Sec. 7. Bank Drafts

A bank draft is a bill of exchange payable on demand, drawn by one banker or bank upon another banker or bank to the order of a person therein named. It is negotiable as usually drawn.

If one being in Chicago desires to send money to New York and for some reason does not or cannot accomplish his result by use of his personal check, he may buy a draft on a New York Bank. This is simply a bill of exchange in which drawer and drawee are banks and bankers. As usually drawn such drafts are negotiable.

(c) Documents of title made negotiable by special statute but not subject to negotiable instruments law or law merchant.

Sec. 8. Bills Of Lading

A bill of lading is an Instrument issued by a carrier of goods reciting receipt of certain goods therein described and evidencing the contract between the parties as to the details of transportation. It is not negotiable unless specially made so by statute, and even then it is not governed by the peculiar rules of the law merchant but is negotiable only In a limited way.

A bill of lading is transferable to effect the transfer of the title of the goods whereof it is the symbol. By the common law, bills of lading are assignable, not negotiable. Now in many of the states statutes have been passed conferring a peculiar and limited negotiability on bills of lading when drawn in a certain way. When such is the case such instruments are not negotiable in the sense that a promise or order to pay money may be negotiable and they are not governed by the negotiable instruments law. These statutes provide that a bill of lading may be drawn to the order of a certain person therein named, or bearer, or they may be drawn simply to a certain person. In the first case the goods are deliverable "to A, or his order," or "to the order of A" or "to bearer;" in the second case the goods are deliverable "to A." In the first case the bill of lading is known as an "order bill," and is negotiable in this limited sense mentioned; in the second case the bill of lading is known as a "straight bill" and is not negotiable, but simply assignable. If an order bill of lading is issued by a carrier it must take notice that such bill may be negotiated and therefore must not deliver up the goods to any one unless the bill of lading is produced by such party, properly indorsed. If a straight bill of lading is issued by a carrier, it need not assume that the bill of lading has been assigned and may therefore deliver up the goods to the consignee named in such bill of lading without his production of the bill of lading, unless it has received notice from the assignee of such bill that such bill has been assigned to him, and such assignee may then obtain the goods upon his production of the bill of lading as evidence that he is the assignee thereof. See Volume 3 of this Series.

Sec. 9. Warehouse Receipts

A warehouse re-reipt Is not negotiable by the common law. Some states have passed statutes conferring upon such Instruments when drawn In a certain way the same sort of limited and peculiar negotiability possessed by a bill of lading as described in the section above.

Many of the states are adopting the uniform warehouse receipt law. Such law divides warehouse receipts into order receipts and straight receipts, just as the uniform bills of lading act divides bills of lading. What has been said of bills of lading in the above section may be applied here. Warehouse receipts are not negotiable except by the aid of such a statute and then are negotiable in the limited way mentioned. See Volume 3 of this Series.

It is better to refer to bills of lading and warehouse receipts as Negotiable Documents of Title and to bills, notes and checks as Negotiable Instruments or Negotiable Paper.

(d) Sundry instruments assignable but not negotiable.

Sec. 10. Certificates Of Corporate Stock

A stock certificate Is an Instrument Issued by a corporation reciting that the bearer or person named therein

Is the owner of the number of shares in the corporation as therein stated. It Is freely transferable but not negotiable.

One of the objects of incorporation is to secure a free transfer of shares without affecting in anyway the existing order of affairs in the corporation. This transfer is accomplished by means of the certificate of stock which is issued to every stockholder. Yet it cannot be said that a stock certificate is negotiable; it is simply assignable. It is not subject to the rules governing commercial paper. A further consideration of such instruments should be sought in the Law of Corporations. See Volume 5.

Sec. 11. Mortgages

A mortgage is conveyance or lien given on real or personal property as a security for a debt. It Is not negotiable, but in some states statutes confer a quasi-negotlability.

Mortgages are assignable by the mortgagee, but not negotiable, being securities for debts, and not the evidences thereof. But the notes which accompany mortgages are negotiable if correctly drawn, and indorsement of such notes operates to transfer the mortgage. In some states, statutes have been passed to the effect that if a mortgage secures and refers to a negotiable promissory note, it shall also be negotiable in the sense that the defenses shall not be set up to defeat foreclosure proceedings which could not be set up in a suit on the note on account of the note's negotiable character.

(e) The instruments within the scope of this text.

Sec. 12. The Negotiable Instruments Herein Considered

The negotiable Instruments hereinafter discussed are only those properly falling under the uniform negotiable instruments law, and not under special statutes, that is, bills, notes, and checks and special varieties thereof. These are the instruments which constitute the proper subject-matter of "The Law of Negotiable Paper."

While various statutes in different states have attempted to confer upon various instruments a negotiable or quasi-negotiable character,, the discussion of them does not, after all, fall properly under a treatment of the law of commercial paper. "Commercial paper" as it is commonly understood means paper evidencing a debt ultimately reducible to money, and not calling for the delivery of other property. It treats of the law of bills, notes, and checks. We shall hereafter consider only those three forms of instruments. What is said shall refer to bonds, certificates of deposit, bank drafts or any instrument payable in money, simply for the reason that they are bills, notes or checks. The discussion will have nothing to do with and will not apply to warehouse receipts, bills of lading, or any instrument which does not contain a promise or order to pay money.