A provision which authorizes the sale of collateral securities in case the instrument is not paid at maturity, is valid and does not affect negotiability.
Securities may be pledged to secure a negotiable instrument and a provision in the instrument which refers to them and authorizes them to be sold does not prevent negotiability. It aids rather than clogs the instrument, and facilitates its transfer. The right to the securities goes with the negotiation.
A provision which authorizes confession of judgment on the Instrument Is valid and does not affect negotiability.
Notes frequently contain a provision whereby some attorney or any attorney is authorized to confess judgment on the note. Such a note is called a judgment note. Its value lies in the fact that the note may be converted into a judgment without the formalities necessary or the time required to take judgment in the ordinary case. The defendant does not have to be served or notified, and judgment can be secured the same day that suit is entered. No evidence is required save of the signature and the amount due, for the attorney whom the note names is empowered to confess judgment.
20. Uniform Negotiable Instruments Law, Sees. 5-6.
Any holder of the note may have the confession of judgment thereon. This form is not in use in many states.
A provision whereby the debtor waives the benefit of any law In his favor does not affect negotiability but whether the waiver is effective depends on the law of the state.
A waiver of laws intended for a debtor's benefit, does not have any effect upon the negotiability, but the waiver's effect depends on local law. Theoretically it would seem one ought not to be allowed to waive a law which is to protect him as a debtor, for such law is passed as much for the good of the community, as for him. Yet in most states it is held he may waive the benefit of such laws, except such as are for the benefit also of his family, and these he cannot waive.
Giving holder option to require money or to have something else given or done does not impair the negotiability of an Instrument.
We have already seen that an instrument to be negotiable must be payable in money, and (1) that an agreement to pay money and do something else, and (2) an agreement to pay money or at the maker's or acceptor's option, do something else, are not negotiable. But if an instrument provide that the holder may require payment of money or that something else be done or given, in other words, requires the obligator to pay a sum certain in money if the holder so elects, and the debtor himself have no right to govern that election, the instrument is negotiable.
The following note was given:
"Boston, April 1st, 1850. In 4 years from date for value received the R. & B. Rwy. Co. promises to pay in Boston, to A, or order, one thousand dollars with interest thereon, at the rate of 6% per annum, payable semi-annually; or upon the surrender of this note, at any time until within six months of its maturity, the maker shall issue to the holder thereof 10 shares in the capital stock in said company in exchange therefor.
(sd) R. & B. Rwr. Co.,
Per X, Pres't. Y, Treas'r."
This note is negotiable; the promise to pay a certain sum being absolute, though the holder may choose to have something else done in lieu thereof.
"The instrument upon which the action was brought has all the essential qualities of a negotiable promissory note. It is for the un-conditional payment of a certain sum of money, at a specified time to the payee's order. It is not an agreement in the alternative to pay in money or railroad stock. It was not optional with the makers to pay in money or stock and thus fulfil their promise in either of two specified ways; in such a case the promise would have been in the alternative."21
21. Hodges v. Shuler, 22 New York, 114.
Putting a note under seal destroyed at common law its negotiable character; but by the uniform negotiable instruments act, sealing an instrument does not destroy its negotiable character.
By common law a seal destroyed negotiability. This the law has now altered. If an instrument has the other requirements essential to negotiability the seal is ineffective to change its character.
The omission of the date of the instrument does not impair its negotiability.
The date is a material part of the instrument but not a formal requisite. The instrument is still negotiable notwithstanding the lack of a date. In this respect the negotiable instrument law provides:
"Where an instrument expressed to be payable at a fixed period after date, is issued undated, or where the acceptance of an instrument payable at a fixed period after sight is undated, any holder may insert therein the true date of issue or acceptance, and the instrument shall be payable accordingly. The insertion of a wrong date does not void the instrument in the hands of a subsequent holder in due
course, but as to him the date so inserted is to be regarded as the true date."22
Dating instrument before or after its issue, if not for fraudulent purposes, does not invalidate It.
The negotiable instrument law provides: "The instrument is not invalid for the reason only that it is ante-dated or post-dated, provided this is not done for an illegal or fraudulent purpose. The person to whom an instrument so dated is delivered acquires title thereto as of the date of delivery." 23
Where an instrument is ambiguous the following rules of construction are applied.24
(1) Where the sum payable is expressed in words and figures, the words govern, in case of discrepancy.
(2) Interest provided for runs from the issue of the instrument in case no date is stated.
(3) Where the instrument is undated, it will be considered to be dated as of the date of its issue.
(4) Writing prevails over print where in conflict.
22. Uniform Negotiable Instruments Act, SEC. 13.
23. Ibid, SEC. 12.
24. Ibid, SEC. 17.
(5) If the instrument is so ambiguously drawn that it is doubtful whether it is a bill or note, the holder may treat it as either.
(6) Where one signs in such a manner that his intention is doubtful, he may be treated as an endorser.
(7) If two or more persons sign a note reading "I promise to pay," both are jointly and severally liable thereon.