The Instrument Is Ineffectual between the parties until delivery thereof, which consists of a parting with the control over It, with an Intention to be bound thereon; but where an Instrument complete and regular on Its face, comes into the hands of a purchaser in due course, delivery will be presumed.25
25. Uniform Negotiable Instruments Act, Sec Id.
A negotiable instrument though complete and regular in form cannot take effect until it has been unconditionally delivered with the purpose of giving effect thereto. If it has passed out of the hands of the party whose name is upon it, a delivery by him even as between the parties will be presumed until the contrary is shown. In such a case it may be shown to overcome the presumption that the instrument was not parted with for the purpose of giving it effect; or was delivered conditionally or for a special purpose only.
But if the instrument, complete and regular on its face, has come into the hands of a person who acquired it before maturity, for value, and without notice of its lack of delivery, the delivery will be conclusively presumed.
Thus, suppose that A made out a promissory note payable to B for the purpose of delivering it to B in a bargain he expected to make with B. The bargain, however, failed and A was about to destroy the note when B snatched it from his hand. The defense of lack of delivery could of course be interposed as against B. B, however, sells the note to C. If the note lacks any element of negotiability, the defense could also be made against C. But if the note was in negotiable form, and C was a purchaser before its maturity, for value, and without notice, the lack of delivery could not be set up against him. If the note had been in such form when secured by B that a forgery would have been necessary to accomplish its further transfer, as where it had been made to A's own order, but not indorsed by him, the defense could have been made even as against C.
If an Instrument Is Issued, wanting in any material particular, any holder has a prima facie authority to fill up the blanks. But blanks must be filled up In accordance with authority. One acquiring the instrument after its completion, and as a purchaser for value without notice and before maturity, can enforce It as filled up, notwithstanding the authority was exceeded.26
26. Uniform Negotiable Instruments Act, SEC. 14.
The text is shown in the following illustration: B has in his hands A's note payable to A's order, and by A indorsed in blank. A has given this to B for the purpose of borrowing what money he can up to $500.00. B in C's presence fills up the note for $1,000 and delivers it to C of whom he receives that amount of money and then absconds. A is not liable. C is bound to know B's authority. Had B filled in the amount and thus completed the instrument without C's knowledge, A would have been bound for any amount (within reason) filled in.
An agent can bind his principal only by executing In the principal's name. By signing his own name and describing himself as agent, he binds himself; except when acting in capacity of public official.
The authority, real and apparent, of an agent to bind his principal on negotiable paper is governed by the rules of the law of agency. Assuming, here, that he has such authority we may inquire into the manner in which it shall be exercised.
First, let it be noticed that even though one lets it be known he is an agent and indeed so describes himself in the instrument itself, he may still be personally bound upon the instrument; upon the broad general principle, that even though an agent have authority to pledge his principal's credit, he may if he choose, pledge his own.
The most approved manner in which an agent should sign to bind his principal on negotiable paper, is to recite in the body of the instrument the principal's name as the promisor therein, signing the principal's name, by himself as agent. The following illustrations will indicate whether the agent binds his principal or himself.
"I promise to pay, etc.
Wm. Smith, Agent." or
7O Negotiable Paper.
"Wm. Smith, Executor." or "Wm. Smith, President." binds Wm. Smith, personally, though he had authority to sign for the principal and intended to bind him or it. Illustration:
"John Jones promises to pay, etc. John Jones,
By William Smith, Agent." or "I promise to pay, etc. John Jones,
By William Smith, Agent." or "We promise to pay, etc. General Manufacturing Co.,
By William Smith, President." binds the principal and not the agent, (assuming there was real or apparent authority.)
One should be very careful not to leave out the word "By." Otherwise he might be personally bound with the other party, even though he should add "agent."
To go into other possible varieties upon which the Courts have differed would only tend to confusion. The cautious business man will be careful to see that the name of the principal is in the body of the note and that the agent subscribes such principal's name by himself as agent.
The rule varies as to public officials. They are not personally bound in making negotiable paper in the performance of their duties and in the scope of their authority though they sign merely in this manner, - "John Jones, Commissary Agent."