Story Case

A bill payable ten days after the date of its issue, but providing that it should be presented for acceptance, was indorsed by James Harrington. On the day of its maturity it was presented to the drawee by the holder, Wilbur Stanley, with a demand for payment. It had never been presented for acceptance. Notice of refusal to pay was given to Harrington, and upon the latter's refusal to pay, suit was brought by Stanley. Harrington claimed to be discharged from the obligation by the failure to present for acceptance before the day of maturity. Stanley denied that such a condition could be imposed in a bill, and insisted that, since there was a definite time of maturity and a default at that time, the drawer and indorsers then became liable. What should the court decide?

Ruling Court Case. Hart Vs. Smith, Volume 15 Alabama Reports, Page 807. Volume 50 American Decisions, Page 161

Smith drew a bill of exchange upon Desha and Smith, to the order of Hart. The bill was made payable at sight. About one month after the bill was drawn, Hart presented it to Desha and Smith, who refused to pay it. Hart notified Smith, the maker of this, and then brought suit against him as drawer. It was contended by Smith that presentment for acceptance was necessary, since it was a bill at sight, and from and after that time the drawee was entitled to three days of grace.

Decision: Presentment for acceptance must always be made when the time of payment from the face of the bill is uncertain. In this case this bill was uncertain, because payment was not due until three days after first presentment was made. Consequently, Smith, the drawer is discharged, because presentment for acceptance, which was necessary, was not made.

Mr. Justice Dargan said: "I feel constrained to hold that a bill payable at sight is entitled to three days of grace. Consequently, a demand of payment made of the drawee, upon the first presentation of the bill to him, is insufficient to charge the drawer, for the bill is not then due. As there was no evidence of any previous presentation of the bill for acceptance, nor notice given of non-acceptance, the demand of payment was prematurely made, and was therefore a nullity. As the evidence fails to show a demand of payment on the day the bill was payable, the court correctly instructed the jury that the plaintiff could not recover." Judgment was accordingly given for Smith, the defendant.

Ruling Law. Story Case Answer

We have seen that, in most cases, presentment for acceptance is not necessary, and that presentment for payment will suffice to hold all parties to the instrument. However, in certain cases where presentment for acceptance is necessary, failure to present within the time allowed by law will result in discharging all parties of secondary liability. It has been pointed out that a bill payable at sight must be presented for acceptance, because three days of grace were allowed by the Law Merchant; and payment could not be demanded until three days after sight. Therefore, a demand made for payment in such a case, unless a new demand is made three days later, will operate to discharge all secondary parties.

It should be noted that the Ruling Court Case, while a correct application of the principle here discussed, is not of wide application to present day transactions, because of the very general abolition of days of grace by the legislatures. In most of the states days of grace are no longer allowed as they were under the English law. As a result, a bill payable at sight need be presented only once, and is due and mature at that time.

The Story Case presents another case where presentment for acceptance is required. The drawer may require presentment for acceptance, and if he does so, that condition enters into the obligation of all the in-dorsers. If it is not made, the indorsers are discharged. Stanley did not make a presentment for acceptance before the time of payment had arrived, and his failure to do so operates as a discharge of the secondary parties. Harrington is therefore not liable, and the court should give judgment for the defendant.