Story Case

Victor Dawson borrowed fifty dollars from Lawrence Bey and gave him the following paper: "$50.

I. 0. U. fifty dollars. To Lawrence Bey, or his order. (Signed) Victor Dawson." Bey had an arrangement with one Simon Zedeck whereby the latter discounted all of Bey's negotiable paper in hand. Zedeck refused to take the above instrument, on the ground that it did not contain a promise to pay, and therefore, was not a note. Is this correct?

Ruling Court Case. Ellis And Wife Vs. Mason, Volume 7 Bawling's English Reports, Page 598

John Mason, being in need of money, borrowed from his sister, Mary Ann, wife of Ellis, the plaintiff, who sues on her behalf. To secure the loan to his sister, John wrote out and gave to her the following paper:

"John Mason, fourteenth of February, 1836, borrowed of Mary Ann Mason, the sum of fourteen pounds in cash as per loan, in promise of payment of which, I am truly thankful for, and shall never be forgotten by me. John Mason, your affectionate brother. £14." Refusing to pay, suit was brought against John by Ellis. Ellis wished to introduce the foregoing paper in evidence to prove the debt. But John Mason contended that it was a promissory note, and was not admissible in evidence because it was not stamped as required by law. Ellis, however, insisted that it was not a promissory note, because it contained no promise to pay.

Decision: In order to be valid as a note, a paper writing must contain a promise to pay. It is not necessary that the promise be in the exact words "I promise to pay," but such words as manifest an intention or expectation to pay are necessary. There was a good promise in this paper, though slightly concealed in the words. Therefore, it was a note and not admissible in evidence, because it was not stamped as required by law, in order that suit might be brought upon it. Mr. Justice Williams, in the opinion of the court, said: "The instrument here is not in the ordinary form of a promissory note. The question is, first, whether there is not an express statement of an advance of a loan of money to the person who has given the paper. That is perfectly clear. The question then is, whether the party does not impliedly undertake or promise to pay it. I think he does undertake (or promise) to pay it. The introduction of terms of gratitude does not destroy the promise to pay." Judgment was given for John Mason.

Ruling Law. Story Case Answer

We have seen that a valid bill of exchange must contain an order to pay. Now, in order that a promissory note shall be valid, as such, it must contain a promise to pay. It is not necessary that it shall contain the words "I promise to pay"; but it is necessary that it contains words which are equivalent to such words of promise. It has been held that where a certain time for payment is named in the note, or words "on demand" are used, the instrument contains a promise to pay. An instrument written in this manner, "I. 0. U. $10," is not a promissory note, because there is no promise to pay. But if it had been written thus: "I. 0. U. $10, to be paid in thirty days," it is held to be a valid promissory note, in that the words added indicate an express promise to pay. The instrument, in the Story Case, is a negotiable promissory note, because it shows an intention to pay.