Story Case

The Western Furniture Company received the following instrument in part payment of furniture delivered:

"Oct. 4, 1914. I promise to pay to the Western Furniture Company, or order, the sum of ten dollars on the first day of each month beginning November 1,1914, and ending November 1,1915, with interest at six per cent. If any payment is not made on the first of each month as stipulated, the whole of the balance shall therefor be due. (Signed) James Powell."

After receiving this instrument, the Western Furniture Company indorsed and delivered it to Byron Collins. On January 1, 1915, Powell failed to pay and Collins brought an action for the balance due. The suit was started in his own name as on a negotiable instrument. Powell maintained that the instrument was not negotiable, since it does not show certainty as to amount. Is this correct?

Ruling Court Case. Smith Vs. Nightingale, Volume 2 Starkie's English Reports, Page 375

In this case there was evidence that one Easterling had been employed by Nightingale as a servant in husbandry, and that he had in his hands money belonging to Easterling, in addition to which, he owed Easterling £65 for services. In payment of these obligations Nightingale executed a note to Easterling in the following words:

"£65. October 12, 1897.

I promise to pay to James Easterling, my head caterer, the sum of £65, with lawful interest for the same, three months after date, and also all other sums which may be due him."

Thereafter, before this became due, Easterling died, and suit was brought by Smith, as the representative of his estate. His success in recovering depended upon whether or not this was a negotiable promissory note. It was contended by Nightingale that it was not a good negotiable promissory note, because of the uncertainty of the amount due under the instrument.

Decision: A negotiable instrument must indicate certainly on its face the amount to be paid, else it is not negotiable. This paper contained a promise to pay a sum, but the amount in no way appeared upon the instrument. Lord Ellenborough said that the instrument was too indefinite to be considered as a promissory note; it contained a promise to pay interest for a sum not specified, and not otherwise ascertained than by reference to the books of Nightingale; and that, since the whole constituted one entire promise, it could not be divided into parts. Judgment was given for Nightingale.

Ruling Law. Story Case Answer

In order to be valid as such, a negotiable instrument must be certain in respect to the amount payable; or it must be so framed that the amount is readily ascertainable at maturity. Thus, a note or bill which contains a stipulation for interest at a certain rate is certain, because it is easy to calculate the interest on the principal; the instrument is likewise held certain, even though the rate of interest is not stated, because the courts assume that the legal rate of interest was intended, and compute a certain amount upon this basis. The Negotiable Instruments Law makes the following provisions: "The sum payable is a sum certain within the meaning of this act, although it is to be paid: (1) with interest; or, (2) by stated installments; or, (3) by stated installments, with a provision that, upon default in payment of any installment or of interest, the whole shall become due, or, (4) with exchange, whether at a fixed rate or at the current rate; or (5) with costs of collection or an attorney's fee, in case payment shall not be made at maturity." In the Story Case, suit was properly started on a negotiable instrument.