Story Case

In January, 1915, The London War Relief Committee, a corporation, purchased ten thousand sacks of flour from the Western Milling Company, giving a note in payment, as follows:

"£1,000 15s. January 10,1915.

The London War Relief Committee, a corporation, hereby promises to pay to the Western Milling Company, or order, thirty days from date, one thousand pounds and fifteen shillings, payable at the Continental National Bank, Chicago, U. S. A.

(Signed) The London War Relief Committee. (Inc.) The Western Milling Company wished to indorse and deliver the note to the Continental Bank for collection. The bank contended that the instrument was not negotiable, since it was not payable in legal tender of the United States. Is this correct?

Ruling Court Case. Chrysler Vs. Benais, Volume 43 New York Reports, Page 209. On September 11, 1866, Renais, Who Resided At

Whitehall in the state of New York, contracted with William Pillar, at Montreal, Canada, for the purchase of timber to be delivered at a point in Canada. On September 13, Pillar expressed a fear that it might not be accepted when delivered. Renais, thereupon, executed a draft for "1,205 gold dollars, payable at the Park National Bank, in the city of New York." Pillar transferred the note to Chrysler. Pillar did not deliver the lumber as he agreed, and when Chrysler presented the draft, Renais refused to pay it. Suit was brought on it.

Renais, by way of defense, contended that this draft was not negotiable, because not payable in money, current at place of payment, New York. Since it was not negotiable, he argues, he can show that the consideration for it, that is, the refusal of Pillar to deliver the timber, had failed.

Decision: A negotiable paper must be payable in money. Money, in this sense, means lawful tender at the place of payment. This draft called for payment in gold dollars in New York. Since gold dollars are legal tender in this country, this was a negotiable instrument, and the failure of Pillar to perform the contract cannot be shown as a defense to prevent a bona fide purchaser of the draft from recovering on it. Mr. Justice Allen said: "The bill in suit was drawn in Montreal on a business firm at Whitehall in this state, payable in New York, in dollars, the money of account of the state, and in gold dollars, a coin authorized by Congress and made a legal tender in payment of debts. It was, therefore, negotiable as a bill of exchange." Judgment was given for Chrysler.

Ruling Law. Story Case Answer

Both by the Common Law and Negotiable Instruments Law, it is necessary that a negotiable instrument shall be payable in money in order to be valid. Clearly, payment in goods, labor, or services does not constitute money, and would, under both laws, render a paper non-negotiable. Also, payment in the coin of a foreign nation is not considered money in this sense. Only payment in lawful tender, as recognized at the place of payment, will render a note negotiable. Obviously, then, the note, in the Story Case, is not negotiable.

It should also be noted here that an instrument is not negotiable if, in addition to the undertaking to pay money, it also contains an obligation coupled therewith to do something else than the payment of money.