Story Case

Wayland Cullet gave Simon Newby the following instrument:

"$150.

When I am in a position to pay bearer, one hundred fifty dollars, I will do this.

(Signed) Wayland Cullet."

Newby signed his name on the back of the instrument and delivered it to Truman Heinze. Later, when Cullet came into possession of considerable money, Heinze brought suit upon the paper as a negotiable instrument. Can he recover?

Ruling Court Case. Woodbury Vs. Roberts, Volume 59 Iowa Reports, Page 348

This was an action on a promissory note made by Roberts, of which the following is a copy: "$300.

Three months after date I promise to pay to the order of Warren Roberts, three hundred dollars. The makers and indorsers of this obligation further expressly agree that the payee, or his assigns, may extend the time of payment from time to time indefinitely as he or they may see fit.

(Signed) Warren Roberts." In this form it came to the hands of Woodbury, who sues upon it. Whether or not he can recover in this action depends upon whether, according to Commercial Law, this note was negotiable. It was contended by Roberts that it was not negotiable, because it was so uncertain as to time of payment; that, by the customs and followings of merchants, a note, to be negotiable, must be certain in respect to time of payment.

Decision: By customs of merchants, an instrument must be certain as to time of payment, or it is not a negotiable instrument. These customs, known as the "Law Merchant," still prevail and are still enforced, but now, by, and as a part of, the Common Law. The note in question, on its face, may or may never be paid. Certainly the time of payment is not determinable. Thus, it is not negotiable, and a suit cannot be maintained upon it as a negotiable instrument.

Mr. Justice Bick, who delivered the opinion of the court, said in part: "Rules applicable to commercial paper were transplanted into the Common Law from the custom of merchants. They had their origin in the customs and laws of business of merchants and bankers, and are now recognized by the courts because they are demanded by the wants and convenience of the mercantile world. Surely these rules ought not to be extended to paper, the like of which was never heard of in mercantile transactions. What business man would expect a banker to discount his paper in the form of the note in question in this case! What merchant ever offered to give or was asked to receive a promissory note containing a like condition I We may safely say that notes of this kind are unknown to commercial transactions. Why, then, extend to them the rules of Commercial Law?" Judgment was given for Roberts.

Ruling Law. Story Case Answer

The history of the Law Merchant may be divided into four periods. The first extends from about 1200 to about 1606. During this period, the Law Merchant saw its origin; special rules were enforced for special people, in special courts, at special places. The second period extends from 1606 to 1756. During this period, the Common Law courts began to enforce the customs of the merchants, not as law, but simply as customs. In 1756, when Lord Mansfield became Chief Justice of England, the customs of merchants began to be recognized as rules of law, and not mere rules of custom. The Law Merchant was made applicable to all persons and all transactions; and thus, became a part and parcel of the law of the land. In the United States, each state developed its own Law Merchant. These laws were founded in substance on the English law, but as each state made variations of its own, based on its own needs and customs, many different rules have come into existence. This caused much inconvenience. Therefore, in 1872, a time which may be regarded as the beginning of the fourth period of the history of the Law Merchant, uniform legislation began to be passed, in order to harmonize the rules of such an important branch of the law.

The State of New York passed a group of laws which stated the Commercial Law in concise, systematic form. This was known as the Negotiable Instruments Law, and has been followed in most other states. In substance, the Negotiable Instruments Law adheres to the customs early established among the merchants. The Story Case and the Court Case indicate that it was demanded by this custom and usage that the document must be payable at a certain time, otherwise it was not negotiable. Therefore, Heinze cannot recover on the instrument as a negotiable paper. This is true under the Negotiable Instruments Law adopted by the state legislatures.