By the ancient rules of law we have seen that the transfer of simple contracts was entirely forbidden. It is usually expressed by the phrase, that a chose in action is not assignable. But bills of exchange and promissory notes, made payable to order, are called negotiable paper; and they may be transferred by indorsement, and the holder can sue in his own name, and the equitable defences which might have existed between the promisor and the original promisee are cut off.

It is generally said that the law of bills and notes is exceptional; that they are choses in action, which, by the policy of the law merchant, and to satisfy the necessities of trade and business, are permitted to be assigned as other choses in action cannot be. This is undoubtedly true; but the law of negotiable paper may be considered as resting on other grounds also. If A owes B one hundred dollars, and gives him a promissory note wherein he promises to pay that sum to him (without any words extending the promise to another), this note is not negotiable; and if it be assigned, it is so under the general rule of law, and is subject in the hands of the assignee to all equitable defences. But if A in his note promises to pay B or his order, then the original promise is in the alternative, and it is this which makes the note negotiable. (a) The promise is to pay either B or some one else to whom B shall direct the payment to be made. And when B orders the payment to be made to C, then C may demand it under the original promise. He may say that the promise was made to B, but it was a promise * to pay C as soon as he should come within the condition; that is, as soon as he should become the payee by order of B. And then the law merchant extends this somewhat, by saying that the original promise was in fact to pay either to B or to C, if B shall order payment made to him, or to any person to whom C shall order payment made after B has ordered the payment made to C. For B has the right of not merely ordering payment to be made to C, but to C or his order; and C has then the same right, and by the continued exercise of this right the transfer may be made to any number of assignees successively, and the last party to whom the note is thus transferred, or the final holder, becomes the person to whom A promised B to pay the money, and such holder may sue in his own name upon this promise. And not only are words "or order" unnecessary in the indorsement, but it is held that if the indorsement be expressly restrictive, as if made to A only, its negotiability remains unaffected, (b) It is said, however, that this does not apply to notes indorsed after maturity. (c)

(a) Heed v. Murphy, 1 Ga. 236.

We may find the reasons of the law of negotiable bills and notes •in their origin and purpose. By interchange of property, men supply each other's wants and their own at the same time. In the beginning of society this could be done only by actual barter, as it is now among the rudest savages. But very early money was invented as the representative of all property, and as therefore greatly facilitating the exchange of all property, and as measuring its convertible value. The utility of this means enlarged, as the wants of commerce, which grew with civilization, were developed. But at length more was needed; it became expedient to take a further step; and negotiable paper, first bills of exchange and then promissory notes, were introduced into mercantile use, as the representative of the representative of property, - that is, as the representative of money. It was possible to make exchanges of large quantities of bulky articles, by the use of money, without much inconvenience; and it was possible for him who wished to part with what he had, to acquire in its stead by selling it for money, an article * in which the value of all that he parted with was securely vested, until he had such opportunity as he might wish to place this value in other property, which he did by buying. But still coin was itself a substantial article, not easily moved to great distances in large quantities; and while it adequately represented all property, it failed to represent credit. And this new invention was made, and negotiable paper introduced, to extend this representation another degree. It does not represent property directly, but money. And as in one form it represents the money into which it is convertible at the pleasure of the holder, so in another form it represents a future payment of money, and then it represents credit. And as names in any number may be written on one instrument, that instrument represents and embodies the credit of one man or the aggregated credit of many. Thus, by this invention, vast amounts of value may change ownership at any distance, and be transmitted as easily as a single coin could be sent. And by the same invention, while property is used in commercial intercourse, the credit which springs from and is due to the possession of that property may also be used at the same time, and in the same way. And all this is possible because negotiable paper is the adequate representative of money, and of actual credit, in the transaction of business. And it is possible therefore only while this paper is such representative, and no longer; and the whole system of the law of negotiable paper has for its object to make this paper in fact such representative, and to secure its prompt and available convertibility, and to provide for the safety of those who use this implement, either by making it or receiving it, in good faith.

(b) Walker v. Macdonald, 2 Exch. 527.

(c) Leavitt v. Putnam, 1 Sandf. 199.

If a note be surrendered to the maker from a mistaken belief that it has been paid, he is still liable for the balance due upon it. (cd)

By the practice of merchants, the transfer of negotiable paper is made by indorsements. The payee writes his name (d) on * the back of the bill or note, or, as it has been held, something which is the equivalent of his name and is intended as a substitute for it, (e) and delivers the paper to the purchaser, (f)1 and is then called an indorser; and it has been