Sec. 1293. Effect Of Negotiability On Rights Of Parties. - When In Hands Of Original Party
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This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
Sec. 1293. Effect Of Negotiability On Rights Of Parties. - When In Hands Of Original Party
Between the immediate parties to a negotiable contract the fact of negotiability is for most purposes immaterial. Any defense may be set up against the adversary party that could have been made in a non-negotiable contract, such as mistake,1 fraud,2 duress,3 want of consideration,4 illegality, as where the instrument is given to defraud creditors,5 or for illegal sales of intoxicating liquor,6 or for services of an unlicensed broker,7 to stifle criminal prosecution,8 or to aid rebellion;9 or failure of consideration.10 While the technical bona fide holder is one who takes from one of the original parties to the contract, mediately or immediately, the original payee who advances money in ignorance of defenses may be given the same protection as a bona fide holder,11 as where he does not know that the signature of a surety is conditioned on obtaining the signature of another who did not in fact sign.12
168 Mass. 573; 60 Am. St. Rep. 411; 40 L. R. A. 498; 47 N. E. 429; Farrington v. R. R., 150 Mass. 406; 15 Am. St. Rep. 222; 23 N. E. 109: Anderson v. Nicholas, 28 N. Y. 600; Farmers' Bank v. Lock Co.. 66 O. S. 367; 90 Am. St. Rep. 586; 58 L. R. A. 620; 64 N. E. 518; Biddle v. Bayard, 13 Pa. St. 150. It has been said that while the usages of business " have given them some of the elements of negotiability." the courts " have with great uniformity held that stock certificates were not negotiable instruments within the broad meaning of that phrase." Knox v. American Co., 148 N. Y. 441; 51 Am. St. Rep. 700; 31 L. R. A. 779; 42 N. E. 988.
24 East Birmingham Land Co. v.
Dennis, 85 Ala. 565; 7 Am. St. Rep. 73; 2 L. R. A. 836; 5 So. 317.
25 Knox v. American Co., 148 N. Y. 441; 51 Am. St. Rep. 700; 31 L. R. A. 779; 42 N. E. 988.
26 Farmers' Bank v. Lock Co., 66 O. S. 367; 90 Am. St. Rep. 586; 58 L. R. A. 620; 64 N. E. 518.
27 0'Herron v. Gray. 168 Mass. 573; 60 Am. St. Rep. 411; 40 L. R. A. 498; 47 N. E. 429.
28 Craig v. Water Co., 113 Cal. 7; 54 Am. St. Rep. 316; 35 L. R. A. 306; 45 Pac. 10.
1 Beland v. Brewing Association, 157 Mo. 593; 58 S. W. 1.
2 Fay v. Fay, 121 Mass. 561.
3 Peckham v. Van Bergen, 10 N. D. 43; 84 N. W. 566.
4 Lang v. Dietz, 191 I11. 161; 60
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