SECTION V.

THE ADMINISTRATION OF A BANK WITH REGARD TO

PROCEEDINGS ON BILLS OF EXCHANGE.

WHEN a banker has discounted a bill, it is handed to the accountant, who will see that it is drawn on a right stamp. The accountant will read it through, and see that it is properly drawn, and will observe that the sum in writing corresponds with the sum expressed in figures, and that no alteration has taken place in the amount, the date, the term, or the place at which it is made payable; for these are material alterations, and would affect the validity of the bill. He will then calculate the time at which it falls due, and place this date upon the bill, or, if it was there before, he will check it, and see that it is right. He will then turn it over, and see that it is indorsed by the party in whose favour it is drawn, and also that the subsequent indorsements are regular and properly spelled; for if there be a variation of a single letter in the spelling of a name, the payment of the bill could not be legally enforced. He will also observe that the bill is indorsed by the party for whom it is discounted. He will then pass the bill through the books,* and at the close of the day deliver it with the others to the banker. The banker will, on the following morning, put these bills away in his bill-case according to the dates at which they fall due. This point should be recollected by persons who have to get bills from a banker before they are due; for, after they have given the amount and the names, the next question asked them will be," When is it due ?" for among a multitude of bills, the only way of readily finding any individual bill is to turn to those that fall due on the same day. Every day the banker looks out the bills that fall due on the following day, and hands them to the chief clerk (or, in some cases, the chief clerk himself has the charge of the bills), who, after checking them against the books, distributes them among the clerks who are to collect them. If the bill be not paid, it is noted on the same evening, and on the following morning returned to the customer for whom it was discounted, and his account is debited

* These books are described in the Section on Banking Book-keeping.

for the amount. But if the party has not the sum to his credit, and the banker does not like to trust him, he merely receives notice of its dishonour; and notice is also given to every other party to the bill, with a demand for immediate payment. The bill has now become that hated object, a "past due bill;" and after a while, if the parties are supposed to be "worth powder and shot," it is handed to the bank's solicitor.

I shall give a short description of Bills of Exchange, and notice a few of those points of law and of business which are of most importance to practical bankers.

A bill of exchange is a written order from one person to another, directing him to pay a sum of money either to the drawer or to a third person at a future time. This is usually a certain number of days, weeks, or months, either after the date of the bill, or after sight; that is, after the person on whom it is drawn shall have seen it, and shall have written on the bill his willingness to pay it. The party expresses this willingness by writing on the bill the word "accepted," and his name. If the bill be drawn after sight, he also writes the date of the acceptance.

It

If the party in whose favour the bill is drawn wishes to transfer it, he writes his name on the back. This is called an indorsement; and may be either special or general. A special indorsement is made to a particular party; as, “Pay to Messrs. John Doe & Co. or order." A general, or blank indorsement, is when the person merely writes his name. is held by the lawyers that a special indorsement cannot follow a general indorsement, and that in such a case the holder may sustain an action for the amount though the bill be not indorsed by the party to whom it is thus specially assigned. In practice, however, this is very common; and bankers always refuse to pay bills not properly indorsed even though previous indorsements may be general. But, in regard to post bills, the Bank of England pays no regard to any special indorsement that may follow a general indorsement.

If a bill be once indorsed in blank, though afterwards indorsed in full, it will still as against the drawer, the payee, the accepter, the blank indorser, and all indorsers before him, be payable to bearer, though as against the special indorser himself title must be made through his indorsee.-Serjeant Byles on Bills of Exchange, p. 115.

The following is the form of a Bill of Exchange :

£1000.

London, 1st of May, 1827.

Two months after date, pay to the order of Messrs. Quick, Active, & Co. (or me or my order) the sum of One Thousand Pounds, for value received.

Hearty, Jolly, & Co.

Two months after date, we promise to pay Messrs. Hearty, Jolly, & Co., or their order, the sum of One Thousand Pounds, for value received.

At Messrs. Steady & Co.,

Bankers,

Lombard Street.

John Careful & Co.

The acceptance is usually written across a bill, but should always be on the front, not on the back of the bill. An indorsement, as the name implies, should be placed on the back.

The person who draws a bill is called the drawer; the person on whom it is drawn is called the drawee: after the bill is accepted the drawee is called the accepter. The person who indorses a bill is called the indorser; the person to whom it is indorsed is the indorsee. The person who pays a bill is the payer; the person to whom it is paid is the payee. These and similar terms may be illustrated by a circumstance said to have occurred on the cross-examination of a witness, on a trial respecting a mortgage.-Counsellor. "Now, sir, you are a witness in this case; pray do you know the difference between the mortgager and the mortgagee ?"-Witness. "To be sure I do. For instance, now suppose I nod at you, I am the nod-er, and you are the nod-ee." The word discountee, denoting the person for whom a bill is discounted, is not used in England, but I observe in the parliamentary evidence that it was employed by some of the witnesses from Scotland.

All bills, except those payable on demand or at sight, are allowed three days' grace. Thus, a bill drawn at two months from the 1st of May, will fall due on the 4th of July; but if that day be a Sunday, or a public holiday,* the bill will be due on the day before. Some bills, instead of being drawn after date or sight, state the time of payment, as "On the first of August pay, &c." These bills are allowed the usual three days of grace. Such a bill would fall due on the 4th of August.

Some parties, when they indorse a bill, write at bottom, "In case of need, apply to Messrs. C. D. & Co." That is, if the bill be not paid when due, Messrs. C. D. & Co. will on the day after it is due pay it for the honour of the indorsers. The notaries always observe the "cases of need" upon the bills that come into their hands, and apply to the proper parties. The advantage of placing a case of need upon a bill is, that the party endorsing it receives it back sooner in case of non-payIt also makes the bill more respectable, and secures its

ment.

circulation.

Were it not for the space it occupies, it would be very desirable that the indorser of a bill of exchange should be compelled to state also his address. This would prevent forged and fictitious indorsements, and give a banker who discounts a bill, a better opportunity of ascertaining the respectability of the parties. In case, too, the bill was unpaid, he might immediately apply to all the indorsers, whereas now he has to find them out in the best way he can. The indorsers and drawer of a bill would have earlier notice of its non-payment, and have a better opportunity of obtaining their money from the antecedent parties.

Bills are divided into Inland and Foreign. Inland bills are those in which both the drawer and the accepter reside in England. Bills drawn from Scotland, or Ireland, are considered as foreign bills. If a foreign bill be refused acceptance or payment, it should be immediately protested and returned. An

* To remove all doubts upon this subject, an Act of Parliament was passed (7th & 8th Geo. IV. chap. 5), which enacts "that from and after the tenth day of April, one thousand eight hundred and twenty-seven, Good Friday and Christmas-day, and every day of fast or thanksgiving appointed by his Majesty, is and shall for all purposes whatever, as regards bills of exchange and promissory notes, be treated and considered as the Lord's-day, commonly called Sunday." This Act does not extend to Scotland, but it has since been extended to Ireland. This Act does not vitiate a bill dated on a Sunday.

inland bill is only noted, and then only when refused payment. A foreign bill may be accepted verbally, or by letter; but no acceptance of an inland bill is valid, unless written upon the bill itself.*

When a merchant in one country draws bills upon a merchant residing in another country, he usually draws them in sets that is, he draws two, three, or more bills of the same tenor and date. These bills are sent to his correspondent by different ships. Thus he secures the swiftest conveyance, and his remittances will not be delayed by any accident that may happen to an individual ship. In drawing these bills, it is always expressly stated whether each bill be the first, second, or third of a set; as, "Pay this my first of exchange (the second and third not being paid)." On the payment of any one bill, the others are of no value. If a merchant, say at Paris, has a set of bills drawn on a merchant at London, he will sometimes send over the first bill to his correspondent in London, to get it accepted, and to retain it until claimed by the holder of the second. The merchant at Paris will then write on the second bill, that the first lies accepted at such a house in London. He will then sell it or pay it away. By this means he is sure that the bill he negotiates will not be returned to him, and greater value is given to his bill, not only as it has the additional security of the accepter's name, but, if it be drawn after sight, it will become due so much the sooner. When the second bill arrives in London, the holder takes it to the house where the first is deposited, and it is immediately given, up to him.

Foreign bills are often drawn at a "usance" after date. A usance from Amsterdam, Rotterdam, Hamburgh, or any place in Germany, is one month; from France, thirty days; from Spain and Portugal, two months; from Sweden, seventy-five days; from Italy, three months. Where it is necessary to divide a month upon a half usance, which is the case when the usance is either one month or three, the half month is always fifteen days. Bills drawn from Russia are dated according to the old style, and twelve days must be added to the date, in order to ascertain at what time they fall due.

A bill is sometimes accepted for the honour of the drawer, or of one of the indorsers. Thus, if a bill from Hamburgh be drawn upon a person in London, who refuses to accept it, another party,

* See 1 & 2 Geo. IV. cap. 78.