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56   BOOKKEEPING

  1. Negotiable, Non-negotiable and Assignable.

A business paper is negotiable when it can be transferred by the payee with full title. Promissory notes, drafts, cheques, etc., having " or bearer " or "or order " after the payee's name

*are said to be negotiable ; those having "or bearer" may be transferred by the payee without endorsement; those having "or order" must be endorsed by the payee before he can transfer them. The expressions "to James Hill " and "to the order of James Hill" are held in law to mean the same as the expression "to James Hill or order."

A business paper is non-negotiable when it cannot be transferred with full title. It is then said to be assignable ; the payee can give only as good a title as he himself has ; the paper is subject to any counter-claim which the payer may have against the original payee. A paper is non-negotiable, or assignable when the word " only " or some such limiting term follows the payee's name.

If the word "bearer" be crossed out in, say, a bank cheque, the word "order" is understood and need not be written above. It is not allowable for anyone to cross out the words "order" or " only " and to substitute " bearer," excepting the payer, and he should initial the change.

  1. Endorsement.

When endorsing paper, it should be turned over, with the left-hand end up, and the name written on the back, well above the middle. The purpose of the endorsement is two-fold : (1) that the payee may be able to transfer the paper, and (2) that the payee may be held liable in case the maker or acceptor should fail to pay.

  1. Collection and Discount.

Business men generally arrange with the bank to collect their customers' notes and acceptances. The bank charges a small fee of s %, more or less according to circumstances.

If, however, business men need ready money they discount the drafts drawn on their customers or the notes given by their customers. The bank places the proceeds to their credit at once, and they may then draw cheques on the amount. Discounting is more expensive than collection by the bank ; but when the paper is placed for collection, the proceeds are available only when it is due and paiwO Drafts are usually discounted before they are accepted by the drawee ; the bank obtains the acceptance afterward ; if dishonoured the bank charges them back to the drawer.

82. Dishonour, Protest and Discharge.

A note is said to be dishonoured by non-payment, and a draft by non-acceptance or non-payment.

When a note or draft is dishonoured, it is necessary for the holder to notify the endorsers of the note, or the endorsers and drawer of the draft, of the dishonour, if he wishes to hold them liable for_ the amount. He may do this verbally, by letter, or by protesting; protesting is the notice given by a notary public. This notice must be given or mailed not later than the next business day after dishonour.

A note or draft is said to be discharged when paid by, or in behalf of, the maker or acceptor.


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