Story Case

Lloyd Ponce, the oldest son of Henry Ponce, a retired and elderly capitalist, was under obligation to a number of trades people who pressed him severely for payment of their claims. Finally, Lloyd Ponce offered a unique proposal to his creditors, one of whom acceded to the proposition. In consideration that the creditor, Henry Lyton, would not press his claim, he received a note, executed for twice the amount of his obligation, as follows:

"$550. January 10,1910.

I, Lloyd Ponce, hereby agree to pay Henry Lyton, or order, five hundred fifty dollars with six per cent interest, thirty days after my father's death. (Signed) Lloyd Ponce."

Lyton indorsed and delivered this instrument to Simon Baum, who paid value for it. The elder Ponce died on January 10, 1915. Lloyd refused to pay the note and, on March 1, 1915, Baum brought an action as on a negotiable instrument. Lloyd Ponce contended that the instrument was not a negotiable note since the time of payment is not certain. Is this correct?

Ruling Court Case. Alexander Vs. Thomas, Volume 16 Queen's Bench Reports, Page 333

This was an action upon a bill of exchange made by Thomas, the defendant herein. It was drawn upon Shadwell, and directed him as follows:

"£1256 13s 4d.

Ninety days after sight, or when you have funds from Thomas, pay Alexander, or order, twelve hundred fifty-six pounds, thirteen shillings, four pence, for value received." The bill was presented by Alexander to Shadwell, who accepted it. However, ninety days after sight Shadwell refused to pay it. Suit was brought against Thomas, the drawer of the alleged bill. He maintained that it was not a bill of exchange, because the time of payment was uncertain.

Decision: It is essential to the validity of negotiable paper that it shall be certain as to the time of payment. The bill in question would not be payable until Shadwell had realized funds. Because there was no way of determining when that would be, it was not a valid bill of exchange and an action could not be brought upon it, because it was not supported by a consideration.

Lord Campbell, Chief Justice, said in part: "I should say the meaning is that the bill is to be paid at the end of ninety days, if Shadwell should be then in funds; if not, that it shall be payable afterwards. Even, however, if the other is the right meaning, namely, that the bill is payable sooner, if the drawee, Shadwell, should be in funds, and, if not, at the end of ninety days, at all events, I think that this would not be a good bill, for the holder would have to watch and ascertain the precise time when the bill should become payable, and, if he failed in doing this and in duly presenting it, the drawer would be discharged. I am of opinion that this is not a good bill of exchange, drawn according to the custom of merchants, so as to relieve the plaintiff from the necessity of stating a consideration for it." Judgment was given for Thomas.

Exiling Law Story Case Answer

A bill or note must be drawn in such a way as will exclude all possibility of any uncertainty in payment. For this reason, the time of payment must be definitely specified. If this were uncertain, the person desiring to dispose of the paper, or the one to whom it was negotiated, would have no assurance of the time when the amount named in the instrument would be realized. However, an instrument payable a specified time after an event which is bound to happen, although the time of occurrence is uncertain, is sufficiently certain to be negotiable. An example of this fact is seen when a note is made payable ten days after the death of a certain person. The event is sure to occur, although the time of happening is uncertain. Therefore, the suit in the Story Case was properly started.

Notes made payable on demand are in a sense uncertain; but they have always been held sufficiently certain to be negotiable. The Negotiable Instruments Law provides: "An instrument is payable at a determinable time within the meaning of this act, which is expressed to be payable: (1) At a fixed period after date or sight; or, (2) on or before a fixed or determinable future time specified therein; or, (3).on or at a fixed period after the occurrence of a specified event which is certain to happen, though the time of happening be uncertain."