ceremony of indorsement was often dispensed with as superfluous, it must be observed that in no way altered the character of the instrument, and. the receiver of the note took it entirely at his own peril, and ran exactly the same risks as if he took any other instrument of credit without indorsement.

54. If any readers of this work should happen to be acquainted with our Theory and Practice of Banking, 2nd edit. 1866, they may perhaps be greatly surprised to see that, though the facts and the system of credit given here, are the same as those set forth in that work, yet our statement of the Law of the subject is perfectly different now to what it was then. The explanation of this extraordinary difference is this; that in the former work we stated the Law according to the current doctrine which may be heard in Westminster Hall, in a special pleader's chambers, or in the common text books. But since that work was published, we were selected by the Royal Commissioners for the Digest of the Law to prepare the National Digest of the Law of Credit. In the preparation of this great national work we could not rest satisfied with the loose, vague, ill-defined, notions floating about Westminster Hall. It became necessary to trace every single principle through the whole course of English Law to its very sources; and to reduce to absolute precision the shifting and conflicting doctrines in the various cases. It was also necessary to investigate thoroughly the Theory of Credit as developed in Roman Law. The result of this investigation was to shew that the common notions on the subject prevalent among English Lawyers, are completely erroneous both in fact and Law. Pages of our common text books must be scored out. All that we find in them stated about the transfer of choses-in-action being contrary to the Common Law, and only adopted from the Law Merchant is pure rubbish, and must be consigned in future to the limbo of myths. We proved by a series of cases traced through 500 years that in every case where a chose-in-action was originally created transferable by the consent of the obligor, the Courts of Law have invariably held that the transferee might sue the obligor in his own name. Yet such is the vitality of error, that it is one of the stock dicta of Westminster Hall, that choses-in-action are not assignable by Common Law. Not only was the series of cases in which Lord Holt

§ 53, 54.] refused to recognize Promissory Notes as legal documents quite contrary to the principles which had been invariably followed for three centuries; but Lord Mansfield expressly declared them to be founded on erroneous principles; and Lord Kenyon, well known as a stickler for the strictest rigour of the Common Law, concurred in this opinion. The whole system of Bills and Notes is strictly legal at Common Law. Moreover it was quite clear that the flimsy reason given by Lord Coke was quite inadequate to explain the case. The Law affecting the transfer of Credit is only an example of a very wide principle of jurisprudence, founded on the very nature of things. Roman Law went through exactly the same phases as English Law is doing; and it seems somewhat strange that the Law of the Romans, who were not a commercial people, reached a much greater state of perfection than the Law of a great commercial people like the English. And the reason is that the Roman Law was worked out by a series of illustrious jurists with whom we have none to compare. Where is our Gaius, or our Modestinus, our Javolenus, our Ulpian, or our Papinian? Alas! we have none such. have no philosophic jurists, only matchless legal practitioners. English law on the transfer of Credit is only a case of arrested development. Three-quarters of a century ago, Justice Buller justly stigmatized the absurdity of having two conflicting systems of jurisprudence to decide the same mercantile case in the same country. We think that it may be of use to present the principles of Law and Equity regarding the transfer of Credit as stated in our Digest.

We

Commencement of the DIGEST of the Law of CREDIT, prepared for the Law Digest Commissioners.

1. (1.) Credit, or Debt, in legal and commercial_language means a Right of action against a person for a sum of money. Such a right is a chose-in-action.

(2.) The person who owes the money is termed the DEBTOR; the person to whom it is owed is termed the CREDITOR, and sometimes the DEBTEE.

2. At Common Law a creditor cannot transfer his debt, or right of action, to a third person without the consent of the 1 Grant v. Vaughan, 1 Bla. 485.

debtor, so as to enable the transferee to sue the debtor in his own

name.

3. But whenever the debtor assents to the transfer of the debt, or chose-in-action, either orally, or in writing, the assignment of it by the creditor is irrevocable, a trust is created, and the assignee may sue the debtor in his own name.

4. If the debtor does not consent to the transfer of the debt, or right of action, the transferee may sue him in the name of the transferor, and equity assumes that the transferor always gives him this permission.

5. In Equity a creditor may transfer his debt, or right of action, with or without the consent of his debtor.

6. A written contract by which one person is bound to pay (1) a certain sum of money (2) to a certain (3) at a certain time, is termed an OBLIGATION, or SECURITY for MONEY, or a VALUABLE SECURITY.

7. (1.) A written ORDER from one person to another who owes, or appears to owe, him money as a debtor, directing him to pay absolutely, and, at all events (1), a certain sum of money (2) to a certain person (3) at a certain time, is in modern language, termed a BILL of EXCHANGE, or shortly a BILL.

(2.) A written PROMISE made by one person to pay absolutely and at all events (1) a certain sum of money (2) to a certain person (3) at a certain time, is, in modern language, termed a PROMISSORY NOTE, or shortly a NOTE.

8. A written ORDER addressed by one person to another who holds a fund, not as his own property, but merely as the AGENT, BAILEE, TRUSTEE, or SERVANT of the writer, to pay a sum of money, is termed a DRAFT, or ORDER, for the payment of

money.

9. A mere acknowledgment of a debt, not containing any promise to pay, is usually termed an I O U.

10. (1.) A bill, note, or I O U, is always a chose-in-action, that is it operates as a charge, or credit, against the person of the debtor.

(2.) A draft, or order, is always a chose-in-possession, and it operates as a charge, or credit, against the fund.

SECTION III.

ON THE LIMITS AND EXTINCTION OF CREDIT.

On the LIMITS of CREDIT.

55. In the preceding sections we have clearly shewn that Credit is the name of a species of Incorporeal Property, which is of the same nature as, but inferior in degree to, money; and that it fulfils exactly the same functions as money as a Medium of Exchange, or Circulation: also that it is Property cumulative to money; that is, that it is over and above, or additional to, the quantity of money in use. In the following sections we shall exhibit the actual mechanism of the System of Credit, and shew how it is the great productive, or circulating, power of modern times. Credit, in fact, is to money what steam is to water: and, like that power, while its use within proper limits is one of the most beneficial inventions ever devised by the ingenuity of man, its misuse by unskilful hands leads to the most fearful calamities. Credit, like steam, has its limits, and we have now to investigate the proper Limits of Credit, and the various methods by which it may be extinguished. Because by its very name and its very nature, it is always created with the express intention either of being, or of being capable of being, extinguished. It is UNEXTINGUISHED CREDIT which produces these terrible monetary cataclysms which scatter ruin and misery among nations. It is by the excessive creation of Credit that over-production is brought about, which causes those terrible catastrophes called Commercial Crises: and the inability of Credit-shops to extinguish the Credit they have created-commonly called the failures of Banks-is the cause of the most terrible social calamities of modern times.

The true limits of Credit may be seen from the etymology of the word. Because all Credit is a Promise to Pay something in future. And that "something," whatever it be, is the VALUE of the promise. That something need not necessarily be money. It is perfectly possible that it should be anything else. The practice of interest, or usury, was in force before the invention of money. It might be a promise to do something. As an example of this, we may take a postage stamp, which is a promise

by the State to carry a letter. And this service is the value of the stamp. Now, it is quite clear, and to shew it, we have only to appeal to every one's experience, that a postage stamp is a valuable thing. It passes currently as small change. Now, people take postage stamps as equivalent to pence, because they often wish to send letters by the post. The recent regulations that stamps shall be convertible into money at any post office, makes them in all respects part of the currency of the country. They are, in fact, 1d. notes.

Now the only real difficulty in the case, is to observe that the naked "Promise to Pay" is independent exchangeable property, quite distinct from the thing itself, and it may circulate, in commerce, just the same as the thing itself. This may surprise some readers at first, but, to shew its truth, they need only appeal to their own daily experience, where they see bank notes, cheques, and bills of exchange, circulating to the extent of hundreds of millions, and performing all the functions of money. We shall see below, that J. B. Say, whose doctrines of credit we shall examine in a future chapter, fully acknowledges that an instrument of credit has an actual value, and may perform the duties of money.

But, of course, it is quite manifest that the VALUE of the promise is the THING itself, and, consequently, if the thing itself fails, the promise has lost its value. This consideration, therefore, at once indicates the limit of credit. Assuming credit to be, what it is in its best known form in this country, the promise to pay money, it is quite clear that every future payment has a Present Value. Consequently, whenever the possession of money at any time is actually certain, the Right to receive it is an exchangeable Property, which may be bought and sold.

Commercial Credit, however, does not rest upon so solid a basis as the certainty of being in possession of money, for then it would be as safe as money itself, and losses would be unknown. It is based upon the expectation of receiving money at a certain time. A trader buys goods, and gives his promise to pay money, upon the reasonable expectation that he will be able to sell them for money before the bill becomes due; or, at least, that he will be in the possession of money before that time. That is, he produces, or brings and offers them for sale, in the hope that they will be consumed, or bought. If he brings forward for sale more of any species of goods than is suitable to