Bonds, which are redeemable at an earlier date at the option of the obligor.33

Even if the maker has the option to pay in parts, the same result follows.34 There is, indeed, an additional difficulty here, for the paper is not surrendered after a part payment, and may be negotiated afterwards as if wholly unpaid. Although the cases do not raise this point, it seems, by analogous cases and the principles of this article, that a purchaser without actual notice of prior part payments can collect in full, unless they are indorsed on the instrument, just as he can if an accelerated payment in full was made.35

Instruments payable "on or before" a fixed date at the option of the holder raise different questions from those subject to the maker's option. The holder cannot be deprived of his investment without his consent, so that its value is absolutely certain. Nevertheless, it has been held in Massachusetts 36 that several of the other objecPac. 125 (1912), statute prior to N. I. L., note gave discount for early payment; National Bank of Commerce v. Feeney, 12 S. D. 156, 80 N. W. 186 (1899), same. The Massachusetts law was changed by STAT. of 1888, c. 329: "No written promise to pay money shall be held not to be a promissory note, or not to be negotiable for the reason that the time of payment is uncertain: provided, that the money is payable at all events and at some time that must certainly come." Lowell Trust Co. v. Pratt, 183 Mass. 379, 67 N. E. 363 (1903). See also Union Cattle Co. v. International Trust Co., 149 Mass. 492, 21 N. E. 962 (1889), bonds. Massachusetts, Oklahoma, and South Dakota have adopted the N. I. L. The Oklahoma and South Dakota cases may rest on uncertainty of amount because of the discount; so also where interest is waived if payment is accelerated, Lamb v. Story, 45 Mich. 488, 8 N. W. 87 (1881); Story v. Lamb, 52 Mich. 525, 18 N. W. 248 (1884); or a premium must be paid, Chouteau v. Allen, 70 Mo. 290, 339 (1879).

33 Hughes County v. Livingston, 104 Fed. 306 (C. C. A. 8th, 1900). Where there are two possible dates of payment, as with Liberty Bonds, and there is a public announcement of redemption at the earlier date, it is possible that the bonds would afterwards be overdue; but see note 27.

34 Bowie v. Hume, 13 App. D. C. 286, 309 (1898); Crocker v. Green, 54 Ga. 494 (1875); Lowell Trust Co. v. Pratt, 183 Mass. 379, 67 N. E. 363 (1903), see note 32; Fisher v. O'Hanlon, 93 Neb. 529, 141 N. W. 157 (1913, N. I. L.). Riker v. Sprague Mfg. Co., 14 R. I. 402 (1884), maker's option to pay not less than five per cent of principal on semiannual interest dates; Contra, Pierce v. Talbot, 213 Mass. 330, 100 N. E. 553 (1913), semble, overlooking STAT. 1888, c. 329, and Lowell Trust Co. v. Pratt, supra; Bell v. Riggs, 34 Okla. 834, 845, 127 Pac. 427 (1912), under statute prior to N. I. L., raising objection that interest would stop on the portion paid.

A provision that the advance payments are not to be borrowed elsewhere does not impair negotiability. Lasher v. Union Central Life Insurance Co., 115 Iowa, 231, 88 N. W. 375 (1901); contra, Union Central Life Insurance Co. v. Champlin, 11 Okla. 184, 65 Pac. 836 (1901).

35 See note 27, supra.

36 Mahoney v. Fitzpatrick, 133 Mass. 151 (1882), - "on demand or in three years";

tions caused by uncertainty of time are fatal to the negotiability of these instruments. While either time paper or demand paper is valid, here is paper which is both, and apparently has two maturities of equal importance. It is uncertain whether the Statute of Limitations runs from the fixed date, or from demand, or from issue, whether equities are let in and indorsers should be charged after the fixed date, or after demand, or after a reasonable time from issue. The Massachusetts court concludes that probably the exercise of the holder's option fixes the maturity at the day of demand.37 Consequently, a subsequent purchaser before the fixed date, though ignorant of the dishonor, would be subject to equitable defenses and unable to sue the indorsers if notice of the dishonor had not been given them.

This Massachusetts interpretation of the effect of demand by the holder seems untenable. In the first place, a business man would naturally consider that the instrument has only one maturity, the fixed date, and that the demand clause is incidental and subordinate, to provide for emergencies. Secondly, these instruments are negotiable in every state which has adopted the Uniform Act,38 and it would be contrary to the fundamental rights of the holder in due course to subject him to hidden equities and oblige him to investigate outside facts, inquiring whether demand had been made and refused. Furthermore, an unknown demand should be without legal significance. The purchaser of an ordinary demand note within a reasonable time after its issue is not subject to equities if ignorant of a prior dishonor.

This brings us to a striking and well-established analogy, which strongly supports the underlying principles of this article. Every bill of exchange payable on time has an implied acceleration provision. Though possessing a fixed date of payment, yet if it is presented for acceptance, and acceptance is refused, it becomes due at once.39 The time for payment is accelerated. However, the acceleration affects only the existing holder and such subsequent

changed by STAT. 1888, c. 329, and N. I. L. § 4 (2). Such instruments were upheld at common law elsewhere. Louisville v. Gray, 123 Ala. 251, 26 So. 207 (1898); Protection Insurance Co. v. Bill, 31 Conn. 534 (1863).

37 133 Mass. 151, 153 (1882).

38 NEGOTIABLE INSTRUMENTS LAW, § 4 (2).

39 NEGOTIABLE Instruments LAW, § 151; Sterry v. Robinson, 1 Day (Conn.) II (1802).

holders as have notice of the dishonor. As to them the bill is overdue; 40 drawer and indorsers are discharged by want of notice; 41 and the Statute of Limitations runs from the dishonor.42 As to holders in due course, ignorant of the dishonor, the instrument remains due for all purposes at the original maturity, and the acceleration is immaterial.43 The implied acceleration provision of the bill of exchange operates according to the principles stated on page 756 of this article. (I) Acceleration is by an act incidental to the collection of the instrument, presentment for acceptance; (II) it applies to persons with notice; (III) it does not apply to persons without notice.

The same principles should govern express acceleration provisions generally. A purchaser ignorant of the fact of acceleration is, in the words of the Negotiable Instruments Law, a holder in due course of the instrument, because "he became the holder of it before it was overdue, and without notice that it had been previously dishonored, if such was the fact." Therefore, he can rely on the face of the instrument, treat it as maturing at the stated day, and recover its full amount at that time.45

Consequently, on instruments payable "on or before" a fixed date at the holder's option, the fixed term is maturity for all purposes except for persons with notice of demand and refusal.46 Such instruments are well fitted for circulation, for they offer a durable investment, with the possibility of earlier collection when the holder needs the money or apprehends the insolvency of the obligor.47

40 Goodman v. Harvey, 4 Ad. & El. 870 (1836); N. I. L. § 52 (2).

41 Whitehead v. Walker, 9 M. & W. 506, 513, 514 (1842); Bartlett v. Benson, 14 M. & W. 733 (1845); Robinson v. Ames, 20 Johns. (N. Y.) 146, 150 (1822), semble. 42 Whitehead v. Walker, 9 M. & W. 506 (1842).

43 Dunn v. O'Keefe, 5 M. & S. 282 (1816); N. I. L. § 117.

44 § 52 (2).

45 N. I. L. § 57.

46 Louisville v. Gray, 123 Ala. 251, 256, 26 So. 207 (1898), note authorizing the payee bank to appropriate makers' deposit in payment at any time. Tyson, J.: "The purchaser would have the right to presume, unless the sum appropriated by the bank [payee] . . . was indorsed somewhere upon the note, that none had been made by the bank; and that the full amount was owing by the makers."

47 The holder can call for part payments in advance. Protection Insurance Co. v. Bill, 31 Conn. 534 (1863). Such a note is subject to special difficulties, for it is not surrendered upon payment, and may be negotiated to a purchaser ignorant of the prior part payment, who would, it seems, recover from the maker in full. For analogous instruments, see note 108, infra. The note in Protection Insurance Co. v. Bill had an additional peculiarity, in that advance payments could be required "within thirty

CONVERTIBLE INSTRUMENTS

Negotiable notes and bonds often provide that the holder may at his option, upon surrender of the instrument, receive instead of money certificates of stock or other securities. Thus Anglo-French notes are convertible into long-time bonds. If the conversion privilege may be exercised before maturity, it is an acceleration provision, similar to the holder's option to demand money and equally valid.48 The time is clearly certain. The promise is not for "an act in addition to the payment of money," but incidental, and allowed by common law and the Negotiable Instruments Law.49 The promise to deliver securities, though not in itself a negotiable instrument since not performed by the payment of money, acquires the negotiability of the principal obligation, by analogy with the principle that the security follows the debt. There can be no doubt that the bondholder can enforce the conversion privilege in his own name,50 and mercantile custom certainly makes him free from

days after demanded, or upon a notification of thirty days in any newspaper printed in Hartford." This provision also was held not to impair negotiability, Dutton, J., dissenting. It is doubtful whether the acts of acceleration are incidental to the collection of the instrument, within the first principle of this article. However, a promise to pay on demand after six months' notice has been held a note, Walker v. Roberts, Carr. & Marsh, 590 (1842); White v. Wadhams, 170 N. W. 60 (Mich., 1918, N. I. L.); I AMES CAS. BILL AND NOTES, 88, note; but see 2 AMES, Ibid., 831-23. Demand of payment by advertisement may perhaps be justified by the analogy of bonds, which are frequently redeemed by the obligor after advertisement. Union Cattle Co. v. International Trust Co., 149 Mass. 492, 21 N. E. 962 (1889). See, also, Stillwell v. Craig, 58 Mo. 24 (1874). If the advertisement renders the note due in Protection Insurance Co. v. Bill, as against a maker ignorant thereof, is the note afterwards overdue as regards a subsequent purchaser who never saw the advertisement?

48 Hotchkiss v. National Banks, 21 Wall. (U. S.) 354 (1874); Loomis v. Chicago, M. & St. P. Ry. Co., 102 Fed. 233 (C. C. A. 2d, 1900); Lisman v. Milwaukee, L. S. & W. Ry. Co., 161 Fed. 472, 475 (Wis. 1908), semble. Hodges v. Shuler, 22 N. Y. 114 (1860); Welch v. Sage, 47 N. Y. 143 (1872); Denney v. Cleveland and Pittsburg R. R. Co., 28 Ohio St. 108 (1875).

49 See note 48; also cases without acceleration provision. Vermilye v. Adams Express Co., 21 Wall. (U.S.) 138 (1874); Dinsmore v. Duncan, 57 N. Y. 573 (1874). N.I.L. § 5 (4).

50 Dicta in Loomis v. Chicago, M. & St. P. Ry. Co., supra; Hodges v. Shuler, supra; Welch v. Sage, supra; Denney v. Cleveland & Pittsburg R. R. Co., supra. Contra, 2 AMES, CASES ON BILLS AND NOTES, 829-16.

Other kinds of incidental provisions are transferable, so that the holder of the negotiable instrument can sue in his own name. Power to sell collateral at maturity: Arnold v. Rock River R. R. Co., 5 Duer (N. Y.) 207, 214 (1856), semble. Waivers of exemption, etc.: Zimmerman v. Anderson, 67 Pa. St. 421 (1871). Power to confess

equities.51 Otherwise, the marketability of convertible securities would be considerably impaired. However, the promise to deliver documents cannot bind indorsers, and even the maker is sometimes discharged from the conversion obligation by subsequent events, though still liable to pay money.52 Probably the exchange of the instrument for the securities before maturity has no more effect than premature payment 53 if the instrument gets into circulation again before the stated maturity, and a bonâ fide purchaser can recover its value. However, indorsement of the election to convert upon the instrument operates as cancellation and terminates negotiability thenceforth, even if the indorsement is fraudulently and totally erased.54

A note convertible into merchandise at maturity is negotiable,55 and the conversion can doubtless be permitted before maturity if the instrument must thereupon be surrendered. However, if goods or labor can be demanded from time to time, the instrument becomes little more than a running charge-account with unlimited room for disputes as to the value of the part performances, and should not be considered negotiable.56

All conversions must be at the option of the holder, and not of the obligor.57

judgment at maturity on behalf of "holder": National Exchange Bank v. Wiley, 195 U. S. 257 (1904), and cases cited. The authorities are divided as to guarantees written on the instrument, 2 DANIEL, NEGOTIABLE INSTRUMENTS, 6 ed., § 1776 ƒƒ.

51 Citations in preceding note. Contra, Lisman v. Milwaukee, L. S. & W. Ry. Co., 161 Fed. 472, 475 (Wis. 1908), semble, cited in Gay v. Burgess Mills, 30 R. I. 231, 242, 74 Atl. 714 (1909), semble. But a strong analogy for complete negotiability of the conversion privilege is found in mortgages, which pass with the notes free from equities. See W. E. Britton, "Assignment of Mortgages Securing Negotiable Notes," 10 ILL. L. REV. 337.

52 Lisman v. Milwaukee, L. S. & W. Ry. Co., supra; Gay v. Burgess Mills, supra; and Massachusetts cases cited therein.

53 State v. Wells, Fargo & Co., 15 Cal. 336 (1860). The cases contra are certainly unsound. Board of Education v. Sinton, 41 Ohio St. 504 (1885); Branch v. Commissioners of Sinking Fund, 80 Va. 427 (1885).

54 Dinsmore v. Duncan, 57 N. Y. 573 (1874).

55 Mosely v. Walker, 84 Ga. 274, 10 S. E. 623 (1889); Preston v. Whitney, 23 Mich. 260 (1871); Hosstatter v. Wilson, 36 Barb. (N. Y.) 307 (1862); McDonell v. Holgate, 2 Revue de Législation et de Jurisprudence, 29 (Quebec, 1818).

56 Dennett v. Goodwin, 32 Me. 44 (1850); contra, Owen v. Barnum, 7 Ill. 461 (1845). 57 Merriwether v. Saline County, 5 Dill. (U. S.) 265 (Mo. 1878).