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2 POWELL POWELL v GREENLEAF CURRIER (1932)

Tuesday, 30 July 2019 10:01 AM

DOCTRINE: If a Bill of Exchange or Promissory Note is subject to the terms of some extrinsic
contract that is referred to in the instrument, the negotiability of the instrument is destroyed. But
the negotiability is not affected by a reference, which is simply a: (1) Recital of the consideration
for which the paper was given (2) Statement of the origin of the transaction, or (3) Statement that
is given in accordance with the terms of a contract between the parties.
FACTS:
• Two PNs were executed by Greenleaf, which contained the following terms:
• For and in consideration of a contract entered into this day with Arthur A. Bishop Co., We,
for value received, promise to pay to Arthur A. Bishop Co., or order, at their office in Boston
• Tthe sum of $150, in 12 monthly payments of $12.50 each, the first monthly payment to be
made upon the signing of this note
• Provided, however, that upon default on any one payment, the whole amount remaining
then unpaid shall at once become due and payable
• We hereby acknowledge the receipt of a true copy of this entire agreement
• Signed: agent, client's signature and witness, Greenleaf Currier
• Arthur A. Bishop indorsed the notes to Powell*
• Powell instituted a suit to recover the balance due on the two PNs
ISSUE/HELD/RATIO:
1. W/N the instruments are negotiable, so that Powell can maintain this suit in their own names -
YES
• Element of NI: An instrument to be negotiable must contain, among other things, an unconditional
promise or order to pay a sum certain in money
• An unqualified order or promise to pay is unconditional within the meaning of the statute
"though coupled with…a statement of the transaction which gives rise to the instrument
• Whether an instrument is negotiable must be determined form the language of the instrument
itself
• Unaided by an inspection of the extrinsic agreements to which they refer
• GENERAL RULE 1: If a Bill of Exchange or Promissory Note is subject to the terms of some extrinsic
contract that is referred to in the instrument, the negotiability of the instrument is destroyed
• But the negotiability is not affected by a reference, which is:
• Simply a recital of the consideration for which the paper was given
• "for value received"
• A statement of the origin of the transaction
• A statement that is given in accordance with the terms of a contract between the
parties
• "as per terms of contract"
• "for payment under contract of even date"
• "note is given in accordance with a contract of even date between B and C"
• To destroy the negotiability, the reference to a collateral contract must show that the
obligation to pay is burdened with the conditions of the contract
• APPLICATION: The PNs contain two references to the extrinsic agreements: (1) For and in
consideration of a contract entered into this day with us by Arthur A. Bishop Co., whereby we are
entitled to use said company's system of collections, and we hereby, "for value received", and (2)
We hereby acknowledge the receipt of a true copy of this entire agreement
• It is NOT apparent how the negotiability of these instruments is affected by either of these
references
• Promise to pay is not "subject to" to the extrinsic agreement or any contingency --> absolute
and unconditional
• (1) is nothing more than a recital of the consideration = imposes no other liability upon any
party
• (2) is a mere acknowledgement by the signers of the receipt of a true copy of the entire
agreement
• Notice that the PNs had their origin in some sort of agreement
• Did not make them "subject to" the terms of such agreements or to any contingency
• GENERAL RULE 2: Negotiability is also not affected by the fact that it appears therefrom that they
were given in consideration of service thereafter to be performed (executory contract) UNLESS it
qualifies the promise to pay

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• The fact that its consideration is to be hereafter realized cannot affect the negotiability of
the note
• Example: We promise to pay Dalziel or order the sum of $300 for the privilege of one
framed advertising sign.
• Example: We promise to pay Arthur A. Bishop Co. for the privilege of using a certain patent
right (collection system)
• When the first payment is to be made upon the signing of the instrument --> the instrument is still
payable at a determinable future time within the meaning of the statute
• It is payable UPON the signing of the instrument
• The signing determines the time of payment
DISPOSITIVE
Judgment reversed, and cause remanded.

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