Unconditional Order or Promise to Pay

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RA Anonas

RA ANONAS
FACTS
Recovery of balance due on two instruments in writing

1st reference:

"For and in consideration of a contract and

agreement entered in to this day with us by
Arthur A. Bishop Co., of Boston, Mass., whereby
we are entitled to the use of said company's
system of collections and we hereby, for value
received," etc.,

2nd reference:

We hereby acknowledge the receipt of a true

copy of this entire agreement."
ISSUE

Whether or not the formal requirement that a

negotiable instrument shall contain an
unconditional promise or order to pay a sum
certain in money was complied with when the
questioned instrument of the parties referred
to some extrinsic contract.
HELD

Yes, the instruments are absolute and uncoditional. The second formal
requirement for an instrument to be negotiable was complied with. The
references of extrinsic contracts did not affect the negotiability of the
instruments questioned.
1st reference: 2nd reference:

"For and in consideration of a contract and agreement We hereby acknowledge the receipt of a true copy of this entire
entered in to this day with us by Arthur A. Bishop Co., of agreement."
Boston, Mass., whereby we are entitled to the use of said
company's system of collections and we hereby, for value
received," etc.,

First reference is nothing more than a Second reference is a mere

recital of the consideration, which does not acknowledgment by the signers of the
affect the negotiability instruments of the receipt of a true copy of
the entire agreementnothing more.
RATIO DECIDENDI
RULES ON REFERENCES TO EXTRINSIC CONTRACT/S

Bill of exchange or promissory note contains a

1 reference to some extrinsic contract in such a

way as to make it subject to the terms of
contract
Conditional and
Negotiability is destroyed

Reference which is simply a

(1) recital of the consideration for which the
paper was given, or Unconditional and

2 (2) a statement of the origin of the

transaction, or
(3) by a statement that it is given in
Negotiability is not
affected

accordance with the terms of a contract of

even date between the same parties.
WHEN UNCONDITIONAL

When the instrument does not make them subject

to the terms of such agreements, or subject to any
contingency whatever, it does not affect their
negotiability

WHEN CONDITIONAL

The reference to a collateral or extrinsic contract must

show that the obligation to pay is burdened with the
conditions of that contract.

Where the promise to pay is made "subject to" some

other contract referred to, the obligation is
conditional and negotiability is destroyed.