Negotiable Instruments and Commercial Exchange

The colonists moved significantly ahead of the mother country in fostering a legal environment supportive of negotiable instruments. These are a class of documents that included bills of exchange, checks, promissory notes (including bank notes), drafts, and other types of securities. Their function in the mercantile world is to provide a means of transferring wealth from one person to another and, as important, to a third party by the holder of the note. The negotiability of such instruments facilitated commerce and trade. They were of special value in the money-scarce economy of colonial America.

The colonists recognized out of necessity the value of having negotiable instruments that were broadly accepted. Massachusetts in 1647 set the pattern with a statute that provided that assignments of debts to others could be made as long as they were properly signed on the back and not based on fraud. The Massachusetts act was widely copied in New England and the middle colonies. The Chesapeake and southern colonies also adopted a lenient attitude toward negotiable paper, largely because of the heavy business they did in staple crops and slaves. Thus, business relations in Maryland and Virginia depended on tobacco and chattel notes, and both circulated broadly.

In the eighteenth century an influx of English lawyers and greater commerce between the colonies and England imposed a somewhat stricter view on negotiable paper than in the mother country. But these changes were superficial. The emerging

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commercial middle class in colonial America simply found the stuffy regulation of English negotiable instrument law unnecessary and unworkable.

Liability and Fault

Neither the English nor the colonists used the word tort to describe the law that they developed to deal with civil wrongs; both understood that fault and liability went hand- in-hand, but the concepts were still murky. Implicit was the notion that each person owed a standard of due care to others, and with this concept went an unarticulated notion of assumed duty. Like contract, however, the law of tort did not begin to develop its modern character until the nineteenth century.

Americans accepted the English notion of no liability without fault, but they twisted this transplanted legal tradition in ways meant to fit their own circumstances. In England, for example, with its limited lands, the rule emerged that owners of animals had responsibility to keep them fenced. Cattle and hogs had to be enclosed and, if they escaped and damaged the property or crops of another, the owner was held liable for the damages. In North America the doctrine was reversed. Owners of agricultural lands were charged with the duty to fence their crops from wandering domestic animals.

What underlay this rule was a consensus throughout the colonies that grazing animals were more valuable than were crops. The American rule of fencing animals out reflected a community wish to protect animals and to place the burden of care on those who might be damaged by them. In a sense, the fencing-out rule was an early form of contributory negligence in which the plaintiff could not impose liability on another if he himself had contributed to the wrong.

In other areas Americans abided by traditional English notions of strict liability. People, for example, who used fire were held accountable for their actions under all conditions. Fire was an inherently dangerous commodity, and it was to be strictly regulated by imposing a heavy responsibility on those who used it. Most American colonial jurisdictions also accepted the view that the owners of proven dangerous domestic animals could not escape liability for destruction caused by their animals just because a fence proved incapable of keeping them out of a farmer's crops.

Date: 2015-01-29; view: 871