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This sub-section does not purport to name all the § 29. defects that may be in the title of a person negotiating a bill, but merely gives a number of illustrations of the defects referred to in the first sub-section. A defective title must not be confounded with the case of no title at all, as in the case of a forged indorsement.
The present clause considers the bill with reference to the person responsible for the offences or illegalities mentioned, the next section (30) considers the question of the validity of the bill in the hands of the person who acquires it from him.
Fraud, duress, or force and fear.-When it was decided to extend the Imperial Act to Scotland, the words "force and fear" were added as the equivalent of "duress," which is not used in Scotch law. The corresponding words in the civil code of Quebec are "fraud, violence or fear": Art. 991. They are grounds of nullity not only in bills and notes but in all contracts. Such contracts are not absolutely void, they are merely voidable at the option of the party on whom they were practised, or those who are in the exercise of his rights.
Fraud consists in inducing a party to act by some misrepresentation or untrue statement intentionally made for that purpose. Duress may consist in actual violence to the person or in threats thereof. "Violence or fear is a cause of nullity, whether practised or produced by the party for whose benefit the contract is made or by any other person": C. C. Art. 994. The "other unlawful means" referred to which when employed would vitiate a bill or acceptance obtained thereby and constitute a defect in the title of the party negotiating it, would be means similar to those enumerated. Fraud is never presumed, but must be proved: C. C. Art. 993.
See also illustrations under section 30, s-s. 2 and 38 (b).
1. On a settlement, part of the consideration for a note was that certain notes according to a schedule were to be handed over to the maker, and plaintiff fraudulently concealed the fact that he had not all the notes. Held, to be a good defence on the note: McCollum v. Church, 3 U. C. O. S. 356 (1834).
2. When it was alleged that a prior note had been obtained by fraud from the maker, and the note sued on given as a renewal, evidence of the alleged fraud is inadmissible in the action on the renewal: Dougall v. Post, 5 U. C. Q. B. 554 (1849).
3. Where a note was obtained in exchange for a bill drawn by shippers, but which the latter had no expectation or right to expect would be accepted by reason of their account being overdrawn and notice from the drawees, it was held that the note was obtained by fraud: Gooderham v. Hutchison, 5 U. C. C. P. 241 (1856).
4. Action on a bill drawn by K. upon and accepted by C. and indorsed to plaintiffs. A plea by C. that he was induced to accept by the fraud of the drawers and indorsers, and that it was indorsed to plaintiffs without value; held to be a good defence: Bank of Montreal v. Cameron, 17 U. C. Q. B. 636 (1859).
5. A note was given to the payee and indorser for a share in a company for the sale of a patent alleged to be held by the payee. It was doubtful whether such company ever existed, or the maker of the note ever had a chance to join. Held, that the maker might set up the defence, that it was obtained from him by fraud: Waddell v. Jaynes, 22 U. C. C. P. 212 (1872).
6. A note given to plaintiff in consequence of threats to prosecute the maker for perjury and obtaining money on false pretences, cannot be recovered by him: Canada Farmers' M. Ins. Co. v. Watson, 25 U. C. C. P. 1 (1875).
7. Where defendant's son had committed forgery and the § 29. notes sued on were given to plaintiff to prevent the scandal becoming public, they were held to be void: Doyle v. Carroll, 28 U. C. C. P. 218 (1877).
8. Where a husband as the agent of his wife obtained a note by fraud, her title is defective, and a holder for value receiving it after maturity cannot recover: Robertson v. Furness, 43 U. C. Q. B. 143 (1878).
9. The defendant C. being in prison under indictment for assaulting plaintiff who had also sued him for damages, offered through his counsel, in settlement, an indorsed note for $1,000 which was accepted. The amount was held not to be disproportionate to the injury. The civil action was withdrawn and the Judge in view of the settlement and reparation, inflicted a fine merely for common assault. Held, that there was no fraud, and no duress, and no illegal consideration, as the law had been vindicated: Kneeshaw v. Collier, 30 U. C. C. P. 265 (1879).
10. Plaintiff purchased from an alleged company 15 bushels of hull-less oats at $10 a bushel, and receiving the company's bond to sell 30 bushels for him at the same price. Defendant bought plaintiff's 30 bushels, giving his note for $300 and getting the company's bond to sell 60 bushels for him. The company sold defendant's notes to plaintiff. Both plaintiff and defendant knew this was only part of a series of transactions and that subsequent parties would be defrauded, the oats being worth no more than ordinary oats. Held, that the transaction was part of a fraudulent scheme, was contrary to public policy, and plaintiff's action properly dismissed: Bonisteel v. Saylor, 17 Ont. A. R. 505 (1890).
11 A son having acknowledged to have taken $25 from plaintiff, the latter by threatening to have the son arrested, induced the mother to give a note for $400. Held, that there was violence, fear and illegal consideration and she was not liable Macfarlane v. Dewey, 15 L. C. J. 85 (1870).
12. Where a creditor secured secretly the notes of the insolvent for the balance of his claim, it was a fraud on the indorsers M'C.B.E.A.-13
$29. of the composition notes and they were entitled to the benefit of this payment: Arpin v. Poulin, 1 L. N. 290 (1880).
13. Where an illiterate man thought he was making his mark to a receipt, and plaintiff concealed the fact that it was a promissory note, plaintiff cannot recover: Benoit v. Brais, 6 L. N. 342 (1883).
14. Where a person takes a note made or indorsed in a partnership name, knowing that it was not made or indorsed for the purposes of the partnership, the onus is cast upon him of showing that the note was signed with the knowledge or assent of every member of the firm: Union Bank v. Bulmer, 2 Man. L. R. 380 (1885).
15. Where the drawer of a bill gave it for a special purpose to a party who, instead of using it as directed, negotiated it after maturity, the person so acquiring it is not entitled to recover: Lloyd v. Howard, 15 Q. B. 995 (1850).
16. Where a son forged his father's name to certain notes and discounted them in a bank, the forgeries being discovered, the bank pressed the father to give security which he did. Held, that the transaction was void on the ground of duress, and illegal consideration: Williams v. Bayley, L. R. 1 H. L. 200 (1866).
17. In an action on a note given for the compounding of a prosecution for perjury, it was held, following ex parte Wolverhampton and S. Banking Co., 14 Q. B. D. 32 (1884), that the consent of the magistrate did not make the transaction a lawful one Bull v. Copeland, 4 T. L. R. 139 (1887).
Illegal consideration.-Considerations are illegal which violate the rules of morality, which contravene public policy, or which are prohibited by statute. If part of the consideration of a bill be illegal the instrument is vitiated altogether. A renewal, or the substitution of a new instrument for the old one will not cure the defect.
See also illustrations under section 30, s-s. 2, and 38 (b).
1. An agreement not to proceed in a prosecution for permitting unlawful gambling in a tavern, is an illegal consideration for a note: Dwight v. Ellsworth, 9 U. C. Q. B. 539 (1852).
2. To support a plea that a note was given in consideration of forbearance to proceed in a prosecution for felony, the particular nature of the charge should be proved: Henry v. Little, 11 U. C. Q. B. 296 (1854).
3. A note given in consideration of a charge of felony being not proceeded with in Utah, is void and cannot be recovered on in Ontario Toponce v. Martin, 38 U. C. Q. B. 411 (1876).
4. It is no defence to an action on a note that the consideration was for pork speculations in Chicago, which are illegal by the laws of Illinois, the contract which was made in Ontario not being against its laws: Bank of Toronto v. McDougall, 28 U. C. C. P. 345 (1878).
5. Defendant, a J.P., was arrested for embezzling fines belonging to the township. Plaintiff gave his note to the township and took the note of defendant and his wife, and the prosecution was abandoned. Held, that the plaintiff was in no better position than the township and the note was void for illegal consideration: Bell v. Riddell, 2 O. R. 25 (1882); affirmed 10 Ont. A. R. 544 (1885).
6. Promissory notes to creditors for the balance of their claim for signing a deed of composition or discharge are void: Blackwood v. Chinic, 2 Rev. de Leg. 27 (1809); Sinclair v.. Henderson, 9 L. C. J. 306 (1865); Decelles v. Bertrand, 21 L. C. J. 291 (1877). Also a renewal of such a note: McDonald v. Senez, 21 L. C. J. 290 (1877); Arpin v. Poulin, 22 L. C. J. 331; 1 L. N. 290 (1878); Wilkes v. Skinner, Ramsay A. C. 82 (1882).