PART 2: BUSINESS TIPS FOR MEN AND WOMEN
FORMS OF RECEIPTS
A receipt for a partial payment:
Leavenworth, Kansas.
December 7, 1910.
$75.00
Received from Charles Long seventy-five
dollars on account.
Henry S. Somers.
A receipt in full:
San Diego, Cal.
July 27, 1910.
$260.75
Received from N. O. Taylor, two hundred
and sixty 75-100 dollars, in full payment
to date. Samuel G. Novris.
Another form:
Portland, Me.
October 20, 1910.
$40.00
Received from Thomas Moore, ten cords
of hardwood, at $4.00 a cord, the sum to
be applied to his account.
Daniel Forman.
In payment of rent:
$17.00
Received from William Forbes seventeen
dollars in full payment of rent of premises
No. 24 West Street, for the month ending
October 31, 1910.
Philip F. Ross.
Where one person pays for another:
Wilmington, Del.
August 17, 1910.
$80.00
Received from Alfred Thompson eighty
dollars to apply to the account of Hiram O.
Wells.
Baker Jones & Co.,
per, S. N. Thorp.
Receipts and other documents signed with a mark X should be
witnessed.
Payment on a note:
Bridgeport, Conn.
July 1, 1910.
$150.00
Received from Casper N. Work one
hundred and fifty dollars to apply on the
payment of his note to me for six hundred
dollars, dated March 8, 1910.
Ruben Hoyt.
The maker of the note should, in addition to getting his receipt,
have the amount of his payment endorsed on the back of the note by
the holder.
Where a receipt is given to the administrator of an estate his
position should be named as "Robert Fields, administrator of the
estate of John Jones, deceased."
WHAT IS AN ORDER?
An order is a command or instruction by one person to another to
do a stated thing.
An order may be given for the delivery of goods or the payment of
cash.
This is the usual form:
Dayton, Ohio.
August 3, 1910.
Mr. G. W. McBride:
Please deliver to Edward Lott goods
from your store to the amount of ten dollars,
and charge to my account.
F. T. Leroy.
This would be an order for cash:
Holden, Ind.
June 18, 1910.
$30.00
Mr. P. T. Mayhew. Please pay to Thomas
Jackson thirty dollars and charge same
to my account.
F. R. Wilson.
A DUE BILL
The customary form of a due bill is:
Durham, N. C.
May 1, 1910.
$10.00
Due George Smith ten dollars, payable
in merchandise from my store.
S. T. Long.
CHAPTER VII
WHO SHOULD KEEP ACCOUNTS
To have any value, business accounts, whether of a great or a
small concern, must be accurately kept.
Every man and woman, having unsettled dealings with others, should
keep some sort of book accounts.
Storekeepers must keep accounts, and every farmer and mechanic,
who would know just what he owns and what he has spent during the
past month and year, should keep an exact account of every cent
received and paid out.
Lawyers and doctors know how to keep accounts, or if they do not
they are neglecting their own side of their professional duties.
Workers, skilled and unskilled, and even the hired girl who is
paid by the month, should keep a record of the compensation
received, and how the whole or the part has been expended.
No woman can be called a really good housekeeper who does not know
to a penny what has become of the money she has received for the
upkeep of her establishment, whether she have a score of servants
or does all her own work.
In order to keep such accounts, as have just been indicated, it is
not necessary to be a trained bookkeeper, or to know anything more
about the art than a good common school education gives.
Another word as to the farmer. I am not thinking in this
connection of the old-time, deep-in-the-ruts farmer, who never
learns and knows nothing to forget, but of that wide-awake
producer who tries to keep up with the times.
Not only should the farmer keep cash accounts, the form may be
quite simple, but all his business affairs should be kept in the
best possible trim.
Personal agreements without some kind of writing to back them up,
are dangerous.
Verbal contracts feed the lawyers.
All transactions involving labor or money should be recorded in
black and white.
Don't trust to your memory.
Don't rely on the memory of another.
AN ACCOUNT WITH CROPS
Every farmer should keep an account with each crop he raises and
even with every field he cultivates.
Against the farm should be charged--
1. Its annual rental value.
2. What all the labor would cost if hired.
3. New machinery.
4. Wear, tear and repair of old machinery.
5. Taxes.
6. Insurance.
7. Doctor's bills.
8. Interest on mortgage if any.
9. The cost of fodder, fuel, etc., consumed.
The farm should be credited with--
1. The rent.
2. The cost of everything produced and consumed on place.
3. The farm products sold.
4. The stock sold.
5. Increased value of stock.
6. Increased value of property, if any.
Such accounts you say will cause trouble; well, you cannot do
anything of value without trouble. The question is will the effort
pay? Those who keep such accounts say it does, and they are
usually the successful, progressive farmers.
The working man, skilled or unskilled, and the working man's wife
as well, should keep some form of cash book that will show from
week to week the receipts and expenditures.
One can be thrifty without being miserly.
Where did the money go?
Look at your book, where every cent expended has been set down,
and you will be surprised to find how the little sums total up.
Look over the list of little things bought and you will be
surprised to see how many were not needed.
Here is a simple form for a home record:
Cash Received
1910.
Jan. 2. Balance on hand.........$45.50
" 3. Work for Mr. Jones....... 1.75
" 3. Smith paid bill......... 13.75
" 9. Work for Mr. Brown....... 7.50
Cash Paid
1910.
Jan. 2. Two shirts...............$1.50
" 3. To wife for house........ 8.50
" 4. Doctor C's. bill......... 6.00
" 5. Fare to Troy............. 2.25
" 6. Horse car................ .20
" 6. Postage.................. .06
" 7. Church Contribution...... 1.00
" 8. Shoes mended............. 0.60
" 9. Newspaper bill........... 1.00
Never "lump" what you receive or what you spend.
Set down each item separately, even to one cent.
When you have filled out each page of "received" and "paid" foot
it up and carry it to the next page set apart for the purpose.
An account book will cost but a few cents. Use the left-hand side
for receipts and the right for expenditures.
At any time the excess of the left hand over the right should show
the amount on hand.
Strike a balance at least once a month.
OTHER RECORDS
Never mix up another's accounts with your own.
John Smith, treasurer of some church, society, or club, is a
different person before the law from John Smith, the trader or
mechanic.
Funds not your own, and which may be added to or decreased from
time to time, as in the case of a society, say like the Odd
Fellows, should be kept in the bank not as John Smith's but as the
funds of "John Smith, Treasurer of Washington Lodge 110,
Independent Order of Odd Fellows," or whatever the name of the
society, club, or church may be.
In the same way, "a treasurer's book" should be kept and all the
receipts and expenditures carefully recorded.
COPIES
If a business proposition is made to another by mail, or if you
hand another in writing your proposition as to a certain contract
you are willing to undertake, for the consideration named, be sure
to keep a copy of the letter or contract; such a precaution may
save trouble.
CHAPTER VIII
AS TO BANKS
No instrument of trade has done so much or is more essential to
the safe and progressive business of the world today than the
bank.
Every department of business, in our modern civilization, must
keep in touch with the bank.
Money is the blood of trade and the banking system is its heart.
The bank is as necessary to the thrifty farmer as it is to the
greatest railroad or the most wide-spread trust.
Banks are depositories for money not in circulation.
Banks have facilities for the safe-guarding of money which the
ordinary business man could not provide for himself.
Instead of running the risk of paying bills with money carried
about on his person, the business man, and every man with ready
money should follow his example, deposits his money in a
convenient bank, for which he receives a proper voucher in the
shape of a credit in a deposit book.
When he pays a bill, he draws a check for the amount, payable to
the order of his creditor. This check, when endorsed by the
receiver and paid by the bank, is in itself a receipt for the
NATIONAL BANKS
As I propose to say something about savings banks in another
chapter, the present will be devoted to what are known as "banks
of deposit."
Banks of deposit are either National, State, or private.
A National bank is, as the name implies, chartered and
incorporated by the Government, with special privileges and
restrictions.
The Government in the organizing of National banks had in mind the
protection of the public without unduly limiting the profit of the
stockholders.
The sum the stockholders must contribute to the establishment of a
National bank varies according to the population and the business
importance of the place in which the bank is to be located.
The capital must exist in a prescribed form.
Certain forms of investment are prohibited, as for instance the
ownership of real estate, except under certain restrictions.
This is done that the National bank may be able to convert its
securities into cash in the shortest order.
In consideration of a prescribed amount of United States bonds,
deposited with the Treasury in Washington, the Government issues
to the National bank a prescribed sum in printed bank notes of
varying denominations.
If the bank should close for any reason, the bank notes or their
equivalent must be returned, when the bonds deposited as security
are released.
Every bank must have a board of directors, a president and a
cashier. Receiving and paying tellers, with bookkeepers, and many
clerks are necessary to carry on the business of a large bank.
In addition, the National banks are under the supervision of
regularly appointed Government inspectors.
A National bank may fail, but its notes are still "as good as
gold."
BANKS AS LENDERS
The bank not only receives money on deposit, but it loans money
under certain conditions.
Many merchants, builders, contractors and others often find it
necessary to borrow money in order to carry on their business
successfully.
If a man's business reputation is good, and the banks keep well
posted in such matters, he may secure a loan on his own note,
though even in such cases the name of a good endorser is required.
If in addition to his note the borrower can offer security in the
way of bonds of good character, or other reliable collateral, he
can usually be accommodated.
Of course, the banks charge interest for loans. They also make
collections on notes and other commercial paper and they issue
foreign and domestic bills of exchange.
Every man with a sum large or small in excess of his expenditures,
should open a bank account. Even if not in business this will
encourage thrift and lead to good business habits.
INTEREST ON DEPOSITS
Some banks, particularly those known as "state" or "private," and
National banks in smaller communities, allow interest on deposits.
This interest varies with the demand for money, but in the eastern
states it seldom goes over four per cent.
It is well to know when interest begins and ends.
If the dates set by the bank for reckoning interest are the first
day of January, April, July and October, money deposited March
31st will begin to draw interest next day, but if deposited April
2nd, it would not begin to draw interest till July 1st.
But if you have the money and would insure its safety, deposit it
at once regardless of time or interest.
If a depositor withdraws his money before the day when interest is
due, he forfeits the interest. But banks vary as to that.
CHECK AND DEPOSIT BOOKS
Every depositor is given a book in which the teller or cashier
credits him on the left-hand side with the amount deposited. Other
deposits are treated in the same way, and at proper times, if
interest is allowed, it is added as a deposit.
The depositor can provide his own check book, and have it printed
in any color he pleases, with the name of himself and business on
the margin. The bank, however, will supply loose bank checks of
its own, or it may provide them in book form, with stubs, or a
space on which the number, amount and purpose of the check may be
noted for the drawer's information.
"Writing up" of the deposit book is leaving it with the proper
officer at the bank--a receipt for the book is never taken. It is
returned with all the checks received, and their amount footed up
on the right hand or debit page, and the balance on hand shown.
Every depositor should know from the record on the check stubs
exactly how his account stands with the bank.
Take care that you do not overdraw.
Keep your own record of your own money.
COMMERCIAL DEPOSIT BANKS
In the Commercial banks of our large cities no interest is
allowed, nor could it be easily calculated where a score of
deposits may be made in a week and a hundred checks drawn in a
day.
The depositor in such a bank is free to check out his funds as he
pleases.
Before opening an account there is more than money needed from the
depositor. If unknown, he must satisfy the bank of his character,
which is best done through the introduction of one known to both.
Some banks make a charge for deposits, where a man makes a
convenience of them by depositing money which he checks out in a
short time.
A depositor, when opening an account with a bank is required to
place his signature in a book kept for the purpose. Until the bank
officer, the paying teller, becomes familiar with the signature on
the check, he verifies it by comparing it with that in the book.
A check may be defined to be "a written order on a bank directing
it to pay a certain sum of money to the person named in the check
or to his order, and signed by a depositor."
So long as the purpose is clearly conveyed in the writing no
particular form of words is necessary, nor need the paper on which
the check is written be the regular printed form properly filled
in.
The "drawer" is the one who makes the check.
The "payee" is the one for whom the check is made.
In making a check, the best plan is to fill out the stub first,
and from the data on it make out the check. This tends to
accuracy.
Be sure to number your check, beginning with I.
Be sure that the number on the stub is the same as on the check.
A person having money in bank and wishing to draw for his own use,
makes his check payable to "self" or to "cash."
Usual form of check:
First National Bank. No. 27
Kingston, Vt., Oct. 13, 1910.
Pay to order of John Smith
Seventy-five 75/100 ------ dollars.
$75.75 George F. Brown.
It is proper form to specify on the face of the check the purpose
for which it is given, but while this is permissible it is not
usual.
Write the amount of the check first in words then in figures. This
makes more certain the amount.
Always begin first word of amount close to left-hand side of
check; when the whole sum is written down draw a heavy stroke
along the line to the word "dollars."
When a check is made payable to John Smith or order, John Smith
must sign his name on the back of the check--left-hand end and
about an inch from the top.
Never sign a check until you are ready to collect, or to bank it.
The payee can endorse the check to another by writing on the back
as follows:
Pay to the order of
Thomas Brown.
John Smith.
A check payable to "bearer" may be negotiated by any one. When
such checks are presented by a stranger, at the bank of the maker,
the paying teller always insists that the stranger be identified.
Never make a check payable to "bearer" if it can be avoided.
Sometimes checks are dated ahead, for reasons satisfactory to the
maker and payee.
A check drawn on August 5th, but dated August 20th cannot be
collected till the latter date.
Never date a check ahead unless you are positive that you will
have the money in bank to meet it on the day named.
Never, if you can avoid it in trade, receive a post-dated check.
Cash or deposit your checks as soon as possible after they are
received.
If the bank should fail, while you are holding the check, the
maker cannot be held for the loss.
CERTIFICATES OF DEPOSIT
Often when a depositor is travelling, he finds it convenient to
carry with him a form of paper that is as good as cash, and much
better in the event of loss.
Banks will issue "certified checks" to depositors. These checks
are stamped by the bank "certified" with the date and officer's
signature attached.
On issuing such a check, the bank debits the receiver's account
with the amount, and so can guarantee the payment whenever or
wherever presented.
Such a check may be received with as much certainty of its value
as if it were a bank bill.
When a person places money in a bank with no intention of checking
it out for some time to come, he may have issued to him a
"Certificate of deposit."
While holding this certificate he cannot check against the money
in the bank.
The holder of a certificate of deposit may transfer it.
The money may be paid in part by the bank, if the certificate is
presented, and the amount is endorsed on the back.
To withdraw all the money the certificate must be surrendered.
USE OF CHECKS
There is no form of commercial paper in such general use as the
check.
The total of all the checks in use at some seasons is far more
than the total of all the money in all the banks.
Checks are balanced in the money centers through what are known as
clearing houses. In these a bank is charged with checks against it
and credited with those in its favor.
The differences are settled by cash.
Often a few thousand dollars will settle check accounts amounting
to millions.
If by any chance you should receive a check in which your name is
misspelled, or not given as you write it, endorse the check
exactly as the name is written on the face, then add your name in
the regular way.
CHAPTER IX
While of National importance, savings banks are chartered by the
respective states in which they exist, and as such are distinctly
local institutions.
Unlike the National, the savings bank is not established as a
money-making corporation.
The ostensible and actual purpose of the savings bank is to
encourage people of small means to save.
The savings bank provides a safe place for the care of such
deposits, and it pays such rates of interest on such deposits as
are warranted by the earnings of its investments after paying the
expenses incident to the proper conduct of its officers.
When a savings bank receives authorization to act, through a
charter from the state, the organizers choose a board of directors
and the proper officers.
Usually the officers occupying positions of trust and
responsibility are required to give bonds for the proper discharge
of their duties.
HOW BUSINESS IS CONDUCTED
With all the legal conditions complied with, and a suitable office
provided, the savings bank is ready for business.
Some savings banks will receive on deposit any sum from five cents
to five thousand dollars.
Other banks will not receive less than one dollar at a time, nor
more than a thousand.
We have heard of "penny savings banks," but they are rarely
chartered, and are organized, only to encourage thrift among
children.
Fractional parts of a dollar are not usually reckoned as drawing
interest.
Some banks require as much as three, four or five dollars before
allowing interest.
Savings banks in the eastern states pay from three to four per
cent. In the west it is sometimes as high as six.
Each bank has certain dates at which calculation of interest
begins. As a rule this is January 1st, April 1st, July 1st, and
October 1st.
Money deposited at any time between these dates does not draw
interest till the beginning of the next quarter.
But never mind the interest.
The best time to make a deposit is when you have the money.
The bank is safer than your pocket.
Count your money carefully and make a memorandum of the amount
before giving to the savings bank to deposit.
Hand the money to the officer--usually "the receiving teller"--
authorized to receive it.
The teller writes down the name, age, occupation and residence of
the depositor.
If money is deposited in the name of one under legal age, the
names of the parents and the birthplace of the minor are also
recorded.
The adult depositor must write his name in a book provided by the
bank for the signature of clients.
When these conditions are complied with, the depositor receives a
memorandum book, known as a "deposit book", in which, with his
name and date, is written the amount of his first deposit.
The deposit book must be carefully guarded, for without its
presentation at the savings bank money cannot be drawn. You cannot
check against your savings bank account, as with a commercial
bank.
HOW THE ACCOUNT GROWS
After the first account is opened the rest is easy.
On the second, as on all subsequent visits, the deposit book, with
the amount to be entered, is handed to the receiving teller. He
counts the money, makes a record of it for his own use, enters it
on your book as a deposit, and hands the book back. That is all.
Whenever interest is due it is written down in the book as if it
were a cash deposit.
The interest, if desired, will be paid in cash, but if allowed to
remain, it begins at once to earn interest for itself.
Interest grows like a rolling snow ball. On such small beginnings
great fortunes have been built.
Savings banks keep a reserve, made up of earnings in excess of
interest and all expenses.
This reserve earns money.
The money so earned is reckoned as a net profit, and it may be
distributed, and usually is, among its depositors as a "dividend."
THE LIMIT OF DEPOSIT
Different banks have different limits of deposit, that is fixed
sums beyond which they will not receive.
The limit is from one thousand to five thousand dollars.
When the fortunate depositor has reached the limit with one
savings bank, there is no law to prevent his opening another
account with another, or with any number of similar banks.
Remember the savings banks are not meant for capitalists, but for
small depositors.
After deposits and interests have reached a total of $1,600, the
interest will not go on earning interest, but will be regarded
simply as a deposit.
This is in compliance with law.
Depositors, posted as to the law, open another account with
another bank, and keep on till the interest limit is reached.
HOW TO DRAW MONEY
A savings bank depositor may either draw money himself or through
some properly authorized person.
This is the method:
The deposit book is presented to the paying teller. The owner
states the sum he wants to draw.
Having assured himself that the bearer of the book is the right
person, the teller takes a receipt in a book kept for the purpose,
for the amount, enters the same on the right hand or debit side of
the book, and hands out the money.
There is a form of authorization for another to draw, printed on
the deposit book. This must be copied and its directions complied
with.
Most banks will not allow depositors to draw out less than a fixed
sum, say $5.00.
This saves trouble, and prevents thoughtless depositors from going
to the bank every time they want a dollar.
Before a depositor can draw a large sum from a savings bank he may
be compelled, under the law, to give from one week to six weeks'
notice of his intention.
This provision may not prevent a run on the bank, but it gives the
managers time to provide for it.
Read the rules in the deposit book.
HOW SAVINGS BANKS EARN
How can a bank that does not discount notes or deal in loans and
commercial paper earn money? How can it pay interest?
While they may be individually small, the aggregate of all the
deposits in a savings bank may, and often do, amount to many
millions.
This money is not allowed to lie idle.
Under the skilled direction of the bank officers, the money,
instead of lying idle in the vaults, is invested in many ways, but
always in accordance with the laws of the state under which the
bank is chartered.
Much of the money is invested in mortgages on real estate, never
on personal property.
National bank stocks, sound railroad bonds, and other forms of
reliable interest security are fields for the investment of
savings bank funds.
Savings banks are subject to the periodic inspection of state
officers appointed for the purpose.
The failure of a savings bank through bad investments or the
dishonesty of officials is very rare.
Avoid all banks that promise more than the regular rate of
interest.
Private banks may be, and usually are, honestly conducted, but to
be safe, deposit only with a bank that is regularly chartered and
is subject to the inspection of the law.
The savings bank is the best for the wage earner.
CHAPTER X
NOTES--DRAFTS
The promissory note is a most useful kind of commercial paper, and
it is in general use in business.
If a man has not sufficient ready cash to pay for the real estate
he is about to purchase, he makes up the difference by a note,
which note is secured by a mortgage on the property.
Remember the mortgage must always be regarded as security. The
note represents the debt.
Often wholesalers take a note as part or even full payment for a
bill of goods to a retailer.
If the wholesaler needs money, he endorses these notes and putting
them in his bank draws against them, less the discount he has to
pay for the accommodation.
As has been shown, an account may be transferred and sold, but a
note is more convenient for that purpose.
AN ILLUSTRATION
As with a check the maker of a note is known as a "drawer," the
person in whose favor it is drawn is the "payee."
Notes may be written in pencil, but it is better and safer to
write with ink on good paper.
Supposing you buy a team of horses, or it may be a bill of goods,
from John Brown, for $350.
Now you have only $100 in cash. What are you to do?
Mr. Brown, knowing you to be reliable, says: "That's all right,
friend Jones. You pay me the $100 cash for which I will give you a
receipt, then I will take your note for six months, payable at my
bank."
You agree to this; pay out the money, make and deliver the note
and take the property in question, which is now yours as much as
it had been his before the transfer.
The following would be a legal form in which to make the note:
$250. Summit, N. J.
October 10, 1910.
Six months after date I promise to pay to
the order of John Brown..............
Two hundred and fifty ...... dollars,....
At the Lincoln National Bank of Summit
.......... Value received.
George Jones.
No. 1. Due April 14, 1911.
Now, if before the expiration of this note, you want to make a
payment on it of, say, $75, you take the money to Mr. Brown, who
endorses on the back of the note, "Received on the within note
$75, January 3rd.," if that be the date, and signs, "John Brown."
It may be well to remember that while a running account may be
collected at any time, the law cannot prevent the maker of a
promissory note from selling all his belongings and leaving the
country before the note is due.
DAYS OF GRACE
Notes may be "time" notes, that is where there is a specified time
for payment, or "demand" notes. The latter are collectable on
presentation.
With the time notes "three days grace" are allowed after the
expiration of the date for payment. No such favor is allowed in
the case of demand notes.
These grace days do not seem businesslike. Why not add them to the
date in the note? Well, it is a custom, quite as old as the
greater part of our laws, and so it must be observed.
Under the law a note is payable at the home or business place of
the drawer, unless otherwise specified.
A note secured by a mortgage has its payment guaranteed.
The usual way of securing the payment of a note given in business
is to have it endorsed with a good name across the back, as in
endorsing a check.
By writing your name across the back of another man's note you
announce to all the holders of that note that you know the maker
and that if he does not pay it you will.
In most states the indorser of a note cannot be held responsible
for payment, unless the holder notifies him, within twenty-four
hours after the note comes due, that the maker cannot or will not
pay.
If an indorsed note changes hands, each indorser is responsible to
all endorsers who follow him and also to the last holder of the
note.
If an indorser, that is, one into whose hands the note has come
after the first endorsement, should not wish to guarantee payment,
he writes before his name, "Without recourse to me."
This is known as a "qualified endorsement."
A NEGOTIABLE NOTE
Most notes are negotiable; that is because they may be sold, like
any other personal property, or the ownership may be transferred
from one person to another.
No note is negotiable that does not bear on its face, the words,
"Pay to bearer," or "Pay to the order of," followed by the payee's
name.
JOINT NOTES
When two persons sign a note they become jointly and individually
responsible for its payment.
Such persons are known as "joint makers."
If one signs his name on the back of a note before it has been
handed to the payee, he makes himself not only an endorser, but a
joint maker.
If the maker of such a note refuses to pay on the expiration of
time stated, he is liable for the amount without any notification.
DISCOUNTING NOTES
If a business man borrows from a bank on his note, he must pay for
the privilege.
Interest is a sum paid for the use of money.
Interest is reckoned as a certain percentage yearly on the
principal.
Interest on interest is called "compound interest" and is unused
in ordinary business transactions.
Instead of collecting interest when the amount borrowed on a note
is due, or deducting it from the principal in advance, it
discounts the note at the rate agreed on and pays the rest.
This is called bank discount and its rate is variable, depending
on the abundance or scarcity of money.
Money is a marketable article, and the price, like that of wheat
or cotton, is governed by supply and demand.
INTEREST ON NOTES
A note may be made payable "with interest," or not, as the parties
concerned may agree.
If nothing is said about interest in the note, no interest can be
collected.
Again a note may go into details and specify that "the interest
shall be ten per cent, payable semi-annually," provided always
that the rate shall not be higher than the legal interest of the
state.
Excessive interest is known as "usury." It invalidates all the
interest, and in some places the principal is forfeited.
When the holder of an interest note receives interest payment he
must record the date and sum on the back of the note.
PROTESTS
If a note comes due on Sunday or on a legal holiday, payment must
be made on the following day.
Holidays are appointed by the separate states.
The United States recognizes no day as a holiday, except Sunday,
and that is acknowledged through custom.
It is customary for banks to notify makers of notes held by them a
few days before time set for payment; but this is not required by
law.
If a note lies unpaid in bank the day set for payment, as soon as
the office closes for regular business the note is protested.
The protest is made before a notary public; he is usually an
employee of the bank.
In the protest formal objection is made against the breaking of
the promise, and demanding that the matter be set right by the
maker, or on his failure, by the indorser.
The indorser, who has to pay, has a claim for the amount on the
maker of the note, as he would have for money loaned or goods
sold, and he can sue to collect.
A note that is not paid within a fixed time is said to be
"outlawed."
Remember the indorser of a note must be notified within twenty-
four hours of the failure of the drawer to make good.
NOTICES
The object in protesting a note is to fix the liability on the
endorser.
If there be more than one endorser notice of protest must be sent
to all at the same time.
It is better, where possible, to serve the notices on the
indorsers in person.
The payee must also be notified.
ACCOMMODATIONS
There is a form of note sometimes used in business which is given
without any consideration on the part of the maker. This is known
as an "accommodation note."
The maker of such a note does not expect to pay it, nor does the
man in whose favor it is drawn expect to do so.
An accommodation note is an instrument by the sale of which, or
through a bank, money may be raised for immediate use.
The maker in this case is a friend who loans his name.
As there was no value received such a note could not be collected
by the payee.
But if it passes into the hands of a third party, who endorses it,
then the maker of the note can be compelled to pay.
A LOST NOTE
A note may be lost or stolen.
The losing of a note does not release the maker from payment of
the full amount on the date and at the place named.
The loser should at once notify the maker of his loss.
A man who buys, before its maturity, a lost or stolen note, may
collect the full amount from the maker, provided the note is
payable to "bearer" and no notice of the loss has been published.
When the maker of a lost note pays the amount to the original
owner, he should receive from him what is known as a "bond of
indemnity."
This bond is to secure him against paying a second time.
NOTES ABOUT NOTES
There are some things worth remembering about promissory notes.
1. Never give one if you can pay cash.
2. A note made on Sunday is worthless in some states.
3. A note given under compulsion is worthless.
4. Notes made by a drunken person, or obtained by any form of
fraud cannot be collected under law.
5. Notes bear interest only when so stated in body of note.
6. The holder of a note has a legal claim against every indorser.
7. Each indorser is responsible to every indorser who follows him.
8. Notes are valid without reference to the kind of paper, or
whether they are written with pen or pencil.
9. Losing a note does not release the maker from payment.
10. If no time is set in a note for payment, it becomes due as
soon as it is made.
11. Where a note is made in one state and is payable in another,
it is governed by the laws of the state in which it is to be paid.
12. Notes payable on demand draw no interest until after they have
been presented for payment.
13. If a note reads "with interest" and no rate is specified then
it draws the legal interest in the state in which it was made.
14. Demand notes are not entitled to days of grace.
15. If no place of payment is named in a note, it should be
presented to the maker personally in business hours.
16. The misspelling of a word or words in no way invalidates a
note.
17. If a person who cannot write makes a note his mark should be
properly witnessed.
18. The makers of a joint note must be sued jointly.
19. If the words and the figures in a note disagree, the words
take precedence.
20. A note signed by a firm may be collected from either of the
partners.
21. When a payment is made on a note secured by a mortgage, the
amount is endorsed on the note, never on the mortgage.
22. A note given by a minor is void, unless given for actual
necessities, like food and clothing.
23. If a note made by a minor is acknowledged when he comes of age
it is binding and collectible.
CHAPTER XI
A DRAFT
A draft is a written order from the first party to the second
party to pay to the third party a certain sum of money at a
certain time.
The first party is called the "drawer."
The second party is the "drawee."
The third party is the "payee."
There are two kinds of draft.
The first is usually where the cashier of one bank, through his
own check, draws on another bank for the cash difference in their
accounts with each other.
The second form of draft is the most usual and is the one we shall
here consider.
The cashier's draft is always for cash and the demand is always
honored. The ordinary business draft may be for cash or for goods.
The business draft is usually honored, but there are circumstances
under which it may be ignored.
TO MAKE A DRAFT
But let us suppose that the draft is all right and that a
merchant, let us call him Henry Thomas, and suppose him a resident
of Philadelphia, has a bill against James Taylor, of Cleveland,
and he wants to collect it, without recourse to law. How will he
go about it?
The bill is for $100.
Mr. Thomas writes this draft:
Philadelphia, Pa., Sept. 5, 1910.
At sight pay to the order of
Johnson National Bank of Philadelphia
One hundred................... dollars.
With exchange
and charge same to
Henry Thomas.
To James Taylor,
Cleveland, Ohio.
Having drawn his draft, Mr. Thomas takes it to the Johnson
National Bank for collection. The collection is actually made by
some bank in Cleveland to which the Johnson has endorsed it over.
If Mr. Thomas wished he might have sent his draft direct to the
Cleveland bank, but he no doubt thought it better to transact such
matters through his own bank.
Or if Mr. Thomas lived where he was not in touch with a bank, he
might have drawn through any person whom he knew in Cleveland.
On receiving the draft for collection, the Cleveland bank would at
once give it to a clerk who would without delay present it to Mr.
Taylor.
Mr. Taylor, having written his acceptance of the draft, is given
three days grace in which to make payment.
In states where days of grace are not allowed, he would have to
pay at once.
Mr. Taylor writes the word "accepted," with the date and his name
across the face of the draft, and if he does not pay cash, he
states in the writing where payment will be made.
Of course, Mr. Taylor cannot be compelled to accept a draft. There
may be good and honest reasons for his not doing so, but having
accepted it, in business honor he is bound to pay it.
The term "Sight draft" explains itself, but the order to pay a
draft may indicate, and often does, the number of days allowed for
payment, after presentation.
FOR COLLECTION
What should be done by the man to whom a bill or a note is due,
when the debtor lives in a place where there is no bank?
In that case he must learn in some way the name of a promising
person to make the collection for him.
In this case he makes out the draft as before, and adds the words
"for collection." This acts as a bar to any transfer of the paper.
Most banks refuse to handle a draft marked "for collection."
DISHONOR
Drafts are not necessarily duns.
Some country merchants prefer to pay their bills to wholesalers in
that way, so that collecting drafts is no small part of the
business of the ordinary bank.
While men are not compelled to meet drafts when presented, if the
amount is due and he defaults or refuses to pay he injures his own
credit.
In refusing a just draft he is said to "dishonor" it.
So sure are wholesalers that their drafts will be met by their
distant debtors that they do not hesitate to draw against them
when deposited for collection, regarding them as cash to their
credit in bank.
PROTESTS
When a draft is not accepted or paid when due, if it be a time
draft, it is protested in the same way as a note.
The protest of a draft serves as a notice to the drawer of its
non-acceptance.
Like notes and checks, drafts may be transferred by a similar
endorsement.
BUYING DRAFTS
If I wanted to pay a bill for $150 to Albert Holt, living at
Wallace, Kansas, and did not wish to trouble him with a check, how
would I go about it?
1. I might express the cash, which would be expensive.
2. I might send it in postal order, not always certain.
3. I might send it by a trusted hand, but might have long to wait
before I found a friend going out to Wallace.
I am living in New York City, and am familiar enough with banking
to know that New York is a great financial center and is in
constant communication with nearly all the outside banks.
The outside banks keep money in deposit here, and the New York
banks, particularly in the spring and autumn, keep deposits with
their correspondents.
With my $150 and a small extra sum to pay my bank for drawing the
draft, I go thither and buy a draft for the sum I owe Mr. Holt.
I mail this draft to my creditor and he can cash it without loss
in his home bank. Here is the form:
No. 101.
Madison National Bank of New York.
Pay to the order of Albert Holt,
One hundred and fifty dollars ($150.)...
.......... L. N. Jones,
Cashier.
To Prairie National Bank,
Wallace, Kansas.
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