Section 1 Historical Background

• Library: Commercial Law 2007

Forms of negotiable instruments were used among traders and merchants in England as early as the 13^th century. See Frederick K. Beutel, The Development of Negotiable Instruments in Early English Law, 51 Harv. L. Rev. 813, 830 (1938). But it was not until the 1620s, when the British Parliament repealed the ban on charging interest, that negotiable instruments, namely bills or bills of exchange, became a more widely accepted alternative to the use of precious metal currencies, which were more susceptible to theft and harder to transport. See 8 William S. Holdsworth, A History of English Law 101–02 (2^nd ed. 1937). By the end of the 17^th century, negotiable instruments had become an indispensable part of the British commercial system and, while the common law at times struggled to keep up with developments in trade, by 1700 courts in England had managed to lay the foundations of modern commercial law. See:

• Hussey v. Jacob, 1 Comyns 2 (1696) (an assignee of a bill of exchange could enforce it even though the original holder could not because the underlying debt was legally void)

• (Anonymous) 1 Comyns 43 (1697) (the bona fide purchaser of a bill of exchange could enforce it even though it had initially been given without consideration)

• (Anonymous) 1 Salk 126 (1699) (the holder of a bill payable to the holder or to the bearer could not recover it, if lost, from a third party to whom the finder had sold the instrument, citing course of trade)

As part of continuing efforts to facilitate and improve a fair and efficient trading system, the British Parliament in 1704 extended the protections...