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W. P. G. HARDING, GOVERNOR PAUL M. WARBURG, VICE GOVERNOR Ex•OFFJCIO MEMSERS FRED£RIC A. DELANO ADOLPH C. MILLER CHARLES S. HAMLIN WILLIAM G. McADOO - SECRETARY OF THE TREASURY CHAIRMAN JOHN SKELTON WILLIAMS COMPTROLLER OF lHE CURRENCY FEDERAL RESERVE BOARD AND FISCAL AGENT 16, 1918. X-1133 8 i r : For your information, there is inclosed respect to the negotiability of a trade acceptance containing the provision: "If this acceptance is paid on or before - - - - - ' a discount of 5'1~ will be all0>7ed". Very truly yours, Governor. Inclosure. ./" FEDERAL RESERVE BOARD AtlgUSt ',Ji th O ADDRESS REPL.Y TO WASHINGTON herewith a.n opinion of Counsel 8.. B. PARKER WILLIS,, 41 SECRETARY ~~ ~._) SHERMAN P. ALLEN, AZST. SECRETARY 84 :::-1133-a FEDERAL RESERVE BO.ARD WASHINGTON August l ... ,.4 1918. My dear Governor: In the accomp~ing letter the Board is asked for a ruling on the negotiability of a trade acceptance containing the following provision: 11 If this acceptance is paid on or before •..•••.•••••• a discount of 5% iVi 11 be allowed". In an opinion of this office, approved by tho Board and publiShed on page 200 of the L~rch 19l8 Federal Reserve Bulletin, the conclusioh ~1aS reached that "A trade acceptance which consists of an order to pey a certain amount. YJhich is tho amount of the debt minus a discount for prompt payment at maturity, or, if not paid at maturity, to pay a greater amount, which is the amount of the debt \7ithout any discount, is an order to pay a sum certain and is negotiable. u '' The principle involved in the two cases is somewhat analogous the only difference being that in one case the discount is allm7ed if payment is rmde at maturity ·,.nne in the other tho discount is all0\7ed if matarity is anticipated. In both cases the test of negotiability, according to the text writers on the Negotiable Instruments Law, is whether or not the sum payable can bo ascertained from the face of the instrument and both forms, in the opinion of this office, meet this condition. As pointed out, ho>vever, by Counsel for the Federal Rosorvo Bank of Chicago, it has been hold in I~nnosota, Nebraska, Toxas and Canada that a promise to pay a certain sum with a provision that a fixed discount is allovmd if paid before maturity. or before a certain date is negotiable. although the contrary has been held in Michigan, Oklahoma, South Dakota and Tennessee. The reasoning of the courts in the cases sustaining the negotiab1lit7 of such instruments seems to be more consistent with tho goneral principles incorporated in the Negotiable Instruments Law and I fully agree ·;,ith Counsel for the Federal Reserve Bank of Chicago that such an instrument should be held by the courts to be negotiable. In view, ho·.vever, of the lack of uniformity of tho decisions of the courts on this point the Board should not approve for genc.:·a..l use an acceptance containing this condition since its ruling uou.ld, of course, have no binding effect on the State courts. Respectfully, (Signed) Hon. w. P. G. Harding, Governor, Federal Reserve Board. M:. C. ELLIOTT. Counsel ..
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