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Part II The Transfer of Intangible Property, 12 Negotiation and the Transfer of Money

From: The Law of Assignment (3rd Edition)

Marcus Smith, Nico Leslie

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2021. All Rights Reserved. Subscriber: null; date: 30 July 2021

Bills of lading and carriage of goods — Payment obligations of the buyer — Applicable law and transfer of title

(p. 290) 12  Negotiation and the Transfer of Money

A.  Overview of the Chapter

12.01  The nature of documentary intangibles was considered in paras 2.79 to 2.82 and Chapter 9. Documentary intangibles are instances where a document embodies a right. Physical dealing with the document, as where the document is delivered from one person to another, gives rights to the holder.1 Goode describes documentary intangibles as comprising three classes:2 ‘documents of title to payment of money (termed instruments), documents of title to negotiable securities (eg bearer bonds and notes), and documents of title to goods’. These various classes of documentary intangible are examined in this chapter, and the circumstances in which they can be transferred are considered.

12.02  Section B considers the concept of ‘negotiation’ and the transfer of certain negotiable instruments, such as bills of exchange, cheques, and promissory notes. These instruments are defined as negotiable because they are all subject to the special regime for transfer, or ‘negotiation’, that represents an exception to the rule that choses in action cannot be transferred at common law.

12.03  Section C briefly recaps the treatment that has been given elsewhere in this book to bearer shares. Bearer shares can also be legally transferred, or ‘negotiated’, by delivery.

12.04  Documents of title to goods are not specifically considered in this chapter. This is because the definition of documentary intangibles in this book is substantially narrower than Goode’s definition. Documentary intangibles, for the purposes of this book, do not include documents whose function is merely to ‘represent’ goods, in the sense of acting as a symbol of the goods for the purposes of physical delivery: to be a documentary intangible, the document in question must embody a right.3 However, the provisions of the Carriage (p. 291) of Goods by Sea Act 1992, which provide that a person who becomes a lawful holder of a bill of lading has transferred to and vested in him all rights of suit under the contract of carriage, are briefly considered in Section D. This is because the effect of the delivery of the bill of lading is to cause interests in the contract of carriage to transfer from one person to another.

12.05  Lastly, the status of money is discussed in Section E.

B.  Negotiable Instruments4

(1)  The Concept of ‘Negotiation’

The history of negotiation

12.06  As has already been described at paras 9.07 to 9.10, the law of negotiable instruments represents an innovation by the law merchant (or lex mercatoria) and the common law to reflect the commercial practice of the City of London. Given the common law’s refusal to countenance the assignment of claims or debts, it became important for merchants to have a reliable means of transferring credit held in their name.

12.07  The practice of indorsing bills of exchange as a means of transferring (or ‘negotiating’) the right to payment from one merchant to another appears to have arisen for the first time in the seventeenth century.5 Prior to that, bills of exchange had represented a means by which two merchants could exchange credit balances standing to their name, typically in different cities or countries. The practice of indorsing bills changed this: now the holder was the beneficiary of the right to payment, even if not a party to the original exchange transaction.

12.08  This had important practical benefits. For example, a country cloth manufacturer might have a credit balance standing in the hands of a factor in London, following the sale of its cloth at market. The manufacturer could draw a bill of exchange against that balance, and use the bill of exchange to pay a local merchant for further raw textiles. The merchant could in turn indorse the bill of exchange to other merchants, in return for other goods or services, until someone decided to present the bill to the factor in London and demand payment. For obvious reasons, the ability to trade credits in this way greatly facilitated the expansion of the English economy in the seventeenth century.

12.09  The proliferation of bills of exchange during this period took place alongside other important commercial innovations, such as the founding of the Bank of England in 1694. Bills of exchange became a pillar of the modern financial system that was being created in London,6 and the courts were required to determine the legal effect of the transfer of such instruments from merchant to merchant. Some early decisions turned on the distinction between ordinary bills of exchange and bank notes issued by the Bank of England (which Lord Mansfield, departing on this point from an earlier reported decision of Lord Holt, described as fungible ‘currency’).7 However, the general tenor of the case law was that a (p. 292) bona fide holder of a bill of exchange was entitled to enforce it against the drawer, free of defences, and even if it had been lost or stolen by some previous holder.8

12.10  The effect of such decisions was to provide considerable protection to the recipients of negotiable instruments. This was of substantial commercial importance, since merchants needed to be sure that the instruments they received would be paid by the original drawer. As a fallback, the recipient could also proceed against the individual who had indorsed the bill to him, or any prior indorser whose bill of indorsement was genuine. In each case, the protections arose out of the need to ensure the security of payment systems in the seventeenth, eighteenth, and nineteenth centuries.9 They also explain why the holder of a negotiable instrument still enjoys rights wider than those of an assignee.

Negotiation and assignment

12.11  Although both negotiation and assignment concern the apparent transfer of a right to personal property, there are several important conceptual and practical differences. Most obviously, the mode of transfer under a negotiation or an assignment is quite different. The requirements for the successful transfer of a negotiable instrument are described variously at paras 12.13 to 12.35.

12.12  As to the effect of the transfer once executed, there are four key differences. First, the transferee of the instrument can sue in his own name, without any need to join the transferor, whereas an assignee may need to join his assignor in some cases. Second, there is no need for notice of the transfer to be given to the obligor, whereas notice is necessary to perfect a legal assignment. Third, the transferee may enforce payment against all parties liable on the instrument, without differentiation, whereas an assignee must identify which right it holds against which particular debtor. Lastly, and importantly, the transferee of a negotiable instrument holds the instrument free of any defect of the title of prior parties, whereas an assignee will always take his assignment ‘subject to equities’.

(2)  Characteristics of Negotiable Instruments

12.13  The nature of negotiable interests was considered at paras 9.11 to 9.12.

12.14  Negotiable instruments include bills of exchange, cheques, and promissory notes. The nature of these instruments is considered in turn below.

(3)  Bills of Exchange

The nature of a bill of exchange

12.15  The nature of a bill of exchange and the obligations and legal relationships arising out of a bill were considered in paras 9.24 to 9.28.

The transfer or negotiation of bills


12.16  The most important feature of a bill of exchange is its negotiability. Section 31(1) of the Bills of Exchange Act 1882 provides: ‘A bill is negotiated when it is transferred from one person to another in such a manner as to constitute the transferee the holder of the bill.’ A bill payable to bearer is negotiated by delivery.10 Section 2 of the Act defines (p. 293) the ‘bearer’ as the person in possession of a bill or note which is payable to bearer. A bill is made payable to bearer normally by writing the word ‘bearer’ as the payee. A bill payable to a person’s order is negotiated by the indorsement of the holder and is completed by delivery.11

Effect of an indorsement

12.17  Section 56 of the Act provides: ‘Where a person signs a bill otherwise than as drawer or acceptor, he thereby incurs the liabilities of an indorser to a holder in due course.’

12.18  Section 55(2) provides that the indorser of a bill, by indorsing it, engages that on due presentment it shall be accepted and paid according to its tenor; and that if it be dishonoured, he will compensate the holder or a subsequent indorser who is compelled to pay it.

The holder of a bill

12.19  The transferee of the bill is known as the holder. Section 2 of the Act defines ‘holder’ as meaning the payee or indorsee of a bill who is in possession of the bill, or the bearer of the bill. The holder may therefore be an original holder of the bill or a transferee. By virtue of s 38(1), the holder may sue in his own name on the bill. A person who is not a holder cannot sue on the bill. If the holder obtains payment then s 38(3)(b) provides that the person who pays him gets a valid discharge for the bill.

The need for consideration

12.20  Although the holder can, by virtue of s 38(1) of the Act, sue in his own name on the bill, his action will fail if he took the bill gratuitously as a gift without any consideration having been given for it, either by him or anyone prior to him.12 It is here, with this insistence on consideration, that the law regarding negotiable instruments betrays its common law origins.13 Clearly, the manner in which a consideration requirement operates in the context of an instrument designed to transfer a right easily and efficiently to third parties will not be straightforward. The position is as follows:

  1. (1)  Section 27(1) of the Act provides:

Valuable consideration for a bill may be constituted by,—

  1. (a)  Any consideration sufficient to support a simple contract;

  2. (b)  An antecedent debt or liability. Such a debt or liability is deemed valuable consideration whether the bill is payable on demand or at a future time.

Thus, the Act varies the general common law rule that past consideration is no consideration.14

  1. (2)  What is more, consideration does not have to move from the holder. Section 27(2) of the Act provides:

Where value has at any time been given for a bill the holder is deemed to be a holder for value as regards the acceptor and all parties to the bill who became parties prior to such time.

(p. 294) Thus, a holder, claiming against an acceptor, drawer, or prior indorser with whom the holder has had no direct dealing, is to be treated as having given value in return for that person’s obligation to pay or compensate him, provided that value has been given by someone for the bill after the acceptor, drawer, or indorser became a party to the bill.15

  1. (3)  Lastly, s 30(1) provides:

Every party whose signature appears on a bill is prima facie deemed to have become a party thereto for value.

The Act thus creates a presumption that consideration has been provided.

The holder in due course

12.21  Section 29(1) provides:

A holder in due course is a holder who has taken a bill, complete and regular on the face of it, under the following conditions; namely,

  1. (a)  That he became the holder of it before it was overdue, and without notice that it had been previously dishonoured, if such was the fact:

  2. (b)  That he took the bill in good faith and for value, and that at the time the bill was negotiated to him he had no notice of any defect in title of the person who negotiated it.

12.22  There is a statutory presumption that a holder is a holder in due course. Section 30(2) provides:

Every holder of a bill is prima facie deemed to be a holder in due course; but if in an action on a bill it is admitted or proved that the acceptance, issue, or subsequent negotiation of the bill is affected with fraud, duress or force and fear, or illegality, the burden of proof is shifted, unless and until the holder proves that, subsequent to the alleged fraud or illegality, value has in good faith been given for the bill.

12.23  The advantages of being a holder in due course are that:

  1. (1)  the holder obtains a good and complete title to the bill, even when the title of the person who negotiates it to him is defective;16

  2. (2)  the holder holds any bill free from any defect of title of prior parties and any personal defences available among such parties, and can enforce payment against all parties liable on the bill.17

Obligations created by a bill: the remedies of the holder in the event of dishonour

12.24  In the ordinary course of things, a bill will be paid by the drawee according to the tenor of the bill, and questions of remedies will not arise.

12.25  The operation of the regime created by the Bills of Exchange Act 1882 is more interesting where a bill is dishonoured. The Act creates a series of contractual obligations, which are best described in s 57 of the Act:

The holder may recover from any party liable on the bill, and the drawer who has been compelled to pay the bill may recover from the acceptor, and an indorser who has been compelled to pay the bill may recover from the acceptor or from the drawer, or from a prior indorser …

(p. 295) 12.26  Section 57 thus not only describes who the ultimate holder of the bill—that is, the person who presents the bill for payment—may recover from, but also how the liability on the bill is allocated as between the various parties who are potentially liable. Thus:

  1. (1)  the ultimate holder may recover from any one of the acceptor, the drawer, or any prior indorser;

  2. (2)  where the ultimate holder has recovered from a prior indorser, that prior indorser may himself recover from any one of the acceptor, the drawer, or any prior indorser;

  3. (3)  where the ultimate holder has recovered from the drawer, the drawer may recover from the acceptor.

The acceptor—where there is one—is the party primarily liable, which is scarcely surprising, given that it is the acceptor who has the primary obligation to pay on the bill. A mere drawee—as has been described—assumes no obligations. No person can become liable on a bill of exchange as drawer, acceptor, or indorser unless he or his agent signs it as such.18

12.27  The Act thus effectively creates a chain of liability, where each person in the chain can claim against the person or persons higher up the chain. This regime may be modified by the exclusion of recourse. Section 16 of the Act provides:

The drawer of a bill, and any indorser, may insert therein an express stipulation—

  1. (1)  Negativing or limiting his own liability to the holder.

  2. (2)  Waiving as regards himself some or all of the holder’s duties.


The nature of a cheque

12.28  As was described in para 9.29, s 73 of the Bills of Exchange Act 1882 provides that a cheque is a bill of exchange drawn on a banker payable on demand to which the provisions of the 1882 Act apply, except as otherwise provided. There are, however, special rules relating to the crossing of cheques which affect their transferability.

Crossing of cheques

12.29  Unlike any other type of bill of exchange, a cheque can be ‘crossed’.19 A cheque which is not crossed is said to be ‘open’. Crossing is the drawing on a cheque of two parallel lines, with or without any further words. The various types of crossing are described in s 76 of the Act.

12.30  The use of further words over and above the drawing of parallel lines on the cheque is quite common. Three forms of wording need briefly to be considered:

  1. (1)  Not negotiable. As has been described, one of the attributes of the negotiation of a bill of exchange is that the instrument is transferable free from equities.20 Where a cheque is marked ‘not negotiable’, the cheque remains capable of transfer by the holder, but the transferee takes subject to equities, that is, he does not get better title than that of the person from whom he took.(p. 296)

  2. (2)  Not transferable. A cheque marked ‘not transferable’—whether accompanied by crossings or not—is valid as between the drawer and the payee, but cannot be conveyed by the payee to anyone else.

  3. (3)  Account payee. At common law, this amounted to a direction to the collecting bank to collect only for the payee named, which (practically speaking) rendered the cheque untransferable. If a cheque is marked ‘a/c payee’ or ‘a/c payee only’, the collecting bank must collect for the payee. The Cheques Act 1992 took the position further. This Act inserted a new section into the Bills of Exchange Act in the form of s 81A. Section 81A(1) provides:

Where a cheque is crossed and bears across its face the words ‘account payee’ or ‘a/c payee’, either with or without the word ‘only’, the cheque shall not be transferable, but shall only be valid as between the parties thereto.

Given that the vast majority of cheques, these days, are pre-printed with crossings and with the words ‘account payee’ (or some such variation), the consequence is that most cheques are no longer capable of transfer.

(4)  Promissory Notes

12.31  In contrast to a bill of exchange, a promissory note involves a straightforward promise from A to B, whereby A promises to pay B a sum of money. There is no direction by A to a third party, requiring the third party to pay B. The nature of promissory notes was considered in paras 9.30 to 9.33.

12.32  Section 89 of the Act states that the provisions in the Act regarding bills of exchange shall apply to promissory notes:

  1. (1)  Subject to the provisions in this part [ie Part IV of the Act, dealing with promissory notes], and except as by this section provided, the provisions of this Act relating to bills of exchange apply, with the necessary modifications, to promissory notes.

  2. (2)  In applying those provisions the maker of a note shall be deemed to correspond with the acceptor of a bill, and the first indorser of a note shall be deemed to correspond with the drawer of an accepted bill payable to drawer’s order.

Thus, the rules relating to the transfer of promissory notes are as for bills of exchange.

C.  Bearer Shares

12.33  Bearer shares were described in paras 9.34. Title in them is transferred by manual delivery of the share warrant, which states that the bearer is entitled to the shares specified in it. This process is the analogous to the negotiation described at Section B.

D.  Bills of Lading and the Carriage of Goods by Sea Act 199221

12.34  As was described in paras 9.41 to 9.42, a bill of lading can serve three functions:

  1. (1)  It evidences the contract between the carrier of the goods and (typically) the owner of the goods being carried.(p. 297)

  2. (2)  It can act as a symbolic representation of the goods on board the ship, and transfer of the bill of lading can serve to operate as a symbolic transfer of possession to those goods.

  3. (3)  By s 2(1) of the Carriage of Goods Act 1992, a person who becomes a lawful holder of a bill of lading ‘shall (by virtue of becoming the holder of the bill … ) have transferred to and vested in him all rights of suit under the contract of carriage as if he had been a party to that contract’.

12.35  It is only in this third function that the bill of lading operates as a documentary intangible: although the bill of lading may not embody the rights under the contract of carriage, the holder of the bill of lading has vested in him, by virtue of being holder, all rights of suit under the contract of carriage as if he had been a party. The consequence is of course that lawful delivery of a bill of lading is effective to transfer the right to sue under a contract of carriage from one party to another.

E.  Money22

(1)  Two Definitions of Money

12.36  In Miller v Race,23 Lord Mansfield defined the concept of money as follows:

Money, properly speaking, is whatever common consent has fixed upon as a sign denoting a certain value; and though, commonly, of gold, or silver, yet, sometimes, of mixed metals: and leather stamped has been used; so may paper; seeing, whatever the material is, common consent may make it money, to all intents and purposes; and that bank notes are so received, and not considered as documents of a debt, or securities for money only, appears from many determinations.

12.37  On this definition, there may be a difference between whatever is by ‘common consent … fixed upon as a sign denoting a certain value’ and legal tender. Legal tender represents payment that a creditor is obliged to accept as payment for a debt.24 Mann stated that ‘only those chattels are money to which such character has been attributed by law, ie by or with the authority of the State’.25 On Mann’s approach, there is no difference between money and legal tender.

(2)  Legal Tender

12.38  Under English law, the following are legal tender:

  1. (1)  Gold coins. Gold coins are legal tender for the payment of any amount.26

  2. (2)  Coins of cupro-nickel, silver, or bronze. Coins of cupro-nickel, silver, or bronze are legal tender as follows:

    1. (a)  Coins of cupro-nickel or silver of denominations of more than 10 pence are legal tender for the payment of any amount not exceeding £10.(p. 298)

    2. (b)  Coins of cupro-nickel or silver of denominations of not more than 10 pence are legal tender for payment of any amount not exceeding £5.

    3. (c)  Coins of bronze are legal tender for payment of any amount not exceeding 20 pence.

  3. (3)  Other coins. Other coins may be made legal tender by proclamation of Her Majesty or called in by proclamation.27

  4. (4)  Bank notes. Bank notes issued by the Bank of England are promissory notes under the Bills of Exchange Act 1882, which have been designated legal tender for payment of any amount.28 Other banknotes, such as those issued in Scotland, are generally accepted in England and Wales, although they do not enjoy the status of legal tender in these countries.

(3)  Money and Value

12.39  In order to examine the proper definition of money, it is important to analyse how money has come to be attributed social value. The bank note is a good illustration of the issues at stake: bank notes are generally accepted to be of negligible intrinsic worth, and yet they are accepted everywhere in highly valuable transactions. The question is why bank notes (and by extension all forms of money) are afforded this privileged position.

12.40  The traditional view is that bank notes are a form of documentary intangible which grant their bearer the right to sue the issuer for the amount of money due on the note.29 However, this analysis begs a further question: what species of money could the bearer recover from the issuer? Historically, the bearer of a bank note was entitled to redeem the value of the bank note in sovereign coins. This meant that the bank note acted as a mere substitute for the ‘true’ and intrinsically valuable metallic currency. However, this right of redemption was abolished in 1914, and Bank of England bank notes are no longer convertible into coins.30 Indeed, in modern times the bearer of a bank note can only redeem the note in exchange for other bank notes of the same or lesser denominations.31 This means that bank notes now have a value that is entirely self-referential:32 the value of a £20 note is that it is worth two £10 notes, or four £5 notes. In other words, the bearer’s right to sue the issuer is now effectively meaningless, because there is no more essential currency in which the issuer’s liability could be paid.

12.41  An alternative view, and a view consistent with the approach of Mann, is that all bank notes derive their value from their statutory recognition as legal tender.33 However, this analysis cannot explain all the practical circumstances in which bank notes are proffered and accepted as a form of payment. To take an obvious example, bank notes issued by (p. 299) the Bank of Scotland are routinely accepted as payment in England and Wales, notwithstanding the fact that these notes are only legal tender north of the border.34 This illustrates why it is difficult to accept Mann’s definition of money without qualification: insofar as Scottish bank notes are treated as money in this country, this is a social rather than a legal convention.35

12.42  Accordingly, one must decide whether the use of Scottish bank notes in England is merely irrational, or if it reveals something fundamental about the way in which bank notes are attributed value by society. It is submitted that while the essential value of bank notes derives from their issue as legal tender by a recognized issuer,36 their practical value is derived from the confidence placed in them by transacting parties. If a bank note is socially recognized as adequate payment, and the payee is confident that she can use it in future transactions, then the bank note will be deemed to be valuable. In this respect, the statutory concept of legal tender can be seen as guaranteeing confidence in respect of certain instruments within a given society, while leaving room for other instruments to gain currency or even preferment through social custom.37

(4)  The Legal Character of Money

12.43  These considerations lead us back to the definitions of money set out in paras 12.36 and 12.37. What is significant about Lord Mansfield’s definition of money is that he recognizes that money does not involve questions of credit or debt, but merely the transfer of tokens that are accepted by society as having value, whether they are intrinsically valuable or not. In this, money differs from other forms of payment. Money simply consists of the chattel held by its owner; other forms of credit — such as banking accounts or bills of exchange — involve the creation of obligations. Thus, in the case of a bank account, the bank owes a debit to the account-holder, which is a purely personal obligation. The account-holder has no proprietary claim in any money. Where there is payment in money, an object is transferred, and apart from the in rem consequences of ownership, no other rights are created. If there is payment by other means, personal obligations are either created, or changed.38

12.44  A further aspect of money is that property in money passes on delivery39 and cannot be specifically recovered from a person who honestly and for valuable consideration has obtained (p. 300) possession.40 The rule nemo dat quod non habet does not apply.41 As was explained by Scrutton LJ in Banque Belge pour l’Etranger v Hambrouck:42

At common law, a man who had no title himself could give no title to another. Nemo potest dare quod non habet. To this there was an exception in the case of negotiable chattels or securities, the first of which to be recognised were money and bank notes: Miller v Race; and if these were received in good faith and for valuable consideration, the transferee got property though the transferor had none. But both good faith and valuable consideration were necessary …

12.45  The reason for this approach is commercial practicality. In the words of Best J in Wookey v Pole:43 ‘ … by the use of money the interchange of all other property is most readily accomplished’. If it were possible to reclaim coins or bank notes from a third party, this would introduce a substantial uncertainty into the system of exchange on which the monetary system relies.44

12.46  This leads us to a conclusion as to the legal character of money, and specifically whether money can be classed as a chose in action. As was described in para 2.82, the status of documentary intangibles as choses in action is a distinctly questionable one. The position of money (in particular coins, but also bank notes) within the pantheon of English property rights is, if anything, even more difficult, in that coins and (in reality)45 bank notes do not embody rights that could otherwise be regarded as choses in action. The better view is that they are tokens, which are treated as having economic value for the purposes of the storage of wealth and exchange, and as such are choses in possession. According to Milnes Holden, the best classification of notes and coins is as ‘negotiable chattels’.46 This means that money can be transferred by lawful delivery, and the bearer is able to benefit from the value of the relevant notes and coins. However, this value is determined by the social value of the chattels themselves,47 and not by any underlying right to which the bearer may be entitled.


1  See para 2.79.

2  Goode 2016, 52.

3  See paras 2.79–2.80. Such documents do not embody rights, but merely give constructive possession.

4  See, generally, Hedley 2001; Byles 2013; Brindle & Cox 2010, ch 6.

5  See Rogers 1995, 170–1.

6  Rogers 1995, 121. Indeed, one of the principal means by which the Bank of England extended loans to merchants at that time was by the discounting of such instruments.

7  Miller v Race (1758) 1 Burr 452, 457. As to the legal character of ‘money’, see Section E.

8  Rogers 1995, 186–93.

9  See Rogers 1995, chs 8 and 9, for a compelling account of the evolution of the law in this area.

10  Section 31(2).

11  Section 31(2). Section 32 sets out the requirements for a valid indorsement.

12  Hedley 2001, [4.28]. Hedley gives a good example of this: ‘ … if someone is given a cheque for £10 as a birthday present, he cannot sue on it’. See also Byles 2013, [19.44].

13  The Jack Report recommended that the need for consideration as a requirement of negotiability be abolished: Jack Report 1989, [8.14]–[8.16].

14  This rule is described in Chitty 2015, [4-026]–[4-036]. See also Brindle & Cox 2010, [6-059].

15  Brindle & Cox 2010, [6-60]–[6-61].

16  Section 38(3)(a).

17  Section 38(2).

18  Section 23 of the Act. Signing by way of an agent is provided for in s 91.

19  For a detailed discussion of crossing, see Hedley 2001, [12.6]–[12.13]; Brindle & Cox 2010, [7-033]–[7-041].

20  See para 12.12.

21  See, generally, Carver 2017, ch 5.

22  See, generally, Mann 2012.

23  (1758) 2 Keny 189, 199; 96 ER 1151, 1154.

24  Chitty 2015, [21-088]. See also s 1 of the Currency and Bank Notes Act 1954; s 2 of the Coinage Act 1971.

25  Mann 1992, 14. This view is based very much on the view that the State plays a pre-eminent role in the establishment of a monetary system and that—stricto sensu—only State-sanctioned tokens can be money. See further the discussion in Mann 2012, [1.17]–[1.28]. Despite the emergence of non-State ‘currencies’ such as Bitcoin in recent years, the State theory of money still best reflects English law.

26  Section 2(1) of the Coinage Act 1971.

27  Section 1(1B) of the Coinage Act 1971.

28  Section 1(1) and (2) of the Currency and Bank Notes Act 1954; for an overview of the history, see Hedley 2001, [14.22].

29  Indeed, this is the tentative definition advanced by Fox: Fox 2008, [1.34].

30  Note also that the modern composition of coins is such that these too have negligible intrinsic value (except for gold coins, which are in practice never used).

31  See s 1(3) and (4) of the Currency and Bank Notes Act 1954. See further Fox 2008, [1.147]–[1.151]; Mann 2012, [2.20]–[2.23].

32  Banco de Portugal v Waterlow and Sons Ltd [1932] 1 AC 452 (HL), (460 per Viscount Sankey LC).

33  See para 12.37.

34  And of course the notes issued by the Bank of England are similarly accepted in Scotland.

35  Fox 2008, [1.33].

36  Insofar as bank notes are now only issued by national issuers, and not by private banks as they were at their historical origin.

37  Fox 2008, [1.23]. Compare, eg, the preferred acceptance of US Dollars over local currency in large parts of the developing world. The reason is that citizens of the developing country will often repose more economic confidence in the US Dollar than in the local currency, even though legally this may appear irrational. This is reminiscent of the original bank notes, which were issued by private banks and whose value and acceptance fluctuated with the financial solidity of the bank that issued them: Fox 2008, [1.36].

38  Of course, bank notes, being promissory notes, straddle the distinction that is being drawn here. However, in reality, given that the presentation of a bank note will simply result in the payment of another bank note (or a number of notes of less denomination), bank notes are tokens in this sense.

39  Wookey v Pole (1820) 4 B & Ald 1, 6; 106 ER 839, 841: ‘The delivery of goods by a person who is not the owner (except in a manner authorised by the owner) does not transfer the right to such goods; but it has long been settled, that the right to money is inseparable from the possession of it’ (per Best J); Chambers v Miller (1862) 13 CB (NS) 125, 143 ER 50.

40  Wookey v Pole (1820) 4 B & Ald 1, 7; 106 ER 839, 841: ‘It is not because the loser cannot know his money again that he cannot recover it from a person who has fairly obtained the possession of it; for if his guineas or his shillings had some private marks from them by which he could prove they had been his, he could not get them back from a bona fide holder’ (per Best J); Miller v Race (1758) 2 Keny 189, 96 ER 1151. The rule does not apply to a holder who is not bona fide in possession for value. Thus, for instance, identifiable currency can be recovered from a thief. This rule applies in the context of coins: as regards notes, the holder in due course is similarly protected by virtue of the provisions of the Bills of Exchange Act 1882: para 12.23.

41  See Section C(5) of Chapter 27 for a description of this rule.

42  [1921] 1 KB 321 (CA), 329.

43  (1820) 4 B & Ald 1, 7; 10 ER 839, 841.

44  This uncertainty would lead to significant additional transaction costs, and so threaten the economic efficiency that money is meant to ensure: Fox 2008, [2.11]–[2.30].

45  Given that the bearer’s right to sue the issuer is now effectively meaningless: see para 12.40.

46  Milnes Holden 1955, 259–60.

47  Whether this value is determined by its status as legal tender or by social custom.