The preceding chapter examined the changes in commercial and financial practice in the seventeenth and eighteenth centuries associated with the transformation of bills of exchange into instruments having economic significance independent of the older form of exchange dealings. This chapter examines the corresponding legal changes.

ACTIONS ON BILLS VERSUS ACTIONS ON EXCHANGE CONTRACTS

In chapter 3 it was shown that in the period up to the beginning of the early seventeenth century, courts of all kinds in England enforced monetary obligations arising out of exchange transactions, but none had developed any special body of law governing bills. By the seventeenth century, the situation was very different. Execution of a bill of exchange gave rise to enforceable legal obligations, regardless of whether the bill was issued in connection with an exchange transaction. The new analysis of bills is well illustrated by one of the earliest reported decisions in the central courts of an action on a bill of exchange, Edgar v. Chut (1663).

In Edgar, a butcher who had bought cattle from a Norfolk grazier persuaded a parson who had funds in London to draw a bill on his London correspondent and give it to the butcher to use in paying the grazier. The parson had instructed his London correspondent not to pay the bill until the butcher paid him the money, but the butcher went bankrupt before reimbursing the parson. The parson was held liable to pay the bill as drawer after the drawee in London dishonoured it.