Swift v. Tyson

41 U.S. 1 (1842)

 

RULE:

A bona fide holder of a negotiable instrument for a valuable consideration, without any notice of facts which impeach its validity as between the antecedent parties, if he takes it under an endorsement made before the same becomes due, holds the title unaffected by these facts, and may recover thereon, although as between the antecedent parties the transaction may be without any legal validity

FACTS:

Defendant and a third party drew up a bill of exchange. The third party endorsed and tendered it to plaintiff for payment of a promissory note owing by the third party. The bill was dishonored at maturity and plaintiff sued defendant. Defendant raised the defense that he accepted the bill of exchange as part consideration for the purchase of land, which the third party falsely represented that he owned. Plaintiff objected to the admission of evidence showing this failure of consideration.

ISSUE:

Does a pre-existing debt constitute valuable consideration in the sense of the general rule applicable to negotiable instrument?.

ANSWER:

Yes.

CONCLUSION:

The Court found that plaintiff, as a bona fide holder for the pre-existing debt of the negotiable instrument, was not affected by any inequities between the parties where he received the bill before it became due without notice of the inequities.

 

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