Page:Harvard Law Review Volume 32.djvu/785

749 ACCELERATION PROVISIONS IN TIME PAPER 749 The same attitude has been taken by the courts in many states toward similar provisions in another common type of commercial paper, called chattel notes. Such a note is usually given by the buyer of a chattel for the unpaid portion of the purchase price, and states that the seller retains title to the chattel until the note is paid.^ For example, the purchaser of an automobile has it de- livered to him for a small sum in cash and a chattel note for the balance of the price, payable to the seller or his order at a distant day, but containing an acceleration clause that the holder of the note may sue at once and seize the automobile if the buyer attempts to sell it or remove it permanently from the state, or suffers it to be taken by a third party on legal process. Such a provision is often held to destroy the negotiability of the note and turn it into an ordinary contract in writing. If so, the purchaser of the note from the seller can not recover from the buyer of the automobile if the car was defective or the sale fraudulent. This conflict between mercantile understanding and judicial decision may have far-reaching consequences in the business world. The cases are not unanimous against negotiability, and the legal problem of the effect of these acceleration provisions in collateral time paper is still unsettled. It is therefore worth while to examine the rules of the law of negotiable instruments which are said to be violated by these provisions, and the application of those rules to still other types of paper, which also have a fixed date for payment but mature earUer upon the happening of some event. It will then be possible to determine whether the bank form of promissory notes and the chattel notes are rendered not negotiable by their acceleration clauses. A negotiable instrument is a substitute for money. It was first used to aid in the payment of money at distant points, and the international bill of exchange still serves that purpose. As an addition to money it increases the purchasing medium in circula- tion. For instance, if many people did not pay their monthly bills ' In states which hold that the clause as to title makes the instnunent invalid as a note, the effect of the acceleration clauses is of coiirse immaterial. Sloan v. McCarty, 134 Mass. 245 (1883). It is usually held, however, that the transaction is equivalent to a chattel mortgage by the buyer to the seller, who retains title for security only; the beneficial ownership and risk of loss are in the buyer, who is therefore imconditionally liable upon a negotiable note. Chicago, etc. Equipment Co. v. Merchants' Bank, 136 U. S. 268 (1889). The cases are collected in 8 Corpus Juris, 129.