bill of exchange is absolutely accelerated by nonacceptance; the holder has no option to waive the dishonor; yet the acceleration does not affect a subsequent purchaser ignorant of the nonaccep- tance. Therefore, the purchaser of an installment note after the date of one or more installments has passed should not be forced at his peril to inquire whether it has been dishonored, so long as he is without notice. Whether the absence of indorsements of payment on the instrument subjects him to notice will be considered presently.
Although some of the objections caused by uncertainty of time are thus absent from these instruments when construed as abso- lutely accelerated, the possible uncertainty of value may cause trouble. If the interest-rate is high, the instrument would normally command a premium, but a purchaser would not pay a business premium if the obligor can default an early installment of interest or principal, pay up in full next day, and deprive the holder forth- with of a supposedly long-time investment. The acceleration would be practically at the option of the obligor, who could take profitable advantage of his own wrong by cutting short his duty to pay high interest. One reply to this very serious objection is that the obligor is not necessarily wrongful. He may in fact have a de- fense to any and all liability on the instrument, and default the first payment of interest in order to bring the dispute to an early decision.[1] It is certainly a clumsy method of ascertaining rights; the law ought to allow the obligor to ask for a declaratory judgment as soon as the dispute arises,[2] without waiting till maturity, or having to break his contract and destroy the holder's investment. A much better reply is, that the holder need not lose his high in- terest in spite of the default. Suppose that an installment note provides for ten per cent interest, and the legal rate is six per cent. In some jurisdictions, interest continues to run at ten per cent after maturity until pajonent;[3] the holder could simply wait after de- fault of the first installment, although the note then matured, and
sue at the date originally fixed for the last installment, getting the
- ↑ San Antonio, etc. Association v. Stewart, 94 Texas, 441, 446, 61 S. W. 386 (1901).
- ↑ Edson R. Sunderland, "A Modern Evolution in Remedial Rights, — the Declaratory Judgment," 16 Mich. L. Rev. 69, 77: "To use a homely figure, prior to 1883 the English courts were employed only as repair shops; since that time they have been operated as service stations."
- ↑ The authorities on both sides will be foimd in i Sedgwick on Damages, 9 ed., § 325 ff.
