Improvements in Circular Letters of Credit or the like.
Year: 1892

page_text: Date of Application, 24th Dec., 1892-Accepted, 28th Jan., 1893
COMPLETE SPECIFICATION.
Improvements in Circular Letters of Credit or the like.
A communication by HOWARD POTTER, of 37, East Thirty-seventh Street,
New York, in the County and State of New York, United States of America,
Banker.
I, WILLIAM PHILLIPS THOMPSON F.C.S., M.I.M.E., of the Agency for
Foreign Patent Solicitors, 6 Lord Street, Liverpool and 6 Bank Street, Man-
chester both in the County of Lancaster, and 323 High Holborn in the County of
Middlesex, Civil Engineer, do hereby declare the nature of this invention and in
what manner the same is to be performed, to be particularly described and ascertained
in and by the following statement :-
This invention relates to improvements in circular letters of credit, and the
objects of the invention are as follows:
First To secure the greatest amount of convenience in size, shape and bulk of
the credit, for the person carrying the same;
Second: To reduce the amount of labour to the party issuing the same to a
minimum ;
Third: To provide a letter of credit which will possess in a single instrument, all
the combined advantages of an ordinary circular note, and a so-called circular
credit, and at the same time none of the disadvantages.
:
Fourth To secure absolute protection to the banker issuing the credit, from the
perpetration of the many varieties of fraud to which he is ordinarily subjected, by
the issuing of ordinary letters of credit, either in the form of circular notes or
circular credits so-called, and
:
"
Fifth To provide a credit the size of which shall be reduced and the physical
appearance of which changed, in proportion to the amount available to the drawee
thereunder, by the negotiation of any one or more of its separable parts.
In the ordinary conduct of banking business, "circular notes are issued from
time to time by the bankers issuing travelling credits, which said circular notes are
issued in the form of loose cheques for any given amount, either according to the
desire of the traveller or the custom of the banker, and are accompanied by a
letter of credit as a separate instrument, which is directed to various bankers, and
which bears the signature of the banker issuing the same.
In cashing notes of this character, the accompanying letter of credit, which is
supposed to have been already signed by the traveller, has first to be produced and
handed to the banker and the note to be cashed then signed in his presence. In
cases where the letter of credit is lost or stolen, the circular notes are intended to
become at once worthless and the traveller thereupon becomes subject to very
great annoyance. While the same is intended to be the case if any one or more of
the notes become lost, nevertheless such a note, in the hands of unscrupulous third
persons, can, by the forging of the endorsement of the person to whom the same is
made payable, be often negotiated and much embarrassment and loss produced
thereby. In other cases the banker issues a so-called "circular letter of credit
for a given sum, directed to any number of bankers. A traveller on presentation of
the same, receives from the banker any sum still available under the credit, and the
latter is supposed to write the same off upon the credit, and to call upon the banker
issuing the same to reimburse him. In this case, the banker issuing the credit
cannot know the exact amount paid under the credit, and has to rely entirely upon
the honesty and integrity of his correspondents in returning to him a draft actually
signed by the traveller. Many travellers, however, object to the ordinary form of
letter of credit, for the reason that the same is not as convenient for their purposes.
"

page_text: as circular notes; and hence a credit which possesses all of the advantages of the
circular note form and none of its disadvantages is a long felt want.
"
In the present invention, by making the credit proper, or the so called "talon
of the credit, in the manner hereinafter indicated and described, and in attaching
thereto, as integral parts thereof, cheques of any desired denomination; which
cheques are in the form of orders on the banker issuing the credit to pay; and
which cannot become operative or negotiable until signed by the traveller, and
detached from the "talon " in the manner hereinafter indicated, the labour of the
banker in preparing the credit is very much diminished, for the reason that he is
obliged to sign the credit itself once only, as is the case in the ordinary letter of
credit, instead of each note as in the case where circular notes are issued, and
finally, by making the letter of credit in the manner indicated, the detaching of
each one of the integral parts thereof operates to write off automatically from
the credit such portion thereof as has been actually drawn, and, as a result thereof,
the part for which value is given, after being actually detached, must be returned
to the banker for payment, thus affording him a voucher possessing all the security
for payment afforded by the ordinary circular note in distinction to that offered by
the ordinary letter of credit.
Again, in certain cases, bankers have been fraudulently induced to. pay circular
notes upon representations that letters of credit to accompany the same were in
existence, when no such letters existed. In the present invention, this species of
fraud is impossible, by reason of the fact that, on the return of any one of the
cheques forming part of the letter of credit, the banker receiving the same can at
once perceive, not merely what detached part of the original instrument he has
before him, but also that the original intrument must actually exist or have
actually existed, and payments on account thereof write themselves off auto-
matically, so to speak, from the full amount for which the credit is issued.
A further advantage of this form of credit is that the traveller will be relieved
from the very serious trouble and risk of carrying two separate documents,, as he is
now obliged to carry in the case of the ordinary circular notes.
The invention will be best understood by reference to the accompanying two
sheets of drawings, in which :-
Figure 1 shows the front of the credit and the cheques attached ; and
Figure 2, the back of the same.
Similar letters refer to similar parts throughout the several views.
In the drawing-
A, A, represents a rectangular sheet of paper, perforated or divided by the two
vertical lines a¹ a¹ and a' a' in the manner shown in Figures 1 and 2. The space
between these two vertical lines is devoted or made applicable on the front of
the instrument, as shown in Figure 1, to the obligation of the banker issuing the
credit. An additional dividing or perforated line 6¹¹ crosses the space between
the line a¹ a¹ and a' a' in the manner shown in Figures 1 and 2, and the space a¹ b¹,
ba is used for the "advice note" portion of the credit; in which the bearer of
the credit is required to write his name under the words
signature of"
placed
at any convenient point, and which also bears the date of issue, and any other
information with reference to the issuing of the credit not found upon the main
portion of the obligation. The remaining portions of the sheet of paper are
devoted, as shown in Figure 1, to any convenient number of cheques, which are
arranged with reference to the obligation itself in any convenient manner, and
connected by perforated or straight lines so as to be removed by tearing or cutting.
In Figure 1, four cheques are shown on either side of the obligation, separated
from each other by straight or dotted lines c¹ c', etcetera, so. that they can be torn.
off. These cheques may be of convenient size, according to the size of the paper
used, and bear any convenient writing or engraving or printing. In the drawing,
the four cheques are shown on either side of the principal obligation, are numbered
in any convenient manner with reference to the number of the credit, and each.
cheque bears. the number of the credit.. The upper left hand cheque,, shown. in!

page_text: Figure 1, is filled out to show the general appearance of such a cheque. It contains
on its face at one end three blank spaces C, D and E, into which directions for
signing and detaching the cheque, as may be directed by the banker negotiating
it, can be inserted in any desired languages, according to the countries in which
the credit is to be used. On its face, it has an order on the banker issuing the
credit to pay, in any desired words, and a blank may be printed vertically across
the face of the cheque for "crossing the same in the manner current in Great
Britain, as shown in Figure 1.
"
At the upper end of the main obligation, a small space may be left, containing,
as shown, the number of the credit with a line for further signature of the bearer
to be filled in on delivery of the credit to him. The lettering and writing upon
this portion of the obligation are inverted with reference to the other printed or
written portions of the credit, and the object of arranging the lettering and writing
in this particular manner is to prevent the signature of the bearer of the credit,
after it has been written upon the same, from being seen by the person signing the
cheques attached to the credit, in the presence of the banker, in such a way that he
can copy the signature, so affording additional protection against fraudulent
negotiation of the cheques. An assignment of the credit may be printed across the
face of the main obligation, as shown in Figure 1, for use if desired.
On the reverse side of the credit, as shown in Figure 2, the indication list of
bankers with whom the same may be available will be printed, arranged in any
convenient manner upon the back of the main obligation in the central portion of
the paper, as shown between the dotted lines a' a² a a³ in that figure. The back
of the separate cheques may each contain a certificate, to be signed by the banker
cashing the same, substantially in the manner indicated on the right hand upper
cheque of Figure 2 within the lines d d as shown. This certificate states the fact
that the cheque was signed and detached in the presence of the banker signing the
same, or any other desired facts relative to the negotiation of the cheques, and in
this way the banker cashing the cheques becomes personally responsible to the
banker issuing the credit for the proper fulfilment of all the formalities attendant
upon the negotiation of each particular cheque, thus affording the banker issuing
the credit an additional safeguard and protection against fraud. Of course the
arrangement of the cheque with reference to the "talon," the names of the bankers
on the indication list, the phraseology of the cheques, the directions as to cashing
the same, the wording of the main obligation and of the advice note at the bottom
of the same, and, in fact, all the writing upon the various parts of the instrument
may vary from time to time, as may be found most convenient, without departing
from the real invention, for the reason that the gist of the same lies not in the
phraseology or arrangement of the words or parts employed but in the combination
of the cheques with and as an integral part of the letter of credit, in such a manner
that the former cannot be negotiated except by the production of the latter and
the signing and detaching of the same in the presence of the banker to whom the
cheques are presented.
The method of using the credit is as follows:-
When the credit is delivered to a purchaser by the banker, the former is required
to write his name upon the blank space left therefor, upon the "talon," and the
credit is thereupon ready for use. When the holder desires to cash a cheque, he
presents the entire credit to any one of the bankers named upon the indication list,
who requires the holder to sign in his presence, before it is detached, any one of
the cheques he may designate, and detaches it from the credit. If the signature
thus signed agrees with that upon the "talon" of the credit, it will be obvious that
the credit is in the hands of the person entitled to use it, and the banker is thus
protected in paying the cheque so detached. The amount left available under the
credit will be at once apparent to the banker to whom it is next presented by the
physical appearance of the credit, resultant from the number of cheques that has
already been detached, its shape and amount. The banker cashing any cheque is
obliged to certify the payment of the same to the banker issuing the credit, by

page_text: filling in the certificate upon the back of the cheque, and, when the cheque is
presented for payment, the banker issuing the credit can at once determine, from
its number, date of certification, and signatures of the traveller and banker cashing
the same, all the necessary facts to protect himself against all attempts to use the
same fraudulently.
As soon as the cheques are all cashed, the remaining part of the credit becomes
available for the balance remaining payable under it, and consequently, when
cashed, must be returned to the banker, making such final payment.
Having now particularly described and ascertained the nature of the said inven-
tion and in what manner the same is to be performed, as communicated to me by
my foreign correspondent, I declare that what I claim is :-
1. As a new article of manufacture, a circular letter of credit, printed on a
single sheet of paper, containing a credit or authorisation to draw, and one or
more cheques which the person accredited by the letter of credit is authorised to
draw.
2. The combination, on a single sheet of paper with a credit of the kind known
as a "circular credit," of cheques separable therefrom to be signed by the
person accredited as authorised to draw under it, which, on their face, are
non-negotiable apart from the credit.
3. The combination, substantially as herein before described, on a single sheet of
paper, of a credit of the kind known as a circular credit, with any number of
cheques forming part thereof, so arranged that the removal and negotiation
of any one of the same shall, by changing the shape, size and physical appearance
of the letter of credit, reduce on its face the amount remaining available to the
drawee thereunder.
4. The combination substantially as hereinbefore set forth, on a single sheet of
paper, of a credit of the kind known as a circular credit, having on its face an
authorisation to draw to any given amount, signed by the banker issuing the same,
and on its back a list of bankers to whom the same is directed, of one or more cheques
of any given amount forming part thereof and separable therefrom, arranged to be
signed by the person authorised by the credit to draw.
5. The combination substantially as hereinbefore set forth, on a single sheet of
paper, of a credit of the kind known as the circular credit, having on its face an
authorisation to draw to any given amount, signed by the banker issuing the same,
and a space for the signature of the party to whom the same is issued and an advice
note printed in connection therewith, and on its back a list of bankers to whom the
same is directed; of one or more cheques of any given amount forming part thereof
and separable therefrom, arranged to be signed by the person authorised by the
credit to draw, and on the reverse side thereof a certificate to be signed by the
banker paying the cheque.
6. The combination, with a credit substantially of the character indicated, of one
or more cheques forming a part thereof, each having on its face one or more spaces
containing directions as to signing and detaching the cheque as may be directed by
the banker negotiating the same.
7. The combination, with a credit of the character indicated, of one or more
cheques forming a part of the same, each having on its back a certificate to be
signed by the banker negotiating the same.
8. The combination, with a credit of the character indicated, of one or more
cheques forming a part of the same, each having on its face an order on the banker
issuing the credit to pay, which, on being detached from the credit, indicates the
amount still available thereunder.
9. The combination, with a credit of the character indicated, of a space at one
end of the main obligation for the signature, of the bearer of the credit, so arranged
that said signature, when signed, shall be inverted with respect to the printed or
written matter upon all other parts of the credit, for the purposes set forth.
10. The combination, with a credit of the character indicated, of one or more

page_text: cheques forming part of the same, each having on its back a certificate arranged to
be signed by the banker cashing the same, setting forth the correct fulfilment of
the requisite formalities for the negotiation thereof.
Dated this 23rd day of December 1892.
WM. P. THOMPSON & Co.,
Agents for the Applicant.