Definition
A reference in case of need is a notation added to a bill of exchange by the drawer or an indorser, naming an alternative party — the "referee in case of need" — to whom the holder may present the instrument for acceptance or payment if the primary drawee or acceptor dishonors it. The named party is not primarily liable on the instrument; they serve as a fallback resource, available only after the instrument has been refused by the original drawee or acceptor.
The notation is permissive, not mandatory. The holder is not required to approach the referee in case of need before pursuing the drawer or indorsers on dishonor. Its function is practical: it gives the holder an additional avenue for collection and may delay or reduce the need for formal protest proceedings.
Common Confusion
Reference in case of need is sometimes confused with an accommodation party or surety. The distinction matters. An accommodation party signs the instrument itself and becomes directly liable in that capacity. A referee in case of need is named only in a notation — not as a party on the face of the instrument — and their role activates only upon dishonor by the primary party. They are an extrajudicial fallback, not a co-obligor.
The term is also occasionally confused with a general guaranty or aval. A guaranty is a separate contractual obligation to pay another's debt; an aval is a form of guarantee written on the instrument itself. Neither maps cleanly onto the reference in case of need, which creates no independent liability unless and until the named person agrees to accept or pay.
Why It Matters in Research
This term belongs almost entirely to the law of commercial paper as it operated under pre-codification negotiable instruments law and the Law Merchant tradition. Researchers working in primary sources predating the Uniform Negotiable Instruments Law (1896) or the Uniform Commercial Code (Articles 3 and 4) will encounter it with some regularity in treatises, banking manuals, and reported cases involving international bills of exchange.
Under Article 3 of the UCC, the concept survives but is rarely used in modern domestic practice. Section 3-419 of the UCC addresses accommodation parties, and the broader framework of dishonor and notice largely displaces the older practice of named referees. Researchers should not expect to find "reference in case of need" as a live term in contemporary American commercial litigation — its appearance in a modern document would be unusual and worth scrutinizing.
The term is more likely to remain relevant in research touching on:
— 19th century Anglo-American commercial law
— International trade finance, where bills of exchange with case-of-need notations were common in transactions with multiple correspondent banks across jurisdictions
— English law sources, where the Bills of Exchange Act 1882 (s. 15) expressly addresses the referee in case of need by statute
Trap for the unwary: older American treatises and reporters often use "referee in case of need" and "reference in case of need" interchangeably, with the former naming the person and the latter naming the practice or the notation itself. The distinction is usually clear from context but can create confusion in keyword searching.
Historical Dictionary Support
Black's Law Dictionary traces the term to Byles on Bills, one of the leading 19th century treatises on negotiable instruments. Byles describes the practice as conventional: the drawer or indorser supplements the instrument with a named alternative presentee, available if the instrument is refused in the ordinary course.
Historical dictionaries are consistent on the basic mechanics but thin on nuance. What they do not address is the procedural interaction between the case-of-need notation and formal protest requirements. In jurisdictions where protest was required to preserve recourse against the drawer and indorsers, a question arose as to whether failure to present to the referee in case of need affected the holder's rights. English law resolved this by making presentment to the referee optional; American practice followed a similar approach, though the statutory treatment varied before uniform acts.
Historical sources also tend to treat this as a foreign bill practice, reflecting its origins in continental and transatlantic trade finance. Domestic bills of exchange in 19th century America rarely carried such notations.
Jurisdictional Note
The Bills of Exchange Act 1882 (England and Wales), s. 15, gives the referee in case of need explicit statutory recognition, specifying that the holder may or may not resort to the referee at their discretion. American jurisdictions reached similar results through case law and, later, the Uniform Negotiable Instruments Law. Modern UCC Article 3 does not use this terminology but accommodates the underlying practice within its general dishonor and presentment framework.