Definition
A set of exchange is the complete collection of parts comprising a single foreign bill of exchange when that bill has been drawn in duplicate or triplicate. Each part is numbered in sequence — first of exchange, second of exchange, third of exchange — and each part is, standing alone, a legally complete and operative instrument. Taken together, however, all parts constitute one bill. Payment of any single part discharges the entire obligation and renders the remaining parts void.
The practice arose from the practical hazards of long-distance commerce: by sending different parts of the same bill by different ships or couriers, a merchant could guard against loss at sea or in transit while ensuring that only one payment would ever be made.
Common Language
This is pure mercantile and legal jargon with no meaningful counterpart in ordinary English. "Set" and "exchange" each carry common meanings, but their combination in this phrase has no common-usage analog. The COMMON LANGUAGE section is omitted.
Common Confusion
The term is sometimes read as referring generically to an "exchange" or "set-off" between parties. It is neither. A set of exchange is not a netting or offsetting arrangement between counterparties; it is a technical description of the physical documentary structure of a foreign bill. Similarly, "set of exchange" should not be confused with "set-off" (a defendant's counterclaim to reduce a plaintiff's recovery) — an entirely separate doctrine. The Rapalje & Lawrence entry included in some sources conflates these topics, moving without clear break from the bills-of-exchange sense into a discussion of judgment set-offs. Researchers encountering that source should note the transition carefully.
Why It Matters in Research
This term belongs almost entirely to the historical record of mercantile law. Researchers are unlikely to encounter it in modern commercial documentation, which has been supplanted by wire transfers, electronic instruments, and standardized banking instruments that do not require duplicate originals for transit security. Its significance is concentrated in:
— Pre-twentieth-century commercial litigation and treatises, particularly disputes involving international trade, where questions arose about which part of a set had been negotiated, endorsed, or dishonored.
— Corpus searches involving bills of exchange generally. Because historical sources treat "set of exchange" as a term of art within the broader bills-of-exchange framework, researchers working on negotiable instruments history should search for both the full phrase and its component parts ("first of exchange," "second of exchange") to capture the full documentary record.
— Jurisdictional traps: English mercantile law and American commercial law treated sets of exchange similarly in principle, but the procedural consequences of presenting one part while another was outstanding could vary. Historical cases occasionally turned on whether a holder of the second part had notice that the first had already been negotiated.
— The Rapalje & Lawrence entry is unreliable for this term specifically. The source's discussion drifts into set-off doctrine mid-entry without signaling the shift, creating a risk of misreading if excerpted without context.
Historical Dictionary Support
The four source dictionaries are in close agreement on substance. Black's (both editions) and Bouvier's converge on the same core rule: multiple parts, each complete in itself, numbered sequentially, payment of one extinguishes the rest. Bouvier's is the most useful of the four for research purposes because it supplies treatise references — Chitty on Bills and Parsons on Notes and Bills — that anchor the doctrine in the primary commentary literature of the nineteenth century. Black's adds the helpful navigational point that the parts are called "first of exchange," "second of exchange," etc., which is essential for corpus searches in historical archives.
Rapalje & Lawrence is the outlier. The entry as it appears in the source material pivots almost immediately into a discussion of judgment set-offs in common law practice, suggesting either a typographical error in the original compilation or an editorial decision to group "set" compounds together regardless of subject-matter relationship. Researchers should not rely on Rapalje & Lawrence for this term without consulting the full surrounding context.
None of the four sources address what happens when different parts of a set are negotiated to different holders in due course — a question that generated real litigation in the nineteenth century. For that issue, Chitty on Bills (referenced by Bouvier's) and Story's Commentaries on the Law of Bills of Exchange are the appropriate sources to consult.
Jurisdictional Note
The doctrine governing sets of exchange developed primarily in English mercantile law and was adopted in substance by American courts. The Uniform Negotiable Instruments Law and its successor, Article 3 of the Uniform Commercial Code, largely displaced the practical need for sets of exchange in domestic transactions, though the UCC preserves rules for instruments drawn in parts.
Encyclopedia Cross-Reference
contracts_103: Assignment of Rights — Rights of Assignee Against Obligor (Defenses, Set-Offs) (The Law Mind Contracts & Commercial Law Encyclopedia) — useful for distinguishing set of exchange from set-off doctrine encountered in the same historical sources.