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DISCOUNT Definition & Legal Meaning

Definition & Citations:

In a general sense, an allowance or deduction made from a gross sumon any account whatever. In a more limited and technical sense, the taking of Interestinadvance.By the language of the commercial world and the settled practice of banks, adiscount by a bank means a drawback or deduction made upon its advances or loans ofmoney, upon negotiable paper or other evidences of debt payable at a future day,which are transferred to the bank. Fleckner v. Bank, S Wheat 33S, 5 L Ed. 631; Bank v.Baker, 15 Ohio St. 87.Although the discounting of notes or bills, in its most comprehensive sense, maymean lending money and taking notes in payment, yet, in its more ordinary sense, thediscounting of notes or bills means advancing a consideration for a bill or note,deducting or discounting the interest which will accrue for the time the note has to run.Loan Co. v. Towner, 13 Conn. 249.Discounting by a bank means lending money upon a note, and deducting theinterest or premium in advance. Bank v. Bruce. 17 N. Y. 507; State v. Sav. Inst., 48 Mo. 189.The ordinary meaning of the term “to discount” is to take interest in advance, and inbanking is a mode of loaning money. It is the advance of money not due till somefuture period, less the interest which would be due thereon when payable. Weckler v.Bank, 42 Md. 592, 20 Am. Rep. 95.Discount, as we have seen, Is the difference between the price and the amount ofthe debt the evidence of which is transferred. That difference represents interestcharged, being at the same rate, according to which the price paid, if invested until thematurity of the debt willjust produce its amount. Bank Johnson, 101 U. S. 276, 26 L Ed. 742.Discounting a note and buying it are not identical in meaning, the latter expressionbeing used to denote the transaction when the seller does not indorse the note, and isnot accountable for it. Bank v. Baldwin, 23 Minn. 206, 23 Am. Rep. 683.In practice. A set-off or defalcation In an action. Vln. Abr. “Discount.” But seeTrabue’s Ex’r v. Harris, 1 Mete. (Ky.) 597.


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