Legal Definitions - circular note

A circular note is a historical financial instrument, essentially a specialized type of letter of credit, issued by a bank to a traveler. It served as a secure way for individuals to access funds while traveling internationally without needing to carry large sums of physical cash. The issuing bank would provide the traveler with a document authorizing them to draw money, up to a specified maximum amount, from a network of its correspondent banks in various foreign locations. When the traveler needed funds, they would present the circular note and proof of identity to a designated foreign bank, which would then disburse the local currency. The amount drawn would be recorded, reducing the remaining balance available on the note.

• Example 1: European Grand Tour (early 20th century)

  In 1910, a wealthy American tourist, Mrs. Clara Beaumont, planned a six-month "Grand Tour" across Europe, visiting France, Italy, and Switzerland. To avoid the risks of carrying large amounts of cash or gold, she obtained a circular note from her bank in New York before her departure.

  This circular note authorized her to draw funds, up to a total of $10,000, from specific partner banks in major European cities. When she arrived in Paris and needed local currency for hotel expenses and shopping, she presented her circular note and passport to the designated French bank. The bank verified her identity, provided her with French francs, and recorded the transaction on the note, reducing her remaining available balance. This allowed her to manage her finances securely and conveniently throughout her extensive travels.

• Example 2: Colonial Administrator's Assignment (mid-20th century)

  In 1948, Mr. Thomas Sterling, a British colonial administrator, was assigned to a remote outpost in British Malaya for two years. While his salary was paid into his London bank account, he needed a reliable way to access funds for local expenses and emergencies in an area with limited banking infrastructure.

  His London bank issued him a circular note, allowing him to draw a set amount of local currency each month from a specific trading company or government treasury office in the regional capital, which acted as a correspondent agent. This note ensured he had access to necessary funds without the complexities of international wire transfers or the danger of keeping large amounts of cash in his remote location. Each withdrawal was noted on the circular note, maintaining a clear record of his expenditures against the authorized limit.