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Notes.

S. 87.-(1) Where a promissory note is in the body of it made CH. XVI. s. 4. payable at a particular place, it must be presented for payment at Promissory that place in order to render the maker liable. In any other case, Presentment presentment for payment is not necessary in order to render the of note for maker liable. payment.

(2) Presentment for payment is necessary in order to render the indorser of a note liable.

(3) Where a note is in the body of it made payable at a particular place, presentment at that place is necessary in order to render an indorser liable; but when a place of payment is indicated by way of memorandum only, presentment at that place is sufficient to render the indorser liable, but a presentment to the maker elsewhere, if sufficient in other respects, shall also suffice. S. 88. The maker of a promissory note by making it(1) Engages that he will pay it according to its tenour; (2) Is precluded from denying to a holder in due course the existence of the payee and his then capacity to indorse.

Liability of

maker.

S. 89.-(1) Subject to the provisions in this Part and, except as Application by this section provided, the provisions of this Act relating to bills of Part II. of exchange apply, with the necessary modifications, to promissory

notes.

(2) In applying those provisions the maker of a note shall be deemed to correspond with the acceptor of a bill, and the first indorser of a note shall be deemed to correspond with the drawer of an accepted bill payable to drawer's order.

(3) The following provisions as to bills do not apply to notes; namely, provisions relating to―

(a) Presentment for acceptance;

(b) Acceptance;

(c) Acceptance suprà protest;

(d) Bills in a set.

(4) Where a foreign note is dishonoured, protest thereof is

unnecessary.

to notes.

[For sects. 91 and 97, as to signature, and general savings, see p. 453, ante.]

CHAPTER XVII.

GUARANTEES AND INDEMNITIES.

[See De Colyar on Guarantees, 2nd ed., A.D. 1885; Smith's Mercantile Law, 10th ed., A.D. 1890.]

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General

nature of the contract of guarantee.

SECT. 1.-General Nature of Contract of Guarantee.

THE general nature of a contract of guarantee is sufficiently simple. It is a collateral engagement, to answer for the debt, default, or miscarriage of another (a), as distinguished from an original and direct engagement for the party's own act. It is therefore of the essence of this contract, that there should be some one liable as principal (b); and, accordingly, where one party agrees to become responsible for another, the former incurs no obligation as surety, if no valid claim ever arises against the principal; whilst, on the other hand, the liability of the surety upon a claim which is good as against the principal, ceases so soon as such claim is extinguished.

But the rule that a party cannot be liable upon a contract of guarantee, unless the principal be also liable, is, in some cases, true in form or words, rather than in substance. Thus, in the case of a guarantee to answer for the price of goods not necessaries, to be sold to an infant, or other person incompetent to contract, there is no doubt that the party guaranteeing, though professedly contracting only in the character of a surety, would be responsible: for, either he could not urge the incapacity of the supposed

(a) See Statute of Frauds, 29 Car. 2, c. 3, s. 4, p. 102, ante.

(b) Per Lord Selborne, in Lakeman v Mountstephen (1874), L. R., 7 H. L. 17.

principal; or he might, by construction of law, be himself treated CH. XVII. s. 1.

as the principal.

General Nature of Contract of Guarantee.

for.

We have already seen that, in the case of every simple contract, a consideration is necessary to give it validity. And we now remark further that, in the case of a guarantee, the mere existence Consideration of the debt, default, or miscarriage, in respect of which it is given, is not a sufficient consideration to support it: so that, unless there be some further consideration for the promise of the guarantor, such promise will be void.

deration in

Thus, a promise to pay a debt already incurred by another, is Past consinot binding without some new consideration, such as forbear- sufficient. ance (c); or without showing that such past consideration was moved at the defendant's request (d). And even in the case of a promissory note given by way of guarantee for a past debt, if it be shown that there was no consideration, such as forbearance, this will be an answer to an action on the note (e).

advance.

But a guarantee of a debt already incurred; or of such a debt Guarantee of past debt, in and a debt to be afterwards incurred, given in consideration of a consideration future advance of money or sale of goods, by the creditor to the of future original debtor, is good (f). And it was probably on this ground, that the following memorandum was held to be sufficient :-"I hereby guarantee the present account of Miss H. M., due to R. T. S. & Co., of 112l.; and what she may contract from this date to the 30th September next" (g).

So where, in consideration of advances made and to be made to Guarantee of past and future A. and B., the defendant guaranteed to A. and B. the repayment of the said advances, this was held to be good (h).

And a guarantee will be good, although it may be doubtful whether it referred to a past or a future credit,-provided it appear from all the circumstances that the parties contemplated the latter (i); and evidence is admissible to show what the transaction really was (k). For one consideration to be done on the one side stated in a document is at all events primâ facie consideration for all that is to be done on the other, and all the premises are to

(e) See French v. French (1841), 2 M. & G. 644.

(d) See Payne v. Wilson (1827), 7 B. & C. 423; Johnson v. Nicholls (1845), 1 C. B. 251, 261, n. (a).

(e) Crofts v. Beale (1851), 11 C. B.

172.

(f) See White v. Woodward (1848), 5 C. B. 810; Boyd v. Moyle (1846), 2 C. B. 644; Johnson v. Nicholls (1845), 1 C. B. 251; and see Westhead v. Sproson (1861), 6 H. & N. 728.

(g) Russell v. Moseley (1822), 3 B. & B. 211.

(h) Chapman v. Sutton (1846), 2 C. B. 634. As to continuing guarantee, see Wood v. Priestner (1867), L. R., 2 Ex. 282, Ex. Ch., and post, p. 480 et seq.

(i) Colbourn v. Dawson (1851), 10 C. B. 765; Steele v. Hoe (1849), 14 Q. B. 431; Edward v. Jevons (1849), 8 C. B. 436; Goldshede v. Swan (1847), 1 Exch. 154; Broom v. Bachelor (1856), 1 H. & N. 255.

(k) Goldshede v. Swan (1847), 1 Exch. 154; and see Butcher v. Steuart (1843), 11 M. & W. 857; Haigh v. Brooks (1839), 10 A. & E. 309.

But if it appear on

CH. XVII. s. 1. be referred to all the considerations (1).
looking at the facts, that the parties did not necessarily contemplate

General
Nature of
Contract of future advances, the guarantee will be void (m).

Guarantee.

need not be

direct.

It must be borne in mind, however, -as was observed by Best, Consideration C.J., in the case of Morley v. Boothby (n),-that "no Court of Common Law has ever said, that there should be a consideration directly between the persons giving and receiving the guarantee. It is enough if the person for whom the guarantor becomes surety receives a benefit, or the person to whom the guarantee is given suffer inconvenience, as an inducement to the surety to become guarantee for the principal debtor."

When a promise to indemnify is implied by law, and see ante, p. 43.

Bills of exchange.

SECT. 2.-Implied Indemnities.

In many cases the law implies a promise to indemnify. Thus, where there is a parol demise by a lessee to an under-tenant, there is an implied promise by the former to the latter, to indemnify him against any distress which may be made by the superior landlord, for the rent due to him, so long, at least, as the undertenant pays his rent to his immediate landlord (0).

So, if A. become surety or bail for B., at his request, the law implies a promise by B. to indemnify him (p). So where A. entered into a recognizance of bail for B., on the removal by certiorari of an indictment for conspiracy, from the Central Criminal Court to the Court of Queen's Bench; and B. was convicted, and the recognizances estreated for the non-payment of the prosecutor's costs: it was held that A. might sue B., as upon an implied indemnity (q). So there is, even at law, an implied contract between sureties, to contribute equally in discharging the demands for which they become responsible for their principal (r).

And so as regards bills of exchange and the respective and mutual rights and liabilities of holders, drawers, acceptors and indorsers it was laid down by Lord Selborne, L.C., in the House of Lords (s), that though there was no contract for suretyship between them, yet there was "a primary and secondary liability of

(1) Harris v. Venables (1872), L. R., 7 Ex. 235.

(m) Bell v. Welsh (1850), 9 C. B. 154. (n) Morley v. Boothby (1825), 3 Bing. 107.

(0) Hancock v. Caffyn (1832), 8 Bing.

358.

(p) Per Ashhurst, J., Toussaint v.
Martinnant (1787), 2 T. R. 100, 104.
(q) Jones v. Orchard (1855), 16 C. B.
A contract to indemnify the bail,

14.

in a criminal case, against the conse quences of the principal's failing to appear on the trial of the indictment, is contrary to public policy; and see Herman v. Jeuchner (1885), 15 Q. B. D. 561, and p. 90, ante.

(r) Davies v. Humphreys (1840), 6 M. & W. 153, 168.

(s) Duncan, Fox & Co. v. North and South Wales Bank (1880), 6 App. Cas. 1.

...

Implied Indemnities.

two persons for one and the same debt, the debt being as between CH. XVII. s. 2. the two, that of one of those persons only, and not equally of both, so that the other, if he should be compelled to pay it, would be entitled to reimbursement from the person by whom (as between the two) it ought to have been paid. . . . The liability of the indorser to the holder is by law merchant conditional, and only secondary ; but, when the conditions required by that law are fulfilled, it becomes absolute, and is that of a principal; and the indorser's right, if he pays the holder, to recover over against the acceptor, is not founded on any agreement between him and the acceptor (who is as likely as not to be a stranger without any communication with him before the indorsement), but is established by the same law." The respective duties of a holder are now regulated by ss. 38-52, and the liabilities of acceptors, drawers, and indorsers by ss. 53-57 of the Bills of Exchange Act, 1882, 45 & 46 Vict. c. 61 (ante, Ch. XVI.).

So the law implies a promise on the part of the principal, to indemnify his agent against any liability which he may incur from the execution of his authority (t).

absence of

express contract.

But there cannot be an implied contract to indemnify, in any Only in the case where the party has entered into an express contract as to the same subject-matter (u). Where a party is either expressly or impliedly indemnified Right of the party indemagainst the demand of a third person, he has no right, without nined to reexpress authority, to defend an action by the latter, and then to cover costs. claim the costs of such defence from the surety; unless, in defending the action and incurring such costs, he has acted as a reasonable and prudent man, unindemnified, would have acted in his own case (x). And a defendant who has a claim to contribution or indemnity over against one who is not a defendant, can bring him in by the third party procedure (y), and in the same way a defendant claiming indemnity or contribution from a co-defendant may have such question determined in the action (2).

The general rule is, that there is no contribution amongst wrong- No contribu tion amongst doers; so that where one man does an act at the instance of another, wrongdoers. which the former must be taken to have known to be against law, even an express promise to indemnify him is void (a). And

(t) Westropp v. Solomon (1849), 8 C. B. 345.

(u) Ante, p. 48. And see Upton v. Fergusson (1833), 3 M. & Sc. 88.

(x) Broom v. Hall (1859), 7 C. B., N. S. 503. Where the action has been properly defended, the indemnity covers the whole costs, and not merely the taxed costs of the defence; Howard v. Lovegrove (1870), L. R., 6 Ex. 43; and see also as

to "reasonably defending," Hammond
v. Bussey (1887), 20 Q. B. D. 79, C. A.

(y) R. S. C. 1883, Ord. XVI., rr. 48–
55; and see notes thereto in the Annual
Practice.

(z) R. S. C. 1883, Ord. XVI., r. 55.
(a) Martyn v. Blithman (1611), Yelv.
197; Shackell v. Rosier (1836), 3 Scott,
59; and see Fivaz v. Nicholls (1846), 2
C. B. 501.

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