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Letter of Guaranty. Sir,- If you will sell to Mr. of the goods he wishes to buy (or the goods may be described) to the amount of
(this may be omitted if the guaranty is intended to be of any amount), within year (or days or months, or the time may be omitted if it is not intended to limit it) from the date hereof, I, for value received, hereby promise and guarantee that the price thereof shall be duly paid. (This letter should also state on what terms the goods should be sold, as to credit, delivery, etc., unless it is intended to leave all this to the buyer and seller. (Date.)
When goods or stocks or other securities are given as collateral security for borrowed money or any other debt, an instrument is sometimes given, the intention of which is to guarantee that the collaterals should be and remain sufficient to secure the indebtedness. It may be in one of the following forms, as the bargain requires. These are sometimes called "margin guaranties."
(43.) Guaranty with Collaterals authorizing Sale. Whereas, I (or we) have deposited with
as collateral security for payment at maturity of the following
(here describe the debt guaranteed.)
Now this Witnesseth, That in the event of the non-payment at maturity of any or all of these hereby authorize
assigns, to sell the above (the collaterals) at public or private sale, or at the brokers' board, without notice to
and apply proceeds to payment of said and all necessary expenses, holding
responsible for any deficiency. In Witness Whereof,
have hereunto set
hand and this day of one thousand nine hundred and
(44.) Guaranty with Collaterals, promising Additional security
or authorizing Sale. Having Borrowed this Day of
(the sum borrowed) on the following collaterals (here describe the collaterals.)
I Hereby Agree, in case the market-price of the said stock should fall at any time during the continuance of the loan to an amount insufficient
to cover the sum loaned, with per cent. margin added thereto, that in such event I will, on demand, deposit additional security to be approved by him, which shall be sufficient to keep the collaterals thus deposited equal to a sum per cent, above said loan, and so as often as said collaterals shall diminish; and that, in default thereof, the said
shall have power to sell at public or private sale, without notice, all, or any of the said securities (as well as any others he may hold), to pay the amount of the said loan, with all interest and charges thereon, and for so doing, I fully release him of all claims, actions, and causes thereof.
THE STATUTE OF FRAUDS.
ITS PURPOSE AND GENERAL PROVISIONS.
THE Statute of Frauds, so called, was passed in the 29th year of Charles II. (1677) for the purpose of preventing frauds and perjuries, by requiring in many cases written evidence of a contract. In nearly all our States a similar statute has been enacted. But no two of the statutes of the different States agree exactly in all their provisions. They do, however, agree substantially; and we shall give in this chapter the prevailing and nearly universal rules for the construction and application of this statute. It is often of very great importance in commercial transactions. Those provisions which especially relate to business law are contained in the fourth and seventeenth sections.
By the fourth section, it is enacted that "no action shall be brought whereby to charge any executor or administrator, upon any special promise, to answer damages out of his own estate; or whereby to charge the defendant, upon any special promise, to answer for the debt, default, or miscarriages of another per. son; or to charge any person upon any agreement made upon consideration of marriage; or any contract for sale of lands, tenements, or hereditaments, or any interest in or concerning them; or upon any agreement that is not to be performed
within the space of one year from the making thereof : unless the agreement, upon which such action shall be brought, or some memorandum or note thereof, shall be in writing, and signed by the party to be charged therewith, or some other person thereunto by him lawfully authorized.”
By the seventeenth section, it is enacted that "no contract for the sale of any goods, wares, and merchandises, for the price of £10 sterling, or upwards, shall be allowed to be good, except the buyer shall accept part of the goods so sold, and actually receive the same, or give something in earnest to bind the bargain, or in part of payment, or that some note or memorandum in writing of the said bargain be made and signed by the parties to be charged by such contract, or their agents thereunto lawfully authorized.”
The second and fifth clauses of the fourth section, and the whole of the seventeenth, relate to our present subject. The second clause prevents an oral guaranty from being enforced at law; but if money be paid on one, it cannot be recovered back.
A PROMISE TO PAY THE DEBT OF ANOTHER.
It is very often difficult to say whether the promise of one to pay for goods delivered to another is an original promise, as to pay for one's own goods, and then it need not be in writing, or a promise to pay the debt or guaranty the promise of him to whom the goods are delivered, and then it must be in writing. If it be a promise to pay the debt of another, it is said to be a collateral promise, and not an original promise. The question may always be said to be: To whom did the seller give, and was authorized to give, credit? This question the jury will decide, upon consideration of all the facts, under the direction of the court. If a seller sues one to whom he did not deliver the goods, on the ground that this other promised to pay for them, then the question is, Did this other promise to pay for them as for his own goods ? for then the promise need not be in writing. Or did he promise to pay for them as for the goods of the party receiving them ? and then it is a promise to pay the debt of
another, and must be in writing. If, on examination of the books of the seller, it appears that he charged the goods to the party who received them, it will be difficult, if not impossible, for the seller to maintain that he sold them to the other party. But if he charged them to this other, such an entry would be good evidence, and, if confirmed by circumstances, strong evidence that this party was the purchaser. But it cannot be conclusive; for the party not receiving the goods may always prove, if he can, that he was not the buyer, and that he promised only as surety for the party who was the buyer; and, consequently, that his promise cannot be enforced if not in writing. And, in general, in determining this question, the court will always look to the actual character of the transaction, and the intention of the parties.
The courts, both in England and in America, have often endeavored to illustrate this question. Thus, in an early Eng. lish case, the court said: “If two come to a shop, and one buys, and the other, to gain him credit, promises the seller, 'If he does not pay you, I will,' this is a collateral undertaking, and void, without writing, by the Statute of Frauds, But if he says, 'Let him have the goods, I will be your paymaster,' this is an undertaking as for himself, and he shall be intended to be the very buyer, and the other to act but as his servant.” So, in a case in Maryland, the court said: “If B gives credit to C for goods sold and delivered to him, on the promise of A to 'see him paid,' or 'to pay him for them if C should not, in that case it is the immediate debt of C, for which an action will lie against him, and the promise of A is a collateral undertaking to pay that debt [and must be in writing], he being only liable as a surety. But where the party undertaken for is under no liability himself, the promise is an original undertaking of the party promising, and binding upon him without being in writing. Thus, if B furnishes goods to C, on the express promise of A to pay for them, and if A says to him, 'Let C have goods to such an amount, and I will pay you,' and the credit is given to A, in that case C being under no liability, there is nothing to which the promise of A can be collateral; but A being the immediate debtor, it is his original undertaking, and not a promise to
answer for the debt of another;" and therefore need not be in writing.
Whenever the main purpose and object of the promisor is not to answer for another, but to subserve some purpose of his own, his promise is not within the statute, although it may be in form a promise to pay the debt of another, and although the performance of it may incidentally have the effect of extinguishing the liability of another. If an old debt is extinguished by a new promise, this promise is considered as an original one, and not within the requirement of the statute.
If there be an oral promise to pay the debt of another, and also to do some other thing, this last can be enforced at law, if this other thing, and so much of the promise as relates to it, can be severed from the debt of the other and the promise relating to that debt; for although that promise must be in writing, the other may be oral.
AN AGREEMENT NOT TO BE PERFORMED WITHIN A YEAR.
UNDER the fifth clause in the fourth section, it is held that an agreement which may be performed within the year is not affected by the statute, as the words," that is not to be performed within one year,” do not apply to an agreement which, when made, was, and by the parties was understood to be, fairly capable of complete execution within a year, without the intervention of extraordinary circumstances,-although in point of fact its execution was extended much beyond the year. Sio where one agreed orally, for one guinea, to give another a number of guineas on the day of his marriage, it was held that this promise was not within the statute, that is, not one which the statute required to be in writing, because he might be married within a year, and the promisor was therefore bound by it. So where one agreed orally never to go into the staging business in a certain place, as this contract could last only while the promisor lived, and he might die within a year, he was heiz to be bound by it.