Chap. XI. further liability (m). All the co-sureties are entitled to the benefit of any security which any one of them has obtained from the principal debtor (n). Securities. Statute of Fraudsguarantee must be in writing. need not It is provided by the Statute of Frauds (o) that 66 No action shall be brought to charge the defendant upon any special promise to answer for the debt, default, or miscarriage of another person 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." The promise must be made to the person to whom the principal debtor is liable, so that a promise to A. to pay B. a debt due from A. to B. is not within the statute (p). It must be a promise to answer for the debt, &c. of another for which that other remains. liable (q); and there must be an absence of any liability on the part of the defendant or his property except such as arises from his special promise (r). An agreement to give a guarantee is within the statute (s). The word "agreement" includes the consideration as well as the promise, and therefore this statute was held not to be satisfied Consideration unless the consideration was stated (t). But in this respect the for guarantee law was altered by the Mercantile Law Amendment Act, 1856 (u), which provides that no such promise "shall be deemed invalid to support an action, suit, or other proceeding against the person by whom such promise shall be made by reason only that the consideration for such promise does not appear in writing or by necessary inference from a written document." appear in writing. The effect of this enactment is to allow parol evidence to be (n) Steel v. Dixon, 17 Ch. D. 825; (o) 29 Car. 2, c. 3, s. 4 (2). (q) Birkmyr v. Darnell, 1 Sm. L. (r) Sutton v. Grey, [1894] 1 Q. B. 285; Harburg Co. v. Martin, [1902] 1 K. B. 778. (s) Mallet v. Bateman, L. R. 1 C. P. 163. (t) Wain v. Warlters, 1 Sm. L. C. 323, and notes; Saunders v. Wakefield, 4 B. & Ald. 595; 23 R. R. 409; Hawes v. Armstrong, 1 Bing. N. C. 761. (u) 19 & 20 Vict. c. 97, s. 3. given as to the consideration, but it does not allow such evidencǝ Chap. XI. to be given to vary or alter the written contract (x). The Partnership Act, 1890 (y), repealing sect. 4 of the Mercantile Law Amendment Act, 1856, provides that of firm. 'A continuing guaranty given either to a firm, or to a third Continuing person in respect of the transactions of a firm, is, in the absence guarantee to of agreement to the contrary, revoked as to future transactions or in respect by any change in the constitution of the firm to which, or of the firm in respect of the transactions of which, the guaranty was given" (2). contracts of A contract of guarantee may be one to which the creditor is a Different party, or it may be a contract, either express or implied, between suretyship. the principal and surety only, to which the creditor is a stranger (a). In the latter case the persons who, as between themselves, are in the position of sureties are, with regard to the creditor, in the position of principals (a). surety. When the creditor is a party to the guarantee, the concealment Duty of from the surety with the knowledge of the creditor of any material creditor to part of his contract with the debtor, which might affect the responsibility of the surety, will avoid the guarantee (b); but there must be something which amounts to fraud (c). release of If a written guarantee is altered in any material particular after Discharge of surety by it has been signed by a surety, that surety is discharged (d). material If the creditor releases the principal, or gives him time, without alteration; expressly reserving all rights against the surety, the surety is debtor, or discharged (e); but not if the principal debtor is released or dis- giving time; charged by operation of law (f). Also, if the contract between loss of the creditor and the debtor is varied so as to alter the position of (x) Holmes v. Mitchell, 7 C. B. N. S. 361. See notes to Birkmyr v. Darnell, 1 Sm. L. C. 299. (y) 53 & 54 Vict. c. 39, s. 18. (2) As to the old law, see Spiers v. Houston, 4 Bli. N. S. 515; Cambridge University v. Baldwin, 5 M. & W. 580; 52 R. R. 850. (a) Duncan v. N. & S. Wales Bank, 6 App. Cas. 11, per Lord Selborne, L. C.; Nicholas v. Ridley, [1904] 1 Ch. 192. (b) Pidcock v. Bishop, 3 B. & C. 605; 27 R. R. 430; Lee v. Jones, 17 C. B. N. S. 482. (c) North British Assur. Co. v. Lloyd, 10 Ex. 523. (d) Davidson v. Cooper, 11 M. & W. 778; 13 Id. 343; Ellesmere Co. v. Cooper, [1896] 1 Q. B. 75. (e) Bateson v. Gosling, L. R. 7 C. (f) Re FitzGeorge, [1905] 1 K. B. 462. 307. securities. Chap. XI. the surety (g); or if the creditor gives up or negligently loses any security to the benefit of which the surety would be entitled (h); or if the creditor releases a co-surety, unless there is no right to contribution (i). Surety's right A creditor, who has been paid by a surety, is bound to give to the surety the benefit of every security which he has received either at the time when the guarantee was given (k), or subsequently (l), whether the surety knew of their existence or not. The Mercantile Law Amendment Act, 1856, provides (m): "Every person who, being surety for the debt or duty of another, or being liable with another for any debt or duty, shall pay such debt or perform such duty, shall be entitled to have assigned to him, or to a trustee for him, every judgment, specialty, or other security which shall be held by the creditor in respect of such debt or duty, whether such judgment, specialty, or other security shall or shall not be deemed at law to have been satisfied by the payment of the debt or performance of the duty, and such person shall be entitled to stand in the place of the creditor, and to use all the remedies, and if need be, and upon a proper indemnity, to use the name of the creditor in any action or other proceeding at law or in equity in order to obtain from the principal debtor, or any co-surety, co-contractor, or co-debtor, as the case may be, indemnification for the advances made and loss sustained by the person who shall have so paid such debt or performed such duty, and such payment or performance so made by such surety shall not be pleadable in bar of any such action or other proceeding by him: Provided always that no co-surety, co-contractor, or co-debtor shall be entitled to recover from any other co-surety, co-contractor, or co-debtor, by the means aforesaid, more than the just proportion to which, between those parties themselves, such last-mentioned person shall be justly liable" (n). as A co-surety who has paid the creditor and taken an assignment of the securities is entitled, under this section, to sue his co-surety for the full amount of the debt, but he can actually Chap. XI. recover only the amount which the co-surety is justly bound to contribute (o). A surety has a right to be indemnified by his principal, and can Right to indemnity recover from his principal all that he has been under a reasonable from prinobligation and necessity to pay (p). cipal. compel debtor The surety, generally speaking, has an equitable right to take Right of proceedings to compel the principal debtor to pay the debt when surety to due, whether the surety has been sued or not (q); and the surety to pay. may sometimes compel the creditor to proceed against the debtor (q). debtor is In guarantees of the class where, so far as the creditor is Where each concerned, each debtor is a principal debtor, and the contract principal. of suretyship exists between the debtors only, the creditor does not lose his remedies against one of the debtors by his course of dealing with the other of them (r). But it is quite consistent with this, that, where one debtor is in fact a surety for the other, the creditor is not to be at liberty, after he has received notice of this fact, to do anything which prejudices the right of one debtor against the other, or to refuse, after he has received all that is due to him, to give effect to the rights of one debtor against the other (s). It has been held that a creditor is not entitled to the benefit of securities which have been given by the principal debtor to the surety (t). (0) Re Parker, [1894] 3 Ch. 400. (p) See notes to Lampleigh v. Brathwait, 1 Sm. L. C. 141, 154. (q) Ascherson v. Tredegar... Co., [1909] 2 Ch. 401, where the earlier cases are all considered. See notes to King v. Baldwin, 2 Hare & Wallace, American Leading Cases, 412 et seq. (r) Ward v. National Bank of New Zealand, 8 App. Cas. 755. (8) Duncan v. N. & S. Wales Bank, 6 App. Cas. 12; Davies v. Stainbank, 6 De G. M. & G. 679, 694; Overend v. Oriental Corp., L. R. 7 H. L. 348; Rouse v. Bradford Bank, [1894] A. C. 586. (t) Re Walker, [1892] 1 Ch. 621, Stirling, J. Creditor not entitled to securities of surety. G.P.P. 12 Chap. XII. Negotiable instrument described. Qualities. Negotiable instrument represents money. CHAPTER XII. NEGOTIABLE INSTRUMENTS. A NEGOTIABLE instrument is a document embodying a contract. to pay money to a person named, or his order (which is signified by an indorsement on the instrument), or to the bearer of the document (a), and possessing certain peculiar qualities which will be best understood by considering such instruments as being exceptions to the operation of two general rules of English law, viz., the rules (1) that no man can transfer a better title to a chattel personal than he himself possesses, except only by a sale in market overt (b); and (2) that a chose in action cannot, at common law, be assigned so as to give the assignee a right to sue on the contract in his own name (c). As to the first rule: 'The general rule of law is undoubted, that no one can transfer a better title than he himself possesses: Nemo dat quod non habet. To this there are some exceptions; one of which arises out of the rule of the law merchant as to negotiable instruments. These, being part of the currency, are subject to the same rule as money: and if such an instrument be transferred in good faith, for value, before it is overdue, it becomes available in the hands of the holder, notwithstanding fraud which would have rendered it unavailable in the hands of a previous holder" (d). An instrument entitling the holder to a sum of money is treated as the representative of money, and as subject to the same rules as the money which it represents; and it has been long settled that the right to money is inseparable from the possession of it (e); "the property in current coin passes by delivery of it, and the actual possessor of the coin, even if he has stolen it, can by (a) See Partridge v. Bank of England, 9 Q. B. 396, 406, 424; Plimley v. Westley, 2 B. N. C. 251; see as to bills of exchange, the Act of 1882 (45 & 46 Vict. c. 61), s. 8 (4). (b) Ante, p. 42. (c) Ante, p. 133. (d) Per Willes, J., Whistler v. Forster, 14 C. B. N. S. 257-8; London Joint Stock Bank v. Simmons, [1892] A. C. 201. (e) Per Best, J., Wookey v. Pole, 4 B. & Ald. 6; 22 R. R. 594. |