The extent of a surety's liability depends on the nature of the guaranty. The liability on the latter class (specific) does not end with the surety's death, and his estate continues liable: see Lloyd's v. Harper, 16 Ch. 290, in which case X., on admission of his son to Lloyd's, wrote a letter engaging to be responsible for his son's engagements as a member of Lloyd's. It was held that the consideration being given once for all, the guarantee does not cease on the death of the surety X. Discharge.-A surety has the right to be kept in the same position as between himself and other parties as he was on executing the contract of suretyship. If this position be altered to his detriment he is released. Hence if fraud was the means of securing the suretyship, it is discharged on general principles of contract. Again, the contract is discharged (1) by release of a co-surety if contribution is thereby lost; (2) by the bond not being executed by all parties according to agreement, as in Ellesmere Brewery Co. v. Cooper, 1896, I Q. B. 375; and (3) by substitution of a new agreement with the debtor without the consent of the surety. and Release of the principal debtor by the creditor discharges the surety, unless the terms of the release preserve the right of the creditor against the surety, the release amounts to a promise not to sue. In such case the surety can pay (since the debt is not discharged) and then sue the debtor. Since guarantee is to secure against the principal's default, discharge of the principal debtor by bankruptcy cannot be said to discharge the surety, or the value of the contract would be lost, nor can a resolution of creditors to take a composition discharge the surety. A binding contract not to sue the principal debtor for a given time, however short, discharges the surety, since it prejudices his right to stand in the creditor's place and to sue, unless the creditor reserves his rights against the surety. Lapse of time under the Statutes of Limitation works release, time running from the date of the principal debtor's default, which in a continuing guarantee is difficult to fix. It should be noted that payments on account by the principal debtor do not keep the liability of a surety alive, as such payments are not made on behalf of the surety, and cannot be construed as an acknowledgment of the surety's liability. QUESTIONS 115. Distinguish between real and personal property; and choses in possession and choses in action. 116. Mention debts upon which interest is legally chargeable. 117. What is the meaning of "taking accounts"? 118. Distinguish between guarantees and indemnities. 119. What is the position of a surety in regard to his cosureties? 120. What is the position of a surety in respect of the principal debtor and creditor? 121. Distinguish between continuing and executed guarantees. 122. State the extent of a surety's liability. 123. Under what circumstances may a surety be discharged? 124. State the effect of the Statute of Limitations upon a surety. CHAPTER XIII NEGOTIABLE INSTRUMENTS Distinction between Negotiable and Non-negotiable InstrumentsHolder in Due Course-Bills of Exchange: Definition, Parties, Acceptances, Capacity, Case of Need, Sans Recour, Forgeries, Consideration, Accommodation Bills, Endorsements, Re-issue, Presentment, Payment, Dishonour, Liability of the Parties, Discharge, Alteration, Lost Bills. PAYMENT of debts is often made by a transfer of a negotiable instrument, whilst some negotiable instruments are very closely allied to guarantees: eg. guarantees often take the form of a joint and several promissory note, whilst an accepted bill gives a good example of the rights of suretyship, viz. the acceptor is the principal debtor, the drawer and indorsers being in the nature of sureties. Generally speaking, any instrument which embodies a contract to pay money, and which may, by mere delivery, either with or without indorsement, transfer the legal right to the money, is a negotiable instrument. We may test an instrument by asking two questions concerning it : 1. Can the transferee sue in his own name without notice to the party liable? 2. Does the transferee take the instrument in good faith, and for value, thus making a good title, notwithstanding a flaw in the transferor's title? Apply these tests to certain instruments-say, to a bill of lading and a bill of exchange respectively, and we find that the former, although not far removed from negotiation, is not fully negotiable. The transferee in such case, by the Bills of Lading Act, 1855, can sue in his own name, but he does not always take a title as above. The bill of exchange, however, answers both tests, being perfectly negotiable. A comparison of non-negotiable and negotiable instruments will show the striking differences in the contracts contained therein. NEGOTIABLE. 1. A negotiable instrument, like the money which it represents, may pass from hand to hand by delivery, or by delivery with indorsement. 2. Holder may sue without notice to the person liable to pay. 3. Transferee of a negotiable instrument is presumed to have given consideration : e.g. holder in due course of a bill of exchange. 4. Holder in due course takes free from equities, i.e. free from any charge upon the instrument, or any taint in title. NON-NEGOTIABLE. I. A contract in a non-negotiable instrument can only be transferred subject to a statute making it transferable: eg. Policies of Assurance Act, 1867, and the Judicature Act, 1873. 2. Contracts assignable by Statute require notice by the assignee in writing (Judicature Act, 1873). 3. Onus of proof is on the party suing on the contract to show that consideration was given. 4. Assignee of an ordinary debt takes subject to equities, i.e. subject to any charges on the debt. Holder in due course.-A holder in due course as above mentioned means "A person who has taken a bill, complete and regular on the face of it, providing that he took it (a) before it was overdue, and without notice that it had been dishonoured, if such be the case; and (b) that he took it in good faith, and for value, without notice of any defect in the title of the person negotiating it. 'Holder in due course,' according to Mr. Chalmers, is synonymous with the more 'cumbrous' technical legal phrase, 'bond fide holder for value without notice.'" Good faith.-Good faith within the meaning of the above definition is defined as covering acts done honestly even if negligently. Negotiability-its source.—Instruments become negotiable in two ways: (1) By the lex mercatoria, or custom of merchants which is engrafted on the common law; and (2) By Statute; e.g. 3 & 4 Anne, c. 9, which made promissory notes negotiable; and the Bills of Exchange Act, 1882, which did not create negotiability, but gave statutory force to the customary negotiability of bills. Custom.-It has been affirmed that only ancient custom of merchants could create negotiability, but in the light of the decision of the Court in the case of the Bechuanaland Co. v. London Trading Bank, where debenture bonds payable to bearer were decided to be negotiable, it would seem that modern custom was to be reckoned with, and that the list of customary negotiable instruments was not finally closed; hence in the future documents not now negotiable may be added to the list: e.g. bills of lading which are not negotiable may at some future time become fully negotiable. For commercial purposes, the most important negotiable M |