If an agent has a general authority and abuses it, the principal is liable to the public and may look, for such redress as he can get, to the wrong-doing agent.

If an agent has only a limited authority, the principal is liable only on aets done under that authority.

Moreover, if an agent who has been held out as having a general authority, ceases to have authority, the principal must take all reasonable steps to notify the termination of that authority to those who have been in the habit of relying on it.

Now how are we to know what is the scope of a general authority? Well, in the absence of any expressly defined authority, brought to the knowledge of or available to third parties, the extent of an agent's usual employment is the measure of his authority. So that if an agent is usually employed by a principal to transact all his business of a particular kind, he is the general agent of that principal, and third parties may safely deal with that agent upon the usual footing, so long as they have no notice that the general agency has been determined. If a clerk has been usually employed to draw, indorse or accept bills, his signature will bind the principal though the money may never come to the principal's use, and even though the agent has been dismissed, if the third parties have no reason to be aware of the determination of his authority.

66

66

A particular agent, however, that is to say, one who is employed with limited authority for the particular occasion, is not presumed to have any authority and must satisfy those who deal with him of the extent to which he is authorised. This prepares us for section 25 of the Act, which lays down that "a signature by procuration operates as notice that the agent has but a limited authority to "sign, and the principal is only bound by such signature if the agent so signing was acting within the actual limits of his authority." Per pro signatures, therefore, require close scrutiny, because you have no general course of dealing to rely on. Even though the same person, to your knowledge, has signed fifty times before in the same way, each signature is merely an assertion of authority to sign on that occasion, and though previous similar signatures would naturally affect the readiness with which you would be satisfied, yet you accept the signature at your own risk if it should turn out that the agent has in fact departed from his authority. In the case of bills drawn on a banker payable to order on demand (i.e., cheques) the banker is protected (by sec. 60, as to forged or unauthorised indorsements) when he pays in good faith and in the ordinary course of business, but this protection (like those under the head of crossed cheques) only applies to cheques, and, moreover, is limited to indorsements; so that as to all other bills but cheques, and all other signatures (even on cheques) except indorsements, the banker is open to the same rule as any other party, and pays on a forged or unauthorised signature at his peril.

S. 25.

S. 26. (1.)

8. 26. (2).

Estoppels or Preclusions.

S. 26 enables an agent to add words to his signature, negativing personal liability, but he must be most careful to leave no doubt of his intention. If he merely adds "agent" or "chairman of the Company," or other descriptive words, they will not avail him any more than if he had added F.R.S. or J.P. to his signature. And, moreover, if there is any doubt of whether the signature has the effect of binding the principal or the agent personally, the holder will have the benefit of the doubt, and whichever construction is most in favour of the validity of the instrument, will prevail.

When we were considering the absolute nullity of a forged or unauthorised signature under s. 24 we postponed considering the qualifying words at the close of that section, viz., "unless the party against whom it is sought to retain or enforce payment of "the bill is precluded from setting up the forgery or want of "authority."

We are now going to see what is the meaning of being precluded. You will remember that the holder, besides defences on the merits, such as want of consideration, fraud, duress, illegality, might find himself confronted by a denial of the existence of some of the parties through whom he claims, or of their capacity to give a binding signature, or of their authority to sign, or of the genuineness of the signature. The objection as to capacity has not much, if any, force now, except to defeat a claim against the incapable party, because as we have seen by section 22 (2) a signature by an infant or incapable corporation gives full rights to the holder against any other party. But showing the non-existence of a party or that his signature was a forgery or without authority, might defeat the holder's claim altogether, unless the doctrine of estoppel or preclusion came to his aid, and enabled him to recover against the parties precluded or estopped from setting up the non-existence forgery or want of authority.

The doctrine of estoppel or preclusion is simply this-that if a person deals with another upon a certain basis and, upon that basis, the person with whom he is dealing gives him some benefit or takes some burthen upon himself, then the law insists that the transaction shall be carried through on that basis even though it should appear that the basis is in fact erroneous. So that the person who, in the early stage of that transaction, has had the benefit of a certain supposition, must not, when the other party's turn comes to derive advantage, turn round and allege the true facts as a ground for getting out of his bargain. If the erroneous facts were good enough basis for him to obtain his advantage upon, they must be left undisputed till the other party has had his share of the benefit.

Preclusion may arise as part of the bargain; and each of the contracts of drawer, acceptor, and indorser gives rise to preclusions of this sort.

But preclusion may arise from any circumstances, outside the contract itself, which make it unfair for a person, who has led another to act upon the faith of certain facts existing, to escape liability afterwards by denying those facts. Now this doctrine explains that reservation at the end of section 24, and the preclusions of the acceptor under section 54 (2), those of the drawer under section 55 (1) (b), of the indorser under section 55 (2) (b) and (c), of the maker of a promissory note under Section 88 (2), and the warranties of the transferor by delivery under section 58 (2). In all those cases the party is held to that state of facts which is presupposed and involved in the contract into which he enters. It is not how much appears on the bill, at the time that a party puts his name to it, that regulates his preclusion. At first sight, one might think it merely amounted to thisthat each party guaranteed everything regular with the bill, up to the time of his putting his name to it. This is not the criterion. The test is, what in honesty and fair dealing is necessarily involved and pre-supposed in the act of his becoming a party to the particular contract into which he enters, with the knowledge that the instrument is likely to be taken for value by a holder in due course? e.g., an acceptor, by accepting, admits to any holder in due course the existence of the drawer, the genuineness of his signature, and his capacity and authority to draw the bill. For, upon any other supposition, his acceptance of the bill for the purpose of its being negotiated, 'or with the knowledge that it may be negotiated, would be assenting to an order which was a nullity. But suppose that, at the time he accepts, there are several indorsements on the bill. No engagement as to these is in any way pre-supposed or involved in the contract which he enters into in accepting the bill. Whether the bill has been properly passed from one holder to another on its way to him is not a matter involved in his assenting to the order of the drawer to pay the contents of the bill to whomsoever may be the holder at maturity.

You are now in a position to appreciate the neatness with which, under the head of "Liabilities of Parties," the draftsman has dealt with this part of his subject, by laying down what precisely is the contract which each of the parties to the bill enters into when he puts his name to the bill, and by immediately following this statement by the preclusions arising out of each of those contracts. You can read them for yourselves. Section 54 gives the contract and the preclusions of the acceptor. Section 55 (1), those of the drawer; the same section (2), those of the indorser. The transferor by delivery of a bearer bill incurs no liability on the bill because his signature is not upon it, but his negotiation of it gives rise to certain warranties which are set out in section 58 (3). And lastly, the maker of a promissory note, who in many

Estoppel by conduct.

Principal

and

Surety.

Rule I. Creditor bound to protect Sureties' interest to best of his power.

respects is analogous to the acceptor of a bill, requires a separate section to himself for this purpose, because there is no drawer in his case, and in section 88 (1), you will find what his contract is and in the same section (2) his preclusion on the note.

As an example of a party being estopped or precluded by his conduct, apart from his signature to the bill or note, one instance will suffice. Supposing, before giving value on a signature, the payer were to write and ask the party whose signature it purported to be whether it was genuine or not, and the person enquired of, knowing the object of the enquiry, replied that it was his, and value thereupon was paid, the person who had so acknowledged the signature would on discovering the forgery be precluded from setting it up against the party whom he had misled.

Some insight into a few of the leading doctrines of Principal and Surety will help very much towards an understanding of those parts of the Act which relate to the Duties of the holder, and to Discharge, whether of parties or of the bill.

Prior to acceptance the drawer is the principal debtor, and indorsers are sureties for him.

On acceptance, the drawee takes on himself the principal liability, and the drawer and indorsers are sureties for the acceptor, but they are not in the position in which ordinary sureties are, where several are sureties for one person; that is to say, while they are all cosureties towards the holder who may proceed against any or all on default of the principal debtor, they are not co-sureties towards each other and entitled as such to contribution from each other all round. As regards each other the most rigid punctilio and order of sequence prevails. As between themselves, each prior party is a principal and those who come after him are sureties. Now this is very important, because it is to that peculiar modification of the relation of principal and surety that the ordinary doctrines of principal and surety have to be applied.

When one man becomes responsible for the debt of another, the law holds him strictly to his bargain with the creditor, but at the same time it calls on the creditor to take all reasonable steps in his power to protect the interests of the surety. How is this carried out in the contracts before us? In the first place the creditor must duly present for acceptance, where acceptance is necessary, and afterwards for payment, and by section 39 (1) (2) (3), and section 40 (2), failure to present for acceptance, where necessary, discharges the sureties. Again, presentment for payment must be duly made, and by section 45, if it is not, the drawer and indorser, i.e., the sureties, are discharged; and where a bill is dishonoured whether by non-acceptance or non-payment, by section 48, notice of dishonour must be given to the drawer and each indorser, otherwise any drawer or indorser to whom notice is not given will S. 51 (2) (9). be discharged. Under section 51 (2) (9), the holder's duties as to

S. 39 (1) (2)
(3).
S. 40 (2).

S. 45.

S. 48.

promptitude in protesting (which in foreign bills takes the place of notice of dishonour) are regulated by the same considerations. The reason for requiring notice of dishonour, of course, is that it might greatly prejudice those sureties who might have effects in the hands of, or about to pass into the hands of, a principal, if they had not the earliest notice that could reasonably be given of the default of the principal debtor.

Rule II.

Only to best

of his power.

But these duties are only required to be fulfilled to the best of the ability of the creditor. So that we are prepared to find, side by side with elaborate provisions for carrying out those duties of the holder, a series of careful provisions excusing delay, or dispensing with the performance of those duties altogether, where the delay or omission is unavoidable or results from the action of the surety himself, or when the surety is only a surety in form, being in reality the principal debtor. Now viewed in that light, those formidable sections from 39 to 52 become not so many intricate and vexatious rules, introduced for the purpose of tripping up bank managers, cashiers, collecting clerks and holders of bills generally, but land-marks, friendly aids to which in any case of doubt or difficulty you may turn. Section 49, for S. 49. instance, with its 15 rules for giving notice of dishonour, is likely to dishearten or discourage a student of the Act unless he reflects as to how such a section originated. When a skilful draftsman codifies the law on such a subject, it is rather like a person mounting an object on a microscopic slide. That each part may be visible when looked for, and all equally in focus, every part, whether prominent or subordinate, normal or exceptional in Nature, is brought up into the same plane. These sections and sub-sections set out, if not every conceivable case, almost every case of typical importance which has actually arisen and been decided upon, and therefore the more voluminous and detailed a section of that sort is, the more likely are you to find the precise case in which you have a doubt specially provided for. I may have some hints to offer you hereafter on the study of this important and voluminous section.

Discharge

The giving of time by a creditor to a principal debtor releases Rule III. the surety, because giving time enlarges and prolongs the risk of and the surety. And if the creditor discharges the principal debtor giving time. absolutely, his doing so is held to imply that he discharges the surety; for, what would be the advantage to the debtor of being discharged, if the creditor, by coming down upon the surety, sent the surety down upon the debtor? But if the creditor discharges the debtor only to the extent of saying "I shall take no steps "against you myself, but I shall claim against the surety, and he will no doubt come upon you for the amount," that is not such a discharge of the debtor as releases the surety. This explains the provision in section 63 (2) that a renunciation, by the holder, of S. 63 (2).

66