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CH. XVII.S.3.
Guarantees
(Statute of
Frauds).

Review of exceptions from the

statute.

Harburg
India Rubber
Comb Co. v.
Martin.

The consideration need not appear on the face of the

memorandum.

Mercantile

ment Act,

1856.

The authorities which have established exceptions from sect. 4 of the Statute of Frauds in its relation to an oral "promise to answer for the debt of another," were fully reviewed by the Court of Appeal in Harburg India Rubber Comb Co. v. Martin. There the defendant, being a director of and large shareholder in a company which he had financed, orally promised the plaintiffs, who were its judgment creditors as yet unsuccessfully proceeding to execution, that he would indorse bills for the debt. It was held that the promise was not a contract of indemnity and that the case was not excepted from sect. 4 by reason of the defendant's interest in freeing his company's goods from execution (a).

(c) Consideration need not be Stated.

Before the Mercantile Law Amendment Act, 1856, 19 & 20 Vict. c. 97, it was fully settled that, to render a guarantee in writing valid under the 4th section of the Statute of Frauds, the consideration for the promise must appear on the face of the instru ment, either in express words, or by necessary implication; and that the omission could not be supplied by parol evidence (b).

But by the Mercantile Law Amendment Act, 1856, 19 & 20 Law Amend- Vict. c. 97, s. 3, it is enacted; that no special promise to be made by any person after the passing of that Act, to answer for the debt, default, or miscarriage of another person, being in writing, and signed by the party to be charged therewith, or some other person by him thereunto lawfully authorised, shall be deemed invalid to support an action, suit, or other proceeding, to charge the person by whom such promise shall have been made, by reason only that the consideration for such promise does not appear in writing, or by necessary inference from a written document.

Signature of

Although, since the statute, parol evidence may be given to supply the consideration, such evidence cannot be given to explain the promise; and, therefore, unless the whole promise be in writing, the memorandum will not be sufficient (c).

The guarantee, to be good, must be "signed by the party to be memorandum. charged therewith," or by his agent. But where the defendant wrote and signed a guarantee which contained a mistake, and, on the mistake being discovered, he wrote a memorandum across the original guarantee, correcting such mistake, but did not sign this memorandum: it was held, that his original signature was a signature of the whole, and so satisfied the statute (d).

(a) Harburg India Rubber Comb. Co. v. Martin, [1902] 1 K. B. 778; 71 L. J., K. B. 529; 86 L. T. 505; 50 W. R. 449, C. A., reversing judgment of Mathew, J.

(b) Wain v. Warlters (1804), 2 Sm. L. C.;

5 East, 10; 7 R. R. 645; Price v. Richardson (1846), 15 M. & W. 539.

(c) Holmes v. Mitchell (1859), 7 C. B., N. S. 361.

(d) Bluck v. Gompertz (1852), 7 Exch. 862.

SECT 4.-Extent of Surety's Liability.

Let us now consider the extent to which the surety is liable. And on this subject the leading principles are as follows:1st. If a person be surety for the fidelity of another in an office of limited duration, or the appointment to which is only for a limited period, he is not obliged beyond that period (e). Therefore, where a bond was taken under an Act of Parliament, conditioned for the due collection of certain rates and duties at all times thereafter; and it did not appear on the record that the collector's appointment was limited, or his office annual, but the Act made it annual; the Court held that the surety was obliged for a year only (ƒ).

And where the defendant became bound to the plaintiffs, as surety for the faithful execution of his office by one A., who had been appointed under the Poor Relief Act, 1819, 59 Geo. 3, c. 12, s. 7, assistant overseer for the parish of M.; and A. was afterwards appointed, under the Poor Law Amendment Act, 1844, 7 & 8 Vict. c. 101, s. 62, collector of poor rates for the same parish it was held that A., having accepted the latter appointment, had ceased to hold the former, and that the liability of the defendant as his surety was at an end (g). So, if the rates, &c., collected, be not such as are authorised by the Act, the surety is not liable (h); nor is he liable where, owing to an error in the appointment of the principal, the latter was not duly authorised, under the Act, to collect the sums which he is charged with having received (i).

So, if the surety's engagement relate to a particular office, it extends only to such things as were included in the office when the engagement was entered into. Thus, a person who became surety for a collector of the customs' revenue, upon his appointment in 1691, was held not liable in respect of the custom on coals, which was first imposed in 1698 (k). And in like manner it has been held, that in construing an agreement in the form of a bond, by which a surety became liable for the due fulfilment of an agent's duties, therein particularly enumerated, a general clause in the obligatory part of the bond, must be controlled by reference to the prior clauses, specifying the extent of the agency (1). (e) See Bamford v. Iles (1849), 3 Exch. 380; Leadley v. Evans (1824), 2 Bing. 32. (f) Peppin v. Cooper (1819), 2 B. & Al. 431; and see Mayor, &c., of Cambridge v. Dennis (1858), E., B. & E. 660.

(g) Malling Union v. Graham (1876), L. R., 5 C. P. 201.

(h) Nares v. Rowles (1811), 14 East, 510. And see Webb v. James (1840), 7 M. & W. 279.

(i) Keep v. Wiggett (1850), 10 C. B. 35. (k) Bartlett v. Attorney-General (1709), Parker, 277; and see Pybus v. Gilb (1856), 6 E. & B. 902; Bonar v. McDonald (1850), 3 H. L. C. 226; Leigh v. Taylor (1827), 7 B. & C. 491.

(1) Napier v. Bruce (1842), 8 C. & F. 470. But where the surety's engagement related to the continuance of one G. in the office of clerk" to a banker; and

CH. XVII. s. 4.
Ertent of
Surety's
Liability.

To what surety is liable.

extent the

Time for

which he is

liable.

Acts or principal, for which surety

defaults of

is liable.

CH. XVII. s. 4.

Extent of Surety's Liability.

Liability of co-sureties in different amounts.

Ellesmere Brewery Co. v. Cooper.

Limited liability.

Surety to or for one person, not liable to or for partner.

Rules where guarantee to or for firm.

Partnership
Act.

So, if the guarantee relate to the performance of a particular contract, the surety is only liable for such damages as are occasioned, strictly, by the failure of the principal to perform that contract (m). But the principal must perform the contract strictly, otherwise the surety will be liable (n).

And where the principal is charged, as bailee, with having received a specific sum of money, which he ought to have paid over within a certain time, but which he did not pay over; the surety will not be liable, if it appear that the principal lost the money by robbery, without any default of his own (o).

Where two or more persons join as sureties for a common principal, but bind themselves in different amounts in event of the principal being in default, they are liable to contribute to the satisfaction of the creditor's claim in proportion to their respective liabilities, and not in equal amounts (p).

The guarantee of the surety may also be expressly limited in amount to a sum fixed less than the principal debt, even though that debt is a floating balance (q).

If a person engage as surety for a particular individual, e.g., to be accountable for monies received by him; the engagement is understood to extend to the receipts of that individual alone; and not to those of himself and a partner (r); and a surety "to A." for the fidelity of a clerk, is not liable in respect of a breach of trust, upon an employment of the clerk by A.'s executors (s).

Before the Mercantile Law Amendment Act, 1856, when security was given to a house, e.g., to a banking-house, and not to the members of the firm by name, the surety would still continue liable, notwithstanding a change of partners (t).

But by sect. 18 of the Partnership Act, 1890, 53 & 54 Vict. c. 39, re-enacting more briefly sect. 4 (repealed by that Act) of the Mercantile Law Amendment Act, 1856, it is enacted that—

"A continuing guaranty or cautionary obligation given either to a firm or to a third person in respect of the transactions of a firm is, in the absence

the defence was, that he had been ap-
pointed "manager," the plea was held
bad, because it did not show that G.
ceased to be clerk when he became
manager, Anderson v. Thornton (1842),
3 Q. B. 271; and see Skillett v. Fletcher
(1867), L. R., 2 C. P. 469, Ex. Ch.

(m) Warre v. Calvert (1837), 7 A. & E.

143.

(n) See London, Brighton and South Coast Rail. Co. v. Goodwin (1849), 3 Exch. 736.

(0) Walker v. British Guarantee Association (1852), 18 Q. B. 277.

(p) Ellesmere Brewery Co. v. Cooper, [1896] 1 Q. B. 75.

(q) See Hobson v. Bass (1871), L. R.,

6 Ch. 792; Gray v. Seckham (1872), L. R., 7 Ch. 680; distinguished in Ellis v. Emmanuel (1876), 1 Ex. D. 157, C. A.

(r) Mills v. Guardians of Alderbury Union (1849), 3 Exch. 590; Montefiore v. Lloyd (1863), 15 C. B., N. S. 203; Bellairs v. Ebsworth (1811), 3 Camp. 52; Wright v. Russell (1774), 3 Wils. 530; S. C., 2 Bl. 934; and see Leathley v. Spyer (1870), L. R., 5 C. P. 595.

(s) Barker v. Parker (1786), 1 T. R. 287; 1 R. R. 201.

(t) Barclay v. Lucas (1783), 3 Doug. 321.

of agreement to the contrary, revoked as to future transactions by any change in the constitution of the firm to which, or of the firms in respect of the transactions of which, the guaranty or obligation was given."

CH. XVII. s. 4.
Extent of
Surety's
Liability.

Guarantee by

A guarantee by two persons in the following form: "We undertake and guarantee that the sum of 400l. and interest shall two or more be paid to you," at a time named, "in the proportion of 2001. persons. each," imposes only a several liability on each, to the extent of 2001. (u).

guarantee.

Mason v.

It frequently becomes a question of some nicety, whether a Continuing guarantee to the extent of a named sum, for the price of goods to be furnished to another, is to be considered a continuing guarantee, Pritchard. until the credit is recalled by notice; or is to be viewed as confined to one transaction, and consequently, as being satisfied by a supply of goods to the specified amount, and a payment made by the vendee for the same.

Thus, in Mason v. Pritchard (x), the Court held that an engagement "for any goods the plaintiff hath or may supply W. P. with, to the amount of 1001.," was a continuing guarantee; and was not therefore discharged by a supply of goods to the amount stated, and a payment for the same by W. P., which had been applied to a subsequent sale to him.

And the same construction has been put upon the following memoranda :

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In consideration of your supplying my nephew with china and earthen- Specimens ware, I guarantee the payment of any bills you may draw on him on account of continuing thereof, to the amount of 2007.” (y). guarantees.

"In consideration of your agreeing to supply goods to K. at two months' credit, I agree to guarantee his present or any future debt with you, to the amount of 607. Should he fail to pay at the expiration of the above credit, I bind myself to pay you within seven days from the date of receiving notice from you

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(z).

"In consideration of your extending the credit already given to A., and agreeing to draw upon him at three months from the 1st of the following month, for all goods purchased up to the 20th of the preceding month: I hereby guarantee the payment of any sum that shall be due and owing to you upon his account, for goods supplied" (a).

"I hereby agree to guarantee the payment of goods to be delivered in umbrellas to J. S., according to the custom of their trade with you, in 1007.” (b). If you will credit A. B., I engage that his payment shall be regularly made from this day, &c.” (c).

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CH. XVII. s. 4.

Extent of Surety's Liability.

Non

continuing guarantees.

Construction

guarantee.

"Whereas W. C. is indebted to you, and may have occasion to make further purchases from you; as an inducement to you to continue your dealings with him, I undertake to guarantee you in the sum of 1007. payable to you, on the default of the said W. C. for two months" (d).

"In consideration of the credit given by the H. company to my son, for coal supplied by them to him, I hereby hold myself responsible as a guarantee to them for the sum of 1007.; and in default of his payment of any accounts due, I bind myself by this note to pay to the H. company whatever may be owing, to an amount not exceeding the sum of 1007.” (e).

“50l. I, J. M. of B., in the county of N., will be answerable for 501. sterling, that W. Y. of S., butcher, may buy of Mr. I. K. of D.” (ƒ).

But in Melville v. Hayden (g) it was held that a guarantee "of the payment of A. B., to the extent of 50l. at quarterly account, bill two months, for goods to be purchased by him of the plaintiff," was not a continuing guarantee to that extent, for goods to be at any time supplied to A. B., until the credit was recalled. And the following memoranda :-"I hereby agree to be answerable to K. for the amount of five sacks of flour, to be delivered to W. T., payable in one month" (h); and, "I hereby agree to be answerable for the payment of 50l. for T. L., in case he does not pay for the gin, &c. he receives from you, and I will pay the amount" (i)-have been held not to be continuing guarantees.

There is considerable difficulty in reconciling all the cases on of ambiguous this subject, a difficulty arising chiefly from their not being at one as to the principle of decision: some laying it down, that the guarantee should be construed liberally in favour of the person giving it; and others that it ought to be construed strictly (k). But where the guarantee is ambiguous, the proper course is to look at the surrounding circumstances, in order to see what was the subject-matter which the parties had in contemplation at the time the guarantee was given; not for the purpose of altering the terms of the guarantee by words of mouth passing at the time, but as part of the conduct of the parties, and to determine what was the scope and object of the guarantee (). And a recital may restrain the generality of the engagement, and explain whether it has reference to past or future transactions, or to

Recitals.

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(e) Wood v. Priestner (1867), L. R., 2 Ex. 66, 282, Ex. Ch. ; and see Coles v. Pack (1869), L. R., 5 C. P. 65, where the Court intimated their opinion that Semple v. Pink (1847), 1 Exch. 74, was overruled by Oldershaw v. King (1857), 1 H. & N. 517, Ex. Ch.

(f) Heffield v. Meadows (1869), L. R., 4 C. P. 595.

(g) Melville v. Hayden (1820), 3 B. & Al.

593; but see Hargreave v. Smee (1829), 6 Bing. 244.

48.

(h) Kay v. Groves (1829), 6 Bing. 276. (i) Nicholson v. Paget (1832), 1 C. & M.

(k) See per Alderson, B., Mayer v. Isaac (1840), 6 M. & W. 605.

(2) Per Willes, J., Heffield v. Meadows (1869), L. R., 4 C. P. 595, and see Leathley v. Spyer (1870), L. R., 5 C. P. 595; Nottingham Hide Co. v. Bottrill (1873), L. R., 8 C. P. 694.

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