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for whom he has given it. It amounts, therefore, in effect, to a guarantee Sec. 56. that the party, for whom it is given, shall perform all the obligations which the bill or note itself imports on his part ; and in France the name of the guarantor is usually preceded by the words, pour Aval. The law of Quebec alone has recognized this contract of guarantee in connection with bills and notes; and some of the cases there decided, are cited below as illustrations. The contract pour Aval, has not hitherto been recognized by the English law-merchant; but in struggling to give some effect to the signatures of sureties---usually on the back of the bill or note,-decisions of the Courts have not been harmonious. In some cases it has been held that the locality of the maker's signature on a note is not material ; and a person putting his signature on the back of a note, intending thereby to become a surety for the maker, has been held to be a joint maker. In other cases the locality of the signature of such surety has been held to be material; and a signature on the back of the note prior to that of the indorser, has been declared to create no liability, because the party so signing, neither acquired nor transfered a title in the negotiation of the bill; and because, if such a signature was intended for a guarantee, the Statute of Frauds required the terms of the contract of guarantee to be in writing. This new section of the Act, in order to be intelligible, must apparently be read as enlarging the effect of s. 23 ; and if so, of doing away with the application of the technical rules of the law-merchant and of the Statute of Frauds, as to a contract of guarantee on a bill or a note. The section has been commented upon in somewhat similar terms in Chalmers on Bills, p. 177 : “ An indorsement, properly so called, must be made by the holder ; but when a person who is not the holder of a bill or note, backs it with his signature, he is not an indorser, but a quasi indorser. The law annexes to his act, consequences similar to those which follow the indorsement of a bill by a holder. Formerly, when a stranger to the bill backed it with his signature, a pleading difficulty arose as to whether he was to be described as an indorser, or as a new drawer. The difficulty was, it is submitted, simply technical, for the consequences are identical. Now it would be sufficient to state the facts, or describe him as an indorser.” The latter words of this section “and is subject to all the provisions of this Act respecting indorsers” are not in the English Act, and may be intended to assure to the persons signing as here described, the rights, as well as the protection, secured to indorsers under the Act.
ILLUSTRATIONS. A note payable to the order of A. was indorsed first by L. and Q., and then underneath their names by A. ;--Held, that L. and Q, indorsed as Avals, and as security for the maker: Latour v. Gauthier, 2 L. C. L. J. 109.
A note was drawn by A. in favour of B. or bearer, and was indorsed by C. in blank ;-Held, to be an indorsement pour Aval, and that C., the donneur pour Aval, could not set up want of notice of protest, or any other defence than might have been pleaded by the maker : Merritt v. Lynch, 9 L. C. R. 353.
Persons who have placed their signatures on the back of a cheque or promissory note, pour Aval, are not indorsers, but makers of Aval, and are not entitled to any other notice than the maker, and are liable with him jointly and severally. An engagement pour Avul is a mixed question of law and fact : Pratt v. McDougall, 12 L. C. J. 243.
An indorser of a note not negotiable, or, if negotiable, not endorsed by the payee, cannot be sued as indorser : West v. Bown, 3 U. C. Q. B. 290.
Measure of damages on
57. Where a bill is dishonored, the measure of damages di-honored which shall be deemed to be liquidated damages, shall be
Imp. Act, s.57
Ind Act,s.117 as follows:
(a) The holder may recover from any party liable on the bill, the drawer who has been compelled to pay the bill may recover from the acceptor, and an indorser who has been compelled to pay the bill may recover from the acceptor or from the drawer, or from a prior indorser
(1) The amount of the bill;
(2) Interest thereon from the time of presentment for payment, if the bill is payable on demand, and from the maturity of the bill in any other case ; 1
(3) The expenses of noting and protest;
(b) In the case of a bill which has been dishonored abroad, in addition to the above damages, the holder may recover from the drawer or any indorser, and the drawer or an indorser who has been compelled to pay the bill may recover from any party liable to him, the amount of the re-exchange with interest thereon until the time of payment. 3
1 The clause in the English Act provides that the interest, as damages, may be withheld wholly or in part; evidently to meet the contingency of a valid tender by the debtor, before action, of the amount due on the bill. But this protection has not been conceded to similar parties here. By R. S. 0. 1887, c. 44, s. 86, interest is payable upon a debt or sum certain, and payable by virtue of a written instrument at a certain time, or in other cases from the time a demand of payment in writing stating that interest would be claimed. See further as to interest as part of the debt, s. 9, sub-s. 3. See further as to damages note 3 to s. 93.
ILLUSTRATIONS. Interest made payable by a note is part of the debt, and not damages for detaining it: Crouse v. Park, 3 U. Č. Q. B. 458 ; s. p., Howland v. Jennings, 11 U. C. C. P. 272.
Though interest does not usually run until demand is made upon a note, yet where payments have been made on account, a demand may be presumed, and interest on the balance will then accrue : Hurd v. Palmer, 21 U. C. Q. B. 49.
Interest in the nature of damages may be allowed on a note at the statutory rate, from the maturity to the entry of judgment : Montgomery v. Boucher, 14 U. C. C. P. 45.
Interest at the rate allowed by our law is chargeable upon a note dated and made payable in the United States: Griffin v. Judson, 12 U.C.C.P. 430.
Interest is in practice more generally allowed by the juries in this country than English authorities would seem to warrant : Spence v. Hector, 24 U. C. Q. B. 277.
Interest cannot be claimed on a bill or note, except by express agreement, but interest may be given by a jury as part of the damages, but not as part of the debt: Ex parte Charman, W. N. (1887) 184.
Nothing but what arises from a contract, agreement, or demand of a debt, can give rise to claim of interest : Boddam v. Riley, 1 Bro. C. C. 238.
A promissory note was dishonored at maturity, but was not protested by the holders (a bank) because of a waiver by the indorsers of presentment and notice ;-Held, that as there was no protest the in:lorsers were not liable to pay interest thereon as a debt. A habit of banks to charge interest on overdue debts, and to collect it if possible, does not establish a custom. The indorsers would be liable to pay interesi as damages for breach of their contract, but such interest could not be recovered in insolvency proceedings : Re McDougall, 12 App. R. 265.
Below the signatures to a note was written “when due, draw fifteen per cent ;"—Held, that the memorandum was no part of the note : Knowles v. Hill, 25 Ill. 288.
2 The English Act leaves it optional to allow the expenses of protest, in cases where protest is necessary. This clause re-enacts part of the former law, (R. S. C.c. 123, s. 6), which provided that the damages to be recovered on a bill drawn in Canada or Newfoundland, should be the amount of the bill, the expense of noting and protest, and interest thereon, and exchange and re-exchange thereon. But it omits the allowance as to bills payable elsewhere, of an additional sum of two and one-half per cent. as damages.
3 The rule in regard to exchange is that when the note is made payable abroad, the rate of exchange is governed by the rate prevailing between the forum in which the action is brought, and the place where the money is to be transmitted ; and at the time the note is dishonored : White v. Baker, 15 U. C. C. P. 292, s. p. Stevens v. Berry, Ibid. 548.
ILLUSTRATIONS. In an action on a sterling bill, drawn by the plaintiffs in London upon the defendant living in Canada, accepted here payable in London, and returned to England ;-Held, that no damages could be recovered, as the
Sec. 57. bill could not be said to have been negotiated in Canada, hut only the
value of the bill at the pound sterling : Foster v. Bowes, 2 U. C. P. R. 256.
A note drawn in Canada and payable generally at Glasgow, Scotland, does not give the holder a right to exchange : Wilson v. Äitken, 5 U. c. C. P. 376.
Damages which may be claimed on non-payment of a bill, cannot be claimed for its non-acceptance. Bank of Montreal v. Harrison, 4 U. C. P. R. 331.
The liability for damages on a foreign bill, dishonored abroad, is to be measured according to the law of the country where the broken contract was entered into. And the only damages recoverable are the amount of the re-exchange and interest thereon, but not interest on the amount of the bill : Re Commercial Bank of South Australia, 36 Ch. D. 522.
When four bills are payable here (England) the drawer is entitled to recover damages by way of re-exchange, which, by the law of the country, where the hills are drawn, the drawer is liable to pay to the holder of the bills : Re Gillespie, 18 Q. B. D. 286.
A custom as to allowing a fixed per-centage by way of liquidated damages in lieu of exchange, re-exchange, and other charges, when bills are returned from the colonies dishonored, however valid in law, does not apply in the absence of an agreement, express or implied, to allow re-exchange : Willans v. Ayers, 3 App. Cas. 133.
Re-exchange is the measure of the damages incurred by the holder of a bill by its dishonor, through his having to obtain funds in the country where the bill was payable. Ibid.
The foreign drawer of a bill accepted in England is entitled, upon the bill being dishonored and protested, to recover from the acceptor the amount of the bill with interest, and all such notarial and telegraphic charges as have been caused by the dishonor, including the re-exchange : Re General South American Company, 7 Ch. D. 637.
Transferer by delivery. Imp. Act,s.58 Ind. Act, ss. 14 & 47.
Warrants, validity of bill.
58. Where the holder of a bill payable to bearer negotiates it by delivery without indorsing it, he is called a “transferrer by delivery :"
2. A transferrer by delivery is not liable on the instrument: 1
3. A transferrer by delivery who negotiates a bill thereby warrants to his immediate transferee, being a holder for value, that the bill is what it purports to be, that he has a right to transfer it, and that at the time of transfer he is not aware of
fact which renders it valueless. 2 1 This, in legal language generally, is spoken of as a sale of a bill ; and the transferor is for this purpose an ordinary vendor. The sending to market of a bill or note without indorsing it, is prima facie a sale of the
bill. Such a transfer of a bill or note payable to bearer, does not render Sec. 58. the transferor liable on the instrument to the transferee. But where such bill or note is payable to order, and is transferred to a holder for value, without indorsement, the new holder acquires the rights of his transferor, and may be subject to equities between such transferor and the other parties to the bill or note. See s. 31, sub-s. 4. The transaction here referred to may be illustrated by the case of a party cashing a cheque, or a bank note of large amount, for other bank notes; and the warranty in either case is similar, in many respects, to that defined in the next clause. Where the transferee discovers that the bill or note does not comply with the terms of the warranty, he must repudiate the transaction with reasonable diligence. See further note 1 to s. 31.
2 The warranty is three-fold :-(1) That “the bill is what it purports to be," or as s. 29 more accurately describes it, is “complete and regular on the face of it,” which is a warranty of the genuineness of the security. (2) That the transferor “has a right to transfer it.” And (3) that “he is not aware of any fact which renders it valueless.” Or in other words, that it is a valid security for its face value, and that the transferor has a good title to it; and that he is not aware of any fact affecting its true value. This last warranty may be equivalent to a guarantee that none of the parties to the bill or note are insolvent, or are persons not having a capacity to contract, or who are not liable for other causes. These points when the occasion arises, may have to be more fully considered. The rule of law, prior to this Act, has been thus stated : “ It is conceived to be the general rule of the English law, and a fair result of the English authorities, that the transferor is not even liable on the consideration if the bill or note, so transferred by delivery, without indorsement, turn out to be of no value, by reason of the failure of the other parties to it. And there is no implied guarantee of the solvency of the maker or any other party:” Byles on Bills, 122.
A vendor of a bill, though not a party to the bill, is responsible for the genuineness of the instrument; and if the name of one of the parties is a forgery, and the bill becomes valueless, the vendee is entitled to recover the price : Gurney v. Womersley, 4 E. & B. 139 ; 1 Jur. N. S. 328.
Where A the holder of a note not then due, traded it with B for a colt, A warranting that the note was “as good as gold,” and it turned out to be valueless ;-Held, that B was entitled to recover from A the amount of the note : Miller v. Dandelin, 24 L. C. J. 208.
Discharge of Bill. 59. A bill is discharged by payment in due course by Discharge by or on behalf of the drawee or acceptor: 1
Imp.Act.s.59 10, 78 & 82.
Ind. Act, ss