the

paper with notice or even with full knowledge, if he took it for value, before maturity.1

The reason is not far to seek. Where the undertaking is for accommodation, the party makes an offer by way of gift, with full understanding, of his credit, intending to respond to any one who acts upon the offer; where the undertaking is supposed by the party making it to be for value when it is not, or when the value fails, he has acted in mistake, never intending to bind himself with consideration wanting.

In the doctrines relating to suretyship and consideration are found the characteristic features of accommodation contracts. The object of the present chapter is only to call attention to and explain the general features of such contracts, as one of the forms of contract of the law merchant, to show that there are such contracts, and what in general they are. The details concerning them will be dealt with more conveniently, as details of the same nature arise in connection with the other contracts of our subject. Thus, dealings with the principal debtor in their effect upon subsequent parties, the extent of the liability of accommodation parties, and other matters of detail will be considered in later chapters.

1 N. I. L. § 36; Maffat v. Greene, 149 Mo. 48. See Merchants' Bank v. Cummings, 149 N. Y. 360. If the accommodation instrument was taken from the accommodated party, after maturity, the case will of course be different. Peale v. Addicks, 174 Penn. St. 549; Chester v. Dorr, 41 N. Y. 279; Kellogg v. Barton, 12 Allen, 527.

CHAPTER XIV.

ASSURER'S CONTRACT.

§ 1. ANNEXING CONTRACTS OF THE COMMON LAW: GUARANTY AND SURETYSHIP.

THUS far we have had under consideration contracts of the law merchant, with but occasional reference to contracts of the Subject for common law annexed to or connected with them. consideration. The first-named contracts having been severally explained, with reference to their peculiarities, nothing further would remain but a consideration of features common to them all, were it not that it often happens, as has already been intimated in these pages, that some contract of the common law, in the way of further assuring performance of the contract of the law merchant, has been added. The effect of adding such a contract, not upon the contract assured, for that remains unaffected, but upon the common law contract itself, is now, or will from time to time become, a matter of importance. But in order to understand how far the assuring contract has been affected by its connection with a contract of the law merchant, we must first ascertain the very nature of the assuring contract itself, that is, its natural ordinary character, uninfluenced by such connection.

Two terms are used to signify further assurance, namely, guaranty and suretyship; to which should be added the executed Guaranty and assurance of mortgage. Guaranty and suretyship suretyship. are terms often loosely employed, the one for the other, and each made to express a certain broader meaning than, strictly taken, it should bear. That is especially true of the use of the term surety or suretyship. But there are situations of fact which are followed by very different rules of law, and

these coincide with the meaning of the two terms in their narrower and more specific sense; at all events, it will serve a purpose of convenience, and at the same time prevent confusion, if we use the two terms in the more specific sense conforming to the situations of fact referred to.1

Accordingly, we may, in the first place, unite the terms guaranty and suretyship under the general designation of contracts of assurance, by which will then be meant any subsidiary contract intended to secure the performance of the contract or contracts assured. Then we may separate the contract of assurance into two parts; first, supposing the assurance to be made as a separate and distinct collateral engagement, to which the name guaranty may be and commonly is given, guaranty, that is, in the specific sense; secondly, supposing the assurance to be part and parcel of the contract assured, being an engagement then to which the name suretyship may be and commonly is given, suretyship, that is, again in the specific sense. We shall find important legal consequences flowing from that division. But both guaranty and suretyship are undertakings to answer for the debt or default of another' within the meaning of the Statute of Frauds, and must accordingly be in writing and signed by the party to be bound or by his lawful agent. The nature and incidents of the contracts will appear in the two following sections.

Proceeding to the subject of guaranty in the specific sense of a separate contract, it is obvious that the assuring contract may be made either at the same time with the contract Time of guaror contracts assured, or afterwards, or, indeed, anty. before the principal contract was made; but cases of that kind are infrequent, and would raise no peculiar legal questions. The time of the guaranty raises certain questions in regard to consideration. It should be observed that both the guaranty and the contract assured must be supported by a valuable considera

1 On the difference see Saint v. Wheeler Co., 36 Am. St. Rep 210 and note.

tion. If the contract assured is wanting in that respect, the guaranty must fall to the ground, though itself founded upon a valuable consideration; and on the other hand, though the contract assured is well supported in that respect, if the guaranty is not well supported also, it must fail. The connection of the guaranty with a contract of the law merchant in no way affects the case.

Contemporaneous guaranty: consideration.

Where, however, the guaranty is made at the same time, that is, in the same general negotiations and substantially at the same time with the principal contract of the law merchant, it is not necessary that it should be supported by any separate consideration from that of the principal engagement.1 Both contracts being made at the same time, it matters not that the consideration more immediately and fully belongs to the principal one; the guaranty, though separate in form, in terms, and in effect, makes part of a general consideration; in other words, in common language of the books, the consideration which supports the principal contract supports the guaranty.

At this point it is necessary to guard against a possible mistake. Does the guaranty, in the entire absence of evidence of consideration, now draw from the contract of the law merchant, which it assures, any of its properties? In a suit upon the contract assured, the law merchant, as we have seen, raises a presumption of consideration to support the instrument when produced at the trial; does this presumption flow over to the guaranty? The answer is not clear; but on the theory that the law should be founded on custom, it may perhaps be in the negative, for there is no custom touching the point. According to this view the guaranty has gained nothing from its connection with the more favored contract, and all consideration to support the guaranty should then be proved as in other cases of contracts of the common law, supposing that it is not under seal. But it more generally happens that the principal contract, for instance a promissory note, recites a consideration for that contract, as by the words For value received'; in which case it

1 Osborne v. Gullikson, 64 Minn. 218.

seems that the same evidence may be passed on to support the guaranty.1

Let it next be supposed that the guaranty is made at some other time, after the making of the principal contract. Now it follows from the very requirement of a considera- Subsequent tion to support the guaranty, that there must be a guaranty. separate consideration to support the assuring engagement; that the consideration which supports the principal contract will not support the guaranty. There are one or two apparent exceptions; first, where the guaranty was agreed upon at the time of making the principal contract, and it was merely committed to writing afterwards, nunc pro tunc; and secondly, where the consideration is a continuous thing, running along at the time both of the principal contract and of the guaranty, as in the case of the guaranty of fidelity of a clerk for a year.1

Another question now arises touching consideration, to wit, whether the interpretation to be put upon the Statute of Frauds in regard to the necessity of a statement of consid- Statute of eration in the guaranty is affected by the fact that Frauds. the contract assured is a contract of the law merchant, by which there is a presumption of consideration. The answer is probably in the negative. If, according to the interpretation put upon the Statute of Frauds in a particular State, or according to special legislation, it is necessary in other cases that the guaranty itself should recite or refer to a consideration, it is equally necessary in the case of a guaranty of a bill, note, or cheque; unless the instrument assured contains a recital of consideration and is contemporaneous within the guaranty."

1 Bickford v. Gibbs, 8 Cush. 154. Perhaps on the whole this, rather than custom, is the true view, and covers the whole case. For whatever proves even but presumptively, a consideration to support the principal contract proves enough for the guaranty.

2 Tenney v. Prince, 4 Pick. 385; Green v. Shepherd, 5 Allen, 589, 591; Moses v. Lawrence Bank, 149 U. S. 298; Cases, 221.

8 Hawkes v. Phillips, 7 Gray, 284.

See Tenney v. Prince, supra; Moies v. Bird, 11 Mass. 436; Leonard &

Wildes, 36 Maine, 265.

5 Moses v. Lawrence Bank, 149 U. S. 298; Cases, 221.