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have reasonable notice. Babcock v. Bryant, 12 Pick. 135; Allen v. Pike, 3 Cush. 238.
Certainly where a letter of credit is of a general character, addressed to no particular individual, but "to all whom it may concern," and without limitation in amount or time of continuance, such a letter being in its form rather a proposition than a contract, the law requires in such a case that due notice be given to the party that the proposed guaranty has been acted upon and made the basis of credit to the person for whose accommodation it was drawn. Mussey v. Rayner, 22 Pick. 229.
And where the letter is addressed to a particular person or firm for a future credit, to be given to the party in whose favour the guaranty is drawn, the supreme court of the United States has decided that notice is necessary to be given to the guarantor that the guaranty is accepted or acted on, and credit given on the faith of it. Edmondson v. Drake &c. 5 Peters 624; Douglass &c. v. Reynolds &c. 7 Id. 125; Lee v. Dick, 10 Id. 495, 6; Adams &c. v. Jones, 12 Id. 207; Reynolds &c. v. Douglass &c. Id. 497; Wildes &c. v. Savage, 1 Story's Rep. 32. This doctrine has been recognized and acted on in Ohio. Taylor &c. v. Wetmore &c. 10 Ohio 490. "It may," Mr. Justice Story thinks, "be most material, not only as to the guarantor's responsibility but as to future rights and proceedings. It may regulate, in a great measure, his course of conduct and his exercise of vigilance in regard to the party in whose service the guaranty is given. Especially is it important in the case of a continuing guaranty, since it may guide his judgment in recalling or suspending it." 7 Peters 125.
In New York, Cowen, J. has expressed the opinion (24 Wend. 50) that the American cases, which hold that under a contract, guaranteeing a debt yet to be made, the guarantor is not liable to a suit without notice that the guaranty has been accepted and acted upon, have no foundation in English jurisprudence. It is admitted in New York, that a declaration made to another of a willingness to become a guarantor, if required, would not render the declarant liable as a guarantor without compliance with the express condition which means giving notice, Stafford v. Low, 16 Johns. 67; that in such cases there must be notice or a subsequent consent to become a guaranty, Beekman v. Hall, 17 Id. 134; but it is considered that these cases-cases of express condition, like Berks v. Tippett, 1 Saund. 32, and other cases in Saund. 33, note, and Com. Dig. Plead. C. 69, 70,-are exceptions to the general rule, that where one guaranties the act of another, his lia
bility is commensurate with that of his principal, and he is no more entitled to notice of the default than the latter, Somersall v. Barneby, Cro. Jac. 287; Brookbank v. Taylor, Id. 685; Atkinson v. Rolfe, 1 Leon. 105; Pitman v. Biddlecombe, 4 Mod. 230; Smith v. Goff, 11 Id. 48, 2 Salk. 457; Harris v. Ferrand, Hardr. 36, 42; 1 Chit. Pl. 286. "The guarantor," Cowen, J. observes, "by enquiry of his principal, with whom he is presumed to be on intimate terms, may inform himself perfectly whether the guaranty were accepted, the conditions fulfilled and payment made." Douglass v. Howland, 24 Wend. 52.
If the defendant said to the plaintiffs in substance, "If you deliver the goods, I will guaranty the payment," the courts of New York will not add a condition that he shall have notice. Smith &c. v. Dann, 6 Hill 543. But if in his proposal he has provided for notice to himself, then it must be given. Fellows &c. v. Prentiss, 3 Denio 512.
Whether or no a guarantor would otherwise be entitled to notice of the acceptance of his guaranty, he may, by the terms of his letter of credit, waive all right to such notice, and make his accountability depend on other conditions. If it be on condition that there be default in paying the price at the time stipulated in the contract, and notice to him of such default, the latter notice is sufficient; and the guarantor is not discharged by the purchaser's having given a bond for the price. Wadsworth &c. v. Allen &c. 8 Grat. 174.
7. Within what time notice must be given of the acceptance of guaranty; and of the amount for which guarantor is held responsible.
In a case in Massachusetts, where there was a mere offer to guaranty a debt or debts which might or might not be afterwards created, it was argued that although the defendant as guarantor was entitled to reasonable notice that the plaintiff had accepted his guaranty and had trusted the third person on the faith of it, yet that notice, within thirty days after the debt became payable, was a reasonable notice. This was three years after the offer of guaranty, and after the plaintiff had first given credit on the faith of it. The supreme court of Massachusetts adjudged that this was not reasonable notice. Allen v. Pike, 3 Cush. 238.
Suppose there be notice that the guaranty is accepted, but no notice of the advance to the third person, and no notice of the non-payment by him until the amount is demanded of the guarantor, the question may then be, how far the failure to
give such notice will affect the liability of the guarantor; whether it will not operate to discharge him unless the demand, by being within a reasonable time, be such notice. White v. Woodward, 5 Man. Grang. & Scott 814, 57 Eng. Com. Law Rep. 814.
According to Mr. Justice Story, all that is generally required of the person making the advances or giving the credit, after having given due notice of his acceptance and intention to act upon the guaranty, is to make a demand upon the debtor when the credit has expired or the amount has become due, and upon his default to give notice thereof within a reasonable time. afterwards to the guarantor. Wildes &c. v. Savage, 1 Story's Rep. 32, 3. This is the general rule; departed from in particular cases which stand upon peculiar circumstances.
Thus in one case, where advances not exceeding $50,000 were contemplated upon certain future contingencies which might or might not arise, it appeared that the plaintiffs, as soon as practicable after receiving the letter of guaranty, did inform the defendants of their readiness to make such advances; so that the question was narrowed to this, whether notice was necessary of the fact that the contingencies had arisen, and the advances been made, and of the amount of such advances. Mr. Justice Story considered that in such a case it was the duty of the plaintiffs, within a reasonable time after the advances were actually made, to give notice thereof to the defendants, and that reliance was placed upon their guaranty to ensure the repayment. And notice not being given in what he deemed a reasonable time, nor until a material change in the circumstances of the debtors, the laches of the plaintiffs, it was held, discharged the defendants from all liability for the advances actually made. Cremer v. Higginson &c. 1 Mason 340.
In a case before the supreme court of the United States, it was insisted that to entitle the plaintiffs to recover, they must prove that in a reasonable time after they had made advances on the faith of the guaranty, they gave notice to the defendants of the amount and extent thereof. Mr. Justice Story in delivering the opinion of the court said, that this being a case of a continuing guaranty, in which the parties contemplated a series of transactions, and inasmuch as the defendants so soon as they received notice of the acceptance must necessarily have understood that there would be successive advances either in cash or by acceptances or endorsements, which would be renewed and discharged from time to time, the court did not perceive any ground of principle or policy upon which to rest the doctrine that notice of each successive transaction, as it arose, should be given. If when all the transactions under
the guaranty were closed, notice of the amount for which the guarantors were held responsible was, in a reasonable time afterwards, communicated to them, this, it seemed to the court, was a sufficient notice of the advances. Douglass &c. v. Reynolds &c. 7 Peters 126. It is not to be understood that in such a case the notice to charge the guarantor must be as strict as in the case of a drawer or endorser of a bill of exchange. Reasonable notice is all that is essential. Louisville Man.
Co. v. Welch, 10 How. 474.
8. Necessary there should be demand on principal and on his refusal notice to guarantor. Consequence of not giving it.
In the case of Douglass v. Reynolds, the court was of opinion that a demand of payment should have been made of the principal debtor, and in case of non-payment by him that notice of such demand and non-payment should have been given in a reasonable time to the guarantors. With this accords a Massachusetts case where the guarantor having within a few days after the credit to the principal expired, received notice of his non-payment, this was considered within a reasonable time, and held sufficient. Dole v. Young, 24 Pick. 250.
In case of failure to make such demand and give notice of non-payment, the guarantor will be discharged to the extent of the damage which he may have sustained thereby but no farther. Consequently if at the time the debt for which the guaranty was given, became payable, the party for whom he became guarantor was insolvent, the liability of such guarantor will remain in full force. Reynolds &c. v. Douglass &c. 12 Peters 503; Wildes &c. v. Savage, 1 Story 35, 6. And whatever benefit might in any case result to the guarantor from the failure to give him notice of non-payment, that benefit may be waived by his acknowledgment of the debt and promise to pay it. Reynolds &c. v. Douglass &c. 12 Peters 505; Louisville Man. Co. v. Welch, 10 How. 476.
9. Where default in paying negotiable paper, rule as to notice to a person who is not a party to it.
Where there is default in paying a bill of exchange or negotiable note, and a person, though not a party to the bill has yet before it became payable, become a guarantor of its payment, there has been some question as to the necessity of notice to him of the dishonour. It is certainly not necessary to pursue the same strictness in order to charge the guarantor as
to charge the drawer or endorser.
ber &c. 8 East 242.
Warrington &c. v. Far
At one time it was said, that if the necessary steps were not taken to obtain payment from the parties liable on the bill, the guarantor would be discharged; and it seemed to be thought, that notice of non-payment should be given him, to guard against his paying in his own wrong when they were discharged. Philips v. Astling &c. 2 Taunt. 206.
That there has been a failure to present a bill to the acceptor and give notice of dishonour to the guarantor is clearly no valid objection on his part, unless he has sustained some damage by the laches. Hitchcock &c. v. Humfrey, 5 Man. & Grang. 560, 44 Eng. Com. Law Rep. 560. The presumption must be that he has sustained none, if the parties for whom he was guarantor were insolvent when the bill or note became payable. Holbrow &c. v. Wilkins, 1 Barn. & Cress. 10; Van Wart v. Woolley &c. 3 Id. 439; 8 Eng. Com. Law Rep. 8; 10 Id. 145; Gibbs v. Cannon, 9 S. & R. 203; Leech v. Hill, 4 Watts 448; Taylor v. McCune, 1 Jones 464; Reynolds v. Douglass &c. 12 Peters 497; Rhett v. Poe, 2 How. 485.
In New York if a party guaranties the payment of a note, his undertaking is not deemed conditional like an endorser; but absolute that the maker shall pay the note when due, or that the guarantor will himself pay it; and proof of demand and notice of non-payment is not necessary. Allen v. Rightmere, 20 Johns. 365; 24 Wend. 35; 1 Hill 260.
And in England it is now established, that where one guaranties and undertakes to pay the amount of a note, provided it be not duly honoured and paid by the maker at maturity, he-not being a party to the note-is not entitled to notice of dishonour. Walton v. Mascall, 13 M. & W. 72.
In Massachusetts, if the circumstances of the parties remain the same, and the guarantor suffers no loss by delay, demand and notice at any time before action brought will be sufficient. Babcock v. Bryant, 12 Pick. 133. But if the circumstances of a drawer or endorser do not remain the same-if he was solvent when the paper arrived at maturity and became insolvent afterwards, the effect of a failure to make demand and give notice, may be very different from what it was in the other case. Oxford Bank v. Haynes, 8 Pick. 423; Talbot v. Gay, 18 Id. 534; Dole v. Young, 24 Id. 250; Sigourney &c. v. Wetherell &c. 6 Metcalf 562. So it is likewise in Ohio. Greene v. Dodge &c. 2 Hammond 431.
But demand and notice may be waived. Bickford v. Gibbs &c. 8 Cush. 154. It is considered in Massachusetts, that in the case of an ordinary endorser who has had no legal notice,