Suretyship and Guaranty.

Suretyship is an undertaking to answer for the debt, default, or miscarriage of another, by which the surety becomes bound in the place of the principal debtor. It renders the surety liable in the same manner as the principal.

Guaranty is an undertaking that the principal debtor shall pay; suretyship that the debt shall be paid. It is limited to mercantile transactions or to paper not under seal while suretyship applies to all undertakings.

A Surety has a right to stand upon the very terms of his contract, and any alteration therein made without his consent is fatal to his obligation, even though it may be to his advantage. He can recover of his principal whatever damage he may have sustained and has the right to be subrogated to the position of the creditor whose demand he pays.

Where there are two or more sureties for the same principal and for the same obligation, they are co-sureties Where one pays more than his just share he is entitled to contribution from his co-surety.

The Liability of a Surety is fixed by the terms of the instrument which he signs and cannot be enlarged or varied from the undertaking therein contained. Under the circumstances pointed out in his obligation the surety is bound, but no further, and in case of doubt the doubt must be resolved in his favor.

Whatever discharges the principal discharges the surety.

Surety Will Be Discharged where the original agreement is changed without his consent. Hence an agreement by the payee of a note with the principal, to extend the time of payment. if made without the assent of the surety, will release him from further liability.

But mere delay on the part of a creditor to proceed against the principal does not impair the obligation of the surety.

Commercial Paper.

Commercial or Negotiable Paper is the name usually applied to those evidences of debt or ownership of property which are in common use in the mercantile and commercial transactions of the world, and which pass from hand to hand by indorsement. This is strictly negotiable paper, but the wider term, "commercial" paper, is in common use to denote almost everything relating to the written transactions or dealings of merchants.

Bills of Exchange are the highest class of commercial paper known to the law. Their essential qualities are, that they shall be payable at all events, not dependent on any contingency, nor payable out of any particular fund; that they be for the payment of money only and not for the performance of any other act, or in the alternative. They are always presumed to be drawn on funds and with the understanding between the drawer and drawee that they constitute an appropriation of the funds of the former in the hands of the latter.

Promissory Notes, to be negotiable, must be for a sum certain and payable, without condition, at some future time to some person therein named, or his order, or to bearer. In the original form they differ greatly from a bill of exchange yet when indorsed and put into circulation are exactly similar to one and are governed by substantially the sames rules. When payable to order or bearer they pass by indorsement and the holder may sue thereon in his own name. No particular form is necessary, provided the promise is unequivocally made, the sum certain and the time of payment unconditional. It is customary to say that the promise is for value received," but these words, while usual and proper, are not necessary to the validity of the undertaking.

Due Bills, under the statute, are placed in the same class as promissory notes, and are assignable in the same manner.

Bills of Lading, though usually classed as commercial paper are not negotiable nor do they possess the characteristics of bills of exchange or other instruments of like nature. A bill of lading does not represent money, but property; it is only negotiable in the sense that its true owner may transfer it by indorsement or assignment so as to vest the legal title in the indorsee. Even when made negotiable by statute they do not stand on the same footing as bills of exchange, but the effect of the statute is merely to make the transfer and delivery of the bill, as a symbol of property, equivalent to an actual transfer and delivery of the property itself.

They may be pledged as collateral security for a debt and the pledgee will acquire a lien upon the property so long as he retains possession of the bill.

When attached to drafts the transaction ordinarily implies a sale on credit and that the bill is retained to secure the acceptance or payment of the draft.

Warehouse Receipts are governed by substantially the same rules as bills of lading. A delivery of a warehouse receipt has the same effect in transferring the title to property as the delivery of the property itself.

Signatures to commercial paper should be the parties' full and proper names or those by which they are known and identified in society. It is not material, however, in what manner the signature is appended. whether in script or roman letters or made with a pen or with type, so long as it is adopted and used as a signature and recognized as such.

Firms and corporations should sign by their official name by any of their proper officers and generally when individuals assume obligations over their own signatures, notwithstanding they may add descriptive words denoting some official trust or dignity, they will yet be held personally liable.

Accommodation Paper is either a negotiable or nonnegotiable bill or note made by one who puts his name thereto without consideration, with the intention of lending credit to the party accommodated. As between the immediate parties the instrument is void and uncollectable, but the beneficiary may transfer it, either in payment of his debts or as collateral

security, and when so assigned in the regular course of business for a valuable consideration it will not be distinguishable in legal effect from any other class of commercial paper.

One who lends his name to serve his friend. that he may obtain money on it, should not complain, when the purpose is answered, if the law considers him precisely in the character he has assumed.

Presentment of a draft or bill must be made within a reasonable time, and in case of non-payment notice must be promptly given to the drawer in order to charge him. When the hill is payable at sight there is no fixed period in which it must be presented and may be considered as matured when presented for payment.

Presentment should be made during the business hours of the day, to the party upon whom it is drawn and at his place of business. if he has such. This rule is not imperative, however, and except where the money is due from a bank the hours for presenting a note or bill may properly range from early morning, through the whole day, down to bed time in the evening.

The Holder of a bill or draft is not bound, as between himself and the drawer, to present it for payment at maturity. If he delays, the only risk he incurs is that of the intervening insolvency of the drawer. But in order to hold an indorser he must exercise diligence in presentment and demand.

The Acceptor of a bill of exchange, by the act of acceptance, admits the execution of the bill by the drawer and that it is drawn upon funds of the drawer in his hands.

With respect to liability, the acceptor of a bill and the maker of a note stand as principals; the indorsers only as sureties.

It is usual to indicate the fact of acceptance in writing upon the face of the bill. but a verbal acceptance, unless provided otherwise by statute, if established by proof, is as binding and conclusive as though in writing. By statutory regulation, however, in many states, no person can be charged as an acceptor unless his acceptance shall be in writing, signed by himself or his lawful agent, and if written on a paper, other than the bill itself, will not bind the acceptor except in favor of the person to

whom such acceptance shall have been shown and who, on the faith thereof, shall have received the bill for a valuable consideration.

The law makes it the duty of the acceptor or drawee to know the signature of the drawer, and the holder is not bound to furnish proof of its genuineness. So, too, if a bill is payable to the order of the payee the acceptor or drawee is bound to ascertain that the person presenting it is the one entitled to payment; if he be deceived and make payment to one not entitled to receive it, the real owner of the bill may recover its amount again from the drawee.

The holder of a bill presenting same for acceptance may insist that such acceptance be written upon the bill itself, and a refusal to comply upon request made will be regarded as a dishonor.

Payment of negotiable paper must be made in money. Usually no particular kind is specified, the amount being simply designated as "dollars," but within comparatively recent years, commencing with the first issue of treasury notes declared to have the quality of legal tender, it has been a common practice of drawers of bills of exchange or checks, or makers of promissory notes, to indicate whether the same are to be paid in gold or silver or in such notes, and the term "current funds" has been employed to a large extent. This latter term covers practically whatever is current and receivable by law as money, whether notes or coin. A note or order so drawn can only be satisfied by a payment in par funds, that is, money circulating without a discount.

A person paying a promissory note to one not its holder does so at his peril. The note itself should be produced and surrendered, or, in case of partial payment, the payment should be indorsed upon the note in the maker's presence. To do otherwise is gross negligence, for which the law frequently affords no relief should the note afterward turn up in other hands.

The possession of a prommissory note by the maker raises a presumption that it has been paid; just as the continuous possession of it by the payee raises a corresponding presumption it has not been paid.