g. Knowledge, no matter how acquired, is notice of acceptance of a guaranty, and it may be inferred from facts and circumstances warranting such a conclusion. German Sav. Bank v. Drake Roofing Co. 51 L.R.A. 758, 112 Iowa, 184, 83 N. W. 960.

h. When the guaranty is a letter of credit, or an effort to become responsible for a credit that may or may not be given to another, at the option of the party to whom the application for credit is made, the guarantor must within a reasonable time be notified of the acceptance of the guaranty. German Sav. Bank v. Drake Roofing Co. 51 L.R.A. 758, 112 Iowa, 184, 83 N. W. 960.

i. A mere offer to guarantee is not binding until acceptance by the person to whom it is made, and until acceptance, is revocable. Lachman v. Block, 28 L.R.A. 255, 47 La. Ann. 505, 17 So. 153.

j. The notice of acceptance to which one who merely offers to become a guarantor for the payment of debts to be contracted by a third party is entitled may be waived by the guarantor, which waiver may be implied from the language or terms of the instrument of guaranty. Hibernia Bank & T. Co. v. Cancienne, L.R.A.1917 D, 402, 140 La. 969, 74 So. 267.

k. The right of a guarantor at the common law and under § 6080, N. Dak. Rev. Codes 1905, to notice that his proposal of guaranty is accepted and will be acted upon, is waived by a provision in the contract "waiving acceptance and all notice," so that the guarantors are rendered liable on the contract without proof of notice to them of the acceptance, where it is shown that the contract was accepted and goods furnished thereunder to the principal. W. T. Rawleigh Medical Co. v. Laursen, 48 L.R.A. (N.S.) 198, 25 N. D. 63, 141 N. W. 64.

(Annotated)

n. Notification of acceptance of the guaranty is not necessary to bind persons who sign an agreement to be responsible for the faithful performance of his contract by one about to be reappointed as salesman for the obligee for another year, since the guaranty is absolute, and not conditional, and it is immaterial that the contract has not been signed by either employer or employee when the sureties put their names to the guaranty which is attached to it. J. R. Watkins Medical Co. v. Brand, 33 L.R.A. (N.S.) 960, 143 Ky. 468, 136 S. W. 867. (Annotated)

o. Prompt notice of the acceptance of a contract of guaranty or suretyship is unnecessary, where the creditor receives an express agreement to become surety to a certain amount for the debtor, and acts upon it by extending credit on the faith of it. Lachman v. Block, 28 L.R.A. 255, 47 La. Ann. 505, 17 So. 153.

p. Notice of acceptance is not necessary to bind one who executes a paper by which he "hereby" guarantees a debt which another now owes, or may owe in the future, to a specified amount, the instrument expressly stating that it is to remain in full force until the debt is fully discharged or the agreement is relinquished in writing. Cowan, McC. & Co. v. Roberts, 65 L.R.A. 729, 134 N. C. 415, 46 S. E. 979.

q. Notice of acceptance of a guaranty in an order to let the guarantor's daughter "have what goods she wants" is not necessary, where it was given after refusal of credit to her. Wright v. Griffith, 6 L.R.A. 639, 121 Ind. 478, 23 N. E. 281.

r. A contract of guaranty is completed by the guarantee's acting thereon by advancing or loaning money to the principal debtor on the faith of the guaranty, where it was signed by the guarantor at the request of the guarantee, and delivered to the latter or to the principal debtor to be by him delivered to the guarantee, so that the guarantor is not entitled to notice of acceptance from the guarantee. Hibernia Bank & T. Co. v. Cancienne, L.R.A.1917D, 402, 140 La. 969, 74 So. 267.

s. A director of a corporation who signs a continuing guaranty to be responsible for any loans or advances made or to be made to the corporation is charged with knowledge of the debts contracted on the face of his guaranty, and is not entitled to receive a formal notice from the guarantee of the acceptance of the contract of guaranty in order to bind him. Hibernia Bank & T. Co. v. Cancienne, L.R.A.1917D, 402, 140 La. 969, 74 So. 267.

t. A guarantor of the payment of the indebtedness of a third person, who expressly binds himself in solido with the principal debtor as if the debts were contracted by him in person, is not entitled to notice by the guarantee of the acceptance of the guaranty in order to render him

§ 6. Conditional signature.

a. Breach by the principal, without the knowledge of the obligee, of a condition upon which one agrees to guarantee pay ment of debts, to the effect that another signer of the instrument will be secured before it is delivered, will not release the one who actually signs from liability. Cowan, McC. & Co. v. Roberts, 65 L.R.A. 729, 134 N. C. 415, 46 S. E. 979.

b. Failure for a period of three months, by one who has signed an instrument guaranteeing payment of another's debts, to notify the obligee that the conditions of its delivery have not been complied with, during which time further credit has been extended, will preclude him from taking advantage of the breach of condition. Cowan, McC. & Co. v. Roberts, 65 L.R.A. 729, 134 N. C. 415, 46 S. E. 979.

§ 7. Consideration.

be in respect to such facts as necessarily operate as an inducement to the guarantor to bind himself, and which immediately affect his liability and bear directly on the particular transaction for which the obligation is given. Lachman v. Block, 28 L.R.A. 255, 47 La. Ann. 505. 17 So. 153. § 12. Revocation. See also ante, § 5 i.

a. Power to revoke a continuing guar anty upon notice is implied unless the terms of the guaranty forbid. Gay v. Ward, 32 L.R.A. 818, 67 Conn. 147, 34 Atl. 1025.

§ 13. Duty of guarantee to guarantor.

Duty to give notice to guarantor of transDuty to make demand on principal debtor. actions, see post, § 22. see post, § 23.

a. A guarantee may, by contract, obligate himself to protect the guarantor from loss, either by efforts to preserve collateral

d.

§ 8. - necessity.

a. A promise, without consideration to answer for the debt of another, is of no effect. Shuman v. Steinel. 7 L.R.A. (N.S.)

1048, 129 Wis. 422. 109 N. W. 74.

b. A contract of guaranty not entered into at the same time as the original obligation or its acceptance by the guarantee must, under the express provision of the Oklahoma statute, be supported by a consideration distinct from that of the original obligation. Clements V. Jackson County Oil & G. Co. L.R.A.1917C, 437, Okla. 161 Pac. 216.

§ 9.-sufficiency.

a. Continued extension of credit to a merchant is a sufficient consideration to support a guaranty by a third person of payment of what has already accrued, as well as what will accrue in the future. where the entire contract is part of one transaction and evidenced by one instrument. Cowan, McC. & Co. v. Roberts, 65 L.R.A. 729, 134 N. C. 415, 46 S. E. 979. § 10. Validity of obligation of principal.

diligence in pursuing the principal debtor. Merritt v. Haas, 21 L.R.A. (N.S.) 153. 106 Minn. 275, 118 N. W. 1023.

b. The guarantee in a contract of unconditional guaranty of payment is under no obligation, as a matter of law, to protect the guarantor from loss, either in efforts to preserve collateral securities held by him, or in pursuing the principal debtor. Merritt v. Haas, 21 L.R.A. (N.S.) 153. 106 Minn. 275, 118 N. W. 1023.

c. A corporation which sells mortgages under a guaranty of principal and interest cannot insist that a purchaser shall proceed in the first instance against a defaulting mortgagor where there is no such provision in the contract. Flynn v. American Bank. ing & Trust Co. 19 L.R.A. (N.S.) 428. 104 Me. 141, 69 Atl. 771.

d. The duty owed by a creditor to a guarantor of the debt is to do no act which affects the right to which the guarantor is subrogated on meeting his guaranty either in property held by the creditor as security for the debt guaranteed, or to bring suit against the principal debtor. He is under no duty to take active measures to collect the debt from the principal debtor to notify the person secondarily liable that the principal debtor is in default. Welch v. Walsh, 52 L.R.A. 782, 177 Mass. 555, 59 N. E 440.

§ 11. Fraud in obtaining.

as condition precedent to enforcing guaranty. Necessity of demand on principal debtor, see post, § 23.

See also ante, § 13 c, d; post, § 19 g.

b. Under an undertaking to guarantee the faithful performance by a lessee of his obligations under the lease, an action will lie against the guarantor as soon as rent is in arrears, without the necessity of attempting to collect from the lessee. Depot Realty Syndicate v. Enterprise Brewing Co. L.R.A.1918C, 1001, 87 Or. 560, 170 Pac.

294.

§ 15. Notice of default as condition precedent.

See also ante, § 13 d.

a. One who guarantees another's account is not entitled to notice of the latter's default, before steps are taken to hold him liable on his guaranty. Newcomb v. Kloeblen, 29 L.R.A. (N.S.) 724, 77 N. J. L. 791, 74 Atl. 511.

b. No notice of default to a guarantor is necessary unless expressly stipulated, where he absolutely and unconditionally guarantees the performance of a definite contract, such as one to deliver specified goods which are paid for in advance on the faith of his guaranty. Heymay v. Dooley, 20 L.R.A. 257, 77 Md. 162, 26 Atl. 117. (Annotated)

II. Construction; effect.

§ 15. Generally.

See PRINCIPAL AND SURETY, § 4 d.

§ 16. General rules of construction. See also CONTRACTS, § 209 s.

a. The intention of the parties to a contract of guaranty, when ascertained, prevails as in other contracts. Staver & Walker v. Locke, 17 L.R.A. 652, 22 Or. 519, 30 Pac. 497.

b. In order to constitute a guaranty the writing should be so construed as to determine the intention of the parties. Exchange Nat. Bank v. Pantagés, 46 L.R.A. (N.S.) 484, 74 Wash. 481, 133 Pac. 1025.

c. The true rule in construing guarantees is to give effect to the intention of the parties as expressed in the instrument read in the light of the surrounding circumstances. Newcomb V. Kloeblen, 39 L.R.A. (N.S.) 724, 77 N. J. L. 791, 74 Atl. 511.

d. The words of a guaranty will be read most strongly against the guarantor. Newcomb v. Kloeblen, 39 L.R.A. (N.S.) 724, 77 N. J. L. 791, 74 Atl. 511.

construction is to be according to what is fairly to be presumed to have been the understanding of the parties. Gay V. Ward, 32 L.R.A. 818, 67 Conn. 147, 34 Atl. 1025.

g. A guaranty indorsed in a negotiable instrument is to be construed with the language of the instrument. Commercial Bank V. Cheshire Providence Inst. 41 L.R.A. 175, 59 Kan. 361, 53 Pac. 131.

h. The body of a letter of guaranty, and not the form of the signature thereto, must control in determining who is the guarantor. London Guarantee & Acci. Co. v.

J. J. Newman Lumber Co. L.R.A.1918C, 310, 116 Miss. 534, 77 So. 522. § 17. Negotiability.

a. An unrestricted guaranty of payment indorsed on a negotiable instrument is negotiable, and passes with the title to the instrument. Commercial Bank v. Cheshire Provident Institution, 41 L.R.A. 175, 59 Kan. 361, 53 Pac. 131.

b. A promissory note indorsed by the payee, "For value received I hereby guarantee payment of the within at maturity, or any time thereafter, with interest at the rate of 8 per cent per annum until paid, waiving demand, notice of nonpayment and protest," is negotiable, and the indorsee is within the rule protecting an innocent purchaser of such paper in due course for value, and before maturity, against defenses good between the original parties. First Nat. Bank v. Cummings, L.R.A. 1918D, 1099, Okla., 171 Pac. 862.

c. A guaranty addressed to a particular person or corporation is a mere personal contract and not negotiable. Voltz v. National Bank, 30 L.R.A. 155, 158 Ill. 532, 42 N. E. 69.

§ 18. Transferability. See also ante, § 17.

a. Any warranty of insurance of rent is a purely personal contract, of which another than the original contractee can avail himself only on principles of con165 Mass. 189, 42 N. E. 577. tract. Walsh v. Packard, 40 L.R.A. 321,

§ 19. Scope and extent of liability. Duration, see post, § 20. Extent of liability on bond, see BONDS, §

1 q.

a. A guarantor has the right to prescribe the exact terms upon which he will enter into a guaranty obligation, and to insist upon a discharge in case those terms are not strictly observed. Lamm v. Colcord, 19 L.R.A. (N.S.) 901, 22 Okla. 493, 98 Pac. 355.

f. A contract of guaranty is to be construed so as to promote the use and convenience of commercial intercourse, and its language is not to be extended by any strained construction, for the purpose of

c. A guarantor is bound only by the precise words of his contract and such words are to be understood in their plain and ordinary sense when read in the light of the

surrounding circumstances and of the object intended to be accomplished. Blyth v. Pinkerton, 57 L.R.A. 468, 10 Wyo. 135, 67 Pac. 619.

d. A guarantor cannot be held to a contract different from the terms of his guaranty, even though it be apparently more beneficial to him. Warren v. Lyons, 9 L.R.A. 353, 152 Mass. 310, 25 N. E. 721. e. A guarantor is entitled to the application of the strict rule of construction, and cannot be held beyond the precise terms of his contract after the meaning of the guaranty has been ascertained and actual operation thereunder been begun. Lamm v. Colcord, 19 L.R.A. (N.S.) 901, 22 Okla. 493, 98 Pac. 355.

f. There is a well-defined distinction between a guaranty of payment and a guaranty of the collection of a debt, the former being an absolute promise to pay the debt at maturity, if not paid by the principal's debtor when the guarantee may bring an action at once against the guarantor; and the latter being a promise to pay the debt upon condition that the guarantee diligently prosecutes the principal debtor for the recovery of the debt with out success. Cowan, McC. & Co. v. Roberts, 65 L.R.A. 729, 134 N. C. 415, 46 S. E.

979.

g. An undertaking by one person that another shall "faithfully pay the price of the goods sold to him by a certain contract, according to the terms thereof, is an absolute guaranty of payment as distin guished from a guaranty of collection, and the obligee may sue the guarantor immediately upon his default without first proceeding against and exhausting the principal. Voorhees, M. & Co. v. Porter, 65 L.R.A. 736, 134 N. C. 591, 47 S. E. 31.

h. The guaranty of the payment of an obligation imports an agreement that its makers were competent and that the instrument is a binding obligation. Bell v. Kirkland, 13 L.R.A. (N.S.) 793, 102 Minn. 213, 113 N. W. 271.

i. A contract of guaranty whereby the guarantor agrees that a note is perfectly good, and will be paid by the maker as it becomes due, is a separate obligation of the guarantor, and becomes absolute upon the default of the maker of such note. Frost v. Harbert. 38 L.R.A. (N.S.) 875, 20 Idaho, 336, 118 Pac. 1095.

j. A guaranty of "full, prompt, and ultimate payment" of promissory notes includes all substitutions, renewals, and extensions of such notes. National Exch. Bank v. Gay, 4 L.R.A. 343, 57 Conn. 224, 17 Atl. 555.

k. A bond guaranteeing the full, prompt, and ultimate payment of all paper discounted by a bank for a corporation does not include renewals of such discounts made after notice of the death of a guarantor. Gay v. Ward, 32 L.R.A. 818, 67 Conn. 147, 34 Atl. 1023.

1. A guaranty of the punctual payment of interest on a note which, by its terms,

bears interest at a given rate, not only until maturity, but for such further time as the principal sum or any part thereof shall remain unpaid, cannot be limited to the payment of interest accruing before the maturity of the note. King v. Bates, 4 L.R.A. 268, 149 Mass. 73, 21 N. E. 237. (Annotated):

m. A guaranty, in consideration of forbearing collection of a note for two years, of "the punctual payment of each and every instalment of interest on said note as they shall become due, and also of each and every instalment of interest that shall become due," on a certain other note, cannot be limited to interest before maturity of the notes, especially where the first note was already overdue when the guaranty was made. Tyler v. Waddingham, 8 L.R.A. 657, 58 Conn. 375, 20 Atl. 335.

n. The liability of one who guarantees the full performance by an agent of all the engagements contained in his contract with his principal does not extend to payment of notes taken by the agent in payment of goods sold for the principal, under a provision in the agency contract requiring the agent to guarantee the payment of such notes, indorse them as soon as taken, waiving demand, protest, and notice, and providing that failure to indorse shall not af

fect the guaranty Staver & Walker v. Locke, 17 L.R.A. 652, 22 Or. 519, 30 Pac. 497.

o. A guaranty of the payment of interest on a note runs only until the maturity of the note. Rector v. McCarthy & Joyce, 31 L.R.A. 121, 61 Ark. 420, 33 S. W. 633; Merritt v. Haas, 21 L.R.A. (N.S.) 153, 106 Minn. 275, 118 N. W. 1023. (Annotated) p. A written guaranty of the salary and expenses of a detective in working up a murder case will not continue after conviction of a suspect and settlement of the bill for services to that time, although the guaranty is not canceled or recalled; and the guarantor cannot be held liable for services rendered in connection with a retrial of the accused. Blyth v. Pinkerton, 57 L.R.A. 468, 10 Wyo. 135, 67 Pac. 619.

q. An editorial publication in a magazine that it guaranteed every advertisement in its columns to be honest and trustworthy, and guaranteed the integrity of its advertising, does not render the publishers liable to a subscriber who, on the faith of the statement, patronizes an advertiser who fails to fill an order according to agreement, in the absence of knowledge of unreliability on the part of such advertiser. Heathcote v. Curtis Pub. Co. L.R.A.1918C, 818, 229 Mass. 569, 118 N. E. 909.

(Annotated)

r. One recommending another to a bank as good for any arrangement it might make with him is not liable, even though he acted fraudulently, for a greater sum than the bank might, under the statute, lend to one customer. Farmers' Sav. Bank v. Jameson, L.R.A.1916E, 362, 175 Iowa, 676, 157 N. W. 460.