within the exception contained in the first schedule of the act.
Nor is it necessary to stamp a written representation or assurance
as to character within 9 Geo. IV. c. 14, supra. If under seal, a
guarantee requires sometimes an ad valorem stamp and sometimes
a ten-shilling stamp; in other cases a sixpenny stamp
generally suffices; and, on certain prescribed terms, the stamps
can be affixed any time after execution (Stamp Act 1891, § 15,
amended by § 15 of the Finance Act 1895).
The liability incurred by a surety under his guarantee depends upon its terms, and is not necessarily co-extensive with that of the principal debtor. It is, however, obvious that as the surety’s obligation is merely accessory to that of Extent of surety’s liability. the principal it cannot as such exceed it (de Colyar, Law of Guarantees, 3rd ed. p. 233; Burge, Suretyship, p. 5). By the Roman law, if there were any such excess the surety’s obligation was rendered wholly void and not merely void pro tanto. By many existing codes civil, however, a guarantee which imposes on the surety a greater liability than that of the principal is not thereby invalidated, but the liability is merely reducible to that of the principal (Fr. and Bel. 2013; Port. 823; Spain, 1826; Italy, 1900; Holland, 1859; Lower Canada, 1933). By sec. 128 of the Indian Contract Act 1872 the liability of the surety is, unless otherwise provided by contract, coextensive with that of the principal. Where the liability of the surety is less extensive in amount than that of the principal debtor, difficult questions have arisen in England and America as to whether the surety is liable only for part of the debt equal to the limit of his liability, or, up to such limit, for the whole debt (Ellis v. Emmanuel, 1 Ex. Div. 157; Hobson v. Bass, 6 Ch. App. 792; Brandt, Suretyship, sec. 219). The surety cannot be made liable except for a loss sustained by reason of the default guaranteed against. Moreover, in the case of a joint and several guarantee by several sureties, unless all sign it none are liable thereunder (National Pro. Bk. of England v. Brackenbury, 1906, 22 Times L.R. 797). It was formerly considered in England to be the duty of the party taking a guarantee to see that it was couched in language enabling the party giving it to understand clearly to what extent he was binding himself (Nicholson v. Paget, 1 C. & M. 48, 52). This view, however, can no longer be sustained, it being now recognized that a guarantee, like any other contract, must, in cases of ambiguity, be construed against the party bound thereby and in favour of the party receiving it (Mayer v. Isaac, 6 M. & W. 605, 612; Wood v. Priestner, L.R. 2 Exch. 66, 71). The surety is not to be changed beyond the limits prescribed by his contract, which must be construed so as to give effect to what may fairly be inferred to have been the intention of the parties, from what they themselves have expressed in writing. In cases of doubtful import, recourse to parol evidence is permissible, to explain, but not to contradict, the written evidence of the guarantee. As a general rule, the surety is not liable if the principal debt cannot be enforced, because, as already explained, the obligation of the surety is merely accessory to that of the principal debtor. It has never been actually decided in England whether this rule holds good in cases where the principal debtor is an infant, and on that account is not liable to the creditor. Probably in such a case the surety might be held liable by estoppel (see Kimball v. Newell, 7 Hill (N.Y.) 116). When directors guarantee the performance by their company of a contract which is ultra vires, and therefore not binding on the latter, the directors’ suretyship liability is, nevertheless, enforceable against them (Yorkshire Railway Waggon Co. v. Maclure, 21 Ch. D. 309 C.A.).
It is not always easy to determine for how long a time liability under a guarantee endures. Sometimes a guarantee is limited to a single transaction, and is obviously intended to be security against one specific default only. On the other hand, it as often happens that it is not exhausted by one transaction on the faith of it, but extends to a series of transactions, and remains a standing security until it is revoked, either by the act of the parties or else by the death of the surety. It is then termed a continuing guarantee. No fixed rules of interpretation determine whether a guarantee is a continuing one or not, but each case must be judged on its individual merits; and frequently, in order to achieve a correct construction, it becomes necessary to examine the surrounding circumstances, which often reveal what was the subject-matter which the parties contemplated when the guarantee was given, and likewise what was the scope and object of the transaction between them. Most continuing guarantees are either ordinary mercantile securities, in respect of advances made or goods supplied to the principal debtor or else bonds for the good behaviour of persons in public or private offices or employments. With regard to the latter class of continuing guarantees, the surety’s liability is, generally speaking, revoked by any change in the constitution of the persons to or for whom the guarantee is given. On this subject it is now provided by section 18 of the Partnership Act 1890, which applies to Scotland as well as England, that “a continuing guarantee or cautionary obligation given either to a firm or to a third person in respect of the transactions of a firm, is, in the absence of agreement to the contrary, revoked as to future transactions by any change in the constitution of the firm to which, or of the firm in respect of the transactions of which the guaranty or obligation was given.” This section, like the enactment it replaces, namely, sec. 4 of the Mercantile Law Amendment Act 1856, is mainly declaratory of the English common law, as embodied in decided cases, which indicate that the changes in the persons to or for whom a guarantee is given may consist either of an increase in their number, of a diminution thereof caused by death or retirement from business, or of the incorporation or consolidation of the persons to whom the guarantee is given. In this connexion it may be stated that the Government Offices (Security) Act 1875, which has been amended by the Statute Law Revision Act 1883, contains certain provisions with regard to the acceptance by the heads of public departments of guarantees given by companies for the due performance of the duties of an office or employment in the public service, and enables the Commissioners of His Majesty’s Treasury to vary the character of any security, for good behaviour by public servants, given after the passing of the act.
Before the surety can be rendered liable on his guarantee, the principal debtor must have made default. When, however, this has occurred, the creditor, in the absence of express agreement to the contrary, may sue the surety, without even informing him of such default having taken place, or requiring him to pay, and before proceeding against the principal debtor or resorting to securities for the debt received from the latter. In those countries where the municipal law is based on the Roman civil law, sureties usually possess the right (which may, however, be renounced by them) originally conferred by the Roman law, of compelling the creditor to insist on the goods, &c. (if any) of the principal debtor being first “discussed,” i.e. appraised and sold, and appropriated to the liquidation of the debt guaranteed (see Codes Civil, Fr. and Bel. 2021 et seq.; Spain, 1830, 1831; Port. 830; Germany, 771, 772, 773; Holland, 1868; Italy, 1907; Lower Canada, 1941–1942; Egypt [mixed suits] 612; ibid. [native tribunals] 502), before having recourse to the sureties. This right, according to a great American jurist (Chancellor Kent in Hayes v. Ward, 4 Johns. New York, Ch. Cas. p. 132), “accords with a common sense of justice and the natural equity of mankind.” In England this right has never been fully recognized. Neither does it prevail in America nor, since the passing of the Mercantile Law Amendment Act (Scotland) 1856, s. 8, is it any longer available in Scotland where, prior to the last-named enactment, the benefit of discussion, as it is termed, existed. In England, however, before any demand for payment has been made by the creditor on the surety, the latter can, as soon as the principal debtor has made default, compel the creditor, on giving him an indemnity against costs and expenses, to sue the principal debtor if the latter be solvent and able to pay (per A. L. Smith, L.J., in Rouse v. Bradford Banking Company, 1894, 2 Ch. 75; per Lord Eldon in Wright v. Simpson, 6 Ves., at p. 733), and a similar remedy is also open to the surety in America (see Brandt on Suretyship, par. 205,
