absolute guarantor. The statute of limitations begins to run as soon as the cause of action accrues. In an absolute guaranty, the cause accrues when the principal defaults; in case of a conditional guaranty, no right of action arises, and hence the statute of limitations does not begin to run, until after the payee has made an effort to collect from the defaulting principal, and the guarantor has been given notice of such failure to pay."

§ 24. Obligation of surety and absolute guarantor compared. It is seen that there are two differences between the obligation of a surety and that of an absolute guarantor: First, the absolute guarantor cannot be sued jointly with the principal; the surety can be joined with the principal. Second, the absolute guarantor's liability does not begin necessarily with his promise but with the default of his principal; the surety's liability is co-existent and contemporaneous with that of the principal. The liability of a surety, guarantor and indorser of a negotiable instrument differs in that while the guarantor and indorser are secondarily liable, the surety, acceptor, maker, and principal

6 Penny v. Crane Brothers Mfg. Co. (1875) 80 Ill. 244; Home Savings Bank of Freemont v. Shallenberger (1914) 95 Neb. 593, 146 N. W. 993; Clay v. Edgerton (1869) 19 Oh. St. 549, 2 Am. Rep. 422; Loverin and Browne V. Travis (1908), 135 Wis. 322, 115 N. W. 829.

7"There is a well-understood difference between a guaranty of payment, and a contract of indemnity against loss, as the result of the nonpayment of a debt. In the first case the liability of the guarantor is fixed by the failure of the principal debtor to pay at maturity, or at the time when the payment was guarantied. In the second the contract partakes of the nature of a guaranty of collection,. no liability being incurred until after, by the use of due and reasonable diligence, the guarantee has become unable to collect the debt from

the principal debtor. A guaranty

of collection, or a guaranty against loss as a result of the failure to collect a debt, places upon the one for whose benefit the guaranty is made the duty of making a reasonable effort to collect the debt from the principal debtor; and a cause of action does not accrue thereon until after such effort has been made, and proved unavailing. There is no right of action upon such contingent liability immediately upon the failure of the principal to perform." Burton et al. v. Dewey et al. (1896) 4 Kan. App. 589, 46 Pac. 325. Accord: Pierce et al v. Merrill et al. (1900) 128 Cal. 464, 61 Pac. 64, 79 A. S. R. 56. 8 In Rockfield v. First National Bank of Springfield (1907) 77 Oh. St. 311, 83 N. E. 392, 14 L. R. A. (N. S.) 842, 845, it was held that "an indorser is not a maker or drawer; not one primarily liable."

are primarily liable. The contracts of a guarantor and indorser are made with reference to another contract, which is the principal one; but both are separate from that of the maker. While the surety's contract also refers to that of the principal, it is not a separate one. In the case of the guarantor, he is merely security for the payment of the principal obligation; the indorser both transfers title to the paper, and also becomes liable for the default of the maker or drawer.

§ 25. General and special guaranties. Whether a guaranty is general or special depends upon whether it is offered for acceptance to the public in general, or a class to whom it is addressed, or whether it is capable of acceptance by a certain individual, firm or corporation. The language and acceptance must determine whether it is the one or the other. If the guaranty is general, any person may accept it and bind the guarantor; 10 if special, only the person addressed may accept.11

"The true distinction between general and special guaranties, as contained in letters of credit, is that upon the faith of a general guaranty any person is entitled to advance money, or incur liability, upon complying with its terms, and can recover thereon the same as though specially named therein.

"In the case of a special guaranty however the liberty of accepting its terms is confined to the persons to whom it is addressed, and no cause of action can arise thereon except by their action in complying with its conditions." 12

CHAPTER II.

REQUISITES OF SURETYSHIP CONTRACT; DEFENSES ARISING OUT OF THE FORMATION OF THE CONTRACT.

§ 26. Elements of a suretyship contract. An undertaking by a surety or guarantor is a contract. The same requirements must be met to make the parties liable as in any other contract, with the addition discussed in Chapter III that a promise by the guarantor to answer for the debt of another must be in writing. Naturally a surety, as defined in the previous chapter, could not make his undertaking verbally. Whether the promisor be a surety or guarantor, he must have capacity to contract, there must be consideration for the undertaking, and a meeting of minds is necessary.

§ 27. Consideration required. Suretyship, being but a branch of the law of contracts, requires a consideration to make valid all undertakings, except such as are under seal. So far as the surety, as distinguished from the guarantor, is concerned, the consideration which will support the promise of the principal will also support that of the surety who signed at the same

time.1 A guarantor, whose name is signed to a negotiable instrument prior to its delivery, is presumed to have signed for the benefit of the principal, as an inducement to the promisee to accept it. No other consideration is necessary to bind the guarantor in such a case. But generally an antecedent debt will not support any promise given by the debtor. The surety's signature to an instrument made at the request of the obligee, obtained after the principal signed and delivered it to the payee, is not enforceable without further consideration.4

However, if the principal agrees with the creditor to procure a certain person as a guarantor whenever he desires, delivers the instrument with this understanding, and subsequently the guarantor signs as such, his promise is supported by a present and valid consideration. The same liability results if the surety or guarantor originally requested the thing to be done, and subsequently signed the undertaking. Though the consideration was antecedent, and beneficial only to the principal, the guarantor is bound.6

The view of the courts with regard to past consideration has been stated as follows:

"The general rule is that a past or executed consideration is not sufficient to sustain a promise founded upon it, unless the consideration, though past, was done or performed at the request of the party promising. Without such previous request a subsequent promise has no legal validity; because the consideration being entirely completed and exhausted, it can not be said that it would not have been made or given but for a promise which is subsequent and independent. But where the consideration and the promise founded upon it are simultaneous, and the whole agreement is completed at once; or where the consideration is to do a thing in the future, the promise rests on a sufficient foundation, and is

1 Casey v. Brabason (1860) 10 Abbott's Prac. (N. Y.) 368.

2 Bickford v. Gibbs et al. (1851)

8 Cush. (Mass.) 154.

8 Wigan v. English and Scottish Law Life Assurance Association (1909) 1 Ch. 291.

4 State Bank of Peck v. Pickens (1925) 117 Kans. 701, 237 Pac.

651;

Simmang V. Farnsworth (1893) Texas Court of Civ. App. 24 S. W. 541.

5 Pauly v. Murray (1895) 110 Cal. 13, 42 Pac. 313; McNaught v. McClaughry (1870) 42 N. Y. 22, 1 Am. Rep. 487.

6 Laingor v. Lowenthal (1909) 151 Ill. App. 599; Paul v. Stack

binding on the party who makes it. To illustrate: If one lends money to another and, at a subsequent time, a third party, who did not request the loan, and is not benefited by it, promises to see that it is paid, such promise is void, because no consideration passes from the promisee to the promisor. But if the promisor requests the loan, or if his promise is made previous to the loan, or at the same time, then it will be supposed that the loan is made because of the promise, which is a sufficient consideration to bind the promisor."

If the debt or obligation of the principal debtor is already incurred previous to the undertaking of the surety, then there must be a new and distinct consideration to sustain the promise of the surety. But if the obligation of the principal debtor be founded upon a good consideration, and, at the time it is incurred, or before that time, the promise of the surety is made, and enters into the inducement for giving credit, then the consideration for which the principal debt is contracted is regarded as a valid consideration, also, for the undertaking of the surety."

§ 28. Capacity of the surety or guarantor to contract. The tendency of modern decisions is to construe many contracts as voidable which at one time were considered void because of the incapacity of the parties to contract. For instance, an infant who becomes a surety, and ratifies his act upon becoming of age, with knowledge of the facts, would doubtless be bound in most jurisdictions, for the reason that it was originally voidable only, and he may ratify any contract, which as an adult, he might make.8

house (1861) 38 Pa. 302. In Jackson's Adm'r v. Jackson et al. (1845) 7 Ala. 791, the opinion states: "Hence, it is said, if one promise in consideration of a credit already given, or agreed to be given, or of a debt already existing, it is an executed, or past consideration, and is insufficient; unless the act, though done, was done upon the request of the party promising."

Controlling negotiable instruments, the Negotiable Instruments Law, Sec. 25, provides that "an antecedent or pre-existing debt constitutes value.'

7 Williams et al. V. Perkins (1860) 21 Ark. 18.

8"From a careful examination of the modern decisions and text writers, we are satisfied that the following propositions may be regarded as settled: first, that an infant's contracts for necessaries are as valid and binding upon the infant as the contracts of an adult, and that such contracts cannot be disaffirmed, and need not be ratified before they can be enforced; second, the contract of an infant appointing an agent or attorney in fact is absolutely void and incapable of