exchange who are not partners, each of them can accept it for himself,' but none of them can accept it for another without his authority. See post, (Sec. 86.) dorser. 35. In the absence of a contract to the contrary, Liability of inwhoever indorses and delivers a negotiable instrument before maturity, without, in such indorsement, expressly excluding or making conditional his own liability, is bound thereby to every subsequent holder, in case of dishonor by the drawee, acceptor or maker, to compensate such holder for any loss or damage caused to him by such dishonor, provided due notice of dishonor has been given to, or received by, such indorser as hereinafter provided. Every indorser after dishonor, is liable as upon an instrument payable on demand. 66 "An Byles says, "The effect of indorsing is a conditional contract, on the part of the indorser, to pay the immediate or any succeeding indorsee or bearer, in case of the acceptor's or "maker's default." And again 66 an indorser contracts that if "the drawee shall not at maturity pay the bill, he, the indorser, " will, on receiving due notice of the dishonor, pay the holder the sum which the drawee ought to have paid, together with such "damages as the law prescribes or allows as an indemnity."3 Lord Justice Brett thus describes the contract of the indorser. "indorser contracts, that if the drawee shall not, on presentment, accept, or at maturity pay the bill, he the indorser will, on receiving due notice of dishonor, pay to the person, who has a "right as against him, if such person though he has given value for, has received no value on the bill, or if such person, though "he did receive value on the bill is liable to pay on the bill, the sum which the drawee ought to have paid, together with such 'damages as the law prescribes, or allows as an indemnity." 66 1 Owen v. Von Uster, 10 C. B. 318; S. C. 20 L. J. (C. P.) 61. 2 Byles on Bills, 13th ed., p. 3. 3 Ib., p. 154. Horne v. Rouquette, 3 Q. B. D. at p. 519; see also Duncan v. 2 (See post, Secs. 93 and 117). Every indorser is in the nature of a new drawer, for some purposes, as against himself, and to that extent there is a new contract, created by the indorsement but the original contract remains. ' It is said that in the case of bills of exchange, every indorser is a new drawer. But even that requires qualification. Bills are drawn according to the customs of merchants, all over the world; and merchants would be much surprised at being told, that an indorser might be considered as a new drawer in all respects. It may be correct to say that an indorsement is in the nature of a new drawing. It is different however in the case of a promissory note for the indorser of a note cannot be sued as a new maker, because the maker of a note stands in the position of acceptor. The contract of an indorser is in so many respects similar to that of a drawer, that it is often said, that every indorser is the drawer of a new bill, and so far is this idea carried, that where in an action against an indorser, he pleaded that he did not draw the bill and the plaintiff signed judgment against him, it was set aside, the Court saying, that the plea was good in law, and the plaintiff not entitled to treat it as a nullity. The motive or object of the party, who incurs the obligation on the bill, may be to guarantee a third person and that may be known to the person who gives value for the bill, but the obligation is by the custom of merchants on the bill.' 3 A party transferring a bill for value, engages as surety, for the due performance by the acceptor of the obligation, the acceptor has taken upon himself by his acceptance. His liability is therefore, measured, by that of the acceptor, whose surety he is, and as the obligations of the acceptor, are to be measured by the lex loci of performance, so also must be those of the surety." (See post, Chap. XVI.) A proper indorsement can only be made by one who has a right to the bill, and who thereby transmits the right." The contract which the indorser of a hundi enters into, is to 1 Lebel v. Tucker, L. R. 3 Q. B. per Mellor, J. at p. 83. 2 Gwinell v. Herbert, 5 Ad. & E. 436; S. C. 6 N. & M. 723. 3 Ib., p. 436. 4 Allen v. Walker, 2 M. & W. 317. 5 Steele v. M'Kinlay, 5 App. Cas. at p. 770. 6 Rouquette v. Overman, L. R. 10 Q. B. per Cockburn, C. J. at p. 536. Steele v. M'Kinlay, 5 App. Cas. at p. 782. pay the amount of the hundi, (in case the drawee makes default), in the place where the hundi has been indorsed by him, and not in the place where it is made payable.1 As to what is a valid indorsement to render an indorser liable, see post, Sec. 50. An indorser is only liable to those who come after him on the bill (see Sec. 38.) As to restrictive indorsements, whereby an indorser, excludes his liability, (see Secs. 50 and 52.) A partial indorsement and its effect, see Sec. 56. The interest for which the indorser of an instrument dishonored by non-payment is liable, see Sec. 80, (Explan.) 2; and the compensation, see Sec. 117. The liability of an indorser after dishonor to pay the instrument on demand is here put on the same footing as that of the maker of a promissory note, or the acceptor of a bill of exchange in like circumstances. As to presentment for payment to an indorser after maturity, see Sec. 74; and as to notice of dishonor, see Séc. 93. The Limitation for a suit against an indorser, is provided for by Art. 80 of the second schedule to the Limitation Act. An indorser cannot deny the signature or capacity of a prior party (Sec. 122.) 36. Every prior party to a negotiable instrument is liable thereon to a holder in due course until the instrument is duly satisfied. Under this section it is laid down that all parties whose names are on the instrument are liable to those who come after them, and the holder, in due course, at maturity, is entitled to make his choice, whether he will proceed against all, or which of them, subject however to the rules relating to giving notice of dishonor, see post, Chap. VIII. As to holder in due course, see 3 Secs. 9 and 58. 37. The maker of a promissory note or cheque, the drawer of a bill of exchange until acceptance, 'Sugan Chund Shivdas v. Mulchund Joharimal, 9 Bom. H. C. R. 270. 2 (App.) 3 Basant Ram v. Kol ahal, I. L. R. I All. 392; see Sec. 29 Civ. Pro. Code., (App). Liability of prior parties to holder in due course. Maker, drawer principals. and acceptor When a bail of and the acceptor are, in the absence of a contract to Exchangs i paid the contrary, respectively liable thereon as principal to the de facto hold debtors, and the other parties thereto are liable therein due course on as sureties for the maker, drawer or acceptor, as thereby the draine the case may be. is discharge литы бесь 86, there being no dishmous as raged by Set 30, the draves is also discharged The primary contract on a bill is that between the drawer and the acceptor if he accept; the secondary contracts are those between the drawer and his indorsee, and between the different indorsers and their indorsees. Each of those is a direct contract between the parties, and each such contract is governed by the common law. But by the law merchant all those contracts can be transferred, the acceptors with the drawer, the drawers with his indorsee, and so on, so that any hureby, although subsequent indorsee may, under certain conditions, sue not it is subsequently only his own indorser, but any prior indorser or the drawer, or found that Chr acceptor. (See Secs. 38, 50, 51) His Lordship also quoted monsmusof the following passage from Byles :-" Suppose the bill to have the player wa been accepted and indorsed for value. The acceptor is the principal debtor, and all the other parties are sureties for him, 25 1 2 liable only on his default. But though all the other parties are, in respect of the acceptor, sureties only, they are not, as between The new oriented themselves, merely co-sureties, but each prior party is a principal Bath Corporation in respect of each subsequent party. For example, suppose a The case wonds have bill to have been accepted by the drawee, and afterwards indorsed by the drawer and by two subsequent indorsers to the been different if holder. As between the holder and the acceptor, the acceptor Un in trench is the principal debtor, and the drawer and indorsers are his sureties. But as between the holder and the drawer, the drawer is a principal debtor, and the subsequent indorsers are his sureties. As between the holder and the second indorser, the second indorser is the principal, and the subsequent or third indorser is his surety." was not bill of promessory 850. & allhuugh sees 85- All contracts raised on a bill, except those with the acceptor, discharges the are contracts of suretyship, or contracts of indemnity.3 Dawse it doester The effect of this section is thus summarised by Lord Blacksischarge a drawver, 1 Horne v. Rouquette, 3 Q. B. D. per Brett, L. J. at p. 517. Byles on Bills, 13th ed., p. 247; see also Ib., p. 154. 3 Horne v. Rouquette, supra, at p. 518. burn:-"By the general law merchant, adopted with some modifications, I believe, in every civilised country, the acceptor of a bill of exchange comes under an obligation to any one who becomes the holder to pay him, and the drawer comes under an obligation to the holder to pay him, if the person on whom the bill is drawn does not accept to pay the bill, and the drawer has due notice of the dishonor. And any one who indorses that bill comes under an obligation to all subsequent holders of the bill, precisely similar to that of the drawer, but he does not come under any such obligation to prior parties to the bill.1 The drawer, acceptor and intermediate indorsers of a hundi which is dishonored are all liable to the holder, but their liability is not joint, as it arises out of different contracts; and a decree obtained against any one of them, without satisfaction, cannot be pleaded as a bar to a suit against any other of them.2 He who comes under the character of acceptor, makes himself liable as such, and nothing, can discharge him but payment or release.3 A recent decision has thus laid down the rights and positions of indorsers and acceptors as between themselves. The acceptor of a bill of exchange knows, that by his acceptance, he does an act which will make him liable to indemnify any indorser of it who may afterwards pay it. The indorser is a surety for the payment to the holder, and, having paid it, is entitled to the benefit of any securities deposited with the holder by the acceptor, and whether at the time of his indorsement he knew, or did not know, of the deposit of those securities. The surety's right in this respect does not depend upon contract, but is the result of the equity of indemnification attendant on the suretyship. Lord Chancellor Selborne, in his judgment, said, "The liability of "the indorser to the holder is, by the law merchant, conditional; "but when the conditions required by that law are fulfilled, it "becomes absolute, and is that of a principal; and the indorser's 'right, if he pays the holder, to recover over against the accep"tor, is not founded on any agreement between him and the 'acceptor (who is as likely as not to be a stranger without any 1 Steele v. M'Kinlay, 5 App. Cas. at p. 769. 2 Abdoor Ruhman v. Baboo Gunesh Lall, 23 Suth. W. R. 444; see also Pigou v. Ram Jushunt, I Suth, W. R. 95. 5 4 3 Fentum v. Pocock, 5 Taunt., per Heath, J. at p. 197. 4 Duncan v. N. & S. Wales, Bk., 6 App. Cas. I. 5 Ib., pp. 13, 14, 15. |