Upon the evidence in this case the plaintiff had an insurable interest in the automobile at the date of the issuance of the policy and at the date of the theft, and this insurable interest was not limited to the amount of cash paid on account of the purchase price. Plaintiff was liable for the full purchase price. As to the balance due at the date of the theft, his notes were outstanding. Indeed, the notes provided that on default of payment of any one of them the whole consideration price became due at the election of the seller, who was entitled to enter judgment against plaintiff by confession for the full amount.

The policy was a personal contract between insurer and insured, not a contract running with the property, and the insurance money was payable to plaintiff without regard to the nature or extent of his interest. Plaintiff's insurable interest was, first, the money actually paid; and, second, his outstanding liability for the balance due. He was entitled to recover the whole amount of the loss, not exceeding the amount of the insurance, regardless of the nature and extent of his peculiar interest.

The case is Vigliotti v. Home Insurance Co., New York, decided by the Appellate Division of the New York Supreme Court, 201 N. Y. Supp. 407.

Precise Language Required in Agreements Guaranteeing Payment for Goods Sold to Another

C

LEARLY the time to make certain as to the meaning of a writing, by which one person guarantees payment for goods sold to another, is at the time when the writing is signed and delivered to the manufacturer or dealer, in whose favor the guaranty is given.

If the language used is not clear and to the point a dispute is likely to arise after credit has been extended, the seller contending that he is protected by the guaranty and the guarantor insisting that he is not liable. Much time and money has been lost in bringing cases of this kind into court and securing a judicial determination as to which of the two contending parties is right.

A recent case involving a contract of guaranty is Clark and others v. Anderson, 122 Atl. Rep. 337, decided by the Supreme Judicial Court of Maine.

The plaintiffs were conducting the business of W. D. True & Co. at Portland, Me. Among their customers was Albert B. Anderson of Stockholm, Me.

On April 6, 1921, Albert Anderson was indebted to the plaintiffs for merchandise amounting to about $7,300 and his credit was

exhausted. The plaintiffs, however, were willing to extend further credit to him provided the defendant, Carl A. Anderson, would guarantee payment of Albert's existing indebtedness.

The defendant was willing to do this and on the date mentioned signed a written guaranty in the following form:

Portland, Maine, April 6, 1921.

D. W. True & Co., Portland, Me.-Gentlemen: In consideration of your selling merchandise and giving credit therefore, to Albert B. Anderson of Stockholm, Me., I hereby guarantee the payment to you of all indebtedness now owing D. W. True & Co., this indebtedness to be made into notes signed by A. B. Anderson with the privilege of renewal until fully paid. This obligation shall continue until you are notified in writing of the withdrawal therefrom. Carl A. Anderson.

Witness: M. L. Buck.

[Seal.]

Thereafter the plaintiffs, in reliance on the guaranty, delivered merchandise to Albert Anderson of the value of $842.29. On July 1, 1921, the defendant wrote a letter to the plaintiffs in which he stated that he withdrew from the agreement. On that date the plaintiffs held notes of Albert Anderson in the total sum of $7,311.22, representing his indebtedness as of April 6, 1921. Albert Anderson filed a voluntary petition in bankruptcy as of July 22,

1921.

The plaintiffs demanded payment of the notes from the defendant, which the defendant refused and this suit was brought.

The dispute centered upon the meaning of the last sentence in the agreement above quoted: "This obligation shall continue until you are notified in writing of the withdrawal therefrom."

The defendant argued that he could withdraw at any time without obligation or liability; in other words, that his agreement was not worth the paper upon which it was written. As expressed by the court:

The defendant argues that he has a right to stand upon the terms of the contract; that, if his construction be the true one, and the contract of guaranty is thereby rendered worthless and was worthless at the start, it is the plaintiffs' misfortune; they should not have accepted the contract.

The court held that this was not the true meaning of the contract and that the defendant was liable on his guaranty. The contract, as construed by the court, meant that upon giving notice to

the plaintiffs the defendant could terminate his liability as to any subsequent renewals of the notes. The following rule was applied:

If the language used be ambiguous and admits of two, fair interpretations, and the guarantee has advanced his money upon the faith of the interpretation most favorable to his rights, that interpretation will prevail in his favor.

In ascertaining the meaning of the contract and deciding that the defendant was liable on his contract of guaranty, the court said:

But, without resorting to a strained construction of the language of the contract, we think that it is not difficult to ascertain the intention of the parties, and by reasonable interpretation make the contract effective.

But it was manifestly for the interest of defendant to be in a position to terminate his liability as guarantor of payment of future renewals whenever he became convinced that his aid was useless, and that Albert could not extricate himself from financial difficulties. This was the right which he reserved by the last sentence of the agreement, which directly follows the provision for renewal of the notes.

The "obligation," which was to "continue until you are notified in writing of the withdrawal therefrom," was defendant's obligation to continue to guarantee payment of renewal notes, and by his notice of July 1, 1921, he withdrew from his obligation to guarantee payment of any notes thereafter received in renewal of existing notes; but that notice of withdrawal cannot be considered as avoiding his liability as guarantor of notes then outstanding. Such a construction would permit the defendant to avoid his contract as soon as it was executed, and cannot be adopted against those who, if it prevail, will have been misled to their injury.

Guaranty of Payment by Customer Terminates When the Customer Enters Partnership

A case in which the party in whose favor the guaranty was made was unsuccessful in enforcing the guaranty is Zeo v. Loomis, Supreme Judicial Court of Massachusetts, 141 N. E. Rep. 115.

The case decided that, when a person guarantees payment for goods sold to an individual, liability under the guaranty terminates when the individual enters a partnership. And the liability does not revive when the individual withdraws from the partnership and again engages in business on his own account.

Peter Loomis was about to engage in business on his own account, and he asked Nicholas Zeo, the plaintiff, to extend credit to him. But the plaintiff would not open an account with Loomis unless the account was guaranteed.

On July 24, 1919, George Loomis, the defendant, signed a written guaranty, addressed to the plaintiff in these words:

I hereby guarantee the payment of all bills contracted with you by Peter Loomis.

The plaintiff thereafter sold goods to Peter Loomis. In August, 1919, Peter Loomis ceased to do business as an individual and formed a partnership. The plaintiff then closed his account with Peter Loomis as an individual and opened an account in the name of the partnership. Some time in the spring or summer of 1920 Peter Loomis withdrew from the partnership and resumed business as an individual. Thereupon the plaintiff opened a new account with him as an individual.

The present suit was founded on this last account. The court held that the last account was not protected by the guaranty, saying:

The guaranty was valid and enforceable as to the first account. William Filene's Sons Co. v. Lothrop, 243 Mass. 214, 137 N. E. 255. It was confined by its terms to bills contracted by Peter Loomis alone. It did not cover goods sold to any partnership of which he was a member. Parham Sewing Machine Co. v. Brock, 113 Mass. 194, 197; Holmes v. Small, 157 Mass. 221, 32 N. E. 3; Jordan Marsh Co. v. Beals, 201 Mass. 163, 87 N. E. 471. When Peter Loomis gave up his individual business and entered into a partnership, the condition of all the interested parties changed with reference to the subject-matter. This was recognized by the plaintiff, who modified his manner of charging the account to conform to the new business arrangement. The retirement of Peter Loomis from individual business activity and his engagement in a partnership was not temporary but continued for many months. It was, in substance, & public declaration of an important alteration in his business methods and relations. It appeared to be permanent.

We are of opinion that on the facts here disclosed the guaranty expired as matter of law when the first account of the plaintiff with Peter Loomis was closed, and that the defendant cannot be held liable for the new account charged after the dissolution of the partnership of which Peter Loomis was a member.

The case also brings out the point that a guaranty, which specifies no term during which it shall continue, does not continue forever. It lasts for a reasonable time only. And what is a reasonable time must be determined with reference to the circumstances and the customs of the trade.

Contracts of Sale

A series of articles dealing with the rules of law which regulate the sale of goods, based on the Uniform Sales Act

Formation of the Contract