interest in the principal bond, and will close with consent to registration, and testing-clause in common form; the inducia of execution, if expressed, being six days. The granter of a collateral obligation for payment of interest is sometimes made to renounce not only the benefit of discussion, as regards his own heirs, but also the benefit of discussion of the granter of the principal bond; but this last provision should not be introduced. The obligation is not legally that of a cautioner, but of a principal, who never had right to require the discussion of the co-principal obligant; and by the Mercantile Law Amendment Act,1 even cautioners, in obligations granted after that Act came into operation, have no longer the benefit of discussion, unless they specially stipulate for it in their bond. 2. What I have said before as to preserving evidence of cautionry, in the case of a bond by two or more parties as ex facie co-principals, is equally applicable to this case; and it may be well to offer a word of warning here against the insidious character of cautionary obligations for payment of interest on borrowed money. They are often asked of law-agents, and other parties, and are represented and supposed to be comparatively light and little onerous, and so they are undertaken without much consideration. But there is no greater mistake. Professor Bell says,2 This looks like an obligation for the interest only; but, if 'the subject of the security fail, it seems to result in an obligation for 'the principal sum, or an annuity redeemable by payment of that sum, ' and must be ruled by the same principles which regulate annuities.' On this point, he refers to the case of Fairholm's creditors (but without noticing any report of it), in which the Court of Session gave judgment against collateral obligants bound for interest only, decerning for payment of the principal sum. The case, he says, was appealed, and remitted on a specialty, and compromised. But any one who is bound to pay the interest of a debt is substantially bound for the debt, whether the principal can be exacted from him or not. It is the same thing, in general, whether a party is bound to pay £1000 of capital or an annuity of £50 for ever. When the rate of interest is to rise and fall with the market-rate on similar bonds, the arrangement to that effect will be expressed, as already suggested, in a separate probative letter, from the creditor to the debtor; but if there is to be a fixed rate of interest for a term of years certain, as is sometimes agreed on, there is no objection to the insertion of a condition to that effect in the bond; a form for which will be found in the last edition of the Juridical Society's Styles.3 AND ANOTHER (2.) The next variety which I notice, in the form of personal bond, is EOND TO ONE that of a bond granted to one in liferent, and another, and his heirs, IN LIFERENT, executors, or assignees, in fee. In such cases, whilst the liferent subsists, IN FEE. the liferenter and fiar must concur in calling up the debt, and in granting a discharge or assignation on payment; and the money, when paid, 119 & 20 Vict. c. 60, s. 8. 21 Bell's Comm. 347. 3 Style Eook, i. 600. BOND TO TRUSTEES. To BANKS, ETC. requires to be placed in deposit, or otherwise kept by itself, for behoof of the parties, according to their respective rights. All this involves. arrangement, which may in some cases be matter of difficulty; and, wherever money is to be lent for behoof of liferenter and fiar, the intervention of trustees for behoof of the parties, according to their interests, will be found convenient. A trust-deed is not essential for this purpose. It is enough to take the bond to the trustees, in trust for behoof of the parties in liferent and fee respectively; and to declare that the trustees shall be entitled and bound to hold for behoof of the parties, during the subsistence of the liferent; and shall be bound, on the lapse thereof, and on being duly discharged and reimbursed, or relieved of expenses, to denude in favour of the fiar. The bond will also contain the usual clauses of indemnity in favour of the trustees, and of the debtor, assignees, and others transacting with the trustees, declaring the trustees not liable for omissions or for one another, but only to act honourably, and account for actual and personal intromissions; and declaring assignees and others transacting with the trustees not concerned with the purposes of the trust. Of this you will find a suitable form in the volume of the Juridical Society's Style Book, already referred to.1 1 (3.) Where bonds are granted to trustees, in trusts formally constituted, the narrative clause will contain an acknowledgment of the receipt of the money from the lenders, as trustees of the truster, acting under a deed or deeds, which will be shortly specified and described; the loan will be acknowledged expressly as made out of the trust-funds under their management as trustees foresaid;' and the obligatory clause, binding the borrower in repayment, will be conceived in favour of the trustees in trust, in accordance with, and for the purposes of, the trust deed or deeds, and their assignees, and will contain the declarations or clauses of indemnity before referred to, for the security of the debtor, assignees, and others, and which in this, and the case immediately before referred to, will be inserted at the end of the obligation, and before the consent to registration. (4.) Where bonds are granted to incorporated banks, or public companies, or trusts, the description of the creditors, and the obligatory clause pointing out to whom the money is to be payable, and by whom discharges or assignations are to be granted, will be regulated, in the case of companies incorporated under the provisions of public Acts, agreeably to these Acts; in the case of companies incorporated by special Act of Parliament, or Royal Charter, or Letters-Patent, by the provisions of such Act, Charter, or Patent; or by the use and wont, if the deed of constitution is silent as to the name in which the property of the corporation is to be held. Thus bonds for money lent by the Royal Bank of Scotland are conceived in favour of The Royal Bank of Scotland,' and the assignees of the bank. In such cases the Act, or other 1 Style Book, 4th edition, i. p. 600. instrument of constitution, must be strictly adhered to. The incorporation is the creature of the instrument of constitution, and can do nothing disconform to its provisions. When the company is unincorporated, it is sufficient to make a personal bond for money lent or due, payable to the company, socio nomine, and their assignees. But it is more usual to make the bond in such cases payable to the whole, or some of the partners individually, and the survivors and survivor of them, in trust, for behoof of the company and partners thereof, according to their interests, and to the assignees of the trustees, and of the survivors or survivor of them. CHAPTER III. BONDS. BONDS in favour of banks or merchants are frequently granted, not CASH CREDIT for a present advance in loan, but with a view to cover the operations upon a cash-account or account-current, to be kept in the books of the bank or mercantile company; out of and into which account money is to be drawn and paid, in the ordinary course of trade. These are technically termed 'Cash-credit Bonds.' When merely personal, they are never granted by individuals singly; but they are of common occurrence on the part of trading companies, or of two or more joint and several obligants. Banks look usually for two co-obligants, in addition to their real customer; making three parties in all, each liable to the bank for the whole debt. The bonds proceed on the narrative that the directors (or other office-bearers) of the bank have agreed to allow the obligants credit to a specified amount, on a current cash-account to be kept in the books of the bank, at a particular office or place, in the name of some one of the obligants particularly specified, or of the company; and to be operated on by the person so pointed out, or by the company, all as the case may be; and the obligants bind themselves to pay on demand, at any time after a certain number of months from the date of the bond, to the bank, or to trustees for the bank, their assignees, etc. (in the form prescribed by the bank's Act of Parliament or charter of incorporation, or other deed of constitution), the sum of the credit, or such part or parts thereof as shall at any time be due upon the cash-account, and that within the office or place of business of the bank (or other place specified), with penalty in usual form, and interest on the sum of the credit, or such part or parts thereof as shall be due for the time, at a specified rate per annum, from the time of advance until repayment. And what I have said with reference to the rate of interest to be stated in bonds to banks for fixed loans, is equally applicable to the case of cash-credit bonds. MODE OF The transaction being one not of permanent loan, to bear interest from term to term, but of banking, in which the interest will be charged to the account at the annual balance, there will, of course, be no stipulation for payment of half-yearly interest, as in ordinary loan transactions. The obligatory clause will be followed by a declaration that the sums to be placed to the debit of the account shall include not only all sums of money which shall be advanced by the bank to the party by whom the account is to be operated on, but also all other advances of every kind which the bank, at any time, shall make, or become responsible for, to such party, or on his account, or on his credit, and, generally, all sums which the party shall, at any time, be owing, or in any manner of way liable for, to the bank. The bank will be declared entitled, at any time, to place the amount of all such debts and liabilities to the debit of the cash-account, but without prejudice to any other securities held by the bank for such debts and liabilities, or any of them; and it will be declared optional to the bank to charge the same to the cash-account or not, as the directors of the bank, or other office-bearers, shall think fit. The cash-credit bond is truly an obligation for payment of the balance due on an account-current. It is therefore necessary, with a view especially to execution by diligence against the granters, to have a special mode fixed, whereby the balance due shall be readily ascertained. This is done by stipulating that a certificate of the amount due on the account, under the hand of the cashier, or some other of the principal officers of the bank for the time being, shall be sufficient to constitute and ascertain the balance due by the parties under the bond, to which there is usually added a declaration that no suspension shall pass of a charge or threatened charge for payment of the balance so ascertained, except on consignation of the sum sought to be suspended. There may obviously be much convenience to a bank in being enabled, in their option, to place to the cash-account all sums for which the party operating on it is indebted to them. Such sums, if so dealt with, immediately fall under the obligations of the bond, and will be included in the certificate or account liquidating or ascertaining the balance due for the time; and, in virtue of the bond and relative certificate or account, the bank can use summary diligence for such sums against all or any of the obligants. The certificate or account made up and authenticated in the terms prescribed by the bond does not require to be registered before resorting to diligence against the obligants. The bond is the ground of charge for the sum due by the account. The certificate or account fixes the amount of that sum for diligence or for ranking in a sequestration. The declaration in the bond, however, that the certificate shall constitute and ascertain the balance, does not preclude scrutiny into the account.2 1 Fisher, 11th Feb. 1824, 2 Sh. 695. in the winter session 1818, noticed (but And the declaration, that no suspension shall pass, except on consignation, is not an absolute bar to suspension on caution.1 Professor Bell says, in reference to Forrester's case, 'the case was very deliberately considered,' and the majority of the Court thought the clause an interference with the public law of the land; and he says the stipulation. is not legitimate or effectual. Effect was again refused to this declaration in a subsequent case.3 The clause, notwithstanding, is universally retained in such bonds. BY WHOLE CO- In such bonds, care must be taken to obtain the subscriptions of all SUBSCRIPTION the individuals named as parties. Where a cash-credit bond is granted to a bank, in name of two or more parties, the account, as I have said, is kept in the name of only one of them, and the bond, which narrates this arrangement, thereby shows that the others are truly cautioners, though they are not expressly described as such. In these circumstances, the parties, so shown to be cautioners, are entitled to the equities of a cautioner; because it appears clearly from the transaction, as set forth in the deed, that they are such, though, by subscribing as principal obligants, and the technical term 'cautioner' not being used, they have not the benefit of discussion, and other privileges conferred by law on cautioners. Thus, in a case where a cash-credit bond was granted to a bank, in name of five parties, but the account was to be kept in name of one of them only, four of the parties named as the granters signed; the fifth refused to do so when the bond was presented for his signature. No intimation of this fact was given to the other cautioners, one of whom, when charged to pay the whole debt, suspended. The bank pleaded that they had not undertaken to procure the signatures of all the parties; but the Court held that, in respect of the want of the subscription of the fifth obligant, named as a party, the whole of the cautioners were free of liability under the bond. A similar decision was pronounced in a later case,5 where the bond was for a capital sum, and in name of five obligants, one of whom was shown, on the face of the deed, to be the principal debtor. The company intrusted this party with obtaining the signature of the obligants, and he forged the signature of one of them. The others were held entitled to the equities of cautioners; and the Court were of opinion that, in the circumstances, the lenders had undertaken to procure the subscription of the coobligants, and were liable for not having done so; they had, in fact, given the borrower control of the bond, and opportunity of committing the forgery. In connexion, and, in some respects, in contrast with these decisions, the case of M'Donald requires attention. In that case a bond for a capital sum, granted in name of five co-obligants, and subscribed by only 1 Forrester, 27th June 1815, F. C. 3 Gilmour, 8th July 1831, 9 Sh. 907. 5 Scottish Provincial Assurance Company, 28th Jan. 1858, 20 D. 465. 6 M'Donald, 5th July 1810, F. C. |