Mortgaged stock. 17 CHAP. XXII. defeat the bank's security; suppose that the branch manager has knowledge of this, and believes he can save the bank from loss by seizing C's sheep or other stock, would he be justified in doing so without instructions from head office? The question being, does his authority as branch manager extend so far? This question arose here in 1896 in the case of Bremner v. the Union Bank, and on the facts before them in that particular case the Court decided that, without express evidence that the manager had been given such authority, it would not do to assume that it was as a matter of course within his authority, the extent of which was to be gathered from his ordinary, and not his unusual, duties. N.S.W.L.R. 74. Limitations in to take security. Before leaving this subject I would like to point out bank's power that, though certain securities are entirely in accordance with law, and may be taken over certain classes of property; over one kind of property by one method and over another property by another method-as the law may be; it is nevertheless necessary for the banker about to accept such a security to be clear that his own bank can deal in that class of security; for occasionally banks are, or were, prohibited by their charters or statutes of incorporation from advancing money upon the security of merchandise. In 1870 the South Australian branch of the National Bank of Australasia had limitations such that it was not lawful for the Bank to advance or lend money upon the security of lands, houses, &c., which involved it in litigation; about the same time the South Ayers v. S. A. Australian Banking Company had in its charter a Banking Co., clause declaring that it should not be lawful for the National Cherry, L. R. L. R. 3 P.C. 559. company to advance money on the security of merchandise; and advanced money nevertheless on the faith of receiving as security a preferential lien on wool; this bank, too, was involved in litigation by the transaction. A prohibitory clause is frequently inserted in a bank's charter which prevents the lending of money upon ships. CHAP. XXII. In some such cases, though the bank cannot lend on the forbidden security, it can acquire it as property in satisfaction of a debt. But the officers of the bank might be liable to the shareholders for a breach of duty. Or the bank might be liable to have its charter cancelled, &c. In Victoria, by the Banks and Currency Act, 1890, any incorporated banking company may, notwithstanding anything to the contrary contained in any Act in force in Victoria relating to such bank, advance money on the security of lands, houses, ships, or pledges of merchandise. T CHAP. XXIII. Use of. CHAPTER XXIII GUARANTEES. Guarantees constitute a very common form of security. When the debtor and his guarantors are substantial men, or substantial having regard to the amount of the debt, and of known honesty, a guarantee affords a very sound security. Sounder perhaps in the case of private persons than when the debt is incurred by a small company of no long standing, a church in struggling circumstances, or an ill-managed municipality. For when men are constrained by reason of their positions as directors, churchwardens, aldermen, &c., to become guarantors for the debts of some institution, they do not as a rule seem to feel their personal honour involved in the same way as in the case of private debts. In such cases, therefore, there is need for great caution that the agreements in, and in connection with, the guarantee should be quite clear and free from the chance of a misunderPractice as to standing. In particular, it is well in such cases if signing. personal liability on the part of the guarantors is contracted for, to have the guarantee signed, after some reference to its terms, in the presence of a responsible officer of the bank and by all the guarantors at the same time. By this means the bank will be forearmed against any assertion that might be made later on by the guarantors that they undertook the obligation in their representative capacity only, or that some signed upon one and others upon a different understanding. Indeed, this precaution is a wise one to take in all cases. For, take the case of a guarantee for a private account to be given by three friends of the debtor. Suppose the sureties are allowed to sign separately, and two of them do so, in the faith that the bank will obtain the third signature; for some reason this is not done. The guarantee is imperfect and useless. CHAP. XXIII. necessary A guarantee must be in writing, for by the Statute Writing of Frauds no action shall be brought upon a contract to answer for the debt of another unless the agreement or a note of it be in writing and be signed by the party to be charged or his agent; the primary liability of the debtor must continue, or the contract would not be one of guarantee. The agent need not in point of law be appointed in writing, though to take the signature in such a transaction of an agent not appointed in writing would be exceedingly foolish unless ample and durable evidence of authority existed; in practice, I suppose a bank would never do such a thing. must be A guarantee must be supported by some considera- Consideration tion, that is, something must be given for it by the bank. It will not be any consideration, for instance, if you have an unsecured advance, and induce some third person to guarantee the customer's account in consideration of making such advances to him as you may see fit, and you then, having obtained that guarantee, open a new account for the customer, and get him to give you a cheque on such new account for the amount of the old advance, which cheque you pay into the credit of the old account and then close up the new account and call up the guarantee. If you want a good guarantee to secure an existing debt, and do not propose to make further bona fide advances to the customer as consideration for the guarantee, you must support it by something more than a mere pretence of making advances. A forbearance from pressing for payment may constitute a real consideration. CHAP. XXIII. Need not be expressed. Continuing. By corporation. Bank to be named. Variety of guarantees. Sureties. The consideration for a guarantee need not be expressed on the face of the document, though it is always better if it is so expressed, It is sufficient if it is actually given. The guarantee for an ordinary bank overdraft must be continuing, which has been defined as "extending it beyond the first sum advanced to sums subsequently advanced so long as the guarantee is continued," or as "contemplating the continuance of a supply on the one side and on the other a liability for any default during that supply." That is to say, the guarantee must not be exhausted the moment the amount of the stipulated advance has been made, but it must cover, so long as it continues in force, all advances made up to the limit, notwithstanding that the account may from time to time have been in credit. If the person giving the guarantee be a corporation, it is necessary to ascertain that the giving of guarantees in such a case is within the powers of the corporation and the manner of executing it is within the powers of its officers. In order to enforce the guarantee, the bank must be named therein, though its signature is not necessary. We are Guarantees are of all kinds and forms. concerned here only with guarantees to secure the payment of money. Even these are very various. Sometimes they are guarantees for the payment of a specific sum, such as the amount of a bill of exchange. Sometimes they are guarantees for only a portion of the debt, or they may be continuing guarantees for a definite or indefinite time, and for a definite or indefinite amount. They vary with the circumstances of each particular case. The most important point to remember is, that as soon as a guarantee has been taken, other parties are involved besides the principal debtor and his creditor. I mean the surety or sureties. They are under a serious |