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common carrier, it is not necessary that the person hold himself out as willing to receive and transport all species of goods. He may restrict his offer to certain kinds; but, having once assumed the business of common carrier, he is obliged to carry for all persons indiscriminately. Carriers of goods may be either private carriers or common carriers. A private carrier is one who carries under special contract, without holding himself out to the world as ready to carry the goods of all who present their goods for transportation. The liability of private carriers for injuries to goods intrusted to them is governed by the general bailment law; but common carrier's subject themselves to an extraordinary liability.81

By the weight of authority, at common law and in the absence of special contract, innkeepers and common carriers are each liable, as insurers, that is, absolutely liable, for any loss or injury to property intrusted to their care which is not caused by, (1) the act of God; (2) the public enemy; or (3) the act or negligence of the owner himself. The reason of the extraordinary liability imposed upon persons engaged in these vocations grows out of the public nature of the employment. It is well known that in early times the continental inns in Europe were frequently resorted to by banditti for purposes of plunder, and the hosts were often found to be in league with the robbers. No transient guest was secure in his person or property. The condition of affairs in England was very different, because of this salutary provision of the common law, which made the keeper of such a house responsible for the safety of the goods of his guest. It became his interest not to rob, but to protect, the wayfarer who came to partake of his hospitality. The law also recognized that there was a peculiar temptation incident to the carrier's employment. Obliged to pass through lonely ways, which were often infested with highwaymen, the pursuit of his calling would often be dangerous if he did not have an understanding with the robber class. The inducements to collude were strong, and the opportunity to do so without detection was great. Public policy seemed to demand that the carrier should assume liability as an insurer of the safety of the goods.82

§ 141. Negotiable Instruments. A negotiable contract is one the rights under which may be so transferred, by the delivery or indorsement of the writing by which they are evidenced, as to enable the transferee to sue at law in his own name, and subject to no equities between prior parties. The writing by which such a contract is evidenced is called a "negotiable instrument." The prin

81. Smith Elem. L. 242; 6 Cyc. 365 et seq.; Hale Bailm. & Carriers 301 et seq.

82. Smith Elem. L. 242, 243; 6 Cyc. 276 et seq.; 22 Cyc. 1081 et seq.; Hale Bailm. & Carriers 351 et seq.

cipal kinds of negotiable instruments are bills of exchange, promissory notes, and checks.83

It was a rule of common law, as we have seen, that choses in action could not be assigned. Courts of equity, however, would allow an assignment to be made subject to certain conditions. They would uphold an assignment made upon sufficient consideration when proper notice of such assignment had been given to the person against whom the right was to be enforced. But the assignee took the chose subject to all defenses which might have been introduced against the assignor. In other words, he took it subject to the equities" between the original parties. By statutes in England and in this country, choses in action are now made assignable at law, subject to substantially the same restrictions which prevail in the equity courts.84 But from time immemorial there was an exception to the common-law rule preventing such an assignment. This was in the case of bills of exchange, which might be so drawn as to be capable of passing from hand to hand by mere indorsement or delivery. And, by the English statute of 3 & 4 Anne, promissory notes were also made capable of being so transferred. These bills and notes were not only exceptions to the common-law rule forbidding assignment, but to the equitable and statutory rules as well; for not only could they be assigned, but if the assignee was a bona fide holder for value, and without notice of the equities between the original parties, he took the instrument free from such equities. In other words, he took the rights which the instrument, on its face, purported to give him. This peculiar quality of bills and notes, which at present applies also to checks, distinguishes them from instruments which are merely assignable. The quality itself is called "negotiability." 85

A bill of exchange or a draft is an unconditional order for the payment of a certain sum of money at a specified time. The person making the order is called the "drawer"; the person to whom it is made, the “drawee"; and the person to whom the money is ordered paid, the "payee." 86 The payee has no rights as such against the drawee until the bill has been accepted by the latter. By accepting the bill, the drawee promises to pay it according to its terms. After acceptance, the drawee is called the "acceptor." A mere order on another for the payment of money does not, of course, have the effect of binding that other, for one man cannot impose contractual liability upon another without that other's

83. Smith Elem. L. 243; 7 Cyc.

520 et seq.

84. Smith Elem. L. 243, 244; 4 Cyc. 7 et seq. See supra, § 134, b.

85. Smith Elem. L. 244; 7 Cyc. 521; Norton Bills and Notes 1 et seq. 86. Smith Elem. L. 244; 7 Cyc. 525 et seq.

consent. The order amounts merely to an offer, and an acceptance is necessary before any contractual rights arise. When accepted, however, there is a complete contract.87

An ordinary form of a bill of exchange is:

"Boston, Jan. 2, 1896. "At sight, pay to A. B., or order, one thousand dollars, value received, and charge to the account of

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"To the First National Bank of Chicago, Ill."

C. D.

The bill is usually accepted by the acceptor writing the word Accepted," with his signature, on the instrument.

A promissory note is an unconditional written promise to pay a certain sum of money at a specified time. The person making the promise is usually referred to as the "maker"; the one to whom the promise is made is called the "payee." 88

The form of a promissory note is usually as follows:

"Cleveland, Ohio, Jan. 2, 1896. "One year from date, for value received, I promise to pay to A. B., or order, one hundred dollars, at the First National Bank of Cleveland. C. D."

In order that a bill or note may be negotiable, it must contain on its face words of negotiability. Bills and notes are either negotiable or non-negotiable. Negotiability is indicated by making the note or bill payable to order or to bearer. Thus, if it is payable to "A. A. or order," to " A. or bearer," "to the order of A.," or merely "to bearer," it is negotiable, but not so if it is merely payable to A." 89

A bill or note payable to bearer is transferable by mere delivery. An instrument payable to order requires indorsement for its transfer. By indorsement is meant the transfer of a negotiable instrument by some writing on the instrument itself. Indorsement must be accompanied by the delivery of the instrument in order to work a valid transfer thereof. Indorsement may be either in blank or special. An indorsement in blank is usually effected by the indorser's writing his name upon the back of the bill or note. The result of a blank indorsement is to make the instrument transferable by mere delivery. A special indorsement is one which directs payment to a particular person or his order; as, for example: "Pay to the order of G. H. [Signed] A. B." 90

In 1897, for the purpose of providing uniform laws on the subject of commercial paper, statutes known as the "Negotiable In

87. Smith Elem. L. 245; 7 Cyc. 757 et seq.

88. Smith Elem. L. 245; 7 Cyc.


89. Smith Elem. L. 246; 7 Cyc. 606.

90. Smith Elem. L. 246; 7 Cyc. 791 et seq., 810.

struments Law" were enacted by New York, Connecticut, Colorado, and Florida; and since then similar statutes have been enacted in twenty-five or more of the other States and in the District of Columbia.

§ 142. Suretyship and Guaranty. A contract of suretyship is a contract by which one person becomes responsible for the debt, default, or miscarriage of another. The one who thus becomes responsible for another's default is called a "surety"; the one for whose default he becomes responsible is referred to as the principal."

99 91

A contract of guaranty is a collateral undertaking by one person to be answerable for the payment of some debt or the performance of some duty or contract for another person who stands first bound to pay or perform. The person becoming so bound is called a "guarantor"; the one to whom he becomes bound is the "guarantee" or "creditor"; and the person whose debt or contract is guaranteed is the "principal" or "principal debtor." 92

The terms "suretyship" and "guaranty," although often used as synonymous with each other, are not to be used indiscriminately. A surety is one who becomes responsible for the default of another at the same time when the principal becomes bound, in view of the same consideration, and, when the contract is reduced to writing, by the same instrument. The guarantor, however, becomes such at a different time from that when his principal is bound, by a different instrument, and often upon a separate consideration. The principal and surety are bound on the same contract, while the guarantor's obligation is purely collateral. A typical example of a contract of suretyship is found in an ordinary bond, by which both principal and sureties are "held and firmly bound" jointly to the obligee.93

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As we have seen, the fourth section of the English statute of frauds, which is substantially followed by the statutes of the various States in this country, provides that "no action shall be brought . . whereby to charge the defendant upon any special promise to answer for the debt, default or miscarriage of another person; unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing, and signed by the party to be charged therewith or some other person thereunto by him lawfully authorized." A contract of suretyship, therefore, must

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91. Smith Elem. L. 247; "Principal and Surety,"


92. See 20 Cyc. 1397, 1400. There can only be a contract of guaranty where there is some principal or sub

stantive liability to which it is collateral.

93. Smith Elem. L. 247; 20 Cyc. 1400; "Principal and Surety," Cyc.

be in writing, in order to be valid, and the words " any special promise to answer for the debt, default or miscarriage of another person" obviously include contracts of guaranty as well as contracts of suretyship.


As a general rule, any act on the part of the creditor which discharges the principal debtor discharges the surety; and the latter is also discharged by any material alteration in the terms of the original liability without his consent. Thus, if the time of payment is extended for a definite period after payment is due, without the surety's consent, he is discharged. As it has been expressed: "The obligor and the obligee are bound to know that, if they find it convenient to change or vary the terms of the original contract, they must seek the assent of the surety, because it is his contract as well as theirs; and, if they will not do so, they take upon themselves the hazard, and thus loosen the bonds of the surety.9 95 Substantially the same rule applies to the contract of guaranty.96

If the principal fails to meet his obligation, and the surety or guarantor pays it or any part of it, the latter may recover from the former the amount so expended in his behalf. The liability of the principal to reimburse the surety or guarantor for money expended by reason of his default is quasi-contractual. In the absence of an express contract to indemnify, the law will create a liability to do so, even though the principal protest against such liability.97

§ 143. Insurance. A contract of insurance is a contract whereby one person (usually a corporation) undertakes to compensate another if that other shall suffer loss. If the contract of insurance is reduced to writing, the instrument by which it is evidenced is called a "policy." Contracts of insurance are of different kinds, according to the nature of the loss against which a person is insured. The most common kinds of insurance are: (1) Fire insurance; (2) marine insurance; (3) accident insurance; and (4) life insurance.98 Fire insurance indemnifies against the results of fire; 99 marine insurance against the perils of the sea; 1 accident insurance against unforeseen and accidental injuries; 2 and life insurance against death. There are also at the present time various other kinds of insurance, as insurance of plate glass, boilers, etc.,


94. See supra, § 129; Smith Elem. L. 247; Clark Contr. (2d ed.) 66, 67; 20 Cyc. 160 et seq.

95. Smith Elem. L. 248; "Prin

cipal and Surety,"

96. See 20 Cyc. 1471.


97. Smith Elem. L. 249; 20 Cyc. 1495; "Principal and Surety,"

98. Smith Elem. L. 249. As to insurance generally see 22 Cyc. 1380. 99. See 19 Cyc. 565. 1. See 26 Cyc. 538. 2. See 1 Cyc. 230.

3. See 25 Cyc. 687.


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