thereof to the holder, or to any subsequent indorser who may be compelled to pay it.

Sec. 66. Every indorser who indorses without qualification engages that on due presentment, it shall be accepted or paid or both, as the case may be, according to its tenor, and that if it be dishonored, and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it.

Obviously the contracts of the drawer and indorser are alike in that they are conditional, and in that both are conditional upon the happening of the same events, i. e., non-payment by the maker or acceptor, due "presentment," and "necessary proceedings on dishonor." What presentment and proceedings on dishonor are, we shall consider later (Chapter VII, below). Here it is sufficient to note that the drawer and the indorser do not become liable unless the acceptor or maker fails to pay. It is for this reason the N. I. L. describes the liability of the drawer and indorser as "secondary"; that of the maker or acceptor as "primary." It provides:

Sec. 192. The person primarily liable on an instrument is the person who by the terms of the instrument is absolutely required to pay the same. All other parties are "secondarily" liable.

§ 121. Order of liability of parties. The normal liability of the various parties to a negotiable instrument may be made plainer by an illustration. A draws a bill of

exchange on X payable to B, and delivers it to B. By drawing the instrument A assumes an obligation to B, or, if B transfers the bill, to whomever happens to be the holder, to pay the bill, if X, the drawee, refuses to accept and pay. So far, A is the only party bound on the bill. B secures X's acceptance. Thereupon X becomes primarily and unconditionally bound to pay B, or, if B transfers the bill, to pay whomever happens to be the holder. Now there are two obligations on the instrument running to B. B indorses to C. C, by the transfer, gets B's rights against both the acceptor, X, and the drawer, A; but he also obtains a third obligation, i. e., that of B, as indorser, who by his indorsement promises to pay if the acceptor does not. C indorses to D, and D thereupon succeeds to the rights of C against X, A, and B, and also obtains the conditional liability of C as indorser. At maturity it is the duty of the acceptor, the person primarily liable, to pay D forthwith. If he does pay, not only his own but every other obligation on the instrument is discharged. A's, B's and C's liability was only a conditional one, to pay if X did not. If X does not fulfil his obligation, then, upon presentment and after the necessary proceeding upon dishonor, the liability of each of the other parties becomes absolute, and each is bound to pay D the amount of the bill forthwith.

§ 122. Same (continued). D may collect from any one of the three he chooses, but, of course, he is not entitled to receive the amount of the bill from more than one of the parties. If he collects from C, the latter, receiving the instrument from D, becomes the holder and comes within

the promise of the acceptor. He also falls precisely within the contract of both A and B for the same reason, i. e., that he has become the holder. C, then, at his option, may look either to X, or to A, or to B for payment. If he secures payment from X, the instrument is discharged just as it would have been had the acceptor paid the holder, D, in the first instance. If he looks to B and recovers, B may in turn recover from either X or A. If the acceptor pays B, the instrument is discharged and with it the liability of A. But if B compels A, the drawer, to pay, he has no one from whom to seek reimbursement except X, the acceptor. If D had in the first place collected from A, the drawer, the result would have been the same: A's payment would have discharged the indorsers, B and C. Had D looked to B, the first indorser, B's payment would have discharged C, the second indorser. As between themselves, the drawer and indorsers are liable in the order in which they became parties to the instrument. That is to say, an indorser, who has been compelled to pay, may seek reimbursement from the drawer and the prior indorsers, but not from subsequent indorsers. But, as between the drawer and indorsers, on the one hand, and the holder on the other, the drawer and each of the indorsers is liable, without regard to the order of time in which they respectively became parties to the instrument.

§ 123. Same: Among indorsers. In determining the order of liability of the indorsers among themselves, it is the order in time in which they become parties to the instrument which controls, and not the order in which their signatures appear on the back of the paper. H. L. Smith,

the payee of an instrument, may have placed his blank indorsement, "H. L. Smith," across the back near the middle, and his transferee, H. Richards, may have indorsed in blank placing his signature above that of Smith. Nevertheless, Smith, the payee, is the first indorser and liable as such, and Richards is the second indorser. When it is remembered that the indorsements do not even have to be on the back of the instrument, but may be scattered over its face, it is obvious that the order of the names on the paper is not a reliable guide to the order of the indorsers' liability.

§ 124. Contract of aval or anomalous indorser. No one but the payee or subsequent holder of a negotiable instrument can properly be an indorser. But mercantile usage permits a person, who is neither payee nor holder, to assume a liability thereon by indorsing his name upon the instrument. Such a person is called an aval. Since he is neither acceptor, maker, drawer, nor in the proper sense an indorser, the courts have found the greatest difficulty in defining his liability. The N. I. L. has solved the problem by providing that he shall be liable as indorser:

Sec. 63. A person placing his signature upon an instrument, otherwise than as maker, drawer, or acceptor, is deemed to be an indorser, unless he clearly indicates by appropriate words his intention to be bound in some other capacity.

Thus, if the payee of a note offers it for sale to a bank but the bank refuses to buy, doubting the ability of the maker and indorser to pay, the payee may induce X, a

third person, to indorse his name on the paper for the purpose of giving it credit with the bank. X is an aval or anomalous indorser, and, under the N. I. L. assumes the same obligation to the bank and subsequent holders, as a regular indorser. The N. I. L. (4) expressly provides: "If he signs for the accomodation of the payee he is liable to all parties subsequent to the payee." His rights, also, upon being compelled to pay, are the same as those of an ordinary indorser, i. e., he may obtain reimbursement by an action on the note against the maker or the prior indorsers, including the payee for whose accommodation he signed. It makes no difference whether X or the payee signed first, or in what order their names appear on the back of the paper. The payee is always, as we have seen, the first indorser and liable as such.

§ 125. Same: Indorsement before inception. In the case just discussed the irregular indorsement was placed on the note, after it had been delivered to the payee and had had its inception as a negotiable instrument. Suppose, however, the indorsement had been made before the maker had delivered the note. The N. I. L. defines the liability of such an anomalous indorser as follows:

Sec. 64. Where a person, not otherwise a party to an instrument, places thereon his signature in blank before delivery, he is liable as indorser, in accordance with the following rules:

1. If the instrument is payable to the order of a third