the waiving heretofore suggested should be borne in mind. where the waiver was after maturity; in such a case, the act, to be valid, must have been done with knowledge that notice had not been given.1

There are one or two cases of excuse of notice peculiar in that they concern only the drawers of bills of exchange or of cheques. The drawer's contract has been explained in a preceding chapter, and it was there shown that one who draws a bill or a cheque, without reasonable ground. to believe that it will be honored by the drawee, is treated much as if, instead of having drawn a bill, he had made a promissory note for the sum. Hence he is not entitled to notice in case of dishonor. The case may then be put, and commonly is put, in this way; that the act of drawing in such a case is deemed a fraud in the eye of the law, and notice of dishonor is accordingly unnecessary. This subject has, however, been fully dealt with in Chapter V., and need not be further considered here. It should be observed, however, that the law dispenses with notice to the drawer only; indorsers must still be notified, for they are no parties to the fraud, though it would be otherwise of an indorser who is the drawer of the bill.

To draw upon oneself, as was seen in Chapter V., also dispenses with the requirement of notice, and perhaps of presentment; and so of cases in which the drawer draws upon a partnership of which he is a member, and the like cases referred to in Chapter V. In these cases, too, the excuse extends only to the drawer; an indorser (not being drawer) is still entitled to notice.

1 Ante, p. 146.

CHAPTER X.

ACCOMMODATION CONTRACTS.

§ 1. NATURE: CONSIDERATION: SURETYSHIP.

THE legal effect of each of the contracts dealt with in the foregoing chapters will be modified somewhat, if it appears that the defendant signed the instrument without consideration for the accommodation of another party. The result is an accommodation contract, which may be described as a gift by A to B of A's credit, to be offered to another on payment of value. A contract of the kind may take any of the forms of the law merchant; a promissory note may be made or indorsed for accommodation; a bill of exchange may be drawn, accepted, or indorsed for accommodation; a cheque may be drawn or indorsed. for accommodation. In a word, any party to the instrument may be an accommodation party.

Accommodation contracts of the kind too are contracts of the law merchant as much as are those which are supported by a valuable consideration at the outset. At the outset, we say, for though accommodation contracts are not so supported when first executed, a valuable consideration must spring up afterwards to make the contract binding; some one must afterwards have taken the paper for value in order to have a claim upon the accommodation party. For example (hypothetical): The defendant accepts a bill of exchange for the accommodation of the drawer, and the drawer makes a gift of the bill to the payee and plaintiff. The defendant is not liable upon his acceptance.

There is then nothing peculiar in the case so far. Nor is there anything peculiar in any other phase of the contract of an accommodation party under the law merchant in its ordinary application. Whatever would be necessary to make a case against one who had signed originally for value is equally necessary to make a case against an accommodation party; and whatever would be effective against a party who signed for value will also be effective against an accommodation party after a consideration has sprung up. What is peculiar to the situation of such a party lies in the fact that he is in a certain sense only a surety for the party for whom he has given his credit. Whatever the outward form of the contract, even though the accommodation party made as such his promissory note, and the person for whose accommodation it was made is an indorser of it, or indeed is not a party to it at all, the accommodated party or person is, between the two, the principal debtor, and the accommodation party the surety.

The accommodation party is a surety, however, not always in the full sense, but often only sub modo. It appears to have been considered at one time that he was in all cases a surety in the full ordinary sense; but the authorities now consider that the suretyship may be essentially modified by the natural character of the particular contract made by the accommodation party. Thus, if a person has accepted a bill of exchange for the accommodation of the payee, a subsequent indorsee, though with notice, may still treat him as an acceptor, not merely in point of liability in the ordinary way of acceptance, but also in regard to the more special questions of suretyship, because he has taken a principal's position. That is to say, the acceptor is not a surety towards the holder, though the holder knows that he accepted for accommodation; he is a surety only between himself and the party for whose accommodation he accepted. Accordingly, he will not be

discharged by acts of the holder, which would discharge. him if he were an ordinary surety, or if he were an accommodation indorser; for an indorser is a surety for parties before him.1

§ 2. TAKING WITH NOTICE.

There is another doctrine touching accommodation acceptance of the greatest significance, and that is, that though the undertaking is (originally) without consideration, it stands upon a footing radically different from other cases of contracts wanting consideration. If a man makes a promissory note, accepts a bill of exchange, or indorses paper, upon the supposition that there is a valuable consideration for his undertaking when there is not, or if there is a failure of the consideration, a person taking the paper with notice, though for value, cannot hold him (with an exception which need not be mentioned here); whereas if the party's undertaking was for accommodation, he would be liable, though the holder did take the paper with notice or even with full knowledge, if he took it for value.

The reason is not far to seek. Where the undertaking is for accommodation, the party makes an offer by way of gift, with full understanding, of his credit, intending to respond to any one who acts upon the offer; where the undertaking is supposed by the party making it to be for value when it is not, or when the value fails, he has acted in mistake, never intending to bind himself with consideration wanting.

In the doctrines relating to suretyship and consideration are found the characteristic features of accommodation contracts. The object of the present chapter is only to call attention to and explain the general features of such contracts, as one of the forms of contract of the law mer

1 See post, pp. 239, 240.

chant, to show that there are such contracts, and what in general they are. The details concerning them will be dealt with more conveniently, as details of the same nature arise in connection with the other contracts of our subject. Thus, dealings with the principal debtor in their effect upon subsequent parties, the extent of the liability of accommodation parties, and other matters of detail will be considered in later chapters.