they can buy cheapest," and unite in effecting the entire overthrow of the protecting duties, (and my antagonist frankly avows his hostility to any tariff whatever.) The tariff is demolished; the revenue is raised by direct taxation; and my Londonderry friends obtain their broadcloths direct from Manchester, at four and a half, or we will say four dollars a yard. This is a handsome saving, certainly. But, cheap as they are, the cloths must still be paid for; and at length the Londonderry farmers set about it. They muster their products; but they now find that the old market is destroyed. Other people have been as keen as they in buying where they could buy cheapest, and the Lowell manufacturers, unable to manufacture cloth at so low a cash price as their British rivals, while their labor, fuel, &c., &c., cost them double, have given over, failed, run down. The manufactories are empty, idle, and going to decay; their inmates have emigrated to Wisconsin, or scattered over the country to find some other employment. This is not the case with Lowell alone, but all similar places. The wood, which formerly brought five dollars, will now hardly command two dollars; corn brings fifty cents, and potatoes are dull at twenty-five. In short, while they have bought this year's supply of cloths nominally twenty per cent. cheaper than last year, they find that the very same amount of property which then paid for the whole, will not now pay for half. They are unable to satisfy their indebtedness; their products will hardly command money at any price; land falls rapidly and ruinously; the sheriffs and lawyers are set to work, and half the property of the township passes under the hammer. The agents or intermediates of the British manufacturers buy part of it; a few misers who have seen and prepared for the storm take the rest; and the ousted occupants follow the late population of Lowell to Iowa or Texas. The free trade principle of "buying where we can buy cheapest," has been run out to its natural termination.

This is no ideal sketch. It is substantially what the whole North experienced, from beginning to end, in 1816-20. That we may be wiser than to enact so ruinous a folly again, is the earnest hope of your correspondent, H. G.

MERCANTILE LAW.

Art. V.-POPULAR SUGGESTIONS ON THE PRINCIPLES OF THE LAW OF GUARANTY AND SURETYSHIP.*

WISDOM is not more shown in the choice of a proper end than in the selection of proper means. And in this choice of means, certainty in their results is an essential merit. Commerce, in all her plans, is constantly aiming, often in vain, after this certainty. Does the ship sail to sea-the merchant counterbalances the uncertainties of her voyage by insurance, and thus secures himself against the rage of the uncertain ocean and its unruly tempests. Nay, more: by insurance of the profits of his voyage, he con

*This Lecture is the fourth and last of Mr. Lord's admirable series, read before the Mercantile Library Association of New York, which have been originally published in the pages of our Magazine. The subjects are treated with a method, fidelity, and minuteness, so characteristic of the accomplished author, and will be found to embrace a mass of valuable information, peculiarly interesting and important to all

business men.

verts the very storms and dangers of the deep into the means of increasing wealth. Thus protected, he lays his plans for the supply of foreign countries, or provides for the wants of his own, with entire coolness and system, and increases his private wealth by diffusing general advantages. In like manner, when his richly laden ship is returned, and her burthen is to be distributed among another class of merchants, certainty again is to be sought in the final returns of his adventure. It must be sold. And here again he has to struggle with uncertainties still greater than those of the fickle ocean. He is now subject to the misfortunes of life upon society at large;-to the risks of insolvency and bad faith, instead of the dangers of the elements. Again does he struggle for some degree of certainty. If he knows the integrity and prudence of him with whom he would deal, or has knowledge of his responsibility, he is willing to trust on his unsustained promises. But he cannot have this knowledge of all. Some will be strangers: some, though known, will be young, of unproved characters: some, of doubtful circumstances, some of questioned integrity. Here it is plain his dealings cannot go forward, unless this uncertainty of payment can be overcome. For as he cannot judge of the unknown circumstances of men, or of their secret purposes of honesty or fraud, the merchant cannot with any exactness compute his risk of loss. And without the knowledge to fix the degree of risk, he cannot reasonably compensate it by a correspondent enhancement of price. The advantage of both parties now becomes obviously promoted if a third person can be found who knows the purchaser so well as to be willing to engage for him, and is so well known to the seller as that the latter will feel secure in his promise. The traffic can then, by aid of this new support, go forward. This new promise intervening, is a suretyship or guaranty.

In other cases, also, of reposing trust, in persons either unknown or not fully confided in, or where the amount of responsibility is too large to admit of a simple confidence in one man's fidelity, a surety is called in, to give to the contemplated transaction the necessary element of certainty.

Suretyship, therefore, implies a want of confidence in the party to be trusted by him who is to trust; and a full confidence by the surety in hin for whose conduct he engages, and for whom he solicits credit. These are the natural principles on which the contract of suretyship reposes, and they are to be constantly borne in mind in considering its consequences.

A suretyship, then, is that engagement, by which one man stipulates for the acts of another, who is dealing for his own benefit. The parties are always three: the debtor, called also the principal, or principal debtor; the creditor, and the surety. These terms are used in their most extensive sense; meaning by creditor him who reposes the trust or confidence, and by debtor him who is primarily bound, whether to pay a debt or perform a duty, and who is trusted for his own account.

Our plan is, I., to consider the mode in which the surety enters into the obligation. II. The extent of the obligation. III. The creditor's duty towards the surety. IV. The exoneration of the surety. V. The fulfilment of the surety's contract. VI. The surety's rights against the debtor.

Sometimes the surety unites with the debtor in a joint obligation, and this is the most convenient form for the creditor. By this the parties binding themselves, both place themselves in the position of debtors; and although as between the debtor and the surety all the principles of suretyship apply, yet as between them and the creditor, for many purposes, they

both stand as principal debtors. They are both bound in the same manner to do the act stipulated. Under this form of contract, the creditor is bound to give notice to the surety of the debtor's default; and he can immediately, and in the same legal proceeding, have his remedy against both the parties.

Another form which this engagement assumes is, that of a separate contract by the surety, stipulating in terms that the debtor shall do the act in question. Here the suretyship stands manifested upon the face of the obligation; here, except where the stipulation by the surety is express to the contrary, notice must be given of the debtor's default before the surety can be called on and the enforcing of the obligation against the debtor and the surety must be by two independent proceedings; and that against the surety must be adopted with great care, and proceeded in with the utmost caution. This form of the contract, while equally obligatory with a joint obligation, has some disadvantages in point of convenience to the creditor, and some advantages to the surety.

Suretyship is sometimes entered into by the endorsement of a promissory note; it then becomes subject, as to the creditor, who knows the character of the endorsement, not only to the principles of the law of suretyship, but also to the principles regulating promissory notes. The engagement, although an endorsement, must nevertheless be founded, by the principles of suretyship, upon proper consideration of value or advantage, and it must be pursued by the creditor with that active diligence to demand payment and to notify dishonor, which belong to the law of negotiable paper. Although this is one of the most common, it is for these reasons not the most eligible forms of suretyship. But it has one advantage to the creditor, which no other form of this contract has, in being capable of being negotiable before its maturity, and thus of forming part of the creditor's active capital.

A guaranty is often found in an express contract or memorandum, whereby for some motive or consideration expressed, (the significancy of which the law is to approve.) the debt of another is expressly stipulated for, and its payment agreed for sometimes it grows out of the mode of dealing between the creditor and his correspondents, who, for a certain agreed compensation, engage to make good the performance of the contracts of certain debtors; as agents for sales, with guaranty commission. Sometimes it grows out of letters, by which trust is solicited for one, and which, when he becomes debtor, imposes the obligation of surety upon the writer, as in letters of cre-dit. In whatever form the suretyship arises, it requires the usual circumstances legally requisite to create an obligation, and it also carries with it certain principles peculiar to itself.

The general principle of contracts most necessary to be here noticed, is, that it must be upon a sufficient consideration, a principle common to all contracts not under seal. The law does not regard the mere promise of any man as a ground for proceeding against him, unless that promise has had its origin in some advantage to the party promising, or some disadvantage to the party taking the promise. A promise by me to deliver goods, or to render services, or to incur a risk, for which promise I have received nothing, and in consequence of which, no other person has parted with or done any thing, is left by the law to the obligations of feeling or conscience alone; the law deals with property and for property's sake; and if no property, no valuable right or advantage, has been acquired by the party promising in consideration of his doing so, or if none has been parted with by him to whom

the promise is made in reliance on it, the law pays no regard to such promise. It deals not with mere sentiments nor with abstract principles of morals; it looks only to those dealings between men in their intercourse of traffic which change their condition as to property or labor, and then only does it step in as the arbiter of right and the avenger of wrongs.

Without further examination of what forms a consideration giving a legal sanction to contracts at large, we will notice the circumstances applicable to the contract of suretyship.

1. If the surety's promises be made before the creditor trusts the debtor, it is requisite that the creditor give trust upon the faith of the surety's promise, or the latter is not binding. Here the consideration of the surety's promise is the creditor's parting with his property; the subject is one within the law's domain, and it will enforce the obligation. Letters of credit are suretyship of this sort: these suretyships all derive their force from the creditor's acting upon the request they contain; they do not become contracts until they are acted upon by the crediting party; if the credit be given first, and the letter of credit is afterwards presented, it is of no effect. Suretyships of this nature require, that the creditor, trusting upon faith of them, should with reasonable diligence inform the surety that he has acted upon his promise, that the surety may know when, and to whom, and to what extent, he is bound, and that he may be able to watch over the debtor for whom he engages, and in season demand such counter securities as may be useful to him. This notice of acting upon the promise ought never to be omitted by the creditor and although it is not very generally understood among merchants that this is essential to the validity of such guaranty, and although all the circumstances under which it must be given, have not been accurately settled among lawyers, yet no promise or guaranty for a future credit can be safely relied on, unless a reasonable communication be made by the creditor to the surety of the trust he has given; and the many useful purposes which this notice answers, and the frequent hardships of the surety's condition, renders it likely, that the more this subject shall be considered and discussed, the more strictly and generally will this requirement be enforced.

2. Sometimes the surety's promise is made after the credit has been given, and without any new inducement. It is then wholly nugatory: no matter in what express words it has been made, nor what the nearness of relation between the parties, nor what the fulness of proof of the promise, it is not binding nothing has been done on the faith of it; the credit had already been given; and the promise is regarded as one of those essays of heedless good nature with which the law has no concern.

But this position has an exception: where the credit is given at the surety's request, but without a promise at the time to assume the debt; then, although he did not promise before, nor at the time the credit was given-yet if he expressly promises afterwards, he is liable: the inducement to the credit was the act of the surety, and the law will take notice of his promise to satisfy the debt thus created at his request: the previous request and subsequent promise are regarded as growing out of the same motives, and as indivisible parts of one transaction.

3. But where the creditor has varied his condition in some manner, in reliance on this new promise of the surety, as if the creditor stipulated with the surety to give the debtor a longer time to pay, or to forbear some remedy or security which he the creditor might adopt, or to give up part of the debt, or if the creditor doubting his debtor's security, give a premium in

money, or in any advantages, to the surety, and the latter, in consideration of any of these things, stipulates for payment of the antecedent debt, or for some past obligations of the debtor, the promise then becomes an available guaranty. It is to be remembered, however, that there must be this new consideration, or the whole promise is idle; and this new consideration, too, must be a matter definite in itself, and must actually alter the property or legal rights of the creditor.

4. When the promise of the surety is not before nor after, but at the time of the trust given by the creditor, then it is valid, on the principle that the creditor was influenced by and acted on the promise of both the debtor and surety, to part with his property, or alter his condition. The promise of the surety has had effect in creating a bargain, and it must stand as a legal obligation.

It is essential, therefore, to a valid contract of suretyship, that the surety's promises have been acted on by the creditor, so as to change the latter's condition; and also, that in prospective suretyships, notice be given by the surety of the credit.

5. Where, however, the contract of the surety is under his hand and seal, the above principles as to the necessity of a consideration do not apply: the sealing is considered by the law as conclusive evidence that a proper consideration has passed between the parties; and this presumption can only be defeated by showing fraud in obtaining the contract, either in its inducement or its mode of execution. This circumstance would give to sealed guaranties a great advantage in mercantile use: but on the other hand, as a sealed instrument comes within the inner recesses of the law's technicalities, as it requires great accuracy in the statement of the parties and in the precise terms of the obligation, and is a formal matter, repulsive from its very formality, it is not greatly in use, nor could it be much recommended as an ordinary practice to merchants.

Besides the consideration required to give validity to a contract of suretyship, the law requires absolutely, that it be in writing, and signed by the surety. The agreement to answer for the debt, duty, or default of another, must, by force of despotic statute law, be in writing; and by agreement is meant, not only the stipulation or thing promised to be done, but the consideration or legal motive that induces the promise. And this requirement of writing does not apply merely to promises over a certain amount, (as in some other cases,) but to all promises of suretyship, however small in amount. The object of making writing an essential, is not merely to furnish evidence of the terms of the contract, nor is it simply a rule of evidence: it is a rule of policy: the contract is void if not signed by the surety, although it may have been written down in his presence, acknowledged by him, and seen and heard by a score of witnesses. The law requires, as the only and exclusive proof of his assent, his signature to the writing. This is founded upon the uncertainty of testimony and its unfaithfulness; upon the frequency with which conversations of recommendation might be distorted; upon the danger of combinations between an unprincipled creditor, and needy and ignorant or wicked dependents, to turn a bad debt upon the debtor's friend, when the latter could not resort to any actual circumstances capable of independent proof for his protection, to show the promise sworn upon him either unfounded or improbable. It stands upon the danger of fraud and perjury in relation to such engagements, and is exclusive of all oaths of verbal communications. The guaranty, therefore, must be in writing; no