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 — — Part

III.

Business of Banking.

639

the documents for an antecedent debt would entitle the pledgee to acquire such rights onl}^ as the pledgor could have enforced at the time of the pledge (s). The same rule applies probably to vendees In such case the or persons who have agreed to purchase (t). securit}^ would not be effective (a). Sect. 19.

Sect.

18.

Securities for

Advances,

Guarantees.

1288. The position and rights of a banker under a guarantee Bankers obviously must depend on the character and form of such guarantee rights, and the parties thereto (b). Certain general principles may, however, be laid down. Where there is an unbroken account, and the guarantee is not Appropriastrictly a continuing one, payments in must be attributed to the ^^^^ earlier items of the account in relief of the surety, unless there are P^^^^^^^exceptional circumstances indicating an intention that the guarantee should not be exhausted by such process .(<?). Where the guarantee is a really continuing one, the surety has no right to control the appropriation of payments in (d) so long as the banker deals with the accounts in the ordinary way of business {e) Payments in may be appropriated to a pre-existing debt of which the surety had no notice or knowledge (/) but it would be contrary to ordinary business and good faith to open a new account during the currency of the guaranteed one, and carry all payments in to the new account (g) But on the determination of the guarantee the banker may close the account and open a new one, to which he may carry all payments in. leaving any debit on the old one to be covered by the guarantee (h)..



.

1289. A pre-existing debt is not a good consideration for a Where in a guarantee no stipulation for future advances guarantee. is made, the consideration must be supplied by forbearance to sue the Court of Appeal, in reversin*^ the judgment of Channell, J., reported [1907] 1 K. B. 519, held that the facts did not show larceny by a trick. (s) The Factors Act, 1889 (52 & 53 Vict. c. 45), s. 3, makes a pledge of the documents equivalent to a pledge of the goods themselves. Cahn v. PockeWs Bristol Channel Steam Packet Co., [1899] 1 Q. B. (t) See 643, jper A. L. Smith, L.J., at p. 654. (a) As to the Factors Acts generally, see titles Agency Sale op Goods. As to the Sale of Goods Act, 1893, see title Sale of Goods. For forms of (&) For the general law of guarantees, see title Guarantee. guarantees to a l3ank, see Encyclopaedia of Forms, Vol. II., pp. 491 501. (c) Cory Brothers v. Owners of Steamship Mecca, [1897] A. 0. 286, 295 City Discount Co. v. McLean (1874), L. R. 9 C. P. 692. It is practically necessary to show that ordinary appropriation would nullify the guarantee. Compare Commercial Bank of Australia v. Official Assignee of Wilson (fc Co., [1893] A. C. 181, where money on suspense account in lieu of guarantor's liability was held not equivalent to payment. (d) Williams v. Rawlinson (1825), 3 Bing. 11 ; Be Sherry (1884), 25 Ch. D. 692.

—



(e)

Re

Sherry, supra.

v. Rawlinson, supra; compare Hamilton v. Watson (1845), 12 F. 109. Re Sherry, supra, per Cotton, L.J., at p. 706 compare Mutton v. Peat, ((/) [1900] 2 Ch. 79, 85, where it was said that the method of book-keeping was not to prejudice the real rights of the surety. (h) Re Sherry, supra.

{f) Williams

CI.

&



Considera-