This section of the book is from the "Canadian Banking Practice" book, by John T. P. Knight.
Question 327.— A man writes and signs upon the back of a bill or note the following: " I hereby guarantee payment of the within." Is he entitled to notice of dishonour ?
Answer.—We think not, and for the following reasons: The contract made is a contract of guarantee and not of endorsement, and to make a guarantor liable it is not necessary that he should receive notice of non-payment of the debt payment of which he guaranteed. The only doubt upon the subject arises under section 56 of the Bills of Exchange Act, 1890. That section is as follows: "Where a person signs a bill otherwise than as a drawer or acceptor, he thereby incurs liabilities of an endorser to a holder in due course, and is subject to all the provisions of this Act respecting endorsers." The words " and is subject to all the provisions of this Act respecting endorsers " do not appear in the English Act, and it may be contended that a person who signs a guarantee on a bill signs the bill otherwise than as a drawer or acceptor, and that, being subject to all the provisions of the Act respecting endorsers, he is entitled to notice of dishonour. We think, however, that a person who signs a guarantee on the back on a bill cannot be said to sign the bill within the meaning of section 56. He is not signing the bill; he is signing a special contract which he has written upon it. If every person who merely places his signature upon a bill signs it within the meaning of section 56, then a mere witness, described as such, would incur the liability of an endorser. This, of course, could not be so. The statute cannot mean that a person who signs his name on a bill, with an express statement of the contract which he intends thereby to make, or of the capacity in which he signs, becomes liable to any greater extent than the special contract or capacity calls for. If this were not so, then a person who upon a bill for $1,000, wrote and signed a guarantee to the extent of $100 only, would under section 56 become liable for the whole thousand, a reductio ad absurdum.