Sec 570

A party offering to act as guarantor must have reasonably prompt notice that his offer was accepted in order to bind him;2 and such notice can be inferred from all the circumstances of the case.3 This rule, however, is limited to those cases in which the offer of guaranty is a mere proposal. But, as is stated by Matthews, J., in a decision of the supreme court of the United States in 1881, " There seems to be some confusion as to the reason and foundation of the rule, and consequently some uncertainty as to the circumstances in which it is applicable. In some instances it has been treated as a rule, inhering in the very nature and definition of every contract, which requires the assent of a party to whom a proposal is made to be signified to the party making it, in order to constitute a binding promise; in others it has been considered as a rule springing from the peculiar nature of the contract of guaranty, which requires, after the formation of the obligation of the guarantor, and as one of its incidents, that notice should be given of the intention of the guarantee to act under it, as a condition of the promise of the guarantor. The former is the sense in which the rule is to be understood as having; been applied in the decisions of this court.4 The agreement to accept is a transaction between the guarantee and guarantor, and completes that mutual assent necessary to a valid contract between the parties. It was, in the case cited, the consideration for the promise of the guarantor. And wherever a sufficient consideration of any description passes directly between them, it operates in the same manner and with like effect. It establishes a privity between them and creates an obligation. The rule in question proceeds upon the ground that the case in which it applies is an offer or proposal on the part of the guarantor, which does not become effective and binding as an obligation until accepted by the party to whom it is made; that until then it is inchoate and incomplete, and may be withdrawn by the proposer. Frequently the only consideration contemplated is that the guarantee shall extend the credit and make the advances to the third person, for whose performance of his obligation, on that account, the guarantor undertakes-But a guaranty may as well be for an existing debt, or it may be supported by some consideration distinct from the advance to the principal debtor, passing directly from the guarantee to the guarantor. In the case of the guaranty of an existing debt, such a consideration is necessary to support the undertaking as a binding obligation. In both these cases, no notice of assent, other than the performance of the consideration, is necessary to perfect the agreement." Hence it was held that a guaranty made at the guarantee's request is the answer of the guarantor to the guarantee's proposal, and no further notice is necessary; and the same rule applies when the agreement to accept is contemporaneous with the guaranty, and forms its consideration. It was also held that when a guaranty is expressed to be in consideration of one dollar paid to the guarantor by the guarantee, the receipt of which is therein acknowledged, it is not an unaccepted proposal, requiring notice of acceptance to bind the guarantor, but without such notice becomes binding on delivery.1 The question Guarantors entitled to notice of acceptance.

1 Leake, 2d ed. 647; Whyte v. Ass. Co., cited in Moore v. Harris, L. R. 1 Ap. Ca. 330; see infra, sec 887.

2 Mozley v. Tinkler, 1 C. M. & R. 692; Reynolds v. Douglass, 12 Pet.

504; Morrow v. Waltz, 18 Penn. St. 118.

3 Adams v. Jones, 12 Pet. 207.

4 See Louisville Manuf. Co. v. Welch, 10 How. 475; Wildes v. Savage: 1 Story, 22.

1 Davis v. Wells, S. C. U. S. 1881. See City National Bank v. Phelps, 86 N. Y. 484. See to the effect that when there is a consideration for the contract of guaranty no notice is necessary to the guarantor, Breed v. Hillhouse, 7 Conn. 523; Douglass v. Howland, 24 Wend. 35; Whitney v. Groot, 24 Wend. 82; Smith v. Dunn, 6 Hill, 543; Union Bank v. Coster, 3 N. Y. 203; Powers v. Bumcratz, 12 Oh. St. 273; Caton v. Shaw, 2 Har. & G. 13; Cooke v. Orne, 37 111. 186; Carman v. Elledge, 40 Iowa, 409; Case v. Howard, 41 Iowa, 479; Davis S. M. Co. v.

Jones, 61 Mo. 409. The law in reference to letters of credit has been al ready distinctively discussed, supra, sec 25 a. As to guaranties in other relations, see supra, sec 436, 515.

In Thompson v. Glover, 78 Ky. 193, Hines, J., delivering the opinion of the court, said: "It is well established that there must be an acceptance of the offer of guaranty, and a notice, express or implied, to the guarantor of such acceptance. The reason of this rule is that the guarantor may have an opportunity of arranging his relations with the party for whose in such case is whether the contract of guaranty was completed between the guarantor and the guarantee. If it was, it is not necessary, as has been just seen, for any notice to be given to the guarantor in order to fix his liability; though it is otherwise where, from the structure of the agreement, or from other facts determining the relations of the parties, the guarantor's acceptance is dependent upon further notification.1 benefit or in whose favor the guaranty is given. The rule should not be pressed beyond this reason. When the whole of the transaction is connected, and of such a nature as to give the guarantor this information, no specific or formal notice is necessary."

In Powers v. Bumcratz, ut supra, the court said: "We have carefully examined the cases of Oxley v. Young, 2 H. Bl. 613, and Peel v. Tatlock, 1 Bos. & Pull. 419, and cannot see how the fairness and correctness of the comment upon them of Cowen, J., before quoted, can be denied or disputed. If there be English cases sustaining the doctrine of Douglas v. Reynolds, they have not been cited in the decisions of the courts of the United States. In several of the cases decided in the state courts English cases are cited. In Craft v. Isham, 13 Conn. 28, 39, which, though decided before Douglas v. Howland, had not been reported, and therefore is not referred to by Cowen, J., it is said, as to the decisions in Douglas v. Reynolds, and Adams v. Jones, that so far as be-ing opposed to or unsupported by authorities, they are founded on principles which long since have been settled and are familiar in Westminster Hall. We barely refer to the authorities." In Wilcox v. Draper, ut supra, after an elaborate survey of the authorities, Maxwell, C. J., said: "The question here involved is presented to this court for the first time. A desire to conform our rulings, where the authorities are conflicting, to those of the supreme court of the United States, and thus secure uniformity of decision, inclines us to follow the cases decided by that court. But it is of much greater importance that decisions shall be based upon sound principles and correct law. The rule as to notice as to guaranty was unknown to the common law, yet it is sought to engraft it on our jurisprudence as a common law rule - to attach conditions to the contract of guaranty which are not applied to other contracts. When a proposition of guaranty of one party is accepted by the other, this makes a complete contract. The proposition is made to the person of whom the credit is desired, and he accepts it. Upon what principles of law can it be said that this proposition, which was intended to be accepted and take effect from that date, should not be binding on the guarantor without notice ? The guarantor makes the person whom he vouches for and thinks worthy of credit so far his agent as to transmit the written guaranty by him, and is it not the business of the guarantor to inquire of him about what has been done under the guaranty ? We therefore hold that a direct promise of guaranty requires no notice of acceptance." See further infra, sec 710.