Adam Wright, Esq., late of Glasgow, now of Edinburgh v. Dugald Paterson, Merchant in Glasgow [1814] UKHL 6_Paton_38

UKHL
Adam Wright, Esq., late of Glasgow, now of Edinburgh v. Dugald Paterson, Merchant in Glasgow
[1814] UKHL 6_Paton_38 · 1814-07-04
A letter of guarantee was granted, having reference to past as well as future contractions. In an action against the cautioner, Held that this was not a cautionary obligation, requiring to be attested in terms of the statutes, but a letter of guarantee in re mercatoria , and therefore constituted a valid obligation. Affirmed in the House of Lords.The appellant granted to the respondent a letter of guarantee for Messrs Simpson and Co., manufacturers in Glasgow, in the following terms:—
“ Glasgow, July 13, 1806.
Mr D. Paterson ,Sir,—I hereby bind myself to see you paid for whatever purchases of cotton yarns, &c., Messrs Joseph Simpson and Co. has made, or may make, from you, for twelve months to come from this date.—I am, yours,

(Signed) Adam Wright .”

The respondent had delivered cotton yarns to Joseph Simpson and Co. per account, to the amount of £621, 7s. 4d. £229, 17s. 5d. of these yarns had been delivered prior to the date of the letter , and the rest after its date.Simpson and Co. having become bankrupt, and an action having been raised, against the cautioner, for payment of the whole amount of £621, 7s. 4d., the defence stated was, that all obligations of this nature require to be attested by witnesses, and the name of the writer mentioned in the instrument in terms of the statutes thereanent. In reply, it was pleaded

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Dec. 5, 1807.

The Lord Ordinary at first pronounced this interlocutor:

“Finds that the letter founded on by the pursuer, is not a letter in re mercatoria , in so far as regards the furnishings made to Simpson and Co. prior to the date of it ; but is a proper cautionary obligation for payment of a debt already due. Finds that the letter is a sufficient guarantee for the subsequent articles of the account, which were all furnished within twelve months after the date thereof. Finds that the two first articles of the account, furnished prior to the date of the letter, amount together to the sum of £229, 17s. 5d. Sustains the defences pleaded for the said defender, and assoilzies him from the action, so far as regards these two articles, and decerns; but repels the defence, quoad ultra , and finds the defender, Adam Wright, liable to the pursuers for the amount of the other articles of the account, being £391, and for the interest thereof, from the period libelled, and in time coining, during the non-payment, and decerns.”
Dec. 18, 1807.The appellant lodged a representation, but the Lord Ordinary adhered, declaring, “That it was the meaning of the Lord Ordinary to declare, by his interlocutor, that the letter in question being properly a cautionary obligation for a debt already incurred, could not be held to be a letter of guarantee, as in re mercatoria ; and, with this explanation, refuses also the second prayer of the representation, superseding extract till the third sederunt day, in January next.”June 14, 1808.The respondent, on his part, thereafter represented, and the Lord Ordinary pronounced this interlocutor:alleged that the representer's letter of guarantee pursued on, is either holograph, bears the writer's name, or is signed before witnesses, adheres to the former interlocutor, and refuses the desire of the representation, and prohibits any more representations from being received.”
“In respect it is admitted that the two first articles of the account pursued for, and from the claim for which the respondent stands assoilzied by the interlocutor brought under review, were furnished by the representer to Simpson, previous to the date of the respondent's letter of guarantee to the representer Simpson—Finds, that the said letter can be considered in no other light than as a cautionary obligation by the respondent (appellant) to the representer, for the amount of these two articles; finds, that a cautionary obligation for a debt already and actually due, cannot be held to be in re mercatoria , or to be validly constituted by a writing defective in the legal solemnities. And as it is not

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Feb. 16, 1809.July 4, 1809.The respondent then reclaimed to the Second Division of the Court, but the Court adhered. On further reclaiming petition by the respondent, the Court altered “the interlocutor complained of; repel the defences pleaded against the first articles of the account libelled on. Find the defender liable to the pursuer for the amount thereof, being £229, 17s. 5d., and for the interest thereof as libelled, and decern; superseding extract till the first box-day in the ensuing vacation; and if a petition shall then be printed and boxed, supersede further until that petition shall be disposed of.” *

Footnote

* Opinions of the Judges:—

Lord Meadowbank .—“The law of Scotland bends to the lex mercatoria for the facility of commerce, and on this principle, there is strong reason to doubt the judgment. A letter of guarantee is as often given on account of a transaction finished, as on account of future furnishings; because a person will often furnish no more unless he is guaranteed for payment of what he has already advanced. This is done every day by bills, and by ordinary letters in rebus mercatoriis ; and it would be detrimental to commerce to require regular writings in transactions of frequent occurrence. By a bill which is neither holograph nor tested, a cautionary obligation might, undoubtedly, have been undertaken; and there is no very good reason why it should not by a missive letter. But this case is still stronger; of two obligations (one of them confessedly valid), both are contained in the same sentence. The second never would have been acted upon without the first. It extended credit to the future transactions. There is, therefore, a rei interventus . The guarantee of the first was relied upon when credit was given for the future.”Lord Glenlee .—“I am for altering; I think the guarantee of past transactions is in rê mercatoriâ in rê mercatoriâ . The only criterion of what is so is, What is necessary for explication of mercantile business? In that view, I cannot distinguish between past and future transactions. The situation is frequent; and to give a bond for the one, and a missive for the other, is quite unnatural. If a bond were taken at all, both would be thrown into it. A letter of credit for a sum advanced, including former advances, is very ordinary, and has always been held good. The making of the further advances proceeds on that faith, and the transaction occurs daily, and is quite natural.”

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On reclaiming petition by the appellant, the Court adhered, and found the defender liable in expenses, subject to modification.Jan. 31, 1810.Mar. 3, 1810.On further reclaiming petition, the Court adhered, but corrected their interlocutor in regard to the point of expenses, and remitted to the Lord Ordinary, to adjust and determine as to these. This being done,The appellant brought his appeal to the House of Lords against these interlocutors.Pleaded for the Appellant .—By the authority of the Scottish statutes, 1540 c. 117; 1579 c. 80; 1593 c. 175; 1681 c. 5; the writing founded on by the respondent is null and void, because it is not attested by witnesses named and designed in it, and, because, the name of the writer of the document is not mentioned in it. This branch of the law of Scotland, by preventing forgery, and insuring deliberate attention to important deeds, ought not to be relaxed. And the writing in question, so far as it contains a cautionary obligation or guarantee for a debt previously due, is not a document

Footnote

Lord Newton .—“I distinguish as to res mercatoria between furnishings made on a missive at the time, and a cautionary obligation for a debt already existing. In the one case, there may be a limitation of time, and in the other there is not. As to the notion of rei interventus , that plea is not well founded. My opinion of the law is clear, that cautionary is a literarum obligatio . It is true about seventy years ago, doubts were stirred about obligations, in the form of a missive, but these were groundless, and put an end to, by the judgments in Lawson's case and others. I was counsel in the case of Syme in 1772, and the result was, that in reference to a verbal engagement, prior to the missive, the party swore that he bound himself for a third only, and he was assoilzied, quoad ultra . If the case is not so reported, it ought to be so.”Lord Justice Clerk ( Boyle ).—“I have doubts as to the interlocutor. The letter cannot be separated, and we are not entitled to presume that any further furnishings would have been made, but for this letter. That is matter of opinion and conjecture, it is true; but that the thing is doubtful, is reason sufficient why we should not take on us to divide a transaction which, on the face of the writing, is one and indivisible. If there had been a simple cautionary obligation for the past furnishings, it would have required a bond . I go on the circumstances of the case, not on the general law of cautionary as laid down by Lord Newton.”Vide Hume's Collection of Session Papers.

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Pleaded for the Respondent .—1st. As to the price of the goods sold subsequently to the letter of guarantee, the respondent contended, (1st), that the appeal was incompetent, because, after the interlocutors of 6th December, and 18th December 1806, he did not submit these to the review of the Inner House, in so far as the amount of these goods was concerned, £391, 9s. 11d., but acquiesced in the same, and, therefore, the appeal is in violation of the statute, 48 Geo. III. c. 151, disallowing “appeals from interlocutors or decrees of the Lord Ordinary, which have not been reviewed by the judges, sitting in the division to which such Lord Ordinary belongs.” As to one part of the account, namely, the goods delivered subsequent to the date of the guarantee, the cause was never reviewed by the judges of the second division, and, therefore, the appeal is incompetent. But (2d), there are no grounds, either in law or in fact, for questioning the judgment of the Lord Ordinary with regard to the future furnishings. The appellant on the contrary, in the pleadings on the other branch of the cause, never disputed that the letter was a writing in rê mercatoriâ in rê mercatoriâ , with regard to these furnishings; and, consequently, the objection of the want of legal solemnities, does not apply to it. 2d. In regard to the price of the goods sold before the date of the guarantee, it is quite clear, that the letter is a writing in rê mercatoriâ in rê mercatoriâ , with regard to these past furnishings; and there is no ground for a distinction between the one and the other in the terms of the letter, or in the principles of mercantile law, or in precedent, or in the practice of merchants. Though even the letter were a simple cautionary obligation, yet as the appellant's subscription is acknowledged, it is thereby rendered a probative and legal obligation, without the aid of the statutory solemnities.

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After hearing counsel, it was

Ordered and adjuged that the interlocutors complained of be, and the same are, hereby affirmed.Counsel: For the Appellant, Robert Forsyth, J. P. Grant. For the Respondent, Wm. Adam, W. G. Adam.