Scottish Court of Session Decisions

This was an action at the instance of Stewart, Moir & Muir, muslin manufacturers, Glasgow, for the price of goods sold by them to J. Nelson Ramsay & Co., Glasgow, and for which the defender, John Brown, grocer, Glasgow, was liable under a letter of guarantee granted by him to the pursuers.

The letter of guarantee was in the following terms:—“I hereby become security to you for all goods supplied by you to Messrs J. Nelson Ramsay & Co., 11 West Nile Street, between the sum of twenty-five and seventy-five pounds sterling; that is to say, when their account exceeds twenty-five pounds I will be responsible for the difference between that and seventy-five pounds, you assuming the responsibility of the first twenty-five pounds. John Brown.”

Inter alia, the defender pleaded—“(1) The document founded on is not holograph of the defender, and is not tested properly. It is not stamped. It therefore constitutes no valid obligation on the defender. (5) The pursuers took bills or promissory notes from J. Nelson Ramsay & Co. for the amount of the account in question, and discharged the said account, or otherwise they, without the defender's knowledge or consent, gave to the said J. Nelson Ramsay & Co. time and indulgence beyond the ordinary period of credit, and they, by one or other of these acts, freed and liberated the defender from his liability, if it ever existed.”

The Sheriff-substitute ( Dickson) held that the defender had been freed from his obligation, and issued an interlocutor to the following effect:—“Finds that prior to the granting of the said letter of guarantee the pursuers had supplied to the said J. N. Ramsay & Co. goods as in the account libelled on, and that upon the footing of the usual credit in the trade, which was that the accounts should be made up and rendered monthly—on the 20th of each month—and paid cash, under deduction of certain discount, at the expiry of that month, or on an early day in the following month; and that it was not consistent with the practice of the trade, or the usual course of dealing between the parties prior to the said letter being granted, to settle the said accounts by bill: Finds that the pursuers did, on 1st June, settle the amount due by J. N. Ramsay & Co. on that date by taking from the said firm two bills at one month's date, for £45, and £39, 11s. 7d. respectively, drawn by the pursuers on and accepted by the said firm; but finds it not proved that the account sued on was therefore

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discharged. Finds that in thus accepting a settlement by bill the pursuers deviated from the custom of the trade, and from the usual course of trading between them and the said firm; and that it is not proved that they did so with the knowledge or consent of the defender: Finds that by so doing the pursuers have liberated the defender from his obligation under the said letter of guarantee, and sustains the defence on that ground accordingly, and assoilzies the defender.”

The pursuers appealed; and the Sheriff-Depute ( Glassford Bell) recalled the interlocutor of the Sheriff-Substitute in so far as it assoilzied the defender.

He remarked in his Note—“The guarantee founded on is open and general. It makes no reference to any terms of settlement or course of dealing or custom of trade. It is simply a guarantee of payment to a certain amount of goods to be furnished on credit. It is true that there had been a previous course of dealing between the pursuers and Ramsay & Co., the parties guaranteed, under which they (the pursuers) were in use to render their accounts monthly on the 20th of each month, and if they were paid on the first Monday or Friday of the following month they were subject to a discount of 6 1 2 per cent., and if not paid till the expiry of a month from the date of rendering, to a discount of 2 1 2 per cent.; but there is no evidence that these were the invariable and exclusive terms either of the trade at large, or of the pursuers; it being, on the contrary, shown that the pursuers had on one occasion taken a bill from Ramsay & Co. at a short date, and then partially renewed it for another short date. It appears also that it was with the very view of getting the period of credit extended when required that Ramsay & Co. offered caution. The witness John Nelson Ramsay depones—‘I agreed to find personal guarantee to get the account extended by way of a longer credit in supply of goods.’ It farther appears that when the defender granted his cautionary obligation he made no inquiries, and did not know what the terms of settlement were. Being examined as a witness, he says—‘I made no inquiry when granting the guarantee as to the state of Ramsay & Co.'s account. I had no personal communication or correspondence with the pursuers at the time. No Statement or account was shown to me then of the position in which Ramsay & Co. stood with the pursuers.’ His letter simply binds him to see paid to the extent of £50 ‘all goods supplied,’ which must mean supplied on reasonable and ordinary credit; for if the payments were to have been cash there would have been no need of security. Now, although the pursuers were desirous of having prompt payment, for which they gave 6 1 2 per cent, discount, and if they did not get that, preferred as the next best, payment within a month, for which they gave 2 1 2 per cent, discount; this did not deprive them of the discretion of settling at a longer credit with no discount, and their taking bills at one month was merely exercising their discretion, as they had done before. The Sheriff is very much fortified in these views by the authority of the case of Bowe and Christe, 19 March 1868, which seems to be nearly on all fours with the present.”

The defender appealed.

Burnet for him;

Campbell Smith in answer.

At advising—