6. Discharge of persons secondarily we have seen, the maker of a note and the acceptor of a bill are primary debtors. Drawers and indorsers are only secondarily liable. A discharge of a debtor op erates as a discharge to parties who are liable to pay only if he fails to pay. Thus if the holder discharges the maker of note, he cannot hold the indorser, be cause by releasing the maker he is depriving the in dorser of his chance to collect from the maker.
7. Real we have already explained. real defences strike at the root of the contract. Where the contract, by reason of the minority or in sanity of the maker of a note, could not be entered into, the contract on the note never existed. Thus a note giVen in satisfaction of a gambling contract would be void. An instrument if materially altered without the assent of all parties liable on it is voided, except as against a party who himself has made, au thorized or assented to the alteration, or subsequent indorsers; but if the alteration is not apparent, a holder in due course may enforce payment of it, ac cording to its original tenor, as tho it had not been altered. The defence of payment at or after maturity is also a real defence.
8. holder may convert a blank in dorsement into a special indorsement; he may also strike out one or more blank indorsements, in which case any indorser subsequent to one struck out is dis charged. A holder or his agent may intentionally cancel a bill or note, and if the cancelation is apparent thereon it is discharged. Liability of any party liable on a bill or note may be discharged by the intentional cancelation of his signature by the holder or his agent. The usual mode of canceling a bill is to write the word "paid" or "discharged" across the bill or note. If the cancelation is made unintentionally, or under a mis take or without the authority of the holder, it is in operative, tho the burden of proof is on the person who alleges that the cancelation was made uninten tionally or under a mistake.
9. is the making of a false document, knowing it to be false, with the intention that it shall be used or acted upon as genuine, to the prejudice of any one, whether within Canada or not, or that some person should be induced, by the belief that it is genuine, to do or refrain from doing any thing. Signing the name of a nonexistent or fictitious person or firm with fraudulent intention has been held to be forgery. A forged signature cannot be ratified, tho where a signature is placed on an instrument without authorization, but under circumstances not amounting to a forgery, it may be ratified. Where a signature on a bill is forged, or is placed thereon with out the authority of the person whose signature it purports to be, the forgery or unauthorized signature is wholly inoperative. No right to retain the bill, or
to give a discharge therefor, or to enforce payment thereof against any party thereto can be acquired thru or under that signature, unless the party against whom it is sought to retain payment of the bill is pre cluded from setting up forgery or want of authority.
In order to protect a bank which may pay a check or bill payable to order on demand, where one or more indorsements may be forged or unauthorized, the statute provides that when a check payable to order is paid by the drawee upon a forged indorsement out of the funds of the drawer,. or is paid and charged to his account, the drawer shall have no right of action against the drawee for the recovery of the amount so paid, or any defence to a claim by the drawee for this amount, unless he, the drawer, gives notice of the forgery in writing to the drawee within one year after he has acquired notice thereof. In other words, an in dorser whose signature to a check has been forged, and out of whose account the amount of the check has been paid by the bank, must make claim upon the bank at once. If he waits for one year, he has lost any right to bring action, and the check will be con sidered to have been paid in due course. Where a partner in a commercial firm fraudulently accepts a bill in the firm name for his private debt, the firm cannot set up a fraud against a holder for value with out notice. The partner was presumed to have au thority from his co-partners to do all acts connected with the partnership business. It has been held, how ever, that where a defendant's name was signed by his nephew, for whom he was in the habit of indorsing, and where he had acknowledged his liability and asked for time, and only denied his liability after his nephew had absconded, it was held that he could not dispute his liability.
If a bill bearing a forged or unauthorized indorse ment is paid in good faith, and in the ordinary course of business, by or on behalf of the drawee or acceptor, the person by whom or on whose behalf the payment is made can recover the amount paid from the person to whom it was paid, or from any indorser who in dorsed subsequently to the forged or unauthorized in dorsement. But notice of the indorsement being forged or unauthorized must be given to each such subsequent indorser, within a reasonable time after the person seeking to recover has acquired notice that the indorsement is forged or unauthorized.