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where the surety agrees to answer "for all legal or other expenses, or for collection." 10

SECTION 29. INSTANCES WHERE SURETY NOT LIABLE.

Where a surety's obligation is to answer for the acts or obligations of several persons he will not be liable for the act of one of the several persons alone." So a surety whose liability is limited to the acts of one person cannot be held liable for the acts of that person acting with others.12

This is simply another application of the rule that a surety is not to be bound beyond the express terms of the contract. And one who guarantees against loss for merchandise sold to a partnership will not be liable for goods sold to the partnership after the membership of the firm has been changed." The partner-, ship as changed is not in law the partnership existing before the change in its membership. So where a note is signed by a surety, with the maker thereof, to be used for a particular purpose, and the principal diverts the note from that purpose and the transferee has notice of that fact, the surety was held not to be bound.14 This was in other words held to be a departure from the contract as made.

One who consents to be liable as a surety for a particular purpose, cannot be presumed to have intended that his liability for the amount be extended for any other than the one stated in the

contract.

purpose,

10 McGhee vs. Importers & Traders Nat. Bank, 93 Ala., 192.

"Bill vs. Parker, 15 Gray, 62.

13 White Sewing Machine Co. vs. Hines, 61 Mich., 423.

455.

19 In re Cinque, 109 Fed. Rep.,
14 Brown vs. Tabor, 5 Wend., 566.

SECTION 30. WHEN SURETY MAY TERMINATE HIS LIABILITY BY NOTICE.

It is the general rule that the surety once he has become such cannot terminate his contract by giving notice to the obligee that he will not thereafter be liable further on the contract. This axiomatic principle must not be confused with the right of one who has offered himself as a guarantor to revoke his offer before it has been acted upon, or acceptance made of the offer. So, where authority is given by one to another person to draw on him and to accept the drafts so drawn, for a limited period, it is held that the authority is taken away by the death of the one who has authorized such credit.15 But here, again, the question is treated as one of agency purely.

Whenever the surety's contract carries with it the right to revoke on giving notice, this would ordinarily mean the giving of such a notice as would reasonably protect the obligee, in the absence of any certain stated time for the notice. Ordinarily the death of the surety will not have the effect of releasing his estate from liability for the further default of the principal within the time for which the surety's contract is to run.16 If all contracts of suretyship were to terminate on the death of the surety, they would be of very doubtful efficacy as a security to the obligee. The rule is, therefore, one of common sense and justice.

SECTION 31. IN GENERAL, WHAT THINGS WILL DISCHARGE THE SURETY.

It may be first stated generally, that whatever discharges the principal will likewise discharge the surety, and it follows that a release of the principal

Michigan State Bank vs. Estate

of Leavenworth, 28 Vt., 209.

16 Estate of Rapp vs. The Phoenix

Ins. Co., 113 I., 390.

debtor by the creditor would also release the surety." But if the creditor specially reserves his right to hold the surety, at the time he agrees to release the surety, the release will be construed as a covenant not to sue merely, and the surety will still be liable.18

When the rule is stated, that that which releases the principal will likewise release the surety, this does not include a release of the principal by operation of law. The most common case of such a release by act or operation of law, is a discharge of the principal in bankruptcy, which discharge does not carry with it the release of the surety.

It has been held by some courts that where the principal is named with the surety in a written obligation, but the principal fails to sign with the surety, that the contract is incomplete and therefore the surety is not bound.

Fraud on the part of the creditor, which is the inducement of the contract, would have the same effect as it would have in any contract; it would make the surety's contract a voidable one. As to what constitutes fraud sufficient to give the surety a right to claim a discharge will presently be spoken of specially.

One of the most frequent defenses claimed by the surety as a discharge from his liability under the contract, is that the terms of the contract have been materially altered by the obligee, so that the contract as changed imposes new conditions and are an increase of risk on the surety. And it is the rule that where the creditor by his own act or conduct has added new hazards to the surety's obligation, or where a new

"Trotter vs. Strong, 63 Ill., 272. 18 Bell vs. Manning, 11 Gratt, Ch.

142; Green vs. Wynn Law Rep., 4 Ch. App., Cas. 204.

Vol. IX.-11.

contract has been substituted for the original contract of the surety, that a discharge may be claimed, and will be allowed. But the rule might be stated in a more simplified way, by saying, that it makes no difference whether the risks of the contract have been increased, or diminished, the surety has a right to claim a discharge for any material alteration of his contract. 19 A violation, by the creditor, of the duties of his relation to the surety, as by the voluntary release of security belonging to the principal and held by the creditor, or the release of securities arising by reason of the misconduct of the creditor, have the effect of releasing the surety to the extent of the injury he suffers thereby; the surety being unable on account of the release of the security, to avail himself of his right to be subrogated to the creditor's rights in such securities. The law puts on the creditor the duty of observing the trust relationship that arises between him and the surety, where he acquires additional security for the payment of the obligation from the principal debtor.20

SECTION 32. ILLUSTRATION OF DISCHARGE BY MATERIAL ALTERATION.

Changing the date in a note only one day, without the surety's consent, was held to be a material alteration, even though the change was made to express the real intention of the parties. This case is an illustration of showing the strictness of the courts in forbidding any tampering with a written contract. In that case the law held it to be a material alteration and sufficient to discharge the surety," and it may be said to be the policy of the law to discourage anything that would

Patterson vs. McNeeley, 16 Ohio State 348; Hessell vs. Johnson, 63 Michigan, 623.

20 Kirkpatrick vs. Houk, 80 Ill., 122. "Newman et al vs. King, 54 Ohio State, 273.

tend to interfere with the maintenance of the integrity of written instruments. The law does not distinguish between an alteration of a written instrument made by the creditor or by the principal debtor; the surety will be discharged by any alteration unless the change in the instrument is by spoliation; that is, an alteration done, which is the act of a third person, or the result of accident.22

A change in the duties of the principal will release the surety who has given a bond for the due performance of the duties of the principal's office.23 So any alteration in the contract which increases the responsibilities of the principal debtor will discharge the surety on the original contract.

An extension of time given by the creditor to the principal, without the surety's knowledge and consent, is a frequent ground for claiming a discharge, both because of the alteration of the contract and because the risk of the surety is thereby increased." But the law requires the extension agreement to be founded on a proper consideration, in order that it work a release.25 And the granting of additional time could not be held to discharge the surety where the surety has been fully indemnified against loss by the principal's putting him in possession of property sufficient to pay the debt.20 The holder of a guaranteed note does not discharge the guarantor by taking collateral security of the maker without extending the time. Taking additional security does not weaken the original contract, nor take from the grantor any advantage.27 It could only be a benefit.

"Murray vs. Graham, 29 Iowa, 250. "National Mechanics Banking As

so. vs. Conkling, 90 N. Y., 116. "Bowmaker vs. Moore, 7 Price,

223.

25 Robinson vs. Dale, 38 Wis., 330. 36 Chilton vs. Robbins, 4 Ala., 223. "Sigourney vs. Wetherell, 6 Metc., 553.

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