a creditor extended the time of payment as to one of three sureties for a debt. Later he sued one of the other sureties, who set up as a defense that the creditor had extended the time as to a co-surety. The court held this was a good defense, and he was released to the extent of his right of contribution, here one-third of the entire debt.

§ 50. Release of co-surety with reservation of rights against the others. A creditor, however, may agree with one co-surety that he will not sue him on his suretyship obligation, but will reserve his rights against the other co-sureties. In such case the other co-sureties will not be released (40), for this is interpreted, not as a release, but as a covenant not to sue the surety with whom the agreement is made. No right of the co-surety is affected by such an agreement made by the creditor. The co-surety may pay the debt and enforce his right of contribution the same as before such agreement was made. For instance, suppose A and B are sureties for a debt and the creditor agrees with A that he will not sue him but will reserve his right to sue B. Suppose the creditor then sues B, who, being liable for the whole debt, has to pay it. B has a right of contribution against A and can sue A and recover one-half of the amount he paid. A covenant not to sue A would therefore be of little value to him. Likewise, a creditor may release one surety from his proportion of the debt, reserving his right against the co-surety for his proportion. Clearly this could not injure the latter, for he actually would be released as to all but his own proportion of the debt.

(40) Thompson v. Lack, 3 Common Bench Reports, 540.

§ 51. Effect of discharge of co-surety in bankruptcy. When there are several sureties for a debt and one becomes bankrupt, the remaining sureties are liable for the entire debt; and, after paying it, can proceed to collect what they can get from the insolvent estate. Suppose A, B, C, and D are co-sureties for a debt of $1,200. If all are solvent each is liable for one-fourth, or $300; that is, any one can pay the debt and recover $300 from each of the other three. If A and B become insolvent, then C and D are liable for $600 each; and, if they pay, must get what contribution they can from the estates of A and B. The fact the creditor proves his claim against a bankrupt surety and gets a dividend does not discharge co-sureties, except that the debt is paid to the extent of the dividend received (41).

§ 52. Effect of accident and mistake. If a bond or other written instrument be destroyed or lost through some accident, so that a suit cannot be maintained on it at law, recovery can be had in equity. A surety on such an obligation is not discharged because of the loss of the instrument, though one of the surety's rights is injured, namely, his right to be subrogated to the creditor's right to sue at law on the instrument, because an action at law cannot be maintained on a lost instrument. However, this was not due to any fault of the creditor. The rule would be otherwise if the creditor deliberately destroyed the instrument. If he did this he could not recover, even from the principal.

If by mistake the instrument signed by the surety fails (41) Ex parte Gifford, 6 Vesey, 805.

to express the agreement the parties intended it to express, so that at law the surety is either not liable at all or is liable in a mode not intended, the instrument may be reformed by a court of equity and the surety held on it according to the terms of the agreement as intended, although such reformation clearly binds him in a way he was not bound before reformation was decreed. Equity corrects such errors to prevent gross injustice, though it is clearly changing a contract or forcing a liability on the surety which he did not actually assume, though he did in fact intend to assume it. See Equity Jurisdiction, Chapter VI, in Volume VII of this work.

§ 53. Assurance or promise of creditor that he will look to principal only. An oral assurance made by the creditor to the surety after the debt is due, that he will look to the principal only for payment, will discharge the surety, if, relying thereon, he omits to pay the debt or fails to secure himself, and thus changes his position in respect to the obligation to his actual detriment (42). Thus, he may surrender to the principal securities, or be otherwise misled to his disadvantage. But a bare statement by the creditor that the principal's responsibility is sufficient security for the debt, or that he will not look to the surety, standing alone, will not estop the creditor from recovering from the surety, unless the surety was actually misled to his disadvantage by reason of such statement. Ordinarily the law regards such statements as mere expressions of opinion or intention, which neither invite confidence, nor is confidence likely to be reposed in them.

(42) West v. Brison, 99 Missouri, 684.

They are not binding as contracts for want of a consideration.

A release of the surety by the creditor of course has no effect on the liability of the principal debtor, but he still remains liable for the entire debt. His liability is in no way changed by release of the surety. A surety may even buy from the creditor his release from the obligation, leaving that of the principal intact (43).

§ 54. Creditor informing surety that debt is paid. When the creditor gives notice to the surety that the debt has been paid, and the surety in consequence changes his situation by surrendering securities or forbearing to obtain securities, or has otherwise sustained loss, the surety is discharged, though in fact the debt was not paid, and such notice was given by mistake and without fraudulent intent. If there is a mistake it is at the peril of the creditor and he will not be heard to complain (44).

§ 55. Notice of revocation. The general rule is that a surety or guarantor cannot relieve himself from future liability by serving notice on the obligee that henceforth he refuses to be liable, unless he has a stipulation in the contract providing that he may give such notice. Thus, in a Pennsylvania case (45) a surety for rent on a lease for a term of years served notice on the lessor that he would not be liable for rent in the future, but the court held he could not revoke his obligation by merely serving notice. He has made a definite legal contract which he has no right to break. A simple guaranty for a proposed loan,

(43)

McIlhenney v. Blum, 68 Texas, 197.

(44) Baker v. Briggs, 8 Pickering (Mass.) 122.
(45) Coe v. Vogdes, 71 Pennsylvania State, 383.

however, may be revoked by the guarantor before the proposed guaranty has been acted on, for, until acted upon, it is only an offer to guaranty. There is no contract entered into in such a case when the notice is given. Where a surety has stipulated that he may terminate his liability by giving notice to the creditor, after he has given such notice he is not liable for subsequent acts or defaults of the principal.

If a surety guarantees the performance of a contract by a certain date, and the principal gets into default be fore that date, the surety can, if he so desires, give notice to the creditor to stop performing the contract; and he will not be liable for additional damages due to continued performance, but will be liable for whatever damages are due on the whole contract taken as if performance was stopped at the time notice was given (46). This is because when one party to a contract stops performance, the other cannot continue performance and pile up the damages, but the damages are estimated at the loss which would be occasioned if the performance stopped at that point.

§ 56. Death of surety. Death of the surety does not ordinarily terminate his contract, and if defaults occur after death his estate is liable. Thus, a surety on a cost bond died, after his death there was a default on the bond, and suit was brought against his estate. The court held that the death of the surety did not revoke his obligation as surety, but his estate continued liable as surety for de

(46) Hunt v. Roberts, 45 New York, 691.