2. (a) That the guarantor is discharged for want of such notice if the amount for which he is bound is an indefinite one; but (b) that he is not discharged for want of notice if the amount for which he is bound is definite.

In view of this conflict and the nicety of the distinctions it is safer for the creditor to notify the guarantor, upon default of the debtor, of the fact of such default and that the creditor looks to the guarantor for payment.

There is also much conflict as to when the guarantee is bound to disclose to the guarantor at the time of making the guaranty some fact known to the guarantee concerning the honesty, fidelity, or solvency of the principal. In some cases a guarantor has been relieved of liability because the guarantee concealed such knowledge, but the cases are by no means clear as to what constitutes fraudulent concealment.

Examples: 1. X has been state treasurer, and, known to the state officers who are required to take and approve his bond, he has been guilty of defalcation. They take a bond from B and others as sureties for the fidelity of the treasurer, concealing this knowledge. This is fraudulent concealment and B and the other sureties are not liable. The same result would be reached if an employer, knowing of the dishonesty of his clerk, afterwards took a fidelity bond to assure his honesty, concealing the prior dishonesty.

2. X is known to C to be financially weak or insolvent. C takes an obligation from X with B as guarantor, concealing this fact. B is not relieved. This is not fraudulent concealment. So it has also been held not to be fraudulent to conceal that the principal has been gambling, or is already indebted to the guarantee. If, however, the guarantor asks the guarantee about such matters, he must answer fully and fairly if he answers at all.

91. What will discharge the guarantor. A guarantor may be discharged from his liability, and it remains to consider what will operate to work such a discharge.

1. Discharge of the principal. If the principal is voluntarily discharged or released, the guarantor is also discharged, unless he consents to such release. But he is not discharged by an involuntary release, as a release in bankruptcy by force of law.

A covenant by the creditor not to sue the debtor, coupled with a reservation of the rights against the guarantor, is held

in England and in some of our states not to discharge the guarantor; and an agreement for release with such reservation is construed to be a covenant not to sue. But this exception is not recognized in some of our states.

Examples: 1. B guaranties X's debt to C, who discharges X from liability, giving him a release under seal. B is also discharged.

2. In above (Example 1) X becomes embarrassed and creditors agree to take 60 cents on the dollar and release X. C receives his 60 per cent. X is released. So is B.

3. In above (Example 1) X goes into bankruptcy and is discharged by payment of 60 per cent. X is released but B is not. C may recover the additional 40 per cent from B.

2. Alteration of contract. If the creditor has altered the terms of the contract with the debtor without the consent of the guarantor, the latter is discharged.

Examples: 4. C guaranties payment for a specified engine to be sold by B to A. Afterwards A decides to take a different engine at a different price. C is discharged.

5. C guaranties payment of a note from B to A, due on September 11. B and A by mutual assent change the note to read October 11. C is discharged. His contract is destroyed by an alteration made without his consent. It would be the same if the date were changed to August 11.

3. Extension of time to debtor. If the creditor definitely extends the time of payment to the debtor without the consent of the guarantor, the latter is discharged.

Example 6. C has guarantied to B the payment of a debt due from A on April 1. B in consideration that A will give him a note extends the time to June 1. C is discharged.

7 (Exception). There is an exception to this rule in the case where the creditor while extending the time to the debtor expressly reserves his right against the guarantor. This is because the rights of the guarantor against his principal are not impaired, since the latter impliedly agrees that the guarantor may at once pay the debt to the creditor and proceed against the principal for indemnity.

A mere forbearance to sue, or an unenforceable promise to forbear, is not an extension of time to the debtor.

4. Surrender of securities by creditor. If the creditor surrenders to the debtor securities held for the enforcement of the debt, the guarantor is discharged to the extent he may be injured thereby.

5. Failure of creditor to proceed against debtor after notice. In New York and some other states, if the guarantor directs the creditor to proceed against the debtor and the creditor fails to do so, the guarantor is discharged if the debtor afterwards becomes insolvent. This is also a statutory rule in some states; but generally it is not in force, and it does not apply, even in New York, to an indorser of a negotiable instrument.

6. Revocation by guarantor. If the consideration for a guaranty consists of an act to be done in the future by the guarantee, a notice of revocation before the act is done will be effectual and will relieve the guarantor. If the consideration consists of a series of acts to be done by the guarantee, notice of revocation will be effectual as to those not yet done, but will be ineffectual as to those already done.

Example 8. B writes to X, "If you let C have goods for his store during the coming year, I will guarantee payment." On January 10 X lets C have goods to the value of $150, and on February 5 to the value of $175. On March 1 B notifies X that he will be no longer liable for goods sold C. On March 15 X lets C have $250 worth of goods. B is liable as guarantor for $325, but not for the $250.

7. Death of guarantor. The death of the guarantor has the same effect as an express revocation, though some states require that the guarantee should have actual notice of the death in order that it should operate as a revocation.

Example 9. In Example 8, suppose B died on March 1. In many states this would operate to revoke the guaranty as to any advances made thereafter. In other states it would operate only from the time X had notice of it. In any event B's estate would be liable for the advances made before his death.

Surety. In the case of a surety, as distinguished from a guarantor, some special results of revocation or death must be noted. (1) It is a technical rule of the law (when not modified by statute) that where an obligation is joint the death of one joint obligor extinguishes the liability as to him, and the survivor alone is liable. If A as principal and B as surety jointly promise to pay C, the death of B relieves his estate. But if the promise is joint and several (“We, A as principal and B as surety, jointly and severally promise to pay C $100 "), the death of one party does not relieve his estate. This technical rule has now been very generally changed by statute so that the death of a joint obligor does not extinguish

the claim as to his estate. Under the above rule the death of a joint surety would of course revoke liability as to future advances. (2) If the suretyship is joint and several, the death of the surety does not revoke the suretyship, as does the death of a guarantor. A guaranty is collateral, but a suretyship is a part of the original contract itself and stands or falls with it. (3) (a) In the case of an indemnity bond for an indefinite period the surety may at any time give notice of revocation, leaving the employer whose employee's fidelity was assured a reasonable time to get other sureties. (b) But in the case of indemnity bonds for a definite period the surety cannot withdraw unless the employee or officer has defaulted so that he may be removed, or unless the surety has reserved in the bond the right to withdraw upon due notice. (c) The death of a surety on a joint and several bond does not terminate the liability of his estate even as to a breach by the principal occurring after the death of the surety.

An indemnity is in some respects like a suretyship and in some like a guaranty.

8. Retention of principal after knowledge of his dishonesty. If the guaranty be against the dishonesty or defalcation of the principal, the guarantor will be discharged if the guarantee, after knowledge of the principal's dishonesty, continues him in his service.

9. Main contract nonenforceable against principal. If the main contract is illegal, and so not enforceable against the principal, the collateral contract of guaranty is also nonenforceable. This rule has been applied to usurious contracts. So also, if the main contract was procured from the principal by fraud and cannot for that reason be enforced, the guaranty of it is also unenforceable. The same has been held of contracts procured by duress, but some cases have escaped this rule where the guarantor signed with knowledge of the duress. Failure of consideration which renders the main contract nonenforceable also relieves the guarantor.

But the fact that the principal is an infant, or of unsound mind, or a married woman, and so may escape liability, will not release the guarantor. These are defenses personal to the principal and the guarantor cannot avail himself of them.

92. Guarantor's liability. The guarantor's liability is fixed by the terms of the contract. This may stipulate for a definite sum or for such sum as the debtor is liable for. The guarantor

may be compelled to pay without resorting to the principal debtor, unless, indeed, he has merely guarantied the collection of a debt, in which case the creditor must first exhaust his remedies against the debtor.

Examples: 1. "I hereby guaranty the within note. C." The holder of the note may proceed against C without first proceeding against the maker of the note.

2. "I hereby guaranty the collection of the within note. C." The holder must first exhaust his remedies against the maker before proceeding against C.

93. Guarantor's remedies. A guarantor who has paid his principal's debt or obligation is entitled to the following remedies.

1. Indemnity against principal. The guarantor may recover from his principal all money properly paid on account of the guaranty, together with any costs reasonably incurred in defending the creditor's claim. In order to safeguard himself the guarantor should give the principal notice of an intended payment in order that the principal may interpose to the creditor's claim any defense he thinks fit.

2. Subrogation to rights of creditor. The guarantor is entitled to be subrogated to all collateral securities held by the creditor for the payment of the debt.

Example 1. B borrows money of A and gives as security certain bonds in pledge and also the guaranty of C. C pays the debt to A. C is entitled to the bonds in pledge as security for his claim against B.

3. Contribution from co-guarantors. If two or more persons are joint guarantors for the principal, and one of them pays the entire debt, he is entitled to a pro rata contribution from his co-guarantors. If one be insolvent, or out of the jurisdiction, the others may be compelled to contribute ratably.

Example 2. C, D, and E are co-guarantors for a debt of $1200 owed to B by A. C pays the entire debt. He is entitled to recover at law $400 each from D and E. If E be insolvent and unable to pay, then C may recover in equity $600 from D.