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against the principal although no cash has been parted with. The surety may recover the amount paid, and also any amount he has necessarily paid as expense by reason of the failure of the principal to pay. Such costs must be reasonable. The surety can never recover more than he has paid; for instance, if a surety pays the principal's claim at a discount, he cannot recover the face value of the claim from the principal. This is for the reason that the implied contract between principal and surety is that the former will reimburse the latter and nothing more.
A surety, when he is sued for the debt of his principal, is obliged to make a defense to the claim of the creditor, if he is aware of a defense, and he must use reasonable diligence in presenting such defense and in preventing a recovery. If the principal has a defense of which the surety has no knowledge, the latter need not plead it, and if a recovery is had against the surety, the principal is bound to reimburse him, although such recovery might not have been obtained against the principal. As in the case of a guarantor, when the obligation of the principal is due and he does not discharge it, the surety may apply to a court of equity to compel the principal to pay, or he may sue the creditor, to compel him to proceed against the principal.
The better course in such cases is for the surety to pay the claim and then to sue the principal for re-imbursement. A surety is not obliged to wait until he is sued upon the demand which the principal fails to pay; whenever such demand exists and the principal has defaulted, the liability of the surety is complete as far as the principal is concerned, and the surety may discharge it and hold the principal.
Rights of surety against creditor.-If the surety is induced to make his contract by the fraud of the creditor, or by fraud which he sanctions, and such fraud is material to the surety's contract, the latter will not be bound by it. It has been held by the courts that a creditor is obliged to inform the surety of material facts which affect the contract of suretyship, and without which such contract would not be made. Thus, if one who becomes surety upon the bond of an officer or employe of a corporation is induced to become such in ignorance of the fact that such officer or employe is already in default, the surety is not bound. Again, where & surety on a contract agrees to become such for a certain
amount, and there is a secret understanding between the principal and the creditor that the actual amount of the contract shall be less, and that the surety shall be called upon to pay under his contract of suretyship, the contract does not bind the latter. If one who is required to give bond for the performance of certain duties is incompetent to fulfill those duties, to the knowledge of the one in whose favor the bond is given, and such knowledge is not disclosed to the surety, the latter will not be bound. The mere fact, however, that the principal is already legitimately indebted to the creditor will not affect the gurety's contract. Neither is it necessary that the creditor should explain to the surety all the details of the transactions between him and the principal; if the principal desires minute information he must obtain it for himself. When a person becomes surety for the faithful performance of the duties of another, and such other makes default to the knowledge of his employer, the latter is not warranted in keeping him in his employ without the consent of the surety. If he does so and there is further default, the surety will be only liable for the default up to the time of discovery. A court of equity will entertain a suit by the surety against the creditor to compel the latter to enforce his claim against the principal so as to hold the surety harmless. Whenever the creditor brings suit against the principal the surety has a right to come in and defend the suit, as in most cases he is bound by the result of the suit. When a surety discharges the obligation of the principal, and the creditor holds any manner of security for such obligation, other than the surety's contract, the surety is entitled to whatever security the creditor holds. The surety is then subrogated to all the rights of the creditor in respect to such securities.
Contribution.-When there are several sureties and one of them pays more than his proportionate share of the debt of the principal, he is entitled to contribution from the others as in the case of several guarantors. A surety's right to contribution is exactly the same as that of a guarantor, and and what has been said in the previous section on this point applies, and need not be here repeated. When a surety or guarantor takes security from the principal to protect himself against loss, and there are other sureties or guarantors
liable on the same obligation, such security inures to the benefit of all, as the law does not allow one surety or guarantor to seek for himself a benefit in this way, to the exclusion of those who are liable with him.
Discharge of surety.-What will discharge a guarantor will usually discharge a surety. Whenever the principal is discharged, the surety is also discharged. If the contract between the principal and creditor is changed without the surety's consent, the latter is discharged. Such change must be one which affects the legal liabilities of the parties, however. An extension of time of payment given by the creditor to the principal will discharge the surety, if done without his consent and for a definite time. In order to discharge the surety, such extension must be valid in law, and must be one by which the creditor is prohibited from suing on his claim for a definite or reasonable lenghth of time. An alteration of a written contract without the surety's consent, if material, will discharge him. When one becomes surety for the performance of some personal duty of another, and such duty is changed without his consent, he is discharged. If, when the surety signs his contract, he stipulates, either orally or in writing, that it shall not be binding upon him until some other person also signs as surety, and such stipulation is known to the creditor, the surety is not bound until such person signs.
Whenever a creditor holds security of any kind for the payment of his claim, and he knows that one of the obligors is a surety, he has no right to surrender such security to the principal without the surety's consent. If such security is surrendered without consent, the surety is discharged to the extent of the damage done him. Such security must be held for the benefit of the surety as well as for the creditor. When a creditor releases one of several sureties, all of them are discharged unless such release is consented to by all.
A creditor always knows that when there are several parties liable on his contract whether they are all principals or whether one or more of them are guarantors, as a guarantor's contract is secondary and always in writing. But as a surety's contract is indentical with that of a principal's, the face of the contract may not show the relation existing between those who are liable on it. If the creditor knows that one liable on a contract is a surety, he cannot prejudice such surety's rights.
"The rule is well settled that wherever, as between joint or several obligors to a contract, the duty of one is primary and of the other secondary, so that, as between themselves, the obligation or the debt is properly that of the former, who thus owes to the latter the duty of exoneration, the relationship of principal and surety exists, no matter what the form of the contract or how absolute may be the undertaking of him who is in fact the surety. This relationship cannot vary or diminish the rights of the creditor upon the original contract. He may even ignore the principal debtor and sue the the surety alone, at his will or convenience, if the form of the contract warrants. But, if the fact of the true relationship between the debtors is brought to his knowledge, he owes to to him who is only secondarily liable that duty which the creditor uniformly owes to the surety, of having no transactions or dealings with the principal debtor which shall vary the surety's position or jeopardize him. This duty rests upon the the actual relation between the parties, and cannot be obscured or excused by any considerations of form or manner of contracting." Mere delay on the part of a creditor in proceeding against the principal, even though it result in damage to the surety, will not discharge the latter.
SALES OF PERSONAL PROPERTY.
A sale of personal property is a contract whereby for a stipulated sum, to be paid in money, an absolute right of property therein is transferred by one person to another. As a sale is a contract, it must have all the elements of a contract, to be valid. Every transfer of property, or of an interest therein, is not a sale. A sale cannot be effected unless the title to property, or some part thereof, passes absolutely from the seller to the buyer, and the buyer must receive control and dominion over the thing purchased. A sale can only be made for a money consideration; when the consideration is anything but money, the transaction is an exchange, although practically all the rules of law governing sales also govern exchanges. Sometimes it is difficult to ascertain whether a certain transaction amounts to a sale or whether it is some other contract. In such cases all the circumstances surrounding the transaction may be considered to determine what the intention of the parties was. A mere transfer of possession does not amount to a sale, as it creates only a limited and not an absolute right of property. For instance, a bailee has only a right of possession of personal property for a certain purpose. When there is a sale, the buyer has a right to keep the subject-matter, but a bailment contemplates a return of the property bailed to the bailor in its original or altered form. Sometimes a bailee has the right to the possession of property and has also the right to purchase it, or one may purchase with the right to return the thing purchased. In the first of these cases there is no sale until the right is exercised, and in the latter there is a sale until the option to return is exercised. A pledge or chattel mortgage of property is generally easily distinguished from a sale. In such cases only a limited right of property passes and the transaction contemplates a return of the property to