and his estate is liable for defaults occurring subsequent to the guarantor's death,88

An appointment of a principal to a private position for a definite period on an entire consideration, would seem to be governed by the rule preventing the surety or guarantor, by giving notice, to relieve himself from liability for future breaches of contract.88

§ 91. Termination where no definite time is expressed. May the surety relieve himself from responsibility for future defaults of the principal by notifying the obligee that he will no longer be liable, where no definite period of time for the continuance of the guaranty was mentioned? The New York Court of Appeals stated the rule in this language:

"A surety bound for the fidelity and honesty of his principal, and so for an indefinite and contingent liability, and not for a sum fixed and certain to become due, may revoke and end his future liability in either of two cases, viz.: first, where the guaranteed contract has no definite time to run; and, second, where it has such definite time, but the principal has so violated it and is so in default that the creditor may safely and lawfully terminate it on account of the breach." 84

The reason for permitting revocation is that a continuing guaranty, until acted upon, is only a promise, conditioned to be

32 Carr v. Ladd, Adm'x (1803) Smith (N. H.) 45. See opinion of Judge Deady in Hecht et al. v. Weaver (1888) 34 Fed. 111.

38 Lloyds v. Harper (1880) 16 Ch. D. 290. In the opinion by Joyce, J., in the case of In re Crace (1902) L. R. 1 Ch. D. 733, it is said: "Now, the right to determine or withdraw a guarantee by notice forthwith cannot possibly exist, in my opinion, when the consideration for it is indivisible, so to speak, and moves from the person to whom the guarantee is given once for all,

as in the case of the consideration being the giving or conferring an office or employment upon any person whose integrity is guaranteed. It is impossible that the guarantor should be entitled by notice, unless he has expressly so stipulated, to determine that guarantee instanter.''

84 Emery v. Baltz (1884) 94 N. Y. 408, 414. See explanation of Emery v. Baltz in Reilly et al. v. Dodge et al. (1892) 131 N. Y. 153, 158, 29 N. E. 1011. Also see National Liberty Insurance Co. of America v. Meyer et al. (1926) Ohio Ct. of App. 153 N. E. 162.

binding if the promisee acts upon it, either to his detriment or the promisor's benefit.85

Where a guarantor gives notice that he revokes his executory contract, reasonable time must be afforded the obligee to adjust himself. Notice by the guarantor will not, in all cases, revoke the guaranty.36 This is especially true in case the principal's contract is one of employment. The obligee must be given reasonable time to find new sureties, or be able to dismiss the employee without injury to himself, unless, of course, the employee has committed an act coming to the obligee's notice which would require that the guarantor be advised of it.37

Instead of classifying the guaranties into those having a definite time to run, and those for an indefinite time, the same idea seems expressed by some courts by classifying them into guaranties made for an entire consideration, and those where the consideration is divisible and separable. Instances of socalled continuing guaranties, or those extending for an indefinite period, or for a divisible consideration, may be cited the guaranty for goods to be supplied in the future, or future loans to be made.38

35 Offord v. Davies et al. (1862) 12 C. B. N. S. 748, 142 Eng. Rep. Reprint 1336. But compare this case with Bradbury et al. v. Morgan et al., Executors (1862) 1 H. & C. 249, 158 Eng. Rep. Reprint 877, the authority of which s questioned in National Eagle Bank v. Hunt, Adm'r (1888) 16 R. I. 148.

36 See Tischler v. Hofheimer et al. (1887) 83 Va. 35, 4 S. E. 370.

87 La Rose et al. v. Logansport National Bank (1885) 102 Ind. 332, 1 N. E. 805, 812; Bostwick v. Van Voorhis (1883) 91 N. Y. 353, 363. The compensated surety seems permitted to revoke according to Vidi v. United Surety Co. (1913) 155 App. Div. 502, 140 N. Y. S. 612, 614.

88 National Eagle Bank v. Hunt, Adm'r (1888) 16 R. I. 148.

CHAPTER V.

DEFENSES OF SURETY OR GUARANTOR ARISING BY ACT OF THE PARTIES SUBSEQUENT TO THE FORMATION OF THE CONTRACT.

§ 92. Diligence required of the obligee to the indorser, guarantor, and surety. The defenses which will release the indorser are entirely different from those available to the guarantor. This is because of the difference in the two contracts. The guarantor promises to pay if the obligee cannot recover from the principal. This presupposes (a) diligence on the part of the obligee to collect from the principal, and (b) notice to the guarantor. Failure to perform this duty by the obligee will release the guarantor only to the extent he has been injured thereby. But the drawer and indorser of a foreign bill of exchange are absolutely discharged for failure to protest it,1 or generally for failure to present any negotiable instrument for payment, or to give notice of the non-acceptance or nonpayment of any negotiable instrument. Both the guarantor and indorser, being "secondary parties," will be absolutely discharged from liability on any negotiable instrument by the discharge of the instrument, cancellation of his signature, discharge of a prior party, release of the principal without reservation of right against the person secondarily liable, or by any binding contract between the holder and the principal to extend the time for payment. The indorser's liability is an outgrowth of the law merchant which held that his contract "is to pay upon demand by the holder upon the drawer, and notice of nonpayment or of dishonor to him."5

The surety assumes a primary liability, and in the absence of statute, the obligee is not required to exercise due diligence to collect from the principal, is not required to demand payment from the principal, and need not give notice of his principal's default. So far as negotiable instruments are concerned, a

1 See N. I. L., Secs. 118 and 152. 2 In Sec. 70, N. I. L., it is provided that "except as herein otherwise provided, presentment for payment is necessary in order to charge the drawer and indorsers."'

3 N. I. L., Sec. 89.

4 N. I. L., Sec. 120.

5 Pattillo v. Alexander (1895) 96 Ga. 60, 22 S. E. 646, 647, 29 L. R. A. 616, which adds: "And, if he fail to perform this duty to give

timely notice of nonpayment, the law presumes injury to the indorser and discharges him."'

6"All that a surety has a right to require of his creditor, in the absence of any statutory provision, is that no affirmative act shall be done that will operate to his prejudice." People v. Whittemore et al. (1912) 253 Ill. 378, 97 N. E. 683, 685. Accord: Villars v. Palmer, Adm'r et al. (1873) 67 Ill. 204.

surety, being primarily liable, under the Negotiable Instruments Law, can be discharged only by the payment of the instrument in due course, its cancellation, by an act which would discharge a simple contract, or when the principal becomes holder in his own right after maturity.7 But the common-law defenses available to a surety are not changed in the case of non-negotiable instruments.

§ 93. The effect of the discharge of the principal upon the surety. This language clearly states the generally accepted rule:

"It may be taken as settled law that where there is an absolute release of the principal debtor, the remedy against the surety is gone because the debt is extinguished, and where such actual release is given no right can be reserved because the debt is satisfied, and no right of recourse remains when the debt is gone.'

But acceptance from the principal by the creditor of a forged instrument, whether for renewal or otherwise, does not discharge the obligation. This does not constitute payment, and in the absence of bad faith or negligence on the part of the obligee, the surety on the undertaking supposed to be paid, is not discharged. Likewise a creditor who accepts in good faith