This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
17 See ch. LXXIII.
The only serious conflict of authority which has arisen upon this question is found in cases in which A and B have become jointly indebted to X as principal debtors, and subsequently by arrangement between themselves it is agreed that B shall be the principal debtor and A shall merely be surety. The most common case of this sort is found in partnerships in which one of the partners has retired and in which the remaining partner has assumed and agreed to pay the obligations of the firm. Since X, under his original contract, was entitled to hold A and B as primary debtors, no reason appears for allowing a subsequent agreement between A and B to alter X's right as against either; and, accordingly, it is held in a number of jurisdictions that X is not bound by such arrangement, and that as between X on the one side, and A and B on the other, the original debtors remain principal debtors,21 as long as X has not accepted such offer on the part of A and B for some valuable consideration. In other jurisdictions, however, it has been held that when X receives notice of such arrangement between A and B, he is bound thereby, whether he assents to such arrangements or not, and whether he receives any consideration for assenting thereto or not.22 A number of the American cases which have taken this view have followed the supposed authority of an early English case,23 in which it was contended by counsel that the creditor had assented to the arrangement whereby one of the original principal debtors became surety and in which the court assumed that such principal debtor was a surety without any discussion of the question. It was accordingly held in England in a subsequent case that such arrangement between A and B was not binding upon X, unless X had assented thereto and that mere notice of such arrangement was insufficient.24 In this case the earlier case 25 was explained on the theory that by new contract upon sufficient consideration X agreed that the retiring partner should be a surety for the former debt. In a subsequent case, however,26 the House of Lords repudiated the reasoning of the later case,27 and held that X was bound upon receiving notice of such arrangement between A and B. It was suggested that the case was substantially the same as one in which A was surety and B was principal, but B did not communicate such fact to X, and in which X learned of such intent on A's part subsequently; in which case it was said that X would be bound by notice of A's intention to assume the liability of a surety so that any subsequent act on the part of X, which would have discharged a surety, would operate to discharge B. It is to be regretted that this anomaly is to survive in England or in any American courts.
18 Moore v. First National Bank, 139 Ala. 595, 36 So. 777; Butler v. Bruce, 75 Neb. 322, 106 N. W. 445; Denison University v. Manning, 65 O. S. 138, 61 N. E. 706.
If the mortgagee does not assent to such arrangement he does not become a surety. Shepherd v. May. 115 U. S. 505, 29 L. ed. 456.
19Malanaphy v. Fuller & Johnson Mfg. Co., 125 Ia. 719. 106 Am. St. Rep. 332, 101 N. W. 640; Regan v. Williams, 185 Mo. 620, 105 Am. St. Rep. 600, 84 S. W. 959.
20 See on this question Meridian Life & Trust Co. v. Eaton, 41 Ind. App. 118, 82 N. E. 480 [denying rehearing, 81 N. E. 667].
21 North Dakota. Dean v. Collins, 15 N. D. 535, 9 L. R. A. (N.S.) 49, 108 N. W. 242.
Ohio. Rawson v. Taylor, 30 O. S. 389, 27 Am. Rep. 464.
Tennessee. Bryan v. Henderson, 88 Tenn. 23, 12 S. W. 338; Clinchfleld Fuel Co. v. Lundy, 130 Tenn. 135, L. R. A. 1915B, 418, 169 S. W. 563.
Texas. A. F. Shapleigh Hardware Co. v. Wells. 90 Tex. 110, 59 Am. St. Rep. 783, 37 S. W. 411.
Wisconsin. First National Bank v. Finck, 100 Wis. 446, 76 N. W. 608.
Contra, see Stein v. Benedict, 83 Wis. 603, 53 N. W. 891; Brill v. Hoile, 53 Wis. 537. 11 N. W. 42; Gates v. Hughes. 44 Wis. 332.
A different question is presented in which A and B have entered into a contract of which X has notice and in which X seeks to claim rights under a contract with B, which, if granted to him will act as a breach of such contract to A's injury.28 If A, the owner of certain realty, has entered into a contract with B, a contractor, for the construction of a building, by the terms of which it is provided that no liens under such contract shall be taken upon such building, a subcontractor who has a knowledge of such contract is bound by the terms thereof.29 In questions of this sort, however, the contract between A and B does not impose any liability upon X, but X is precluded from asserting rights against A in violation of the terms of such contract, because such contract is either by fair implication a part of the contract between X and B30 or else X, by his contract with B. has attempted to interfere with the performance between A and B.31 If A has agreed to furnish services to B under a contract which leaves A free to select the means of furnishing such services, B and 0 can not compel A to employ C to furnish such services by a contract between themselves to which A does not assent.32
22 England. Rouse v. Bradford Banking Co. , A. C. 586.
Georgia. Preston v. Garrard, 120 Ga. 689, 102 Am. St. Rep. 125, 48 S. E. 118.
Oklahoma. Johnson v. Jones, 39 Okk. 323, 48 L. R. A. (N.S.) 547, 135 Pac. 12.
New York. Oolgrove v. Tallman, 67 N. Y. 95, 23 Am. Rep. 90.
Wisconsin. Stein v. Benedict, 83 Wis. 603. 53 N. W. 891.
23 Oakeley v. Pasheller, 4 Clark & F.
207 Tfor opinion of court below see, Oakeley v. Pasheller, 10 Bligh (N. S.) 648].
24 Swire v. Redman, L. R. 1 Q. B. 536.
25Oakeley v. Pasheller, 4 Clark & F. 207 [for opinion of court below Oakeley v. Pasheller, 10 Bligh (N. S.) 548].
26 Rouse v. Bradford Banking Co. , A. C. 586.
27 Swire v. Redman, L. R. 1, Q. B. 536.