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.
An instrument frequently contains language which shows that the parties intend it to operate as a release, but that at the same time they intend it to have consequences which the law would not attach to a release. By a special application of the rule, that the general paramount intent controls the specific intent,1 and that every part of the contract is to be given effect if practicable,2 the courts will construe such an instrument as a covenant not to sue, rather than as a release, if it appears that the consequences provided for in such instrument were primarily intended by the parties and that the release was a mere incident thereto.3 Since the law did not tolerate a release of one joint debtor or of one joint and several debtor, with the reservation of the creditor of his rights against the remaining joint debtors or joint and several debtors, an instrument of this sort was frequently construed by the courts to be a covenant not to sue, although the language which was used was language which was specially appropriate to a release.4 A covenant not to sue, which is unlimited in point of time, is treated as equivalent in legal effect at least to a release, if it is given by a sole creditor to a sole debtor, or by all of the joint creditors to all of the joint debtors, or to all of the joint and several debtors.5 This view is rather a matter of practical convenience than an attempt to enforce the intention of the parties. If the covenant is really a covenant not to sue, it does not purport to discharge the existing right, but it merely binds the creditor not to enforce it as against the debtor. On the one hand, to treat such a covenant as equivalent to release, is either to ignore the intention of the parties or to grant specific performance at law; but, on the other hand, to treat such a covenant as a mere covenant not to sue, leaving the original creditor free to sue on the original cause of action, would result in giving a cause of action to the original debtor, upon the covenant not to sue. Two actions would thus be brought, in the first of which the creditor would recover against the debtor, and in the second of which the debtor would recover from the creditor the amount which the creditor had just recovered from the debtor. The construction thus adopted prevents this circuity of action.
7 Cobb v. Morrison. - N. H. - , 104 Atl. 829.
8 Hoe's Case, 5 Coke, 70b, 71a.
See also on this general question. Altham's Case, 8 Coke 148a. 150b; Hancock v. Field, Cro. Jac. 170; Tynan v. Bridges. Cro. Jac. 300; Whitton v. Bye. Cro. Jar. 486; Tetley v. Wanless, l. R. 2 Ex. 275.
2 See Sec. 2040.
3 Solly v. Forbes, 2 B. & B. 38: Ward v. New Zealand National Bank. 8 App. Cas. 755; Rice v. Reed [19001, 1 Q. B. 54; Bradford v. Prescot't, 85 Me. 482, 27 Atl. 461.
A covenant not to sell is not a release. Carey v. Bilby, 129 Fed. 203.
4 Price v. Barker, 4 Ell. & B. 760; Ward v. New Zealand National Bank, 8 App. Cas. 755.
See also, Line v. Nelson, 38 N. J. L. 358.
On the other hand, a covenant not to sue for a limited time has a legal effect which is substantially different from that of a release. A release must operate permanently or not at all. A right of action can not be suspended by a release.6 A covenant not to sue may, on the other hand, subject the creditor to an action on the part of the debtor if he brings an action in violation of such covenant. For these reasons a covenant not to sue for a limited time is not construed as equivalent to a release.7