1 This was the ground upon which the case of Hamilton v. Watson, 12 Clark & F. 119, was decided. No fraud was alleged, but simply a concealment of material facts, and the ground of the decision was that the facts concealed were not material. The Lord Advocate and Solicitor-General said: "The principle of law is not disputed here, but its applicability to the present case. In all the cases cited there was a concealment of something which affected the very nature of the contract entered into by the surety." . . . "Admitting to the fullest extent the authority of these cases (Pidcock v. Bishop, Smith v. Bank of Scotland, Leith Banking Co. v. Bell), it is submitted that they do not apply to the present. The only fact that the bankers here could communicate was that Elles was not able at the moment to pay his own debts, and could not get money except through the credit of a third person. But that fact was evident from the circumstance of his requiring a surety; for had he been in nourishing circumstances, there would have been no need of a surety to obtain him a credit. The argument on the other side cannot be maintained without the appellant going the length of contending that the surety is entitled to know the specific use to which the money raised on his credit is to be applied. Information to that extent would in most cases be impossible; and if any necessity to impart it could be imposed on bankers, they must altogether refuse cash credits to any of their customers." This view was completely sustained by the court, and was the ground of the decision. The Lord Chancellor said: "I have already stated during the argument that I considered that there was no averment of any agreement as to the mode in which the money was intended to be applied." "The mere circumstance of the parties supposing that the money was intended to be applied to a particular purpose, and the fact that it was intended to be so applied, do not appear to me to vitiate the transaction at all." Lord Campbell said: "The question is, what, upon entering into such a contract, ought to be disclosed? and I will venture to say, if your lordships were to adopt the principles laid down and contended for by the appellant's counsel here, that you would entirely knock up those transactions in Scotland of giving security upon a cash account, because no bankers would rest satisfied that they had a security for the advance they made, if, as it is contended, it is essentially necessary that every thing should be disclosed by the creditor that is material for the surety to know. If such was the rule, it would be indispensably necessary for the bankers to whom the security is to be given to state how the account has been kept, whether the debtor was in the habit of overdrawing, whether he was punctual in his dealings, whether he performed his promises in an honorable manner; for all these things are extremely material for the surety to know. But unless questions be particularly put by the surety to gain this information, I hold that it is entered into after the execution of the original contract,1 cannot, however, be extended beyond the actual terms of his engagement.2 Whenever, therefore, he fairly assumes a liability, it may be extinguished by any act or omission of the guarantee which alters the terms of the contract, unless it be with his consent.3 Nor does it matter that such an alteration be for the benefit of the guarantor, because he has a right to stand upon the very terms of his agreement.4 So, also, inasmuch as the contract of the guarantor and surety is dependent upon that of the principal debtor, the discharge or release of such principal discharges the surety5 also. Thus, if the creditor, without the consent of the guarantor, and without reserving his rights against him,6 agree, upon sufficient consideration,7 to give time to the principal debtor;8 or make an arrangement with him, altering the terms of the
§ 1126. There is, however, one exception to this rule, that the discharge of the principal is a discharge of the surety, which obtains when the discharge arises from causes which originate with the law, and therefore alter the contract with the implied consent of the guarantee. Thus, where a surety claimed relief on the ground that the defendants, who were creditors, signed the certificate in bankruptcy of the principal debtor after the plaintiff had given them notice not to do so, it was deemed to be no ground for discharging the surety.1
§ 1127. The liability of a surety, though the relation be quite unnecessary for the creditor to whom the suretyship is to he given, to make any such disclosure; and I should think that this might be considered as the criterion whether the disclosure ought to be made voluntarily, namely, whether there is any thing that might not naturally be expected to take place between the parties who are concerned in the transaction, that is, whether there be a contract between the debtor and the creditor, to the effect that his position shall be different from that which the surety might naturally expect; and if so, the surety is to see whether that is disclosed to him. But if there be nothing which might not naturally take place between these parties, then, if the surety would guard against particular perils he must put the question, and he must gain the information which he requires. Now, in this case, assuming that there had been the contract con tended for, and that that had been concealed, that would have vitiated the suretyship. There is no proof, nor is there any allegation that there was any such contract. There is, therefore, neither allegation nor proof, and what then does the case rest upon? It rests merely upon this, that at most there was a concealment by the bankers of the former debt, and of their expectation that if this new surety was given, it was probable that that debt would be paid off. It rests merely upon non-disclosure or concealment of a probable expectation. And if you were to say that such a concealment would vitiate the suretyship given on that account, your lordships would utterly destroy that most beneficial mode of dealing with accounts in Scotland." This opinion by Lord Campbell, if taken together with that delivered by him the previous year in the case of Railton v. Matthews, 10 Clark & P. 939 (see supra), seems clearly to indicate the rule of the text to be that adopted by him. See, also, Evans v. Keeland, 9 Ala. 42; Lee v. Jones, 17 C. B. (n. s.) 482, 506; Phillips v. Foxall, Law R. 7 Q. B. 666 (1872).