It may be first stated generally, that whatever discharges the principal will likewise discharge the surety, and it follows that a release of the principal debtor by the creditor would also release the surety.17 But if the creditor specially reserves his right to hold the surety, at the time he agrees to release the surety, the release will be construed as a covenant not to sue merely, and the surety will still be liable.18

Michigan State Bank vs. Estate of Leavenworth, 28 Vt., 209.

15 Estate of Rapp vs. The Phoenix Ins. Co., 113 I11., 390.

When the rule is stated, that that which releases the principal will likewise release the surety, this does not include a release of the principal by operation of law. The most common case of such a release by act or operation of law, is a discharge of the principal in bankruptcy, which discharge does not carry with it the release of the surety.

It has been held by some courts that where the principal is named with the surety in a written obligation, but the principal fails to sign with the surety, that the contract is incomplete and therefore the surety is not bound.

Fraud on the part of the creditor, which is the inducement of the contract, would have the same effect as it would have in any contract; it would make the surety's contract a voidable one. As to what constitutes fraud sufficient to give the surety a right to claim a discharge will presently be spoken of specially.

One of the most frequent defenses claimed by the surety as a discharge from his liability under the contract, is that the terms of the contract have been materially altered by the obligee, so that the contract as changed imposes new conditions and are an increase of risk on the surety. And it is the rule that where the creditor by his own act or conduct has added new hazards to the surety's obligation, or where a new contract has been substituted for the original contract of the surety, that a discharge may be claimed, and will be allowed. But the rule might be stated in a more simplified way, by saying, that it makes no difference whether the risks of the contract have been increased, or diminished, the surety has a right to claim a discharge for any material alteration of his contract.19 A violation, by the creditor, of the duties of his relation to the surety, as by the voluntary release of security belonging to the principal and held by the creditor, or the release of securities arising by reason of the misconduct of the creditor, have the effect of releasing the surety to the extent of the injury he suffers thereby; the surety being unable on account of the release of the security, to avail himself of his right to be subrogated to the creditor's rights in such securities. The law puts on the creditor the duty of observing the trust relationship that arises between him and the surety, where he acquires additional security for the payment of the obligation from the principal debtor.20

17 Trotter vs. Strong, 63 I11., 272. 18 Bell vs. Manning, 11 Gratt, Ch.

142; Green vs. Wynn Law Rep., 4 Ch. App., Cas. 204.