containing the guaranty was intentionally misread to the guarantor and its purport misstated, at least where his physical or mental condition at the time was such as to excuse him from the duty of reading it for himself,160 and the rule is the same where the terms of the contract were correctly stated to him, but it was afterwards secretly changed in such a way as to be prejudicial to him.167 But while it is undoubtedly the rule that strict integrity and complete fairness are due from the creditor of a debtor to one who is about to become surety for such debtor, yet this will not excuse the surety from reasonable attention to the circumstances under which he is called on and reasonable diligence to inform himself as to the risk involved in the act he is about to do.168 And generally, the fact that a surety signs a bond or contract without reading it, when he is able to read and has an opportunity to do so, or without making any inquiry as to its contents, will prevent him from relying, for his defense, on the fact that its terms or purport are different from what he was told or what he supposed it to be.169 It should be added, in this connection, that misrepresentation or concealment, to be available as a defense to a surety or guarantor, must relate to a material fact,170 and that the defense of fraud will be held waived if the surety does not rescind or disaffirm his contract within a reasonable time after notice of the facts.171

A guaranty may also be revoked or rescinded on discovering a material mistake in matter of substance. 172 Thus,

166 Strouse V. Querns, 22 Pa. Super. Ct. 6; Shores-Mueller Co. v. Knox, 160 Iowa, 340, 141 N. W. 948. On the general rule as to fraud committed by misreading an instrument or misstating its contents, see, supra, § 57.

167 Machin v. Prudential Trust Co., 210 Pa. 253, 59 Atl. 1073. 168 Stedman v. Boone, 49 Ind. 469; Jones v. Swift, 94 Ind. 516; Wanamaker v. Powers, 102 App. Div. 485, 93 N. Y. Supp. 19.

169 Spring Garden Ins. Co. v. Lemmon, 117 Iowa, 691, 86 N. W. 35; Jaycox v. Trembly, 42 App. Div. 416, 59 N. Y. Supp. 245; International Text-Book Co. v. Mabbott, 159 Wis. 423, 150 N. W. 429. As to the general rule on the subject of signing an instrument without reading it, see, supra, §§ 52-57.

170 Baglin v. Title Guaranty & Surety Co. (C. C.) 166 Fed. 356. 171 Barnes v. Century Sav. Bank, 165 Iowa, 141, 144 N. W. 367. 172 Griggs v. Moors, 168 Mass. 354, 47 N. E. 128. See Bassett v. O'Neal Coal & Coke Co., 140 Ky. 346, 131 S. W. 25.

where a person signing a guaranty thinks that it is for eleven hundred dollars, when in reality it is for as many thousands, there is a mistake as to the substance of the contract, and the guaranty is binding only up to the amount as to which there was no error, and this is so although the mistake was not induced by the creditor or by any representations of his.178 A guaranty extorted by duress is void and unenforceable,174 but whether duress exerted upon the principal debtor will be available as a defense to the surety, is a question not yet entirely settled, in view of the general rule that the defense of duress is open only to the person upon whom it is imposed.175 A contract by which an insane person assumes the liabilities of a surety or guarantor is void, even though the other party had no knowledge of his insanity.17 But an undertaking by an infant as a surety or guarantor is voidable only and may be ratified by him after attaining his majority.1

177

A "continuing" guaranty is one which is not limited in time or to a particular transaction or to specific transactions, but is operative until revoked.178 Such a guaranty may be retracted and annulled before it has been acted upon or before reliance upon it has caused loss or injury,179 but after it has been acted upon, it cannot be revoked to the prejudice of the party secured in respect to past transactions, though it may be withdrawn as to other or additional liability thereafter.180 Thus, for instance, where directors of a corporation personally execute a continuing guaranty, securing payment for goods sold and to be sold by the

173 Newman v. Scarborough, 115 La. 860, 40 South. 248, 112 Am. St. Rep. 278.

174 Tandy v. Elmore-Cooper Live Stock Commission Co., 113 Mo. App. 409, 87 S. W. 614.

175 See Fountain v. Bigham, 235 Pa. 35, 84 Atl. 131, Ann. Cas. 1913D, 1185. And see, supra, § 224.

178 Edwards v. Davenport (C. C.) 20 Fed. 756; Van Patton v. Beals, 46 Iowa, 62. And see, supra, § 254.

177 Harner v. Dipple, 31 Ohio St. 72, 27 Am. Rep. 496.

178 Merchants' Nat. Bank v. Cole, 83 Ohio St. 50, 93 N. E. 465, Ann. Cas. 1912A, 773. See Malone v. Crescent City Mill & Transportation Co., 77 Cal. 38, 18 Pac. 858.

179 Radcliffe v. Varner, 55 Ga. 427.

180 Conduitt v. Ryan, 3 Ind. App. 1, 29 N. E. 160.

plaintiff to the corporation, the guaranty can be revoked or withdrawn at any time thereafter on notice to the plaintiff, in which case the liability of the guarantors will extend only to sales made pursuant to it before the notice.181 But a guaranty is not revocable at the pleasure of the guarantor where it is made to cover some specific transaction which is not yet exhausted, or where it is founded upon a continuing consideration the benefit of which the guarantor cannot or does not renounce. Thus, if the promise is to guaranty the payment of goods sold up to a certain amount, and after a part has been delivered, the guaranty is revoked, the revocation will be good, unless the promise was founded upon a consideration which has been paid to the guarantor for the whole amount, or unless the seller has, in reliance on the guaranty, not only delivered a part to the buyer, but bound himself by a contract enforceable at law to deliver the residue.182 If the guaranty is limited in respect to time, the effect is not quite so clear. In a case in Pennsylvania, it was held that one who has guarantied the payment of rent by a tenant under a yearly lease cannot relieve himself from liability during the year, but he may give notice to the landlord that he will not be bound beyond the end of the current year, and if this is done in sufficient time to enable the landlord to demand a new surety or give the tenant notice to quit, and he nevertheless permits the tenant to hold over, the guarantor will not be liable. 183 But on the other hand, an English decision holds that a guaranty to secure the repayment of money to be advanced to a third person on discount "for the space of twelve calendar months" is revocable within the year. It was said: "This promise by itself creates no obligation. It is in effect conditioned to be binding if the plaintiff acts upon it, either to the benefit of the defendants or to the detriment of himself. But until

181 Mamerow v. National Lead Co., 206 Ill. 626, 69 N. E. 504, 99 Am. St. Rep. 196; White Sewing Mach. Co. v. Powell, 25 Ky. Law Rep. 94, 74 S. W. 746; Singer Mfg. Co. v. Draughan, 121 N. C. 88, 28 S. E. 136, 61 Am. St. Rep. 657; Merchants' Nat. Bank v. Cressey, 164 Iowa, 721, 146 N. W. 761. But compare Calvert v. Gordon, 3 Man. & Ry. 124.

1822 Pars. Contr. 30.

183 Pleasonton's Appeal, 75 Pa. 344.

the condition has been at least in part fulfilled, the defendants have the power of revoking it. In the case of a simple guaranty for a proposed loan, the right of revocation before the proposal has been acted on does not appear to be disputed. Then are the rights of the parties affected either by the promise being expressed to be for twelve months, or by the fact that some discounts had been made before that now in question, and repaid? We think not. The promise to repay for twelve months creates no additional liability on the guarantor, but on the contrary fixes a limit in time. beyond which his liability cannot extend. And with respect to other discounts, which had been repaid, we consider each discount as a separate transaction, creating a liability on the defendants until it is repaid, and, after repayment, leaving the promise to have the same operation that it had before any discount was made, and no more." 184 After the principal has defaulted, or a breach of the guarantied contract has occurred, the guarantor may rescind his guaranty so far as concerns future transactions, though of course this will not release him from liability already incurred; or he may, in the same circumstances, demand such changes in the contract of guaranty, or in the arrangements between the other parties to the contract, as will guard him against similar occurrences in the future, and refuse to be further bound if his demands are not acceded to.185 Thus, "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 guarantied 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." "186 But even where a guaranty is clearly revocable, it cannot be revoked without a due regard to the rights

184 Offord v. Davies, 12 Com. B. N. S. 748.

185 Hunt v. Roberts, 45 N. Y. 691; Dwelling House Ins. Co. v. Johnston, 90 Mich. 170, 51 N. W. 200; Pacific Fire Ins. Co. v. Pacific Surety Co., 93 Cal. 7, 28 Pac. 842.

186 Emery v. Baltz, 94 N. Y. 408.

and interests of the person protected by it. Thus, in the case of a guaranty of a financial officer's fidelity, a proposed revocation cannot be made to take effect instantaneously, but time must be given to the employer to give notice to the employé and to the other sureties, if any, and to procure a new bond or guaranty.

187

§ 343. Partnerships.-Where a contract by which persons enter into a copartnership does not fix any limit of time for its continuance, either absolutely or by reference to the completion of a specific undertaking, but creates a mere partnership at will, either of the partners may withdraw from the firm and so terminate the contract at any time and at his mere pleasure, and if he acts in good faith, gives reasonable notice of his intention, and causes no unnecessary injury to the business of the firm, he is not answerable in damages for so doing.188 In such a case, the fact that one of the partners, on entering the firm, paid a bonus for a good-will established by the other partner will not prevent the latter from dissolving the partnership nor render him liable in damages. 189 But to justify the dissolution of a partnership at will, it is necessary that the renunciation of the partnership should be made in good faith and at a reasonable time, and not, for example, when the other partner is permissibly absent from the place where the business is done; and a partner who dissolves the partnership with an unfair design and for his own private advantage is liable for any damages sustained thereby by the other partner, 190

A partnership formed for a fixed and limited period of time, or for the accomplishment of a specific purpose and

187 Bostwick v. Van Voorhis, 91 N. Y. 353.

188 Howell v. Harvey, 5 Ark. 270, 39 Am. Dec. 376; Lawrence v. Robinson, 4 Colo. 567; Blake v. Sweeting, 121 Ill. 67, 12 N. E. 67; Carlton v. Cummins, 51 Ind. 478; Whiting v. Leakin, 66 Md. 255, 7 Atl. 688; Fletcher v. Reed, 131 Mass. 312; Berry v. Folkes, 60 Miss. 576; McElvey v. Lewis, 76 N. Y. 373; Skinner v. Tinker, 34 Barb. (N. Y.) 333; Collins v. Dickinson, 2 N. C. 240; McMahon v. McClernan, 10 W. Va. 419.

189 Carlton v. Cummins, 51 Ind. 478.

190 Howell v. Harvey, 5 Ark. 270, 39 Am. Dec. 376; McMahon v. McClernan, 10 W. Va. 419.