ExpertHard1 markMultiple Choice
CPA · Question 13 · Area II: Business Law
Which of the following defenses is available to a gratuitous surety but NOT to a compensated surety?
Which of the following defenses is available to a gratuitous surety but NOT to a compensated surety?
Answer options:
A.
A material modification of the creditor-debtor contract that increases risk.
B.
Fraud by the creditor.
C.
Discharge of the principal debtor's obligation by payment.
D.
A non-material extension of time given to the debtor.
How to approach this question
Gratuitous Surety = Discharged by ANY change. Compensated Surety = Discharged only by MATERIAL change increasing risk.
Full Answer
D.A non-material extension of time given to the debtor.✓ Correct
A gratuitous surety is discharged if the creditor extends the debtor's time to pay, even if the extension is not material. A compensated surety is discharged only if the modification is material and increases the surety's risk.
Common mistakes
Treating compensated and gratuitous sureties the same regarding contract modifications.
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