Debtor-Creditor Relationship

Question 1

Suretyship and guaranty contracts should satisfy elements of contracts in general

Answer 1

• If surety’s or guarantor’s agreement arises at same time as the contract between creditor and debtor, no separate consideration is needed (consideration between creditor and debtor is still needed)
• Guaranty’s agreement to answer for debt or default of another must be in writing

Question 2

Once a debtor is represented by an attorney

Answer 2

the debt collector should communicate with that attorney rather than communicating with the debtor.

Question 3

Exoneration

Answer 3

1) Surety may require (by lawsuit if necessary) debtor to pay obligation if debtor is able before surety has paid
(2) Exoneration is not available if creditor demands prompt performance from surety

Question 4

A distinction between a surety and a cosurety is that only a cosurety is entitled to

Answer 4

contribution

Question 5

A seller of goods on credit required the buyer to obtain a surety to guarantee payment for the goods purchased. Which of the following defenses may the surety use to avoid payment?

Answer 5

I. The seller of the goods committed fraud against the buyer to induce him/her to buy the goods.
II. The seller of the goods committed fraud against the surety to induce the surety to guarantee payment.

Question 6

the surety will be discharged by

Answer 6

the creditor’s refusal to accept the principal debtor’s tender of full payment on a mature debt
- However, the tender of full payment will not discharge the principal debtor but will merely stop the running of interest on the monetary obligation.

Question 7

The general rule is that a surety is released from liability for acts of

Answer 7

the creditor which materially increase the surety’s risk.

Question 8

As sureties, the owners are immediately liable on the debts if

Answer 8

the corporation defaults. No notice need be given them.

Question 9

hen the creditor refuses to accept the principal debtor’s tender of payment,

Answer 9

the surety is released. However, the debtor remains liable as the accrual of additional interest stops.