Debtor - Creditor Relationships - Suretyship: Rights of Parties

Question 1

What defenses are not available to a surety?

Answer 1

Capacity of the principal debtor; Bankruptcy of the principal debtor; Statute of limitations running on debtor’s obligation.

Question 2

What defenses are available to a guarantor?

Answer 2

Contracts defenses of the principal debtor such as fraud, duress, failure of consideration, breach.

Question 3

Under what circumstances are compensated and uncompensated discharged from liability?

Answer 3

On material alterations, uncompensated surety is discharged; compensated surety is discharged only if modification increases the risk.

Question 4

What defenses are available to a surety through creditor actions?

Answer 4

Release of debtor. Refusal by creditor to accept payment.
Material alteration of agreement with debtor.

Fraud and collusion with debtor to get guarantor to provide guaranty.

Release of collateral to debtor (but only released for the amount that is the value of the collateral).