Asked by Darren Szack on Apr 24, 2024
Verified
As a condition of giving Doyle a thirty-year loan for $100,000,the Caldwell Bank requires that Doyle procure a surety.Doyle pays Sal $5000 to serve in this role.Later,Doyle and the bank make a binding contract to extend the term of the debt from thirty years to thirty years and three months.Will this change discharge Sal from his obligation? Make no assumptions except those stated here.
Surety
A surety is a person or entity that takes responsibility for another's performance of an obligation, such as the repayment of a loan, ensuring its fulfillment or providing compensation for failure.
Obligation
A legal or moral duty to perform or refrain from performing a specific act.
Term of the Debt
The length of time over which a borrower is required to repay a debt.
- Know the responsibilities and risks of various types of surety and guarantor roles in loan agreements.
- Analyze the impact of changes in loan agreements on the obligations of sureties.
Verified Answer
MN
Mahnoor NadeemMay 02, 2024
Final Answer :
It is very unlikely that this change would discharge Sal from his obligation.Sal is a compensated surety.Compensated sureties must show that they will be harmed by an extension of time before they are relieved of responsibility because of a binding extension without their consent.A compensated surety must show that a change in the contract was both material and prejudicial to him if he is to be relieved of his obligation as surety.In this case,the change in the term of the loan amounts to less than 1% and the facts give no other reason to think that the change is material or that it prejudices Sal.
Learning Objectives
- Know the responsibilities and risks of various types of surety and guarantor roles in loan agreements.
- Analyze the impact of changes in loan agreements on the obligations of sureties.
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