§ 6A-3-605 - Discharge of indorsers and accommodation parties.
SECTION 6A-3-605
§ 6A-3-605 Discharge of indorsers andaccommodation parties. – (a) In this section, the term "indorser" includes a drawer having theobligation described in § 6A-3-414(d).
(b) Discharge, under § 6A-3-604, of the obligation of aparty to pay an instrument does not discharge the obligation of an indorser oraccommodation party having a right of recourse against the discharged party.
(c) If a person entitled to enforce an instrument agrees,with or without consideration, to an extension of the due date of theobligation of a party to pay the instrument, the extension discharges anindorser or accommodation party having a right of recourse against the partywhose obligation is extended to the extent the indorser or accommodation partyproves that the extension caused loss to the indorser or accommodation partywith respect to the right of recourse.
(d) If a person entitled to enforce an instrument agrees,with or without consideration, to a material modification of the obligation ofa party other than an extension of the due date, the modification dischargesthe obligation of an indorser or accommodation party having a right of recourseagainst the person whose obligation is modified to the extent the modificationcauses loss to the indorser or accommodation party with respect to the right ofrecourse. The loss suffered by the indorser or accommodation party as a resultof the modification is equal to the amount of the right of recourse unless theperson enforcing the instrument proves that no loss was caused by themodification or that the loss caused by the modification was an amount lessthan the amount of the right of recourse.
(e) If the obligation of a party to pay an instrument issecured by an interest in collateral and a person entitled to enforce theinstrument impairs the value of the interest in collateral, the obligation ofan indorser or accommodation party having a right of recourse against theobligor is discharged to the extent of the impairment. The value of an interestin collateral is impaired to the extent (i) the value of the interest isreduced to an amount less than the amount of the right of recourse of the partyasserting discharge, or (ii) the reduction in value of the interest causes anincrease in the amount by which the amount of the right of recourse exceeds thevalue of the interest. The burden of proving impairment is on the partyasserting discharge.
(f) If the obligation of a party is secured by an interest incollateral not provided by an accommodation party and a person entitled toenforce the instrument impairs the value of the interest in collateral, theobligation of any party who is jointly and severally liable with respect to thesecured obligation is discharged to the extent the impairment causes the partyasserting discharge to pay more than that party would have been obliged to pay,taking into account rights of contribution, if impairment had not occurred. Ifthe party asserting discharge is an accommodation party not entitled todischarge under subsection (e), the party is deemed to have a right tocontribution based on joint and several liability rather than a right toreimbursement. The burden of proving impairment is on the party assertingdischarge.
(g) Under subsection (e) or (f), impairing value of aninterest in collateral includes (i) failure to obtain or maintain perfection orrecordation of the interest in collateral, (ii) release of collateral withoutsubstitution of collateral of equal value, (iii) failure to perform a duty topreserve the value of collateral owed, under chapter 9 or other law, to adebtor or surety or other person secondarily liable, or (iv) failure to complywith applicable law in disposing of collateral.
(h) An accommodation party is not discharged under subsection(c), (d), or (e) unless the person entitled to enforce the instrument knows ofthe accommodation or has notice under § 6A-3-419(c) that the instrumentwas signed for accommodation.
(i) A party is not discharged under this section if (i) theparty asserting discharge consents to the event or conduct that is the basis ofthe discharge, or (ii) the instrument or a separate agreement of the partyprovides for waiver of discharge under this section either specifically or bygeneral language indicating that parties waive defenses based on suretyship orimpairment of collateral.