Which of the following defenses is available to a gratuitous surety but NOT to a compensated surety?

Answer options:

A material modification of the creditor-debtor contract that increases risk.

Fraud by the creditor.

Discharge of the principal debtor's obligation by payment.

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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