Exam 32: Nature of the Debtor-Creditor Relationship

Sureties have no rights to protect them from loss, to obtain their discharge because of the conduct of others that would be harmful to them, or to recover money that they were required to pay because of the debtor's breach.

The use of letters of credit arose in international trade.

Which of the following contract defenses cannot be raised as a defense against suretyship obligations?

Bud is unable to obtain a loan without some form of additional reassurances. Bud comes to you for assistance. You are willing to help Bud, but you wish to protect yourself from liability as much as possible. Would you prefer a surety or a guaranty? The bank issuing the loan also wishes to protect itself as much as possible. Would the bank prefer a surety or guaranty? If your oral assurances are enough to solidify the loan, has a surety or guaranty been formed?

Howard bought goods from Williams. Howard sent Williams a draft covered by a letter of credit issued by First National Bank. Is the bank required to investigate to determine whether the goods sent by Williams conform to the contract?

Otella borrowed $5,000 from a bank and was behind in her payments. Later, Armand wrote to the bank that Armand would "make good" Otella's obligations if Otella did not pay. Armand's agreement is:

If an issuer requests its correspondent bank where the beneficiary is located to notify the beneficiary of the issuance of a letter of credit, the correspondent bank is called a(n):

In a guaranty contract, the obligor is called a:

If the issuer of a letter of credit dishonors a draft without justification, it is liable to its customer for:

Standby letters of credit are used only in international trade situations.

A surety that has made payment of a claim for which it was liable as surety is entitled to indemnity from the principal debtor.

If a guaranty contract is entered into subsequent to the original transaction:

Consideration is not required to establish or modify a letter of credit.