Exam 32: Nature of the Debtor-Creditor Relationship

When a surety pays a claim that it is obligated to pay,it automatically acquires the claim and the rights of the creditor which is known as subrogation.

Suretyship is a pledge to pay one's own debts and obligations.

If a debtor is about to leave the state,the surety may call on the creditor to take action against the debtor.

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):

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

In most states contracts of guaranty do not have to be in writing to be enforceable.

When a suretyship or guaranty contract is entered into after and separate from the original transaction,there must be new consideration for the promise of the guarantor.

The use of letters of credit arose in international trade.

A surety that has made payment of a claim for which it was liable as surety is not entitled to indemnity from the principal debtor.

The issuer of a letter of credit must verify that the underlying transaction has been performed.

Bailment given as security for the payment of a debt is a(n):

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?

Letter of credit transactions involve ______ contract(s).