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Brown cosigned Royal's $50,000 note to State Bank. If Royal is later adjudicated mentally incompetent, what would be Brown's liability on the note?
Any contract made by a party legally deemed incompetent is voidable, and a voided contract would release the liability of all parties involved.
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Which of the following rights does a surety have?
I. Right to compel the creditor to collect from the principal debtor
II. Right to compel the creditor to proceed against the principal debtor’s collateral
As a rule, a surety generally has no rights to compel the creditor to collect from the principal debtor. Such rights are only available to a guarantor of collectability, who is liable only if the creditor has exhausted all other legal remedies.
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Which of the following events will release a noncompensated surety from liability?
A non-compensated (or gratuitous) surety is bound to the contract if he or she makes a promise to act as a surety prior to consideration changing hands from the creditor to the debtor. A gratuitous surety is released from liability only in a change of the original contract.
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Per the Federal Fair Debt Collection Practices Act, which of the following would a collection service using improper debt collection practices be subject to?
The FDCPA gives parties injured by unfair collection practices the right to sue for damages. It does not provide for any of the other answers given.
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Of the following defenses, which would a surety be able to assert successfully to limit the surety’s liability to a creditor?
A surety may raise his or her own contract defenses to limit his or her liability, thus the surety’s own incapacity is a defense to the surety promise.
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Of the following rights and liabilities, which does a surety have?
A surety does not have the rights listed, as the surety acts to back up the debts of another party. Thus, the surety would have the liability on debt they agreed to backstop.
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