Liability on a negotiable instrument that is imposed on a party only when the party primarily liable on the instrument defaults and fails to pay the instrument when due is referred to as ________.
A) secondary liability
B) unqualified liability
C) fringe liability
D) warranty liability

Question

Quizplus · Accepted Answer

Secondary liability is imposed on a party (such as an endorser or guarantor) only if the party primarily liable (such as the maker or drawer) defaults and fails to pay the instrument when due. This type of liability is also known as contingent liability.

Liability on a Negotiable Instrument That Is Imposed on a Party