Gary decided to borrow from Jones Bank since it promised that his loan interest rate would be systematically reduced every year when the board met.The loan rate was never reduced, but actually increased monthly.Gary refused to pay the interest demanded and sued for rescission of the contract.The bank attempted to collect from Lewis, a surety under the loan.Does Lewis have to pay?
A) No, because the surety stands in the shoes of the debtor for all purposes.
B) Yes, because there is no defense.
C) Yes, since the surety obligation is separate from the underlying contract.
D) No, because a fraud perpetrated upon Gary will be a defense.

Question

Quizplus · Accepted Answer

A surety can assert the defenses of the principal debtor if the debtor's obligation was affected by fraud, as in this case where the bank did not adhere to the promised conditions.

Gary Decided to Borrow from Jones Bank Since It Promised