Zahra agreed to act as surety for a loan taken by her son, Rudo, from the Third National Bank. The terms of the loan provided that Rudo would pay the loan off in 12 monthly installments at 10 percent. If Rudo renegotiates the terms of the loan with the bank without Zahra's knowledge and is now obligated to pay the loan off in 12 monthly installments at 9 percent, which of the following statements is true?
A) Renegotiation of the note by Rudo does not relieve Zahra of liability as surety because the new terms are more favorable than the original terms.
B) Zahra must notify the bank in writing that she no longer wishes to act as surety in order to avoid liability under the new terms.
C) Zahra must notify Rudo in writing that she no longer wishes to act as surety in order to avoid liability under the new terms.
D) Zahra is no longer obligated because her responsibilities as a surety cannot be changed without her consent.

Question

Quizplus · Accepted Answer

A surety contracts to be responsible for the performance of the principal's obligation. If the principal and the creditor change that obligation by agreement, the surety is relieved of responsibility unless the surety agrees to the change. This is because the surety's obligation cannot be changed without his or her consent. In this scenario, Zahra is no longer obligated because her responsibilities as a surety cannot be changed without her consent.

Zahra Agreed to Act as Surety for a Loan Taken