§ 34.1-3-605 — Discharge of indorsers and accommodation parties

(a) In this section, the term "indorser" includes a drawer
having the obligation described in section 34.1-3-414(d).
(b) Discharge, under section 34.1-3-604, of the obligation
of a party to pay an instrument does not discharge the
obligation of an indorser or accommodation party having a right
of recourse against the discharged party.
(c) If a person entitled to enforce an instrument agrees,
with or without consideration, to an extension of the due date
of the obligation of a party to pay the instrument, the
extension discharges an indorser or accommodation party having a
right of recourse against the party whose obligation is extended
to the extent the indorser or accommodation party proves that
the extension caused loss to the indorser or accommodation party
with respect to the right of recourse.
(d) If a person entitled to enforce an instrument agrees,
with or without consideration, to a material modification of the
obligation of a party other than an extension of the due date,
the modification discharges the obligation of an indorser or
accommodation party having a right of recourse against the
person whose obligation is modified to the extent the
modification causes loss to the indorser or accommodation party
with respect to the right of recourse. The loss suffered by the
indorser or accommodation party as a result of the modification
is equal to the amount of the right of recourse unless the
person enforcing the instrument proves that no loss was caused
by the modification or that the loss caused by the modification
was an amount less than the amount of the right of recourse.
(e) If the obligation of a party to pay an instrument is
secured by an interest in collateral and a person entitled to
enforce the instrument impairs the value of the interest in
collateral, the obligation of an indorser or accommodation party
having a right of recourse against the obligor is discharged to
the extent of the impairment. The value of an interest in
collateral is impaired to the extent (1) the value of the
interest is reduced to an amount less than the amount of the
right of recourse of the party asserting discharge, or (2) the
reduction in value of the interest causes an increase in the
amount by which the amount of the right of recourse exceeds the
value of the interest. The burden of proving impairment is on
the party asserting discharge.
(f) If the obligation of a party is secured by an interest
in collateral not provided by an accommodation party and a
person entitled to enforce the instrument impairs the value of
the interest in collateral, the obligation of any party who is
jointly and severally liable with respect to the secured
obligation is discharged to the extent the impairment causes the
party asserting discharge to pay more than that party would have
been obliged to pay, taking into account rights of contribution,
if impairment had not occurred. If the party asserting
discharge is an accommodation party not entitled to discharge
under subsection (e), the party is deemed to have a right to
contribution based on joint and several liability rather than a
right to reimbursement. The burden of proving impairment is on
the party asserting discharge.
(g) Under subsection (e) or (f), impairing value of an
interest in collateral includes (1) failure to obtain or
maintain perfection or recordation of the interest in
collateral, (2) release of collateral without substitution of
collateral of equal value, (3) failure to perform a duty to
preserve the value of collateral owed, under article 9 or other
law, to a debtor or surety or other person secondarily liable,
or (4) failure to comply with applicable law in disposing of
collateral.
(h) An accommodation party is not discharged under
subsection (c), (d), or (e) unless the person entitled to
enforce the instrument knows of the accommodation or has notice
under section 34.1-3-419(c) that the instrument was signed for
accommodation.
(j) A party is not discharged under this section if (1)
the party asserting discharge consents to the event or conduct
that is the basis of the discharge, or (2) the instrument or a
separate agreement of the party provides for waiver of discharge
under this section either specifically or by general language
indicating that parties waive defenses based on suretyship or
impairment of collateral.
PART 7
ADVICE OF INTERNATIONAL SIGHT DRAFT