Asked by Kayla Cohen on May 20, 2024
Verified
Which of the following is a correct statement regarding discharge by impairment of the collateral?
A) Discharge cannot occur through impairment of the collateral.
B) If a party posts collateral to ensure his or her performance of the negotiable instrument and the holder of the collateral impairs its value,the party to the instrument is discharged from the instrument to the extent of the damage to the collateral.
C) If a party posts collateral to ensure his or her performance of the negotiable instrument and the holder of the collateral impairs its value,the party to the instrument is totally discharged from the instrument regardless of the extent of the damage to the collateral.
D) If a party posts collateral to ensure his or her performance of the negotiable instrument and the holder of the collateral impairs its value,the party to the instrument is totally discharged from the instrument only if the instrument is for less than $500; otherwise,the party to the instrument is discharged from the instrument to the extent of the damage to the collateral.
E) If a party posts collateral to ensure his or her performance of the negotiable instrument and the holder of the collateral impairs its value,the party to the instrument is totally discharged from the instrument only if the instrument is for less than $1,000; otherwise,the party to the instrument is discharged from the instrument to the extent of the damage to the collateral.
Impairment Of Collateral
A decrease in the value or usability of property or assets that have been pledged as security for a loan, potentially affecting the secured party's interest.
Discharge
The completion, termination, or fulfillment of a legal obligation, duty, or contract.
Negotiable Instrument
A written promise or order to pay a specific sum of money that is transferable from one person to another.
- Learn about specific UCC provisions related to discharge, impairment of collateral, and the warranties involved in the transfer of negotiable instruments.
Verified Answer
JM
jasha moncurMay 21, 2024
Final Answer :
B
Explanation :
Uniform Commercial Code Section 3-605(d)states that if a party posts collateral to ensure his or her performance of the negotiable instrument and the holder of the collateral impairs its value,the party to the instrument is discharged from the instrument to the extent of the damage to the collateral.
Learning Objectives
- Learn about specific UCC provisions related to discharge, impairment of collateral, and the warranties involved in the transfer of negotiable instruments.