§ 554.3605

554.3605 Discharge of endorsers and accommodation parties. 1. In this section, the term 'endorser' includes a drawer having the obligation described in section 554.3414, subsection 4. 2. Discharge, under section 554.3604, of the obligation of a party to pay an instrument does not discharge the obligation of an endorser or accommodation party having a right ofrecourse against the discharged party. 3. 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 extensiondischarges an endorser or accommodation party having a right of recourse against the partywhose obligation is extended to the extent the endorser or accommodation party proves thatthe extension caused loss to the endorser or accommodation party with respect to the rightof recourse. 4. 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, themodification discharges the obligation of an endorser or accommodation party having a rightof recourse against the person whose obligation is

on of a party other than an extension of the due date, themodification discharges the obligation of an endorser or accommodation party having a rightof recourse against the person whose obligation is modified to the extent the modificationcauses loss to the endorser or accommodation party with respect to the right of recourse.The loss suffered by the endorser or accommodation party as a result of the modification isequal to the amount of the right of recourse unless the person enforcing the instrument provesthat no loss was caused by the modification or that the loss caused by the modification wasan amount less than the amount of the right of recourse. 5. 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 endorser or accommodation party having a right of recourse against theobligor is discharged to the extent of the impairment. The value of an interest in collateral isimpaired to the extent the value of the interest is reduced to an amount less than the amount ofthe right of recourse of the party asserting discharge, or the

The value of an interest in collateral isimpaired to the extent the value of the interest is reduced to an amount less than the amount ofthe right of recourse of the party asserting discharge, or the reduction in value of the interestcauses an increase in the amount by which the amount of the right of recourse exceeds thevalue of the interest. The burden of proving impairment is on the party asserting discharge. 6. 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 valueof the interest in collateral, the obligation of any party who is jointly and severally liablewith respect to the secured obligation is discharged to the extent the impairment causesthe 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 partyasserting discharge is an accommodation party not entitled to discharge under subsection 5,the party is deemed to have a right to contribution based on joint and several liability ratherthan a right to reimbursement.

ge is an accommodation party not entitled to discharge under subsection 5,the party is deemed to have a right to contribution based on joint and several liability ratherthan a right to reimbursement. The burden of proving impairment is on the party assertingdischarge. 7. Under subsection 5 or 6, impairing value of an interest in collateral includes failure to obtain or maintain perfection or recordation of the interest in collateral; release of collateralwithout substitution of collateral of equal value; failure to perform a duty to preserve thevalue of collateral owed, under Article 9 or other law, to a debtor or surety or other personsecondarily liable; or failure to comply with applicable law in disposing of collateral. 8. An accommodation party is not discharged under subsection 3, 4, or 5 unless the person entitled to enforce the instrument knows of the accommodation or has notice under section554.3419, subsection 3, that the instrument was signed for accommodation. 9. A party is not discharged under this section if the party asserting discharge consents to the event or conduct that is the basis of the discharge, or the instrument or a separateagreement of the party provides

not discharged under this section if the party asserting discharge consents to the event or conduct that is the basis of the discharge, or the instrument or a separateagreement of the party provides for waiver of discharge under this section either specificallyor by general language indicating that parties waive defenses based on suretyship orimpairment of collateral. 94 Acts, ch 1167, §77, 121, 122; 2013 Acts, ch 30, §151Referred to in §554.3419 Sat Dec 23 01:57:10 2023 Iowa Code 2024, Section 554.3605 (26, 0)