                                 CODE OF VIRGINIA

DISCHARGE OF ENDORSERS AND ACCOMMODATION PARTIES (§ 8.3A-605)

a. In this section, the term &#8220;endorser&#8221; includes a drawer having the
obligation described in &#xA7; 8.3A-414 (d).

b. Discharge, under &#xA7; 8.3A-604, of the obligation of a party to pay an
instrument does not discharge the obligation of an endorser 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 endorser or accommodation party
having a right of recourse against the party whose obligation is extended to the
extent the endorser or accommodation party proves that the extension caused loss
to the endorser 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 endorser or accommodation party having a right of recourse against the person
whose obligation is modified to the extent the modification causes 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
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 endorser 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 (i) 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 (ii) 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 (i) failure to obtain or maintain perfection or recordation of the
interest in collateral, (ii) release of collateral without substitution of
collateral of equal value, (iii) failure to perform a duty to preserve the value
of collateral owed, under Title 8.9A or other law, to a debtor or surety or
other person secondarily liable, or (iv) 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 &#xA7; 8.3A-419 (c) that the instrument was signed for
accommodation.

i. A party is not discharged under this section if (i) the party asserting
discharge consents to the event or conduct that is the basis of the discharge,
or (ii) 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.

HISTORY: Code 1950, § 6-473; 1964, c. 219, § 8.3-606; 1992, c. 693.