Fact Pattern 32-1 Petro Refinery asks Quality Bank for a loan to increase its inventory. Quality requires Rob, Petro's president, to sign a personal guaranty to pay the debt if Petro defaults. Meanwhile, to make a sale of refined oil to Slick Lubricants Inc., Petro asks Slick's outside accountant Tina to co-sign a credit application.
Refer to Fact Pattern 32-1. After the loan agreement is signed, Slick agrees to a higher rate of interest without telling Tina. Tina is
A) discharged from the agreement.
B) liable at the higher rate of interest.
C) liable at the lower rate of interest.
D) liable for the principal only.

Question

Fact Pattern 32-1 Petro Refinery asks Quality Bank for a loan to increase its inventory. Quality requires Rob, Petro's president, to sign a personal guaranty to pay the debt if Petro defaults. Meanwhile, to make a sale of refined oil to Slick Lubricants Inc., Petro asks Slick's outside accountant Tina to co-sign a credit application.
Refer to Fact Pattern 32-1.  After the loan agreement is signed, Slick agrees to a higher rate of interest without telling Tina. Tina is
A) discharged from the agreement.
B) liable at the higher rate of interest.
C) liable at the lower rate of interest.
D) liable for the principal only.

Quizplus · Accepted Answer

Tina is discharged from the agreement because a material alteration, such as a change in the interest rate, was made without her consent.

Fact Pattern 32-1 Petro Refinery Asks Quality Bank for a Loan