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Arkansas Code Annotated

Ark. Code Ann. § 4-3-605 (2026)

Discharge of secondary obligors

✓ current as of May 2026
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  1. If a person entitled to enforce an instrument releases the obligation of a principal obligor in whole or in part, and another party to the instrument is a secondary obligor with respect to the obligation of that principal obligor, the following rules apply:
    1. any obligations of the principal obligor to the secondary obligor with respect to any previous payment by the secondary obligor are not affected. Unless the terms of the release preserve the secondary obligor's recourse, the principal obligor is discharged, to the extent of the release, from any other duties to the secondary obligor under this chapter.
    2. unless the terms of the release provide that the person entitled to enforce the instrument retains the right to enforce the instrument against the secondary obligor, the secondary obligor is discharged to the same extent as the principal obligor from any unperformed portion of its obligation on the instrument. If the instrument is a check and the obligation of the secondary obligor is based on an indorsement of the check, the secondary obligor is discharged without regard to the language or circumstances of the discharge or other release.
    3. if the secondary obligor is not discharged under paragraph (2), the secondary obligor is discharged to the extent of the value of the consideration for the release, and to the extent that the release would otherwise cause the secondary obligor a loss.
  2. If a person entitled to enforce an instrument grants a principal obligor an extension of the time at which one or more payments are due on the instrument and another party to the instrument is a secondary obligor with respect to the obligation of that principal obligor, the following rules apply:
    1. any obligations of the principal obligor to the secondary obligor with respect to any previous payment by the secondary obligor are not affected. Unless the terms of the extension preserve the secondary obligor's recourse, the extension correspondingly extends the time for performance of any other duties owed to the secondary obligor by the principal obligor under this chapter.
    2. the secondary obligor is discharged to the extent that the extension would otherwise cause the secondary obligor a loss.
    3. to the extent that the secondary obligor is not discharged under paragraph (2), the secondary obligor may perform its obligations to a person entitled to enforce the instrument as if the time for payment had not been extended or, unless the terms of the extension provide that the person entitled to enforce the instrument retains the right to enforce the instrument against the secondary obligor as if the time for payment had not been extended, treat the time for performance of its obligations as having been extended correspondingly.
  3. If a person entitled to enforce an instrument agrees, with or without consideration, to a modification of the obligation of a principal obligor other than a complete or partial release or an extension of the due date and another party to the instrument is a secondary obligor with respect to the obligation of that principal obligor, the following rules apply:
    1. any obligations of the principal obligor to the secondary obligor with respect to any previous payment by the secondary obligor are not affected. The modification correspondingly modifies any other duties owed to the secondary obligor by the principal obligor under this chapter.
    2. the secondary obligor is discharged from any unperformed portion of its obligation to the extent that the modification would otherwise cause the secondary obligor a loss.
    3. to the extent that the secondary obligor is not discharged under paragraph (2), the secondary obligor may satisfy its obligation on the instrument as if the modification had not occurred, or treat its obligation on the instrument as having been modified correspondingly.
  4. If the obligation of a principal obligor is secured by an interest in collateral, another party to the instrument is a secondary obligor with respect to that obligation, and a person entitled to enforce the instrument impairs the value of the interest in collateral, the obligation of the secondary obligor is discharged to the extent of the impairment. The value of an interest in collateral is impaired to the extent the value of the interest is reduced to an amount less than the amount of the recourse of the secondary obligor, or the reduction in value of the interest causes an increase in the amount by which the amount of the recourse exceeds the value of the interest. For purposes of this subsection, impairing the value of an interest in collateral includes failure to obtain or maintain perfection or recordation of the interest in collateral, release of collateral without substitution of collateral of equal value or equivalent reduction of the underlying obligation, failure to perform a duty to preserve the value of collateral owed, under Chapter 9 or other law, to a debtor or other person secondarily liable, and failure to comply with applicable law in disposing of or otherwise enforcing the interest in collateral.
  5. A secondary obligor is not discharged under subdivision (a)(3) or subsections (b), (c), or (d) unless the person entitled to enforce the instrument knows that the person is a secondary obligor or has notice under § 4-3-419(c) that the instrument was signed for accommodation.
  6. A secondary obligor is not discharged under this section if the secondary obligor consents to the event or conduct that is the basis of the discharge, or the instrument or a separate agreement of the party provides for waiver of discharge under this section specifically or by general language indicating that parties waive defenses based on suretyship or impairment of collateral. Unless the circumstances indicate otherwise, consent by the principal obligor to an act that would lead to a discharge under this section constitutes consent to that act by the secondary obligor if the secondary obligor controls the principal obligor or deals with the person entitled to enforce the instrument on behalf of the principal obligor.
  7. A release or extension preserves a secondary obligor's recourse if the terms of the release or extension provide that:
    1. the person entitled to enforce the instrument retains the right to enforce the instrument against the secondary obligor; and
    2. the recourse of the secondary obligor continues as if the release or extension had not been granted.
  8. Except as otherwise provided in subsection (i), a secondary obligor asserting discharge under this section has the burden of persuasion both with respect to the occurrence of the acts alleged to harm the secondary obligor and loss or prejudice caused by those acts.
  9. If the secondary obligor demonstrates prejudice caused by an impairment of its recourse, and the circumstances of the case indicate that the amount of loss is not reasonably susceptible of calculation or requires proof of facts that are not ascertainable, it is presumed that the act impairing recourse caused a loss or impairment equal to the liability of the secondary obligor on the instrument. In that event, the burden of persuasion as to any lesser amount of the loss is on the person entitled to enforce the instrument.

History. Acts 1991, No. 572, § 5; 2005, No. 856, § 42.

Research References

U. Ark. Little Rock L.J.

Survey—Business Law, 14 U. Ark. Little Rock L.J. 735.

U. Ark. Little Rock L. Rev.

Survey of Legislation, 2005 Arkansas General Assembly, Business Law, 28 U. Ark. Little Rock L. Rev. 321.

Case Notes

Agreements Not to Sue.

The provision of this section that an agreement not to sue any person against whom the party has a right of recourse discharges a party to the instrument does not apply where the evidence does not show that an enforceable or binding agreement not to sue was made. Glover v. Nat'l Bank of Commerce, 258 Ark. 771, 529 S.W.2d 333 (1975) (decision under prior law).

This section applies where there is an enforceable contract not to sue a liable party. Ward v. Worthen Bank & Trust Co., 284 Ark. 355, 681 S.W.2d 365 (1984) (decision under prior law).

Where a bank did not make an enforceable contract not to sue the purchaser of a note, the original maker of the note was not discharged from liability on the note during the time the bank suspended collection efforts. Ward v. Worthen Bank & Trust Co., 284 Ark. 355, 681 S.W.2d 365 (1984) (decision under prior law).

Any Party to the Instrument.

The term “any party to the instrument” includes makers and endorsers. F & M Bank v. Poe, 19 Ark. App. 151, 718 S.W.2d 457 (1986) (decision under prior law).

The defenses under this section are available to both makers and accommodation parties. In re Sanders, 75 B.R. 746 (Bankr. W.D. Ark. 1987); In re Sanders, 75 B.R. 751 (Bankr. W.D. Ark. 1987); In re Sanders, 75 B.R. 757 (Bankr. W.D. Ark. 1987); In re Sanders, 75 B.R. 761 (Bankr. W.D. Ark. 1987) (decision under prior law).

This section only applies to “any party to the instrument,” and does not encompass a person who has signed a separate guaranty agreement. Myers v. First State Bank, 293 Ark. 82, 732 S.W.2d 459 (1987), modified, Myers v. First State Bank, 293 Ark. 82, 741 S.W.2d 624 (1987), supp. op., Myers v. First State Bank, 293 Ark. 82, 732 S.W.2d 459 (1987), modified, Myers v. First State Bank, 293 Ark. 82, 741 S.W.2d 624 (1987) (decision under prior law).

The words “agrees to suspend the right to enforce” signify the granting of an extension of time for payment. Hence, the holder of a note discharges any party to the instrument, including accommodation makers, to the extent that the holder grants an extension without the consent of the party or without an express reservation of rights. McIlroy Bank & Trust v. Maestri, 297 Ark. 130, 759 S.W.2d 808 (1988) (decision under prior law).

Where the bank assigned the note to the accommodator, he became holder of the note, and though ordinarily a holder takes a note assignment subject to all defenses which the maker had against the bank, an accommodation maker has an independent cause of action against the party accommodated; consequently, maker's right of recourse was unencumbered by any defenses the accommodated party held against the bank. Mobley v. Harmon, 304 Ark. 500, 803 S.W.2d 900 (1991) (decision under prior law).

Although the primary maker was automatically discharged against the bank when the note was extended without his consent, such discharge was not a defense available against an accommodation party suing the accommodated primary maker. Mobley v. Harmon, 304 Ark. 500, 803 S.W.2d 900 (1991) (decision under prior law).

Extensions.

Where a bank chose to extend a loan obligation four times with only the accommodation maker's agreement, it effectively released the primary maker. Mobley v. Harmon, 304 Ark. 500, 803 S.W.2d 900 (1991) (decision under prior law).

Impairment of Collateral.

It is no defense for one claiming to be an accommodation endorser of a note that the holder of the note impaired the collateral by failure to complete the proper filing of the financing statement, where the endorser could have seen to the filing himself. Rushton v. U.M. & M. Credit Corp., 245 Ark. 703, 434 S.W.2d 81 (1968) (decision under prior law).

Refusal of bank to accept certain collateral on reduction of its indebtedness did not constitute an impairment of collateral. Worthen Bank & Trust Co. v. Utley, 748 F.2d 1269 (8th Cir. 1984) (decision under prior law).

Where guarantor of loans failed to prove that bank, holder of the note, was responsible for the loss or impairment of the collateral and the extent to which that impairment resulted in loss, court correctly found no impairment of collateral on the part of the bank and was justified in refusing to so instruct the jury. Worthen Bank & Trust Co. v. Utley, 748 F.2d 1269 (8th Cir. 1984) (decision under prior law).

Where the collateral was impaired because of the creditor's failure to properly file its security agreement with the Secretary of State so as to perfect its security interest in the inventory, the creditor discharged the guarantor, and the creditor could not reserve its rights to personally sue the guarantor for the deficiency on the note by virtue of the settlement agreement. F & M Bank v. Poe, 19 Ark. App. 151, 718 S.W.2d 457 (1986) (decision under prior law).

Creditor who is not in possession of collateral has no obligation to repossess it for protection of its guarantor, and failure to do so is not impairment of collateral. Moore v. Luxor (N. Am.) Corp., 294 Ark. 326, 742 S.W.2d 916 (1988) (decision under prior law).

Impairment of recourse or collateral is not available to the maker of a note as a defense to a foreclosure action. Federal Land Bank v. McGinnis, 711 F. Supp. 952 (E.D. Ark. 1989) (decision under prior law).

Knowledge of Recourse.

This section is made to appear to be effective against a holder who releases an obligor with knowledge of recourse the holder may have against the obligor; the section contemplates knowledge of recourse the party may have had against the person discharged or released. Shinn v. First Nat'l Bank, 270 Ark. 774, 606 S.W.2d 154 (1980) (decision under prior law).

Release of Guarantors.

One of several guarantors on a note, each of which guaranteed a specific portion of the note and agreed to be liable notwithstanding the release of any other guarantor, was not released by failure of the holder to file a claim against the estate of a deceased guarantor within the statutory period for filing claims, which expired before the default of the maker on the note. Rauch v. First Nat'l Bank, 244 Ark. 941, 428 S.W.2d 89 (1968) (decision under prior law). (But see, Myers v. First State Bank of Sherwood, 293 Ark. 82, 732 S.W.2d 459, modified, 293 Ark. 82, 741 S.W.2d 624 (1987).).

A guarantor who pleads release has the burden of proving that release and, under this section, that burden requires that he prove that the collateral was impaired, and the extent to which the collateral was impaired. Van Balen v. Peoples Bank & Trust Co., 3 Ark. App. 243, 626 S.W.2d 205 (1981) (decision under prior law). (But see, Myers v. First State Bank of Sherwood, 293 Ark. 82, 732 S.W.2d 459, modified, 293 Ark. 82, 741 S.W.2d 624 (1987).).

The discharge of guaranty involves proof that (1) the holder of the note was responsible for the loss or impairment of the collateral, and (2) the extent to which that impairment results in loss; mere proof that the holder did not properly perfect its lien on a part of the collateral does not in and of itself show that any damage resulted. Van Balen v. Peoples Bank & Trust Co., 3 Ark. App. 243, 626 S.W.2d 205 (1981) (decision under prior law). (But see, Myers v. First State Bank, 293 Ark. 82, 732 S.W.2d 459, modified, 293 Ark. 82, 741 S.W.2d 624 (1987).).

Where there was no evidence in the record of the value of the collateral initially pledged, the guarantors of the debt could not meet the burden of proving the extent of the impairment of the collateral and their right to pro tanto release. Van Balen v. Peoples Bank & Trust Co., 3 Ark. App. 243, 626 S.W.2d 205 (1981) (decision under prior law).

A material alteration in the obligation assumed, made without the assent of the guarantor, discharges him. Merchants Nat'l Bank v. Blass, 282 Ark. 497, 669 S.W.2d 195 (1984) (decision under prior law). (But see, Myers v. State, 293 Ark. 82, 732 S.W.2d 459, modified, 293 Ark. 82, 741 S.W.2d 624 (1987).).

If the due date of a note is extended without the consent of a party eligible to rely on this section, that party is discharged from liability to the holder of the note. In re Sanders, 75 B.R. 746 (Bankr. W.D. Ark. 1987); In re Sanders, 75 B.R. 751 (Bankr. W.D. Ark. 1987); In re Sanders, 75 B.R. 757 (Bankr. W.D. Ark. 1987) (preceding decisions under prior law). (But see, Myers v. First State Bank, 293 Ark. 82, 732 S.W.2d 459, modified, 293 Ark. 82, 741 S.W.2d 624 (1987).).

When a material alteration in an obligation is made without the consent of the uncompensated guarantor, the guarantor is discharged from liability. An increase in the interest rate of the principal debt without the consent of the uncompensated guarantor increases the guarantor's obligation and therefore discharges the guarantor. In re Sanders, 75 B.R. 761 (Bankr. W.D. Ark. 1987) (decision under prior law). (But see, Myers v. First State Bank, 293 Ark. 82, 732 S.W.2d 459, modified, 293 Ark. 82, 741 S.W.2d 624 (1987).).

Comaker's liability on note had to be found in note itself, and not accompanying mortgage, and where the due date of the note was extended without the comaker's consent, and the extension was not provided for in the note, that party was discharged from liability even though the comaker had signed the mortgage which provided that “This conveyance is given as a Mortgage for the purpose of securing: (a) The payment of 1 Promissory Note(s) of even date herewith and all extensions and renewals of the indebtedness.” In re Sanders, 75 B.R. 761 (Bankr. W.D. Ark. 1987) (decision under prior law). (But see, Myers v. First State Bank, 293 Ark. 82, 732 S.W.2d 459, modified, 293 Ark. 82, 741 S.W.2d 624 (1987).).

Unauthorized Extensions.

An accommodation maker of a promissory note is discharged from liability on the note when the payee extends the time for payment four times, twice with the agreement of the accommodation maker and twice without such agreement, and each extension is for a time in excess of that prescribed for payment in the original note; the extensions which were not authorized by the accommodation maker discharged him from liability. Rogers v. Merchants & Planters Bank, 302 Ark. 353, 789 S.W.2d 463 (1990) (decision under prior law).

Chapter 4 Bank Deposits and Collections

Research References

ALR.

Documentary draft under UCC § 4-104(1)(f). 65 A.L.R.4th 1095.

Liability of bank for diversion to benefit of presenter or third party of proceeds of check drawn to bank's order by drawer not indebted to bank. 69 A.L.R.4th 778.

What constitutes wrongful dishonor of check rendering payor bank liable to drawer under UCC § 4-402. 88 A.L.R.4th 568.

Who may recover for wrongful dishonor of check under UCC § 4-402. 88 A.L.R.4th 613.

Damages recoverable for wrongful dishonor of check under UCC § 4-402. 88 A.L.R.4th 644.

Am. Jur. 10 Am. Jur. 2d, Banks, § 703 et seq. and 11 Am. Jur. 2d, Banks, § 953 et seq.

Ark. L. Rev.

Bank Deposits and Collections: Article IV — Letters of Credit: Article V, 16 Ark. L. Rev. 45.

Bank to Bank Relations under the Uniform Commercial Code: Article IV, 16 Ark. L. Rev. 61.

Bank to Consumer Relations under the Uniform Commercial Code: Article IV, 16 Ark. L. Rev. 66.

Electronic Funds Transfer and “Competitive Equality”: A Doctrine That Does Not Compute, 32 Ark. L. Rev. 347.

The Uniform Commercial Code and the Arkansas Electronic Funds Transfer System, Hargis, 32 Ark. L. Rev. 470.

Murphey, Revised Article 3 and Amended Article 4 of the Uniform Commercial Code: Comments on the Changes They Will Make, 46 Ark. L. Rev. 501.

C.J.S. 9 C.J.S., Banks & Banking, § 327 et seq.

U. Ark. Little Rock L.J.

Murphey, Acceptance and Dishonor: “Payable Through” Drafts and Personal Money Orders, 5 U. Ark. Little Rock L.J. 519.

Verdun, Postdated checks: An old problem with a new solution in the revised U.C.C., 14 U. Ark. Little Rock L.J. 37.

Adams, Problems with the 1990 Revision of Articles 3 and 4 of the Uniform Commercial Code, 15 U. Ark. Little Rock L.J. 665.

Case Notes

Punitive Damages.

Punitive damages can be awarded for bad faith Article 4 violations, where the statute does not specifically prohibit them, without the necessity that an alternative, common law tort be pled. Gordon v. Planters & Merchants Bankshares, Inc., 326 Ark. 1046, 935 S.W.2d 544 (1996).

Cited: Citizens Bank v. National Bank of Commerce, 334 F.2d 257 (10th Cir. 1964).

Part 1 — General Provisions and Definitions

Publisher's Notes. For Comments regarding the Uniform Commercial Code, see Commentaries Volume A.

Research References

ALR.

Documentary draft under UCC § 4-104(1)(f). 65 A.L.R.4th 1095.

U. Ark. Little Rock L.J.

Survey—Business Law, 14 U. Ark. Little Rock L.J. 735.

Notes of Decisions
Cited in 2 cases, 2008–2020 · leading case: Stevens v. Heritage Bank, 289 S.W.3d 147 (Ark. Ct. App. 2008).
Sort: Relevance Newest Treatment
Stevens v. Heritage Bank, 289 S.W.3d 147 (Ark. Ct. App. 2008). · cites it 2× “The court found that the estate’s obligation on the note was not discharged pursuant to Ark. Code Ann. § 4-3-605 (d) because the estate failed to prove that it suffered a loss as a result of the extension and modification of the note.”
Johnson v. Sheffield Fin. (E.D. Ark. 2020). “Johnson’s “debt was still due and owing.”29 The letter concluded with the following: “Under Arkansas law, Sheffield’s inability to enforce its security interest in the Ranger renders it unable to enforce or collect from the debt secured thereby.”
Annotations are extracted automatically from the opinions in the Syfert caselaw corpus and ranked by authority, recency, and treatment. Dots show Syfertize treatment of the citing case itself.