O.C.G.A. § 11-3-601 (2019)

Annotations

Cross references. Discharge of surety by increase of risk, § 10-7-22.

JUDICIAL DECISIONS ANALYSIS GENERAL CONSIDERATION DISCHARGE ON UNDERLYING CONTRACT DISCHARGE OF SURETY General Consideration Editor’s notes. - In light of the similarity of the statutory provisions, decisions under former Code 1933, § 109A-3601 and former Code Section 11-3-601 are included in the annotations for this Code section. Purpose of former subsection (3). - Former Code 1933, §§ 109A-3-208 and 109A-3-601(3) are intended to eliminate circuity in order of responsibility of endorsers of check. Columbian Peanut Co. v. Frosteg, 472 F.2d 476, 1973 U.S. App. LEXIS 11994 (5th Cir.), cert. denied, 414 U.S. 824, 94 S. Ct. 126, 38 L. Ed. 2d 57 (1973) (decided under former Code 1933, § 109A-3-601). Discharge on Underlying Contract Effect of failure of consideration on note liability. - Former subsection (2) of this section codifies principle that failure of consideration on underlying contract discharges liability on note. Hunter v. McLelland, 143 Ga. App. 746, 240 S.E.2d 153, 1977 Ga. App. LEXIS 2485 (1977) (decided under former Code 1933, § 109A3-601). Recognition of interdependence of promises to deliver possession and pay. - Promise of seller to deliver possession and comply with other terms of contract are interdependent with promise of buyer to pay for the property. Neither buyer nor seller is obligated to perform

unless the other is ready and able to perform his or her obligations under the contract. Hunter v. McLelland, 143 Ga. App. 746, 240 S.E.2d 153, 1977 Ga. App. LEXIS 2485 (1977) (decided under former Code 1933, § 109A-3-601). Effect of vendor’s failure to deliver title according to contract. - Inability of vendor of land to make title according to vendor’s contract will give vendee a cause of action for breach of contract and justify vendee in asserting want or failure of consideration as to any notes executed therefor in hands of a holder with notice. Hunter v. McLelland, 143 Ga. App. 746, 240 S.E.2d 153, 1977 Ga. App. LEXIS 2485 (1977) (decided under former Code 1933, § 109A-3-601). Increased rate of interest. - The comaker of the third series of renewal notes was discharged following subsequent renewals at an increased rate of interest, where the provisions of the note did not cover subsequent modifications of the interest rate and the comaker had not signed the subsequent notes. Bank of Terrell v. Webb, 177 Ga. App. 715, 341 S.E.2d 258, 1986 Ga. App. LEXIS 1526 (1986) (decided under former Code Section 11-3601). Discharge of Surety Section governs surety’s discharge on a note. - Surety’s discharge on a note is now governed by former § 11-3-601

which lists various circumstances in which a party may be discharged from liability on an instrument. DeKalb County Bank v. Haldi, 146 Ga. App. 257, 246 S.E.2d 116, 1978 Ga. App. LEXIS 2299 (1978) (decided under former Code Section 11-3-601). Section 10-7-22 was superseded by former Code 1933, § 14-902, which was, in turn, repealed by O.C.G.A. § 11-10-103. Law governing discharge of sureties and other parties on instruments is currently governed by Uniform Commercial Code provisions cited in O.C.G.A. § 11-3-601. Christian v. Atlanta Army Depot Fed. Credit Union, 151 Ga. App. 403, 260 S.E.2d 533, 1979 Ga. App. LEXIS 2547 (1979) (decided under former Code Section 11-3-601). Relationship to suretyship chapter. - There is no conflict between application of the law of suretyship and holding that commercial paper chapter of Uniform Commercial Code controls in cases based on negotiable instruments, since former Code 1933, § 109A-3-601, which provided for discharge of parties to negotiable instruments, in former subsection (2) provided for such use of suretyship law. Import of that subsection was that in situations other than those listed in former subsection (1) of former Code 1933, § 109A-3-601, the law providing for discharge of surety or guarantor of simple

contract for payment of money applies equally to surety or guarantor of negotiable instruments. Consequently, an agreement (novation) which would discharge surety or guarantor of simple contract for payment of money will also discharge one who is guarantor or surety on negotiable instrument. Sewell v. Akins, 147 Ga. App. 454, 249 S.E.2d 274, 1978 Ga. App. LEXIS 2720 (1978) (decided under former Code 1933, § 109A-3-601). Some decisions have applied the surety law to contracts of surety or guaranty securing obligations evidenced by instruments which were almost certainly negotiable instruments without reference to the Uniform Commercial Code. Sewell v. Akins, 147 Ga. App. 454, 249 S.E.2d 274, 1978 Ga. App. LEXIS 2720 (1978) (decided under former Code 1933, § 109A-3-601). Effect of discharge of principal debtor. - Whenever principal debtor is discharged, surety is also discharged. Samples v. Kamp-N-Go Sys., Inc., 139 Ga. App. 324, 228 S.E.2d 360, 1976 Ga. App. LEXIS 1788 (1976) (decided under former Code 1933, § 109A-3-601). Where maker of note, or principal, is discharged by express terms of assignment clause to which note is subject, defendant endorser or surety is discharged. Samples v. Kamp-N-Go Sys., Inc., 139 Ga. App. 324, 228 S.E.2d 360, 1976 Ga. App. LEXIS 1788 (1976) (decided under former Code 1933, § 109A-3-601).

RESEARCH REFERENCES Am. Jur. 2d. 11 Am. Jur. 2d, Bills and Notes, §§ 322, 391 et seq., 417 et seq. 69 Am. Jur. 2d, Secured Transactions, § 229. C.J.S. 10 C.J.S., Bills and Notes, § 231 et seq. U.L.A. Uniform Commercial Code (U.L.A.) § 3601. ALR. Renewal of bill or note as precluding defenses available against the original, 35 A.L.R. 1258; 72 A.L.R. 600. May one not a holder in due course of original note acquire that character as to a renewal note, 35 A.L.R. 1300.

Discharge of drawer or endorser of check by holder’s acceptance therefor of something other than money, 52 A.L.R. 994; 87 A.L.R. 442. Renewal note as discharging original obligation or indebtedness, 52 A.L.R. 1416. Statement made to prospective transferee at time of execution of obligation, negativing defense or offset against obligation, as affecting right to set up defense of fraud, 60 A.L.R. 1180. Right to countermand or stop payment on cashier’s check or check or draft drawn by one bank upon another, 107 A.L.R. 1463.

Renewal note signed by one comaker as discharge of nonsigning comakers, 43 A.L.R.3d 246.