11.4 Discharge of Guarantor by Modification of Obligation.

• Jurisdiction: Arizona

Modification of the original obligation without the guarantor’s consent discharges the guarantor. Western Sur. Co. v. Horrall, 111 Ariz. 486, 533 P.2d 543 (1975). Cf. Restatement (Third) Suretyship and Guaranty § 41 (1996) (guaranty is discharged if the modification creates a substituted contract or imposes fundamentally different risks on the guarantor, or to the extent the modification would otherwise cause the guarantor a loss); Indian Village Shopping Ctr. Inv. Co. v. Kroger, 175 Ariz. 122, 854 P.2d 155 (App. 1993) (a noncompensated guarantor was discharged by a lease modification made without its consent, where the modification’s effect on the guarantor was open to conjecture).

A guarantor may consent in the guaranty contract to future modifications of the primary obligation, and such consent is an effective waiver of the guarantor’s right to be discharged upon modification of the original obligation. Restatement (Third) Suretyship and Guaranty § 48 (1996) (defining circumstances in which guarantor can consent in advance to acts that would otherwise discharge the guaranty, and/or waive such discharge defenses; and providing that such consent may be express or implied, and if express, may be effectuated by specific language or by general language). In Int’l Harvester Co. v. Fuoss, 157 Ariz. 378, 758 P.2d 649 (App. 1988), however, the ex-wife of one of the corporate borrower’s principals was discharged from her obligations as a guarantor of the corporation’s farm equipment debt because the creditor continued to extend credit to the corporate borrower without notice to her after it knew (1) of...