New Jersey § 12a:3-605

§ 12a:3-605.

a. In this section, the term “ indorser ” includes a drawer having the obligation described in subsection d. of 12A:3-414. b. Discharge, under 12A:3-604, of the obligation of a party to pay an instrument does

not discharge the obligation of an indorser 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 indorser or accommodation party having a right of recourse

against the party whose obligation is extended to the extent the indorser or accommodation

party proves that the extension caused loss to the indorser 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 indorser or accommodation

party having a right of recourse against the person whose obligation is modified to

the extent the modification causes loss to the indorser or accommodation party with

respect to the right of recourse. The loss suffered by the indorser 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 indorser 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 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 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. of this section, 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. of this section, impairing 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,

failure to perform a duty to preserve the value of collateral owed, under chapter

9 or other law, to a debtor or surety or other person secondarily liable, or failure

to comply with applicable law in disposing of collateral. h. An accommodation party is not discharged under subsection c., d. or e. of this

section unless the person entitled to enforce the instrument knows of the accommodation

or has notice under subsection c. of 12A:3-419 that the instrument was signed for

accommodation. i. A party is not discharged under this section if the party asserting discharge 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

either specifically or by general language indicating that parties waive defenses

based on suretyship or impairment of collateral.