Question 10-Contribution.

Their liabilities are as follows:

Allen$468,750; Barker$187,500; and Cooper$93,750

Though it is essential to establish the concept of the difference between their

liabilities and the amount that a creditor is to collect. In case of more than
one sureties, the cosureties are jointly and severally liable for the principal
debtor's default up to the amount of each surety's undertaking. The creditor
may proceed against any or all of the cosureties and collect the entire
amount of the default from any of them, limited to the amount that surety
has agreed to guarantee. As a result, it is possible that one cosurety (Allen, in
this case) may pay the entire amount of the principal debtor's obligation to
the creditor.When a surety pays her principal debtor's obligation, she is
entitled to have her cosureties pay to her their proportionate share of the
obligation paid. So, if Allen had paid the whole $750,000, she would be able
to demand reimbursement of $187,500 from Barker and $93,750 from
Cooper. This right of contribution arises when a surety has paid more than her
proportionate share of the debt even if the cosureties originally were not
aware of each other or were bound on separate instruments. All that is
required is that they are sureties for the same principal debtor and the same
obligation. The right and extent of contribution can be determined by
contractual agreement among cosureties. In the absence of such agreement,
sureties obligations for equal amounts share equally; where they are
obligated for varying amounts, the proportion of the debt that each surety
must contribute is determined by proration according to each surety's
undertaking.

The total undertakings of the cosurities is $1,200,000 ($750,000 + $300,000

+ $150,000).

Allen =$750,000 $1,200,000 ($750,000) = $468,750

Barker =$300,000 $1,200,000 ($750,000) = $187,500

Cooper =$150,000 $1,200,000 ($750,000) = $93,750

TOTAL $750,000

Question 11-Subrogation. Stephens may recover $125,000 from the

proceeds. Upon the creditor's full payment of the principal debtor's
obligation, a surety is subrogated to the creditor's rightsagainst the principal
debtor including any security interests. Carter had been paid $250,000 by
Stephens so Carter is only entitled to $250,000 of the proceeds of the sale of
the property. Stephens is entitled to the remainder of $125,000 ($375,000
$250,000).

Question 12-Defenses of Surety. (a) Paula as principal debtor may properly

assert the defenses of (i) infancy and (ii) fraud, which consisted of Carey's
setting back the odometer.(b) Scott as surety may not assert Paula's infancy
which is a personal defense of the debtor but he may assert the fraud
practiced upon Paula by Carey in setting back the odometer.

Question 13-Nature and Formation. Because Stafford has agreed to act only
as a conditional guarantor of collection, it is liable only if Cole first obtains a
judgment against Preston and then is unable to collect under the judgment.

Question 14-Defenses of Both Surety and Principal Debtor. Sutton is

released from his liability as a surety to the extent of the value of the security
released by Campbell.