Can anyone explain Co-suretyship when one party is released FYI the question below. The answer is A. I thought it would be B because the release is 50% of what you owe.
I can actually explain it or at least I hope I can.
If a co-surety is released without permission of the other surety then the value is reduced by their share of the total. This is important because that's why you ended up getting tricked.
The amounts really don't matter (As long as it's above the amount required, if it were less than it would matter) but I will explain using the ones in the example you provided.
The amounts of Surety A is $100,000 and amount of Surety B is $100,000. A is released. As a result, their share isn't covered by B. When I say share, I mean the percent and in this case it would be (Surety A/(Surety A + Surety B)) thus you do (100,000/(100,000+100,000) which means the 50% answer that you are supposed to get.
I hope that clarifies it for you.
Just to offer a little more insight. If Flenge repaid $25,000 and defaulted on the rest. The remaining $25,000 would be covered by Surety B, but he would be only liable for $12,500 (Which is to say the outstanding amount multiplied by the percentage).
AUD: 85 (3/8/16)
FAR: 77 (6/7/16)
BEC: ??? (9/7/16)
REG: ???
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