Effect of knowledge of obligee in making release.

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§483-5 Effect of knowledge of obligee in making release. If an obligee releasing or discharging an obligor without express reservation of rights against a co-obligor, then knows or has reason to know that the obligor released or discharged did not pay so much of the claim as the obligor was bound by the obligor's contract or relation with that co-obligor to pay, the obligee's claim against that co-obligor shall be satisfied to the amount which the obligee knew or had reason to know that the released or discharged obligor was bound to such co-obligor to pay.

If an obligee so releasing or discharging an obligor has not then such knowledge or reason to know, the obligee's claim against the co-obligor shall be satisfied to the extent of the lesser of two amounts, namely (1) the amount of the fractional share of the obligor released or discharged, or (2) the amount that such obligor was bound by the obligor's contract or relation with the co-obligor to pay. [L 1941, c 60, §5; RL 1945, §8745; RL 1955, §192-5; HRS §483-5; gen ch 1985]

Case Notes

Where there was no reservation of rights in purchase agreement option by obligee against one co-obligor and no relationship between the co-obligors as joint debtors requiring payment, indemnification or contribution, this section did not apply; thus, as there was no reservation of rights in purchase option by obligee against one co-obligor, as required under §483-4, the purchase option which discharged that co-obligor from liability for the balance due under the agreement of sale discharged the other co-obligor as well. 89 H. 461 (App.), 974 P.2d 1051.


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