Mae's Music Shop asked School District 4 to sign a note on an outstanding balance on music instruments. Mae's Music Shop needed the funds before the date of the note's maturity and discounted the note at the Bank of Wallace. Which party retains a contingent liability in the event that the note is dishonored?

Mae's Music Shop retains responsibility to pay the Bank of Wallace even if School District 4 defaults on the note.

Explanation:

A contingent liability is merely a potential loss or a liability that may take place in the future that rely on the outcome of a future event. A contingent liability is not certain.

In the question, Mae's Music Shop sold some musical instruments on an outstanding balance to School District 4 and asked School District 4 to sign a note for the purchase. But since Mae's Music Shop needs money before the maturity of the note, they went to the Bank of Wallace and discounted the note.

Now in case of any contingent liability, if the note is dishonored, Mae's Music Shop is liable to pay to the Bank of Wallace for the money.

Thus the answer is - --

Mae's Music Shop retains responsibility to pay the Bank of Wallace even if School District 4 defaults on the note.