Business Law The plaintiff and her husband are poorly educated immigrants who sp
ID: 423112 • Letter: B
Question
Business Law
The plaintiff and her husband are poorly educated immigrants who speak little English. They run a very successful grocery business. The family home and other assets are in the plaintiff's name; all business debts are in the name of the plaintiff’s husband.
Two years ago the plaintiff's husband sought bank finance to ensure that the business stayed afloat. As a condition of the loan, the bank asked that the plaintiff provide a personal guarantee. The plaintiff agreed, executing a deed of guarantee. Prior to signing the guarantee, and at the insistence of the bank manager, the plaintiff received independent legal advice. The solicitor carefully and clearly explained that, should the plaintiff's husband's business fail, the bank would be entitled to sell her home to discharge the debts.
The plaintiff's husband's business has been recently put into liquidation. The plaintiff is seeking to resist the bank's attempt to enforce the guarantee by arguing undue influence. Advise the bank.
Explanation / Answer
In business law, where it is established that a plaintiff was induced to enter into a contract or transaction by the undue influence of the defendant, the contract may be rendered voidable. But in this case nothing of this sort happened. Before signing the guarantee, the plaintiff received independent legal advice in which she was informed that if her husband's business fails then the bank would be entitled to sell her home to discharge the debts. It was at her will that she became the guarantor for her husband's loan and kept her home as a guarantee against the loan. When you sign your name as a guarantor, you are legally responsible for paying back the entire loan if the other person cannot or will not make the repayments. So, she cannot stop the bank from enforcing the guarantee by arguing undue influence. She was well aware about the consequences of becoming a guarantor. Since her husband's business has been put into liquidation, so, the bank can enforce the guarantee in this situation. Also, there must be evidence that the defendant was inclined to exercise undue influence over the victim. Defendants who aggressively initiate a transaction, insulate a relationship from outside supervision, or discourage a weaker party from seeking independent advice may be attempting to exercise undue influence. But this didn't happened in this case. So, there is no undue influence involved in this case.
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