Garth and Elizabeth Are Husband and Wife

question 12

Essay

Garth and Elizabeth are husband and wife. Garth is a real estate agent and Elizabeth an artist. Although her occupation does not expose Elizabeth to a great deal of business-related matters, the couple have entered into many real estate deals and business ventures as full partners. Garth has an opportunity to buy into a condominium complex. He asks Elizabeth to sign as his loan guarantor so that he may invest in the project. Before the project is complete, the contractor abandons the job and all partners are left to answer the debt. Garth cannot produce sufficient funds to cover his loan, and the bank turns to Elizabeth as guarantor for payment. Outraged at the course of events, Elizabeth refuses to pay, and seeks legal assistance to nullify the contract. As her lawyer, what do you tell Elizabeth?

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Definitions:

Legal Document

A written instrument that formally expresses a legally enforceable act, process, or contractual duty, obligation, or right.

Times Interest Earned

A ratio that measures a company's ability to meet its interest payments based on its earnings before interest and taxes.

Net Income

The profit of a company after all expenses and taxes have been subtracted from total revenue, indicating the company's actual profitability.

Interest Expense

The cost incurred by an entity for borrowed funds; it is the price paid for the use of borrowed money.