Elizabeth Gave a Guarantee to the Bank in Support of a Loan

question 112

Multiple Choice

Elizabeth gave a guarantee to the Bank in support of a loan to Tomasz.Over the next few years,the Bank and Tomasz made a number of alterations to the loan agreement.The effect of these changes was to significantly increase the amount owing to the Bank.Elizabeth had no notice or knowledge of these changes,nor she did not consent to any such changes.What is the likely result?

• A) Elizabeth is bound by the changes to the loan, because guarantees are, by their nature, continuing.
• B) Guarantees are a mere formality; only Tomasz has obligations to the Bank.
• C) The guarantees are likely to be invalid and unenforceable against Elizabeth.
• D) A guarantee is executed under seal, therefore it will be presumed valid regardless of defect.
• E) The failure to notify Elizabeth would release both Elizabeth and Tomasz from their obligations.

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Definitions:

Bearing Risk

The action or practice of assuming the potential for loss or danger in a financial operation or investment.

Dollar Return

The total amount of money gained or lost on an investment, expressed in dollars.

Preferred Stock

A class of ownership in a corporation with a specified dividend that is paid out before dividends to common stockholders and typically does not carry voting rights.

Annual Dividend

The total dividend payment a shareholder receives from a company in one year, often expressed as an amount per share.