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:

Pension Program

A financial arrangement designed to provide individuals with an income when they are no longer earning a regular income from employment.

Real Rate

The interest rate adjusted for inflation, reflecting the true cost of borrowing or the true return on investment.

Nominal Interest Rate

The percentage increase in money that the borrower pays the lender, not adjusting for inflation.

Inflation Rate

The percentage rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling, over a given period of time.