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Question: malcolm is amys son malcolm runs his own business selling...

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Malcolm is Amy’s son. Malcolm runs his own business selling bright green wigs. His business is not

doing very well and is experiencing financial difficulty. His bank told him that they will only lend

him money if someone acts as guarantor. Malcolm asks his mother, Amy, whether she would help

him by being a guarantor for his loan. Amy agrees but she is not really sure what a guarantor is meant

to do. Malcolm says: “Don’t worry, dear Mother! It’s just a formality that the banks use. No big

deal.”

A week later, Malcolm and Robert (the bank manager) show up at Amy’s house. Amy shows them

in. Malcolm pulls out a piece of paper and says, “Mummy, I just need you to sign here”.

Amy says, “I’m not sure what all this is about but I just don’t want to anything to happen to my

house.”

Robert and Malcolm both say that everything will be fine. Amy signs the document, where it says

‘Guarantor.’

A few months later, as the demand for bright green wigs remains low, Malcolm goes out of business.

Despite the loan, it wasn’t enough to avoid financial ruin. Amy receives a letter from the bank that

says because she was guarantor of Malcolm’s loan, the bank needs to sell her house so they can

recover the $180,000 still owing.

Advise Amy as to anything that can be done to save her house. Refer to any relevant cases in

your answer in IRAC form.

 

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