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Question 1 (10 Marks)
Mr. and Mrs. Lee provide a guarantee to a bank over a loan for a motor vehicle purchased by their son Lim. Lim subsequently defaults on his repayments and the bank seeks to enforce the guarantee against his parents. At the time the guarantee was entered into, neither parent had a good grasp of the English language, both were elderly and they received no independent legal advice. Mr. and Mrs. Lee believed that the extent of their liability was far more limited than it was. Upon what grounds could it be argued that reality of consent is missing from the guarantee agreement? What would be the likely status of the agreement?
Question 2 (10 Marks)
Critically analysis the following scenario and advise Belinda whether she has an action against the ferry company for the loss of her car.
Belinda, who resides in Melbourne, decided to take her family to Hobart. Arriving at the ferry (which she has often used before), she is given a ticket on paying her fare and the fare of her three children. On the reverse side is written:
'All vehicles and passengers use this ferry at their own risk'
She does not read these words nor does she see the notice on the ferry itself that has identical wording. Due to negligent navigation by its captain, the ferry collides with an underwater obstruction marked by a warning buoy. The ferry sinks slowly enough for all the passengers and crew to be rescued but the ferry and vehicles on it are lost.
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The main issue is to analyze the ground upon which it can be argued that the element of consent is missing from the guarantee agreement formulated by Mr. and Mrs. Lee and what would be the likely status of such agreement.
In Australia, there are instances where the loan agreement established amid the lenders and borrowers is set aside by either party on the ground that the same is not fair. Mainly concerning from the sureties point of view there are various grounds under which protection has been granted and the same are understood herein under (Sneddon M, n.d)
Thus, these are the two grounds under which the sureties are granted right to set aside the transaction entered by them with the lenders as the transaction are entered by the sureties either on the basis of nonvoluntary assent or by unconscionable conduct.
By applying the law to the facts, it is submitted that
Mr. and Mrs. Lee provide a guarantee to a bank over a loan for a motor vehicle purchased by their son Lim who subsequently defaults on his repayments. Bank now seeks to enforce the guarantee against his parents but when the guarantee was entered into neither parent had a good grasp of the English language, was elderly and received no independent legal advice.
In such circumstances, if the son of Lee couple has caused undue influence upon him and the bank is aware of the same and has done nothing to curb such transaction then the Lee couple has the right to set aside the transaction on the basis of undue influence. However, if the lender has directly influenced the decision of the Lee couple by not submitting any independent advice than the couple has the right to cancel the agreement on the basis of unconscionable conduct.