Ashley's parents, Jim and Shelley, want to assist her in building the business, so in 2009 they signed limited guarantees for the principal sum of $128 000, with interest, at bank prime rate plus 1.5 percent in favour of the Monarch Bank. The guarantees were given to secure a line of credit for Ashley and were provided for (1) a $100 000 term loan with interest at bank prime plus 2.25 percent and (2) a revolving demand loan for general operating purposes. The revolving loan was not to exceed the principal sum of $125 000, and the lending was subject to an accounts receivable margin requirement.

Interest under the revolving loan was at prime plus 1.5 percent per annum. The revolving loan

contained a provision under which the bank agreed to apply specified credit balances to repay the loan.

In 2012, Ashley's business seemed to be doing fine so she told her parents she no longer needed their help. Jim and Shelley gave the bank notice in writing that they were ending their liability in accordance with the guarantee. (Their understanding was that this fixed their maximum liability at the amount then outstanding under the loan.) At the time of the notice, their liability under the revolving loan was $95 000.

After receiving the notice, the bank converted the revolving loan into a fixed loan without the

knowledge or consent of Jim and Shelley. In 2013, Ashley renegotiated the loan arrangements to comprise (1) a $100 000 term loan with interest at prime plus 2.5 percent and (2) a fixed operating loan with interest at prime plus 2 percent and with more flexible margin requirements.

If Ashley defaults on the loan, will the bank be able to sue Jim and Shelley to enforce the guarantees?