Australia Business Law (Victoria University Bachelor of Business)

Readings:

- Parker D and Box G, Business Law for Business Students, 3rd Edition, 2013, Thomson Custom Publishing

- Sweeney, O'Reilly & Coleman, 2013/2016, Law in Commerce, 5th Ed /6th Ed., LexisNexis

Using IRAC (Issue, Rule (Relevant Cases), Application, Conclusion) format answer the case below:

James is a local business person who believed that he had finally hit on a concept that was going to make him incredibly wealthy. James had made many, usually unsuccessful attempts to get rich quick. James calculated that he would need at least $300,000 to establish this business venture. Knowing that he did not have the cash required Johnie decided to approach Mega Bank for a loan.

James contacted Mega Bank and made an appointment with the local branch lending officer for 10.30 am on Wednesday 18 April. During James' appointment Mega Bank indicated that they were very impressed with James' business idea and would be happy to advance the $300,000. The only requirement was that someone would need to guarantee James' loan. James commented to the lending officer that his father would most likely provide the bank with a guarantee.

The following day James spoke with his father Carlo, who agreed to assist James in his business venture. An appointment was made for both James and Carlo to meet with the lending office on the following day.

At the appointment the lending officer placed the guarantee forms in front of Carlo and pointed out where he needed to sign. Carlo in his very poor English asked what the guarantee meant. The lending officer and James gave Carlo a very brief explanation and told him that he had nothing to be concerned about. In fact the lending officer had another appointment and asked Carlo to hurry up and just sign the paperwork.

Carlo signed the bank guarantee and the $300,000 was deposited in James' account the following day.

Eight months latter James' business venture was in ruins and he was unable to make any payments on the loan. Mega Bank asserted their right under the bank guarantee and demanded that Carlo pay out the amount outstanding. Carlo was unable to do so and Mega Bank threatened to sell his home.

Carlo has approached you seeking advice on the possibility of having the bank guarantee terminated.

Using the relevant case law, advise Carlo on the likelihood of him being able to terminate the bank guarantee between himself and Mega Bank.