Best Care Pty Ltd ('Best Care') is a subsidiary of Alpha Pty Ltd ('Alpha'). Alpha's ultimate goal is to sell its shares in Best Care to the highest bidding investor.

As part of Best Care's development and expansion plan, a $2m loan application was made with Oz Bank Ltd ('Oz Bank'). The collateral for the loan included Best Care's inventories, trademarks, licences and other highly valued industrial equipment. Upon assessing Best Care's application, Oz Bank was satisfied to approve a loan facility of up to $900,000. Upon further inquiry, the bank manager suggested that the loan facility could be extended to $2m if Alpha could act as either a guarantor or a co-applicant.

A meeting between Best Care's managing director (Ben), Alpha's managing director (Andrew) and the bank manager (Chris) was organised to discuss further details. The following conversation took place:

Andrew: "We have always banked with you Chris. You've made such a good career out of dealing with Alpha. Help us out here. You know us and how much potential Best Care's got".

Chris: "No doubt about that. But its collateral is not enough. You know they had to be independently assessed, with new regulation and all. The fact that it is newly set up doesn't help. But if you put your name down though ...."

Andrew: "Not possible. That would put us back in terms of credit rating. And I need a good financial report. My bonus depends on it. You know what shareholders are like. You're one of them!"

Chris: "Well ok. Maybe have your people draft up a letter of comfort, acknowledging the loan and your position as holding company. Maybe I can massage it with the assessor."

Andrew: "And our name (the holding company's) won't be part of the loan application will it? It's just a piece of paper that comes with the application?"

Chris: "Yep."

Ben: "Sounds good to me. As long as we have that $2m loan approved. The industry is booming. There will be no problem paying it back. Thought the bank would be able to appreciate our potential".

Some key content of the letter of comfort sent to Oz Bank is extracted below:

Alpha Pty Ltd

3 Crescent Ave, NSW, 2001

Letter of Comfort

...

Alpha Pty Ltd confirms its 90% holding interest in Best Care Pty Ltd. We hereby acknowledge our support of Best Care Pty Ltd's loan application with Oz Bank Ltd.

...

It is our company's policy to ensure our affiliates and subsidiaries make their best efforts in repaying loans and meeting their liabilities.

...

This letter is proof of our intention to be bound in honour.

...

With best regards,

Andrew Parker (signed)

Alpha Pty Ltd, Managing Director

The loan application for $2m was finally approved on 1 February 2020 for a term of 10 years at 4% pa rate, monthly repayment and interest of $20,259 is due on the 1^stof each month.

The Corona virus pandemic saw Best Care struggling with delays in both interstate exports and imports and increased expenses in shipping online orders. Best Care was able to meet its monthly repayment for the first two months. It has not been able to pay since 1 May. Chris is very anxious as this has been affecting his reputation at the bank.

Answer the following questions:

1.Could Oz Bank rely on the letter of comfort to demand repayments from Alpha Pty Ltd?

2.Could Best Care rely on the doctrine of frustration to be released from the loan agreement with Oz Bank?

The answer should be structured as follow:

1. Identification of the Issues
2. Relevant Laws
3. Application of relevant laws
4. Conclusion

Most important part is 2&3 so please elaborate as much as possible for those parts.