David is 21 years old and has just recently graduated from the University of Prince Edward Island School of Business.David is an extremely eager individual and wants to immediately get into business, on his own, for the very first time.After exploring a number of possibilities, David has his heart and mind set on the widget business.In fact, he has approached "Widgets 'R Us", a business which produces and sells widgets in the Charlottetown area.The owner of Widgets 'R Us is Mr. Widget.Mr. Widget operates Widgets 'R Us from a leased premises.He and his son are the sole operators of the business and all the equipment used to make the widgets is owned by Widgets 'R Us.Mr. Widget is anxious to get out of the widget business as he is 65 years old and his son has really no interest in carrying on the business.Mr. Widget explains to David the business grossed $250,000.00 in sales last year.However, after taking into account the cost of goods sold and the operating expenses, the company just broke even.Mr. Widget indicates to David that he feels that widgets are going to be the "hottest thing on the market".He feels that, although sales have not reflected this fact, if the widget is marketing correctly, David could turn the operation around and increase sales and in turn make a real decent profit.The parties negotiate a purchase price of $100,000.00.They also negotiate a clause in the agreement which indicates that Mr. Widget is not to be involved in or operate any widget related business in Canada for a period of five years.

David needs to finance his operation.He approaches a banker, Mr. Banker.Mr. Banker is not excited about financing this venture but notes that David's father, Mr. Wealthy, has a tremendous amount of wealth and has been a well respected and valued client of the bank for years.He explains to David that he cannot advance the $100,000.00 necessary in order to finance this venture unless his father guarantees the loan.David approaches his father with this and after consideration the father agrees to talk with Mr. Banker.Mr. Wealthy goes to the bank where he has done business for years.He trusts Mr. Banker.He asks Mr. Banker's opinion on the business venture.Mr. Banker explains that although David has no real business experience, he feels that David is a bright and eager young man and that David should be successful.Mr. Wealthy, anxious to help his son and trusting in his banker's advice, signs the document guaranteeing the $100,000.00 business loan.He does not receive any independent advice.

One year has passed since David has been in business.Things are not looking so good.Three months into the venture, the major piece of equipment, the widget maker, broke down and needed a major overhaul.This cost David $25,000.00 and shut down operations for two months.David's business has never recovered from this.Further, to make things worse, David hears a rumor that Mr. Widget is expecting to open up a rival widget business in the City of Charlottetown.

Question A:Mr. Wealthy has come to you for advice.He knows it is just a matter of time before the business fails and he will be called upon to honour the guarantee.Please advise Mr. Wealthy as to whether he is obligated to honour this guarantee. (6 marks)

Question B:If David survives the widget business and Mr. Widget opens up a rival business, what rights, if any, would David have.Also, what remedy (or remedies) would David be looking to the courts to grant him? (3 marks)