Question 4

Zlotnik incorporated a company shortly after graduation. The company bought a truck and a computer. Short of operating capital, the company, through its agent Zlotnik, borrowed $10 000 from the bank. In consideration for its loan, the bank took, in addition to the company's promise to pay the bank both principal and interest, a mortgage of its truck and computer. The company made its payment each month without incident. For reasons still unknown, the stock market took a tremendous fall, which caused the officer of the bank to call Zlotnik and ask him to guarantee the company's debt. The company was doing very well, so Zlotnik agreed to be guarantor of the debt. His oral assurances were sufficient for the bank officer.

a) Based on these facts, discuss the legal issue(s) that should be of particular concern to the parties.