BUSINESS AND CORPORATIONS LAW
Olga migrated to Australia from Russia a year ago and is living with her cousin, Ivan, and his parents, an elderly couple who do not understand English. Olga has been unemployed for most of the time since she arrived in Australia, but she has recently been offered to work as a courier for Beverly, a florist. The work requires Olga to deliver flowers and floral arrangements to customers according to order. However, under the terms of the work contract, Olga must have and use her own car to do the flower deliveries. The contract also provides that Olga is to be paid by the number and distance of the deliveries.
Olga is very keen to take on this job. She goes to a car dealer who has a car that would be suitable for doing flower deliveries. The car costs $22,000, money which Olga does not have. Olga therefore goes to the Eastpac Bank and applies for a $22,000 loan. Eastpac Bank informs Olga that it will not lend her any money unless a third party guarantees the loan. Olga requests Ivan to guarantee the loan but he turns her down, stating that he thinks she will default on the loan and he does not want to be liable for Olga’s loan under a guarantee.
Olga then goes to Ivan’s parents, Tanya and Boris, and tells them that she would like them to help her borrow money to buy the car. Both Tanya and Boris are very close to Olga. They are old and frail and have become dependent on Olga for physical and emotional support. Tanya and Boris are eager to help Olga and therefore readily agree to guarantee her loan from Eastpac Bank. They sign the guarantee document at the Eastpac Bank. However, the bank does not explain to Tanya and Boris that Olga’s income as a flower courier is uncertain and that they may have to pay the bank any sums outstanding on Olga’s loan if Olga defaults on repayment.
Olga buys the car using the loan money and commences work as the flower courier. Unfortunately, Olga is only receiving three or four delivery jobs per day and the income she makes is not enough to cover her car expenses and the repayment of the principal and interest on her bank loan. Eastpac Bank now seeks to enforce the guarantee against Tanya and Boris.
Using case law and statutory law, advise Tanya and Boris as to their legal rights.