Question

Donald borrowed $2000 from Ace Finances Ltd. The agreement stated that the full amount plus interest of $500 was payable on 30 November. Shortly after arranging the loan, Donald lost his job and has been unemployed ever since. Advise Donald in each of the following scenarios: (Note – the issue will be the same in each part) ,write by IRCA form

(a) On 10 November, Donald approaches the company, saying: “I have scraped up $2000 but that is all I have. If you take that in full satisfaction and agree not to sue me for the remaining $500 you can have it now.”

(b) Donald informs the company that he will sell his car if the company will take the proceeds in lieu of the amount owed. The company agrees even though it plans to sue him at a later stage for the difference. Donald sells his car for $2000, hands over the money on 30 November and, 6 months later, the company sues him for the remaining $500.

(c) Donald’s daughter, Ivanka, offers to pay the company $2000 if they agree not to sue her father for the remaining $500. The company agrees so Ivanka hands over the money on 30Nov

Answer 1

(a) On 10 November, Donald approaches the company, saying: "I have scraped up $2000 but that is all I have. If you take that in full satisfaction and agree not to sue me for the remaining $500 you can have it now."

Donald can use this remedy to relieve his duties from the debt obligation. If the company agrees to take the $2000 in full satisfaction, Donald will pay less than the original agreed terms.

Full satisfaction means that if the company will agree to the new terms from Donald, then the performance of those terms should be according to the agreement. If the company agrees $2000 and agree not to sue Donald, according to the full satisfaction contract term, then Donald will be relieved his duties from the remaining debt.

(b) Donald informs the company that he will sell his car if the company will take the proceeds in lieu of the amount owed. The company agrees even though it plans to sue him at a later stage for the difference. Donald sells his car for $2000, hands over the money on 30 November and, 6 months later, the company sues him for the remaining $500.

If the company agrees to take the proceeds in lieu of the amount owed, Donald should ensure that the lieu foreclosure agreement made upon selling the car should state that the company is waving its rights to recover any remaining debts. The company should agree to waive the remaining debts if they agree to take the proceeds in lieu of the amount owed.

Proceeds in lieu mean that Donald who is the borrower will give back the lender its property without foreclosure.

The company sued Donald because the lieu foreclosure agreement might have not stated that the company waived the remaining debt.

(c) Donald's daughter, Ivanka, offers to pay the company $2000 if they agree not to sue her father for the remaining $500. The company agrees so Ivanka hands over the money on 30 November.

If the company agrees not to sue for the remaining $500, then Donald can take this option. Ivanka will now be the guarantor to Donald and if the company will want to sue Donald, they will come after Ivanka.

Given that the company agreed not to sue Donald, i would advise Donald to take this option