Tuan is president and sole shareholder of Entertainment, Inc. Entertainment, Inc. wishes to borrow money, but to do so, the bank requires Tuan to orally agree to personally pay the debt of the corporation if Entertainment, Inc. cannot. Tuan's guarantee to repay is:a. enforceable under the parol evidence rule. b. unenforceable because there is no insurable interest. c. enforceable because of the leading object rule. d. unenforceable because it is a collateral promise.

Question

Tobias Flynn

Business

4 July, 12:27

Tuan is president and sole shareholder of Entertainment, Inc. Entertainment, Inc. wishes to borrow money, but to do so, the bank requires Tuan to orally agree to personally pay the debt of the corporation if Entertainment, Inc. cannot. Tuan's guarantee to repay is:a. enforceable under the parol evidence rule. b. unenforceable because there is no insurable interest. c. enforceable because of the leading object rule. d. unenforceable because it is a collateral promise.

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Jonas Fry · Answer 1

The correct answer is "c"

Enforceable because of the leading object rule

Explanation:

Leading Object Rule is the principle of contract law providing that the statute of frauds does not apply to an oral promise to pay another's debt when the promise is made primarily for the promisor's own benefit.

Here, the bank is asking Tuan (President) to orally agree to repay the debt of corporation, if Entertainment Inc cannot repay. This is primarily for the benefit of the company, because, if Tuan agrees, the company will be acquiring the loan from the bank. Therefore, the contract is the enforceable because of the leading object rule.