Alice is president and sole shareholder of Best Fabrics,Inc.Best Fabrics,Inc.wishes to borrow money,but to do so,the bank requires Alice to orally agree to pay the debt of the corporation if Best Fabrics,Inc.cannot.Alice's guarantee to repay is:
A)unenforceable under the parole evidence rule.
B)enforceable because of the leading object rule.
C)enforceable because there is an insurable interest.
D)unenforceable because it is a collateral promise.

Question

Quizplus · Accepted Answer

The leading object rule states that if a primary purpose of the guarantor is to secure an economic benefit for herself or a third party, then the guaranty is enforceable even if it is not in writing. Here, the bank requires the guarantee from Alice in order to lend money to the corporation, and the primary purpose of Alice's guarantee is to benefit the corporation by enabling it to borrow money. Therefore, the guarantee is enforceable even though it is not in writing.

Alice Is President and Sole Shareholder of Best Fabrics,Inc