A husband and wife’s company obtained goods on credit and the wife provided a guarantee for the amounts owed. The supplier sued on the guarantee and the wife raised a defence of unconscionability.
The court did not believe the wife and found that she signed the guarantee, was an astute business woman who made decisions in the business independently of her husband and without direction from him and had signed many mortgages and guarantees over the years.
The law is that if you sign a document then in the absence of fraud or misrepresentation or circumstances in which it is unconscionable to do so, you are bound by it and it is immaterial whether you read it or not. The law is that the unconscionable circumstances may arise (a) from undue influence over the person signing or (b) if the person signing does not understand the effect of the document, unless the lender took reasonable steps to ensure that the person received independent legal advice (the second limb known as Garcia unconcionability) but in both cases, the wife must be a volunteer. It is irrelevant that the person would have signed even if a proper explanation had been given. The defence is concerned with the conscience of the lender, not what the person would have done had the lender not behaved unconscionably.
The court found that Garcia unconscionability was not established because the wife received benefits through the company whose debt she guaranteed and was not a volunteer. Athough unnecessary to decide, found that the lender failed to prove that the wife understood the effect of the guarantee signed, because even though she knew what a guarantee was, having signed previous guarantees, the lender did not prove that she knew that her liability under it was not subject to any maximum limit.
The court gave judgment for the supplier.
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