Bar Exam (US) Contracts: Question below is based on the following fact situation. Hamilton Humph...

Question

Question below is based on the following fact situation.

Hamilton Humphrey is the father of J.P. Humphrey, vice-president of a small electronics firm known as Electro-Aeronautics, Inc. In January, 2006, the company decided to radically overhaul its manufacturing processes and borrowed $200,000 from the City National Bank for this purpose. The loan was secured by a mortgage on the plant and building site, and it would become due on February 1, 2007.

When the debt came due, Electro-Aeronautics was short of ready cash and City National threatened to foreclose. Hamilton Humphrey then intervened on behalf of the company and told the Bank officials that if they would refrain from any legal action against the company for a year (until February 1, 2008), he would personally see that the debt was paid. The bank orally agreed to Hamilton's surety arrangement. However, it was never reduced to writing.

On April 15, 2007, the Bank filed a foreclosure suit against Electro-Aeronautics. Hamilton Humphrey did not learn of the suit until a week later, but he raised no objection, since he thought the Bank was violating its agreement with him by foreclosing prior to February 1, 2008, and thus relieving him of his part of the bargain.

Two weeks later, on May 1, 2007, the Bank's loan officer called Hamilton Humphrey and said that the Bank would hold offon the foreclosure suit as per their agreement since the company had just made a new technological development that would place it in a very lucrative and competitive position.

Assume for the purposes of this question only that soon after the new technological development took place, Electro- Aeronautics' business fortunes declined, which resulted in its insolvency. In an action by the Bank against the appointed receiver in bankruptcy and Hamilton Humphrey, the Bank will most likely recover for the outstanding loan from

AnswerChoose the correct answer.Choose all that apply. Correct Partially correct Incorrect Don't Know

  1. A
    Correct Answer
    Humphrey only.
  2. B
    Correct Answer
    receiver only.
  3. C
    Correct Answer
    either Humphrey or receiver.
  4. D
    Correct Answer
    both Humphrey and receiver.
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