Edward is the principal shareholder in Family Company, which has a loan with Nasty Bank. The company is experiencing financial difficulties that are making it difficult to pay off the loan on time. However, the bank tells the company that if Edward, as principal shareholder, guarantees the loan, it will give the company one more year to pay off the loan. A couple of weeks later and after Edward has given his guarantee to the bank, the branch of the bank that extended the loan has a change of managers. When the new manager sees the poor financial health of the company, he makes a demand for immediate payment on both the company and Edward and puts the company into receivership. In this case, if the bank decides to sue Edward and the company,
a. the company will be liable on its loan and Edward will be liable on his guarantee.
b. Edward will be liable as principal shareholder.
c. Edward will not be liable on his guarantee, because there was a material change in the term of the loan.
d. Edward will be liable on his guarantee so long as the bank sues the company first.
e. Edward will not be liable on his guarantee, which was discharged by the bank manager's arbitrary actions.
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