Law in relation to the debt

Bella is married to Fred. She met Fred online and moved from South America to live in Australia with Fred. Bella speaks English but is not proficient in reading and writing English. Bella works in Fred’s business, and they work up to 80 hours a week buying, packaging and delivering flowers. The business operates as a partnership with Bella and Fred the two partners, each with a 50% interest.

Fred believes they need a new van and also some new refrigeration equipment in order to facilitate the business, but this will require borrowing from the bank. Fred takes Bella to the bank and tells the manager organising the loan that Bella is his partner, and that they need to borrow $500,000. Bella is presented with various documents which she signs, Fred does all the explanation to Bella, the lender asks Bella if she thinks everything is okay, and she replies yes.

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Two months later, the business is doing very poorly, Fred has moved interstate and is not contactable, the bank has sent a notice threatening legal action and Bella is now discovering the extent of her legal liability to the bank.

At the same time, it transpires that the van which was purchased by Fred for $39,000 out of the borrowings from the bank and which had been represented to him by the sales assistant as suitable for the extensive delivery program that was required by the business and in excellent order and condition. It proved to be neither – the engine regularly overheated as a result of the many short delivery trips and two months after taking delivery of the van its engine blew a gasket and required a complete reconditioning for which a very high quote was given. The repairer said that they had been treated badly as it was clear that the van had not been in good order and condition when it was sold.

The refrigeration equipment was purchased from an industrial electrical equipment firm for $90,000 and seemed to be operating satisfactorily until following an electricity blackout it ceased to work and the stock of flowers held in the refrigerator perished and substantial contracts for supply of the flowers which included many rare specimens could not be completed which meant a significant loss for the business.  Bella has been advised that there was a fault in the refrigeration equipment and that if the fault had not existed the blackout would not have caused any damage. The retailer who sold the refrigerator said that there was a latent defect in the machine and that a claim should be made against the manufacturer.


Examine Bella’s position in law in relation to the debt to the bank and the arrangements made by the partnership business.
(10 marks)

Examine whether the business would have any rights in relation to the van and the refrigeration equipment

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