Alice, the president of ABC Bank, had a meeting with Fred to discuss the fact that he was having difficulty making the payments on his loan that was guaranteed by Sylvia. Fred requested that Alice provide a grace period to Fred and allow him to miss a few payments without penalty in order to catch up his finances. Alice had no objection. Assuming the guaranty agreement did not address such
situations, is Alice acting prudently and why or why not?
a. Yes, because Sylvia, as a guarantor, has no rights to oppose any action of the bank.
b. Yes, because while Sylvia has certain rights in regard to actions taken by the bank, she had no right to oppose the provision of a grace period since it is unlikely that allowing such a grace period would impair Sylvia's interests.
c. No, because Alice should have obtained the written consent of Sylvia in the form of an affirmation of the guaranty in view of the grace period.
d. No, because as a matter of equitable business practice, Alice should have put Sylvia on notice although Alice did not increase the bank's exposure by failing to do so.
c
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