ABSTRACT
Over the past 10 years, the English courts have been grappling with a difficult problem involving the interaction of the law of contract with an area of social and economic sensitivity. It is important for the economy that small businesses flourish. Such businesses often cannot do so without significant and substantial borrowing. Creditors will only be willing to lend the sums concerned on the basis of some appropriate security. The only available security will often be the house in which the borrower is living with his or her partner. The danger is that the partner, having a legal interest in the house, may be persuaded by undue influence or misrepresentation to allow it to be used for security without a full appreciation of the risks involved. The courts may then be asked to prevent the creditor from enforcing the security, in order to protect the rights of the partner. The situation most commonly arises where the borrower is a man and the person supplying the security is his wife, though as the House of Lords has now made clear, care needs to be taken wherever the relationship between borrower and surety is ‘non-commercial’.
