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A bank offers a borrower a loan at an unusually high interest rate during a credit shortage. The…

Section 16 illustration (d) treats an unusually high rate during a tight money market as an ordinary banking transaction on the stated facts. A high rate alone does not…

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A bank offers a borrower a loan at an unusually high interest rate during a credit shortage. The borrower accepts in an ordinary commercial transaction. Assume the rate is lawful and no facts show that the bank could dominate the borrower’s will. How does the high rate alone affect the agreement?

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Answer and explanation

Correct answer B

Section 16 illustration (d) treats an unusually high rate during a tight money market as an ordinary banking transaction on the stated facts. A high rate alone does not establish undue influence.

Option feedback

Option A

A lawful high rate alone does not make an otherwise valid agreement void.

Option B

Section 16 illustration (d) recognises an unusually high rate during a credit shortage in an ordinary banking transaction as consistent with free consent.

Option C

An undue-influence claim requires more than a high rate. The facts do not establish the requisite dominance.

Option D

The facts expressly state that the rate is lawful.

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