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Abstract

The operation of the special equity principle can be seen where a wife does not understand the nature and effect of the guarantee she is induced to sign by the husband whereupon the transaction may be set aside. It should be remembered that women often become involved in these guarantees because of the existence of a personal relationship rather than because of any real appreciation of the legal relationship created. Credit providers such as banks involve women in this kind of ‘sexually transmitted debt’, ‘emotional debt’ or ‘relationship debt’ as a means of countering debtor default or to compensate for inadequate or non‐existent debtor assessment procedures, rather than to make it more difficult for men to access credit. This article looks at the how the High Court’s decision in Garcia v National Australia Bank has followed the special equity principle and raises questions concerning its status. It also looks at the application of the principle in Garcia in the modern context and the limitations and the future of that application.

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