Third party spousal guarantees given as security for bank debts: an anachronism or a perpetuation of gender stereotypes
Third party guarantees are given by spouses, usually women, who are induced to sign by their husbands because of the existence of a personal relationship rather than because of any real appreciation of the legal relationship created. Banks involve women in this kind of "sexually transmitted debt", "emotional debt" or "relationship debt" as a means to counter default or compensate for inadequate or non-existent debtor assessment procedures. The operation of the special equity rule can be seen where a wife does not understand the nature and effect of the guarantee she is induced to enter into whereupon the transaction may be set aside. This article looks at how the courts have viewed the special equity principle and raises questions concerning its status, its possible perpetuation of unwelcome gender stereotypes, its application in the modern context, its limitations and the future of that application.