Michael owns his own mobile personal fitness training business called Body Sculptors Pty Ltd. The business is doing well and Michael decides to purchase a house. To obtain finance, in March 2012, Michael made an appointment at the Caulfield branch of Bravo Bank Ltd with Terry, a lending officer. Bravo Bank Pty Ltd agrees to lend Michael $350,000 at a variable interest rate of 6.5 percent. At the end of the meeting, Terry gives Michael a document called “Bravo’s Pre-Contractual Disclosure”. Michael noted that the document did not mention when loan repayments are to be made, or how a borrower defaults under these obligations.

A week later, Michael returns to Bravo Bank Pty Ltd and signs a loan contract to borrow $350,000. When Michael returns home later that night he finds his profit/loss statements of Body Sculptors Pty Ltd for the past two years and documents outlining his income from his business. He also finds his latest credit card statement for $20,000 and documentation regarding a personal loan for $30,000 from Indy Bank Ltd. He used these lines of a credit card to start his personal fitness training business and has only repaid $5,000 of the personal loan. Michael forgot to give these documents to Terry before signing the contract. Michael uses $300,000 to purchase a house in Clayton. The remaining $50,000 is used to purchase furniture and gym equipment for a new premises Michael has leased for Body Sculptors Pty Ltd.

Michael makes the monthly loan and interest repayments for the first few months. However, business at the new premise for Body Sculptors Pty Ltd declines when a 24-hour fitness center opens nearby. Hoping business will pick up, Michael sells his car to make the next two loan repayments. Michael even stops visiting his favorite Thai restaurant. But by October 2012 he has defaulted on his loan obligations and is unlikely to be able to repay the balance of the loan.

Advise Bravo bank Ltd on the enforceability of their loan agreement with Michael. Refer to relevant legislation.