In Life, There Are No [Personal] Guarantees (Especially When They Are Buried In An Ambiguous Provision Of A Contract)

by: Peter J. Gallagher (@pjsgallagher)

In a recent unpublished decision, the Law Division refused to enforce a purported personal guarantee in a commercial contract. Individuals and entities that include such guarantees in their contracts with customers should read the decision (or just continue reading below).

In Century Star Fuel Corp. v. Jaffe, defendant entered into a contract with plaintiff whereby defendant obtained a line of credit from plaintiff that defendant could use to purchase heating oil from plaintiff. The one-page contract, which was prepared by plaintiff, contained a single signature line for defendant’s president to sign on behalf of defendant. It also contained what the court described as “boilerplate language” providing the following: “Applicant . . . agrees and acknowledges that the person who signs this Application has the Authority to do so; and Personally Guarantees all present and future extensions of credit.” Defendant was identified as the “Applicant” in the signature line. Plaintiff alleged that this clause was unambiguous and rendered defendant’s president personally liable for defendant’s debts. Defendant disagreed and argued that the clause was unenforceable because its president never intended to be personally bound. Both parties moved for summary judgment. The trial court sided with defendant.

 

Continue reading “In Life, There Are No [Personal] Guarantees (Especially When They Are Buried In An Ambiguous Provision Of A Contract)”

Extra! Extra!

by: Peter J. Gallagher (@pjsgallagher)

The latest edition of  "Commercial Litigation Briefs" is out. The newsletter is published by my firm and contains short articles on topics and cases of interest to commercial litigators. This month there are two articles — one by me and one by my colleague, John DeSimone. My article discusses a recent decision from the Delaware Supreme Court that required Wal-Mart to produce attorney-client communications to shareholders as they investigated whether to bring a derivative lawsuit against the company. John's article reports on a recent New Jersey Appellate Division decision about debt buyers trying to collect on charged-off credit card accounts they purchased from other debt buyers, which also provides helpful guidance for litigators on the hearsay exception for business records.

Enjoy!