Home > Uncategorized > Businesses: Be Careful When Providing a Personal Guarantee of a Business Contract

Businesses: Be Careful When Providing a Personal Guarantee of a Business Contract

I just read an opinion decided October 28, 2013 issued from the Eastern District of Michigan concerning a business guarantee.
The case is Wells Fargo Bank, Nat. Ass’n v. Canal Crossing Phoenix LLC, 13-10121, 2013 WL 5785793 (E.D. Mich. Oct. 28, 2013).
There, the Defendants attempted to dispute personal liability on a guarantee.
It appeared they tried to argue that an ambiguity existed, where one did not really exist.
The Court found the guarantee to be clear and unambiguous – relying on a prior case law that held “the plain language of the repayment guaranty to be clear and unambiguous, and acknowledged the repayment guaranty as an independent obligation owed by defendant to plaintiff” See also Angelo Iafrate Co. V. M & K Development Co., 80 Mich.App. 508, 264 N.W.2d 45, 48 (Mich.App.1978).
It is well settled that “if the language of a contract is unambiguous, the language is reflective of the parties’ intent as a matter of law.” Burton, 373 F.Supp.2d at 718 (citing Quality Prods. and Concepts Co. v. Nagel Precision, Inc., 469 Mich. 362, 666 N.W.2d 251 (Mich.2003)).  The Court found the guarantee language to be  “clear and unambiguous, and authorizes Wells Fargo’s decision to pursue repayment under the Repayment Guaranties without prior foreclosure on its collateral.”

If a personal guarantee is clear – the Court will apply the plain language of the contract and hold the individual personally liable for the debt.
Therefore business owners – make sure you understand the ramifications of a personal guarantee – you don’t want to end up in court hiring your attorney to attempt to argue that the guarantee is “ambiguous”.
Lesson to creditors – make sure your contractual language is clear; you do not want an ambiguity to preclude you from recovering what you are owed.
Questions? Feel free to contact me:
email:  Jeshua@dwlawpc.com
Categories: Uncategorized

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