An important part of a credit application is the “personal guaranty.” Yet, many suppliers of materials and/or services either don’t seek a guaranty or don’t review the guaranty when it is returned. Often a guaranty is seen as surplus. It is not. It may be your last chance to get paid.
One of a debtor’s most prevalent tricks is to put the tag “president” or “agent” after signing the guaranty. Even if your guaranty says that it is a “personal guaranty” or that the undersigned is “individually liable,” a crafty “guarantor” will still claim that they are not responsible because of the tag “president” or “agent” after the name. Don’t leave this to a judge’s discretion.
You can avoid this “defense” by refusing to accept any guaranty in which the “guarantor” attempts to negate individual liability. However, even if the debtor slips one by you, don’t abandon ship.
The Supreme Judicial Court in Bisonnette v. Keyes , 319 Massachusetts. 134 (1946), held that the mere use of the description word “agent” does not by itself avoid individual liability. Decisions of the Appellate Division of the District Court can be interpreted to hold that where a guaranty distinguishes between the customer and the guarantor, the addition of the mere descriptive term “president” after the guarantor’s name did not negate individual liability.
Although it would be better to avoid this dilemma, a properly worded guaranty can improve your chances of getting paid, even if the debtor plays it cute.