Corporate Liability, Personal Liability on Personal Guaranty Agreements

Many times a lender or creditor will enter into a contract with a corporation or business entity and request that the signer or owner of the business personally guaranty all amounts due. There is a very specific legal way this should be done for the guaranty to be enforceable.

When weighing whether a signatory intended to sign in his corporate or individual capacity, the question is whether “the language of the so called guaranty clause is sufficient to manifest a clear and explicit intent by [the signatory] to assume a personal guaranty contract.” Wired Music, Inc. v. Great River Steamboat Co., 554 S.W.2d 466, 469 (Mo. Ct. App. 1977). The presumption is it “was the agent’s intention to bind his principal and not to incur personal liability.” Id. at 468. Thus, Missouri has adopted the policy that “in order to hold a corporate officer individually liable in signing a contract of guaranty…the officer should sign the contract twice[,] once in his corporate capacity and once in his individual capacity.” Capitol Group, Inc. v. Collier, 365 S.W.3d 644, 648 (Mo. Ct. App. 2012). “By signing the contract twice, the officer executing the contract for his corporation clearly manifests his intent to assume personal liability.” Id.