Personal Guaranty: General & Special, Breach, Interpretation
A guaranty — a species of contract — is a collateral agreement for another’s undertaking and is an independent contract that imposes responsibilities different from those imposed in the agreement to which it is collateral. Specifically, a guaranty is a contract where a guarantor becomes secondarily liable for the obligation of a debtor in the event the debtor defaults. Missouri interprets a guaranty and a contract similarly; however, the liability of a guarantor is strictly construed according to the terms of the guaranty agreement and is not extended by implication beyond the strict letter of the obligation. See Dunn Indus. Group, Inc. v. City of Sugar Creek, 112 S.W.3d 421, 434 (Mo. 2003). This preference, however, does not entitle a guarantor to demand an unfair and strained interpretation of the words used in order that it may be released from the obligation. Zoglin v. Layland, 328 S.W. 2d 718, 721 (Mo. Ct. App. 1959).
There are two types of guaranties: (1) general and (2) special. A general guaranty is addressed to persons generally and is assignable consistent with traditional contract law. A special guaranty is addressed to a particular person, and thus is usually non-assignable.
A breach of guaranty is very similar to a breach of contract action. What can sometimes complicate things is interpreting the guaranty agreement. A guaranty agreement may be construed together with any contemporaneously executed agreements dealing with the same subject matter as an aid in ascertaining the intention of the parties. Those agreements, however, do not constitute a single contract, and the liability of the guarantor remains primarily dependent on the guaranty agreement itself.
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