In New Jesey business law, a person or business may personally guaranty the performance of a third party. If the third party defaults on its obligations, the party which gave the personal guaranty (the “guarantor”) then becomes liable for the third party’s default. Different states have different requirements for the enforcement of personal guarantees, however. On December 2, 2025, the
Background
E&N Construction, Inc., a construction company, signed a two page agreement with Extech Building Materials, Inc. to purchase construction supplies. They signed a two page, six paragraph agreement. The sixth paragraph provided:
6. IN CONSIDERATION OF EXTECH BUILDING MATERIALS, ITS SUBSIDIARIES OR AFFILIATES EXTENDING CREDIT, WE JOINTLY AND SEVERALLY DO PERSONALLY GUARANTEE UNCONDITIONALLY, AT ALL TIMES, TO EXTECH, ITS SUBSIDIARIES OR AFFILIATES, THE PAYMENT OF INDEBTEDNESS OR BALANCE OF INDEBTEDNESS OF THE WITHIN NAME[D] FIRM. THIS GUARANTEE SHALL CONTINUE UNTIL 10 FULL BUSINESS DAYS AFTER GUARANTOR SENDS A WRITTEN REVOCATION OF THE GUARANTEE TO EXTECH.
Two representatives of E&N signed the agreement. Next to their signatures was: “(No Title).” Nothing else explained the capacity in which they were signing. Extech supplied building materials to E&N on credit, and Extech alleged that E&N defaulted owing $1,016,627.65. It then sued for this amount in the Superior Court of New Jersey. Extech and the two signatories moved for summary judgment over the alleged personal guarantees. The Court denied Extech’s argument that the guarantees were enforceable against the signatories, and dismissed the claims against them personally.
Extech appealed to the Appellate Division of the Superior Court of New Jersey, which reversed the dismissal of the personal guaranty claims. One of the signatories, Joaquim Ferriera, appealed to the Supreme Court of New Jersey.
The Supreme Court reversed the Appellate Division’s decision and reinstated the dismissal of the claims against Ferriera regarding the personal guarantee.
The Supreme Court’s Opinion
In its opinion, the Supreme Court first explained that a personal guaranty is a contract, and a separate contract from the underlying obligation. The crux of New Jersey contract law, it explained, is that the parties’ intent expressed in the contract controls. The Court explained:
A personal guaranty is an individual’s promise to a third party to answer for a principal’s debt or performance on an underlying contract, payable to the third party only upon the principal’s default or failure to perform. A guaranty is fundamentally separate from the underlying contract, and its “independence is not affected by the fact that both contracts are written on the same paper or instrument or are contemporaneously executed.” But it is still a type of contract, and its enforceability therefore depends — as with any contract — on mutual assent between the parties. New Jersey’s Statute of Frauds also requires that any assumption of liability for the debt of another be in writing and signed by the party assuming liability.
Personal guarantees are strictly interpreted in accordance with their terms, and if there is an ambiguity it is construed against the drafter.
Ferriera argued that the Supreme Court should adopt the rule used in many other states that to be enforceable a personal guaranty should be in a separate agreement, or at least have a separate signature. The Supreme Court rejected this, however. It explained that the keystone was that the guarantor must clearly and unambiguously agree in a signed, written agreement to be bound by the guaranty, but it did not set a bright line rule on how that should be done.
However, the Supreme Court explained that it is not enough to merely sign the agreement.
In the corporate context, an officer is not personally liable on a contract between the corporation and a third party — that is, the officer does not serve as a guarantor of the corporation’s obligation — simply by signing the contract in an organizational capacity or by virtue of a corporate position. The officer may, however, personally guarantee the company’s obligation if both the officer and the third party so agree.
The Court then examples of how that intent could be unambiguously demonstrated.
There are multiple ways a corporate representative can unambiguously manifest an intent to personally guarantee an underlying agreement. The representative may (1) execute a separate personal guaranty agreement; (2) sign the underlying agreement once as a corporate representative and again individually; or (3) sign the underlying agreement a single time, provided that the agreement explicitly states the individual intends their single signature to bind both the company and the representative individually.
Applying this analysis to Ferrierra’s case, the Supreme Court found that even though it rejected his argument for a two agreement or two signature rule, the agreement was at best ambiguous and did not demonstrate his intent to be bound by the personal guaranty with the required clarity. The Supreme Court therefore reinstated the dismissal of the lawsuit against Ferriera for liability under the alleged personal guaranty.
The Takeaway and a Word of Caution
The takeaway is that a personal guaranty, properly drafted in a clear and unambiguous written agreement, is fully enforceable. However, parties seeking to draft enforceable personal guarantees should limit themselves to the three concrete examples given by the Supreme Court or take a substantial risk that the guaranty won’t be enforced.
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