Complex Commercial Litigation

Entity and Structure Issues

Guaranty Enforcement

Guaranty Enforcement

Guaranty Enforcement

Enforcement depends on whether the guaranty is of payment, permitting direct action, or of collection, requiring exhaustion against the principal first. Guaranties are strictly construed in the guarantor's favor.

Material modification may discharge the guarantor.

Alternative Names:

Enforcing a Guaranty|Guarantor Liability

Why it Matters?

Material modification without guarantor consent discharges the obligation in many jurisdictions, which catches lenders and landlords that extended terms, increased amounts, or restructured obligations without obtaining reaffirmation. Waiver of defenses language in the guaranty addresses that risk and is standard in commercial forms. Guaranties of payment permitting direct action without pursuing the principal are substantially more valuable than collection guaranties.

Frequently asked questions

What discharges a guarantor?

Which guaranty type is more valuable?