Personal Guarantees on Commercial Contract Collections and the Typical Requirement of Two Signatures under North Carolina Law
July 18, 2012
When defending against a personal guarantee claim, the first thing a business owner should know is that, pursuant to North Carolina’s statute of frauds, all guarantees must be in writing. There is no such thing as an oral guarantee in North Carolina. Additionally, as recently confirmed in the North Carolina Court of Appeals case Tucker Materials, Inc. v. SafeSound Acoustics, Inc., there must be two separate signatures – one on behalf of the corporation or limited liability company and one on behalf of the guarantor individually. No matter the contract language, if there is only one signature, the creditor will likely be unable to prove a personal guarantee and will be limited to recovering from the assets of the company.
In Tucker Materials, the contract specifically provided “[t]he undersigned personally guarantees payment of applicant’s past due accounts . . .” The applicant in the contract was the company – SafeSound Acoustics, Inc. Presumably, Tucker Materials wanted SafeSound owner, Sherri Noble, to be personally liable. The Court of Appeals noted, however, that on the signature block, Sherri Noble had only signed once and, under her name was the title “President.” The Court found this was insufficient to establish a personal guarantee because “the nearly universal practice in the commercial world is that the corporate officer signs twice, once as an officer and again as an individual.” The Court entered Summary Judgment in favor of Ms. Noble, which meant the question of whether she was personally liable did not even go to trial.
The Tucker case is a prime example of why anytime a personal guarantee is involved, you are well served to have an attorney review the contract. Maginnis Law offers free consultations for all business clients, and our attorneys will review any alleged personal guarantee during the course of the consultation. If you wish to retain the firm, we extend several billing arrangements to our business clients including hourly, flat rate, and monthly retainer.
Maginnis Law represents clients throughout the RTP area, including Raleigh, Durham, Cary, Morrisville, Apex, Chapel Hill, Clayton, Garner, and Wake Forest. To speak with a Raleigh civil litigation attorney regarding your case involving a personal guarantee, call the firm at 919.480.8526 or 919.526.0450. You may also send a confidential email inquiry using our contact page.