Guaranty

Our team specializes in advising clients on guaranties of all kinds, especially in leasing transactions, and representing them in guaranty-related litigation matters.

Guaranties play a crucial role in various transactions, serving as a means of securing performance obligations and mitigating financial risks. Guaranties can be included in various types of contracts to ensure performance or fulfillment of obligations, including:

Lease Agreements: In commercial leases or rental agreements, guaranties might be included to ensure payment of rent or adherence to other lease terms, often by an individual (usually a principal of the tenant) or parent company or another financially stable entity.

Loan Agreements: Guaranties are commonly included in loan agreements, where a third party (guarantor) pledges to repay the loan if the borrower defaults.

Construction Contracts: In construction contracts, performance guaranties are often included to ensure that the contractor completes the project according to specifications and within the agreed-upon time frame.

Service Contracts: Guaranties may be included in service contracts to assure the quality of services provided. For example, a warranty might guarantee the repair or replacement of defective parts.

Sales Contracts: In contracts for the sale of goods or services, guaranties may be included to ensure that the goods or services meet certain standards or specifications.

Employment Contracts: Executive contracts or contracts for high-level employees may include guaranties related to compensation, benefits, or performance bonuses.

“Good Guy” and Limited Guaranties:

In addition to our comprehensive expertise in guaranty matters, our team is particularly adept in advising clients on “Good Guy” and other forms of limited guaranties.

A Good Guy Guaranty is a type of personal guaranty often included in commercial lease agreements, especially in the context of retail and office leases. Unlike traditional guaranties, which provide broad financial assurances, Good Guy Guaranties typically incorporate specific provisions that, when invoked, can limit the liability of the guarantor.

Key Features of Good Guy Guaranties include:

• Limited Liability: Good Guy Guaranties typically limit the guarantor’s liability to a specified period, usually tied to the tenant’s occupancy of the leased premises. Upon vacating the premises in good condition and complying with certain lease obligations (such as rent payments), the guarantor’s liability may be terminated, depending on the terms of the specific guaranty.
• Tenant Compliance: These guaranties incentivize tenants to maintain lease compliance and uphold their end of the bargain. By offering a potential exit strategy for guarantors who fulfill their “good guy” obligations, landlords encourage tenants to fulfill their lease obligations responsibly.
• Risk Mitigation: For landlords, Good Guy Guaranties serve as a risk mitigation tool, providing assurance that tenants will uphold their lease obligations and maintain the leased premises appropriately. This can be particularly valuable in volatile economic climates or when leasing to startups or businesses with uncertain financial profiles.

If you have any questions about guaranties (or the broader agreements in which they are found), please let us know. At BFKP, our attorneys can help you negotiate and litigate guaranties of all kinds.