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Amoco Oil Company v. Luessen

A-3977-01T5 (N.J. Super. App. Div. 2003) (Unpublished)

GUARANTIES—Although it is true that a person cannot guaranty his or her own debt, not every document labeled as a guaranty is actually such a document and therefore it may be enforceable against the signatory.

An individual entered into a franchise agreement with a gasoline company. One of the documents signed by the individual was an agreement titled “Unlimited Guaranty.” After the franchisee was terminated, a dispute arose between the gasoline company and the ex-dealer concerning payment for final deliveries of gasoline. That dispute was entangled with one about monies owed to the ex-dealer under the gasoline company’s “Merchandising Assistance Program.” Eventually, a small net recovery was awarded to the dealer. Nonetheless, as part of the court’s proceeding, a finding was made that money was, in fact, due to the gasoline company for unpaid gasoline. As a result, the gasoline company sought an award for interest and attorney’s fees under the “Unlimited Guaranty.” The lower court held that the “Unlimited Guaranty” agreement was an enforceable promise to pay one’s own debt and also lacked consideration. Here, the ex-dealer individually did not operate his business through a separate entity. On appeal, the Court ruled that even though the document was titled an “Unlimited Guaranty,” it was actually a credit agreement between the dealer and the gasoline company. It was “not a promise to pay a pre-existing debt but was for the purpose of establishing a credit account for [the ex-dealer] as a principal obligor so that he would not have to pay for gasoline and related products on delivery.” Further, the Court disagreed with the lower court that there was no consideration. By its very terms, the agreement provided that the gasoline company was willing to lend money or otherwise extend financial accommodation to the ex-dealer.

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