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Binder Machinery Co. v. TPK Construction

A-1986-01T2 (N.J. Super. App. Div. 2002) (Unpublished)

GUARANTIES—A person cannot be relieved of his personal guaranty obligation because he didn’t read the guaranty, that failure is his own negligence.

The president of a construction company executed six promissory notes on behalf of the company. On the reverse side of each note, there was an unconditional personal guaranty of payment. Those guaranties “were in a separate paragraph from the verbiage of the promissory notes” and required a separate signature. The president of the debtor signed the guaranties, personally. When the company defaulted on the notes, the creditor sued both the company and the guarantor. The guarantor claimed that because of his long term business relationship with the debtor, he reluctantly agreed to sign the promissory notes and guaranties even though he told the creditor’s salesman, “I like to have business documents reviewed by my lawyer.” In his defense to enforcement of the guaranties, the guarantor claimed that he “did not have the opportunity to read any of the documents in detail” and “[the salesman] never told [him] that [the creditor] wanted [him] to personally guaranty a corporate obligation.” In essence, he alleged that, as a lay person he did not understand what the guaranties meant. The lower court held for the creditor, finding that “the guaranties clearly stated that the signer would be personally liable for the notes.” The lower court noted that no fraud had been asserted as a defense. The Appellate Division was not persuaded either. It felt obligated to set forth a few well-settled principles of relevant law: “a person cannot be relieved from a contractual obligation simply by not reading the contract. ... Such failure is negligence as a matter of law on the part of the signer. ... Thus, if the [guarantor] did not read the guaranties, he is liable as a matter of law.” Further, “in a creditor-debtor relationship there is no duty to disclose, especially when information is equally available to both parties.”

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