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Daewoo Electronics America, Inc. v. T.C.L. Industries (H.K.) Holdings Limited

2011 WL 6934405 (U.S. Ct. App. 3rd Cir. 2011) (Unpublished)

GUARANTIES — When a guaranty for a product will expire a certain length of time after the date of its execution and the only date on the document is at the top thereof with no other indication as to what the execution date might otherwise have been, a court will treat the guaranty as clear and ambiguous and use the printed date instead deciding whether the guaranty was signed later.

A manufacturer of electronic equipment sold goods to an electronics distributor who then resold those same goods to retailers. A minority shareholder of the distributor guaranteed payment for the goods in an amount up to $5 million, but only for unpaid invoices in “the 12 month period from the date of execution of [the] Guaranty.” According to the guaranty, the guarantor had “no liability whatsoever for any Obligations incurred by the [distributor] after the” end of the twelve month period. According to the manufacturer, the date that started the twelve month period was February 5, 2004, corresponding with “the date the guaranty was signed by the guarantor’s officers” and was transmitted to the manufacturer. According to the guarantor and the distributor, the guaranty’s “‘date of execution’ was December 4, 2003 since the only date appearing in the guaranty was ‘December 4th, 2003.’” Basically, the manufacturer was arguing “that the guaranty did not become effective until February 5, 2004, and [] submitted evidence to show that the parties continued to negotiate the terms of the guaranty into January 2004, and that the signed guaranty was not delivered” to it by the distributor and the guarantor until February 5, 2004. This raised an important issue because, under the facts presented, if the guaranty period ended on December 3, 2004, there would be nothing to recover under the guaranty. On the other hand, if the guaranty ran through February 4, 2005, the manufacturer was entitled to recover $5 million of a nearly $8 million judgment it had obtained against the distributor.

The December 4, 2003 date appeared only at the top of the document, not on the signature page. In fact, there was no “space on the signature page for the signers to insert the execution date.” Accordingly, the lower court found “that by including only one date at the top of the guaranty, and leaving no space to insert a date on the signature page, the parties [] demonstrated their intent that the guaranty take effect on December 4, 2003.” The lower court continued that “[h]ad the parties intended a date other than December 4, 2003 as the effective date, they could have omitted that date at the top of the guaranty and included a space on the signature page for an insertion of the execution date.”

After losing its motion for consideration, the manufacturer appealed and the Court of Appeals conducted a plenary review because the lower court’s decision was on summary judgment. Whether a contract is clear or ambiguous is a question of law. Here, the Court began by reciting that “[i]n interpreting a contract, [i]t is not the real intent but the intent expressed or apparent in the writing that controls. ... A court may look to extrinsic evidence to ‘uncover the true meaning of contractual terms,’ but not to vary an unambiguous contract.” In this case, the Court found that “[s]ince ‘December 4th, 2003’ appears at the top of the guaranty document, no other date appear[ed] on the document, and the signature page [did] not contain a space for a date, there [was] only one reasonable construction of the guaranty’s date of execution: December 4, 2003.”

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