Shah v. Diamond Furniture Warehouse Corp.

A-6917-96T5 (N.J. Super. App. Div. 1998) (Unpublished)
  • Opinion Date: April 17, 1998

LEASES; GUARANTIES—An otherwise valid lease guaranty need not be a separate document apart from the lease and is valid if the guarantor signs the lease.

A landlord sought damages against the principals of a corporate tenant based on a lease clause which stated that the individuals signing the lease on behalf of the corporation personally and individually, jointly and severally, guaranteed full performance. The lower court found this clause to be unenforceable because it was tucked into an illegible and incomprehensible lease. The lower court also stated that to bind individuals by a personal guarantee requires the guarantee to be a separate document and, “not in the middle of a lease that has so many paragraphs that it’s questionable whether it has anything to do with the tenancy.”

The Appellate Division disagreed, finding that the guarantee clause was neither illegible nor incomprehensible. The Court also found no legal requirement that a guarantee be in a separate writing, as long as the guarantor signs the lease. Although a guarantee may be unenforceable if it is part of a contract of adhesion or violates public policy, the Appellate Division did not find any problem with the guarantee clause in this lease, and found no reason to deny its enforcement.