Case Law Summaries

Stavola Asphalt Co., Inc. v. Joseph Ferguson & Sons

• Opinion Date: April 19, 2002
• Business Law
• E-Mail

UCC; GUARANTEES — Even if the UCC were applicable to a personal guaranty of credit by a business’ owner, a guarantor’s addition to a form guaranty is enforceable if the original form did not expressly require that no changes be made, the change did not materially alter the terms of the agreement, and the recipient of the guaranty did not object to the change.

A customer purchased construction goods and services on credit. As a condition for extending credit, the seller required the personal guaranty of a corporate officer. The officer changed the seller’s guaranty form so that his guaranty was limited to materials purchased by the customer within a certain time period and for a certain job. The company paid for the goods and services referenced in the guaranty. The seller continued to extend credit to the company. When the customer failed to pay, the seller sued the corporate officer under the guaranty. At trial, the lower court found that under common law, a guaranty is to be interpreted against the person who prepared the form and demanded that it be signed and that any ambiguities in the guaranty are construed in favor of the guarantor. The lower court found that the officer clearly intended for his guaranty to be limited to a certain time period. The seller appealed. It argued that the guaranty was to be interpreted under the Uniform Commercial Code (UCC). The seller claimed that under the UCC the officer’s changes to the guaranty constituted a material alteration that did not become part of the contract. The Appellate Division upheld the lower court decision and agreed that the guaranty was to be analyzed under common law. The Court then analyzed the seller’s claim and found that even if the UCC were applicable, the seller could not prevail. Under the UCC, the officer’s additions to the guaranty became a part of the contract unless: the seller’s form specifically stated that the officer had to accept the form without any changes, the seller objected to the changes within a reasonable time, or the changes materially altered the contract. The Court found that the guaranty did not expressly state that the officer had to sign the guaranty without changes. It also found that the seller waited several years before it objected to the officer’s limitation on the guaranty. Therefore it failed to object within a reasonable time. Further, the Court found that the limitation was not material in the context of the parties’ relationship. The seller had always sold goods to the customer on a cash-on-delivery basis, so that the customer paid for each order separately and each order was a separate contract. When the seller extended credit to the customer, the officer limited his guaranty to one job at a time, which was consistent with the past relationship.

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