The New Jersey Supreme Court recently clarified when a corporate officer can be held personally liable for company debt based on language in a credit application or supply agreement. In Extech Building Materials, Inc. v. E&N Construction, Inc., the Court held that a corporate representative is not personally bound by a purported personal guaranty because the agreement did not clearly and unambiguously manifest an intent to assume personal liability for corporate debt.

Background

Extech Building Materials supplied construction materials to E&N Construction under a written credit application. When E&N allegedly failed to pay more than $1 million, Extech sued not only the company, but also two individuals who had signed the credit application on E&N’s behalf.

The application included a paragraph—written in capital letters—stating that the signers unconditionally “personally guarantee” payment of the company’s debts. However, the agreement presented several problems:

• The guaranty language appeared in the same document as the corporate credit obligation.
• Each signer signed the agreement only once.
• The signature lines did not specify whether the signers were acting in a corporate capacity, individual capacity or both.

The signer denied that he intended to personally guarantee the company’s debts.

New Jersey Law re: Personal Guarantee of Corporate Debt

The Court made several important observations:

• Agency principles matter. When a corporate officer signs a document for a company, courts presume the officer intended to bind the company only, unless the document clearly says otherwise.
• Single Document. A single document may contain two distinct, and enforceable contracts: (1) the principal-creditor agreement and (2) personal guaranty of the corporate indebtedness.
• Single Signature. There is no bright-line “two-signature rule” in New Jersey requiring that a personal guaranty be in a second, separate agreement from the company’s agreement.
• Unambiguous Intent. “[A] valid personal guaranty of a company’s indebtedness requires the signer to unambiguously manifest their intent to be personally bound.”

The Court explained that personal liability can be clearly established in several ways, including:

• a separate guaranty agreement,
• two distinct signatures (one corporate, one individual), or
• a single signature accompanied by explicit language stating that the signer is acting in both capacities.

Holding: The Credit Application did not create a personal guarantee of the corporate representatives because it did not contain a clear manifestation of intent to be personally bound.

Why This Decision Matters

For suppliers and lenders, the case is a warning that boilerplate personal guaranty language in a credit application may not be enforceable. If personal liability is intended, the agreement must be drafted with precision.

For business owners and corporate officers, the decision provides meaningful protection against unintended personal exposure when signing routine credit documents.

Takeaway

The New Jersey Supreme Court has made clear that courts will not lightly impose personal liability for corporate debt. Without clear, unambiguous proof that an individual intended to guarantee payment personally, the guaranty is not enforceable.

Attorney Advertising. This is a brief summary and is for informational purposes only. This writing does not constitute legal advice and should not be relied on without additional analysis.

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