By: Douglas J. Roberts, Esq.
Generally, officers and directors of corporations are not personally liable for the corporation’s obligations under a contract. However, a party to contract negotiations seeking more assurance than the mere performance of a corporation may attempt to obtain a personal guarantee from the corporation’s principal that is signing the contract by adding language to the contract that will bind the principal individually.
In Coleman v. 688 Skate Park, Inc., WL 2836138 (Fla. 2d DCA), July 21, 2010), 688 Skate Park, Inc. (“Tenant”) entered into a commercial lease agreement with Coleman (“Landlord”). When the Tenant failed to meet its rent obligations under the lease, the Landlord brought an action against the Tenant and the Tenant’s president individually, claiming the Tenant’s president was personally liable as a signatory under a guaranty clause in the lease agreement, even though the signature line included the typed phrase “as its President” directly below it.
Paragraph 36(S), “Miscellaneous Provisions” of the lease agreement provided in pertinent part: “the individual executing this Lease on behalf of said corporation, limited liability company or limited partnership, guarantees the obligations of Tenant hereunder.”
The Tenant’s president argued that he was not sufficiently set out as a party to the lease agreement, and therefore should not be held personally liable. The trial court agreed with the Tenant’s president, and further reasoned that the president was not personally liable because the lease did not have a clause describing “joint and several liability” between the corporation and the corporation’s principal, nor a clause expressly clarifying that the person signing was indicating by his signature that he had read the entire agreement”. The Landlord appealed the trial court’s decision.
On appeal, the appellate court determined these were not the requirements under existing case law where the plain language of the contact specified that any signatory to the lease was accepting personal liability for the contract, regardless of the whether the signing designation “as its President” was used.
Determination of whether a contract’s language is “plain enough” to support a claim for personal liability requires scrutiny of each and every contract. But an important lesson can be drawn in that simply designating your corporate office when you sign is no substitute for carefully reading the entirety of the contract, and enlisting the assistance of counsel to ferret out a carefully placed clause that provides for personal liability in the event of a breach.
If the plain meaning of a personal guarantee can be determined within the contract, you may well be paying for a breach of your corporation’s contract with your personal assets.
About the Author:
About the Author: Douglas J. Roberts has been Board Certified in Construction Law since 2005, the first year the Florida Bar offered its members the opportunity to achieve such a designation. He served as a judicial intern to the Honorable Arthur Birken, Broward County Circuit Court Judge, a certified legal intern with the Broward County State Attorney’s Office, and has practiced in the area of Construction Law for over 15 years, during which he has represented the FDIC, Hewlett-Packard, a Panel Bankruptcy Trustee in the Southern District of Florida, as well as general contractors, subcontractors, suppliers, sureties and owners in South Florida. Mr. Roberts has been recognized by his peers as a “Florida Super Lawyer” and focuses his practice exclusively on construction law related representation. For more information, please contact him at [email protected]