NJ Justices Tighten Execs’ Contract Guarantee Liability Rules

Business executives can’t be personally liable as guarantors for their company’s broken contracts unless there are features in a document that show the signee intended to take on that liability, the New Jersey Supreme Court ruled Tuesday.

The unanimous ruling clears up confusion that parties said could impact an unknown number of business disputes.

A “valid personal guaranty of a company’s indebtedness requires the signer to unambiguously manifest their intent to be personally bound,” Justice Douglas M. Fasciale said in his unanimous opinion.

Personal guarantees are common tools executives are often asked to sign to backstop business deals, especially ...