Tredway, Lumsdaine and Doyle LLP

Lately, I have seen a significant amount of frustration by businesses and individuals in the business industry concerning collection on accounts. Of special concern are loans and lines of credit being extended to other businesses that either have questionable ability to pay, or are on the brink of bankruptcy. In such a situation, it can be desirable to have the individual owners of the debtor business sign a personal guaranty wherein the person guarantees to pay the debt of the corporation. There are several types of guarantees, e.g., continuing guarantees and limited guarantees. Although the idea is simple, there are several legal requirements and subsequent actions that must be considered and handled with care.

Certain contract provisions are essential to every contract, such as attorney’s fees and interest terms. Unfortunately, in this down-turned economy, breach of contract actions are on the rise and the terms of the contract generally govern the parties’ agreement. A party generally will not be allowed to recover attorney’s fees unless their contract so states, or the dispute is over what is called an “open book account.”