Waivers Of Defenses In Personal Guarantees

• Published date: 12 March 2025
• Subject Matter: Finance and Banking, Corporate/Commercial Law, Debt Capital Markets, Financial Services, Corporate and Company Law, Contracts and Commercial Law
• Law Firm: A.Y. Strauss
• Author: David S. Salhanick

Personal guarantees are written agreements under which a person or entity agrees to pay or be financially responsible for someone else's debt. Commercial personal guarantees often include a 'waiver of defenses,' under which the guarantor waives and surrenders its right to dispute enforcement of the guarantee except in the case of actual payment. Are these waivers of defenses enforceable? If they are enforceable, might there be cases where the guarantor can still assert defenses? These issues will be discussed here.

Waivers of Defenses Generally

Where the terms of the guarantee include a broad, unqualified waiver of the guarantor's right to assert defenses to enforcement of the guarantee, courts will generally enforce the waiver. As the Supreme Court of New York, Appellate Division, First Department, stated in Red Tulip, LLC. v. Neiva, 44 A.D.3d 204, 209 (1st Dep't 2007), 'New York courts have consistently upheld broadly worded waiver language ' to preclude the assertion of defenses to a guaranty[.]' (internal citations and quotations omitted).

For this reason, in Citibank, N.A. v. Plapinger, 66 N.Y.2d 90, 92 (1985), the New York Court of Appeals rejected a claim by the guarantor that the guarantee was induced by fraud, stating '[f]raud in the inducement of a guarantee by corporate officers of the corporation's indebtedness is not a defense to an action on the...