Banking
Jan. 31, 2012
The limitations of the sham guaranty defense
Although this defense is used more now because of the economic downturn, it is rarely truly applicable. By Benjamin Taylor of Miller Barondess LLP
Many commercial loan transactions involve a personal guaranty of repayment, given by either a principal of the borrower or a related entity. Lenders will often require a personal guaranty, sometimes from multiple guarantors, even when the underlying loan is secured by real estate or personal property. In the context of a collections action to enforce the guaranty, a popular but often improperly claimed defense is that of the "sham guaranty...
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