Personal guarantees- do you need it and how do you get it?

In law school one definition of a guarantor was "an idiot with a fountain pen." Fair or not, there are certainly times that I have seen guarantors who have either not realized that they had guaranteed the contract, or had no business doing so. Sure we have seen many guarantors claiming that they were mere employees, relatives who happened to be minding the store, friends, and yes, sometimes more imaginative non related unlucky persons who just happened to be around when the alarm salesman showed up with a pen.

What makes the guarantee so important? When you enter into a contract with your subscriber you are of course agreeing to look to that subscriber for payment. It is for that subscriber you agree to perform your part of the bargain, the contracted for services. If your subscriber fails, whatever the reason, you have no where else to look for payment, for you to recover what you hoped to receive under the contract. That changes when you have a guarantor. The subscriber fails, you look to the guarantor. This may sound simple and obvious, and it is, but here is the more sophisticated point.

Often when subscribers fail they have some advanced awareness that things are going sour. Often, before they go sour, things, money, inventory, equipment and other things that can be converted to money, go south. This is particularly the case when the owner of the business is not on the hook for the business debts. After all, if the business is failing, his livelihood as he knows it at an end, better to salvage for him and his family rather than creditors who have all made out better than he and, in his mind, assisted in his business demise. If however the owner has guaranteed the debt, then things change. No point converted those assets to himself if he is on the hook to the creditors personally. So, if there is time and if there is some money, which creditors do you think gets paid first, possible the only ones to get paid? Right, those personally guaranteed. (right after the secured creditors).

How do you get the personal guarantee? The almost universally accepted way is to get the contract signed twice, once by the subscriber (say a corporation) and once by the guarantor. Now I can say with some degree of confidence that there are several alarm owners out there who think that they can be inventive, get around that very cumbersome two signature requirement. There must be some language that can be inserted in that extra small print that says the sucker signing the contract is also guaranteeing performance. So when there is a breach both the subscriber and unsuspecting owner (assuming it was he who signed the contract) get sued. Well, good luck, but I doubt it can work if a Judge has to rule on it. Even the Judges know about the two signature rule.

How fancy does the guarantee have to be? Well, I'm not that fancy. How about a single sentence, or part thereof, that says, "The undersigned personally guarantees lessee's performance." That should do it. Want more, for $200 I can turn it into another contract, called, that's right, Personal Guarantee." Alarm Contracts It's not there yet, but let's see how many orders I get for it.