Wednesday, January 2, 2013

THE PERSONAL GUARANTEE

Many contracts deal with parties that are either LLCs or corporations.  A contract is only paper and evidence in a lawsuit when somebody breaches the contract.  But you don't want a hollow victory in court, you want one that has money behind it.  Ergo, it is often wise to at least attempt to get personal guarantees of the members/shareholders of the entities that are parties to the contract.  When they balk at doing this, you can have a decent idea about the bona fides of the party--they ain't all that bona.
If it's a lease agreement and you can't get a PG, then take some extra months rent security.  In other situations, where you can't get a PG, try to get some kind of hard assets to back up the party's financial obligations.
Protect yourself with a PG whenever possible.

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