Clarity Over Convenience: New Jersey Supreme Court Provides Lessons for Companies Seeking Personal Guarantees

Oftentimes when dealing with a small business, especially a new one with limited credit history, it is wise to obtain a personal guarantee from the company’s principal. In its unanimous decision this week in Extech Building Materials, Inc. v. E&N Construction, Inc., No. A-28-24 (Dec. 2, 2025), the Supreme Court of New Jersey answered whether a single signature in an agreement binding a company as the principal debtor can simultaneously bind the signer in their personal capacity as a guarantor. In Extech, the answer was “no” – the single signature did not show the principal’s unambiguous intent to be bound as a guarantor. The Court’s decision, however, offered guidance to businesses going forward.

The Extech Dispute. Extech Building Materials, Inc. (Extech), a building materials supplier, presented a two-page “Credit Application and Agreement” to E&N Construction, Inc. (E&N), a construction company, to govern Extech’s sale of building materials to E&N. E&N’s president, Joaquim G. Ferreira, signed the two-page document. Directly above the signature line was a provision in all capitals stating that the signer(s) “DO PERSONALLY GUARANTEE UNCONDITIONALLY” the payment of indebtedness of the company. But there was no indication of whether Ferreira was signing individually, as a representative of E&N, or in both capacities. When E&N failed to pay for materials supplied by Extech, the supplier sued Ferreira personally for the debt.

Ruling for Ferreira, the New Jersey Supreme Court held that Ferreira’s single signature on the Credit Application did not unambiguously manifest his intent to personally guarantee the Credit Application. Although the Court rejected a bright-line rule prohibiting a single signature from binding both a debtor and personal guarantor, the relevant question is whether in signing the document, the signer unambiguously manifested an intent to be bound personally. In Extech’s case, there was no way to read that unambiguous intent into the Credit Application.

Lessons for Businesses Going Forward.

The Supreme Court’s decision provided clear guidance on ways that businesses may avoid Extech’s error.

1. Require a separate personal guaranty agreement. The most effective way to ensure that an individual is personally bound as a guarantor to an obligation is to have a separate guaranty agreement. Although requiring two documents may add some cost to the transaction, it is the most straightforward way of ensuring that the guaranty is seen as a separate undertaking from the underlying contract with the business.
2. Require two separate signatures on the same agreement. Slightly less obvious than a separate personal guaranty agreement is requiring two signatures on the same document, one from a person as a corporate representative and the other from a personal guarantor. This may result in the same company officer signing the document twice, but doing so avoids any confusion that the signer was unaware that they were signing in both their corporate capacity to bind the company and their personal capacity to bind themself.
3. Sign the underlying agreement a single time. A single signature can bind a personal guarantor so long as the document explicitly states the individual intends their single signature to bind both the company and themselves individually. This method requires the highest level of clarity and creates the most risk for confusion as Extech demonstrates.

Businesses seek to reduce risks.

In the context of obtaining a personal guaranty, the decision in Extech serves as a reminder for companies to ensure their agreements use clear methods to demonstrate a specific intent to bind the person as well as the company. A single signature is often not enough.

For questions and more information on contract disputes and personal guarantees, please contact Partner Lawrence Bluestone, Esq. via email here or call 973.533.0777.