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TexLaw, Attorney
Category: Business Law
Satisfied Customers: 4430
Experience:  Internationational Commercial Attorney
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Hi ZDNLaw. I recently received a demand letter from one of

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Hi ZDNLaw. I recently received a demand letter from one of my company's suppliers. They are demanding payment not only from the company but from one of our employee's who unwittingly signed our credit application. The credit application did not ask for any of his personal information, it is only signed by him. The form asked for details on the company (our FEIN, pricipals, bank details, etc...). But when it came to signing, it was signed by our project manager. The key verbiage just above his signature reads:

"For good consideration, and as inducement for XXXX supply company to extend credit, it is hereby agreed that the undersignd does personally guaranty the prompt, punctual and full payment of all monies owed on the open account.

By: ______________________"

All of the other verbiage relates to the terms and conditions which do not seems to spell out that he would have become liable for the company's debt.

Are there some common steps I can take to have the supply company agree to have his name removed from this liability?

Thanks for your question.

As you have indicated, once a person signs a guarantor agreement, the only party that may release that person is the party who is being guaranteed to receive the payment.

In this sort of situation, what needs to be communicated to the supplier is that they have obtained the guarantee from an employee rather than a company owner. Generally, in situations like this, you will only be able to secure your employee's release by offering a replacement guarantor. Are there any company owners who would be willing to replace the employee as a guarantor?

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Customer: replied 3 years ago.

While I and my business partner could sign as guarantor, the supplier's attorney is suggesting that they not remove the employee's name.


If this escalates to a full-blown law-suit, how can I ensure that the employee receives representation to protect his interests? Could my company's attorney also represent him as an employee of the company?

Yes, your company attorney can represent both parties. The employee will likely need to sign a waiver of any conflict of interest that the attorney may have as a simple matter of course. However, it appears that your interests are aligned and thus there should not be a problem in the company attorney also representing the employee.

The employee may only be liable on the guarantee if the company is found to be liable on the underlying contract.
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