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A question about contract consideration. Hypothetical.

Please take at face value.Landlord...
A question about contract consideration. Hypothetical. Please take at face value.Landlord and tenant enter into a commercial lease for 24 months for a commercial suite.
Landlord obtains a personal guarantee from Guarantors.
Guarantee covers the performance of the lease, any amendments, options, renewals or extensions.
The lease contains no options or proposals beyond 24 months, or any language to suggest otherwise.
12 months into the lease the tenants sign an amendment that includes an additional suite, increases the rent by 100% and extends the term for an additional 24 months.
6 months later the tenant defaults on the lease.
Landlord files a lawsuit against the tenant and Guarantors. A judgment is entered against the tenants.
Guarantors and Landlord have not settled.
Guarantors argue that notwithstanding the guarantee language, the original lease contains no consideration. They further argue that the lease contract contains no detriment or mutuality as originally written beyond 24 months.
Landlord argues that the lease was entered into on the conditions of the guarantee and the guarantee language is sufficient consideration for any and all possible future transactions. Landlord reasons that it is the same thing as a line of credit with a bank or vendor whereby guarantors are liable for future loans or purchases.
Guarantors counter that this analogy does not apply because there were no terms to describe rates, limits or any other descriptions of further transactions. They further argue that the analogy does not apply because the tenants were locked out and received no benefit, whereas in the Landlords analogy there would have been a transfer of goods or money.Given this narrow set of facts, who is right?
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Answered in 21 minutes by:
5/22/2017
RGMacEsq
RGMacEsq, Attorney
Category: Business Law
Satisfied Customers: 18,167
Experience: Licensed Texas General Practice Attorney
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A guarantee whereby one person (the guarantor) guarantees repayment in exchange for performance by the other party (here the landlord) is generally sufficient consideration. The only situations where it's not necessarily the case is when it's ambiguous whether or not the guarantor should receive something that was not received. But most of the time it's clear that the guarantor is guaranteeing performance by one side in exchange for performance by the other side, and often there's no direct benefit. There doesn't have to be direct benefit for it to be consideration. Rather, a promise for a promise is enforceable. If I say that I'll give $100 to you if you cross the Brooklyn Bridge, and you do so, I'd have to pay, because I make a promise and you make a performance, which is consideration. I'm bargaining for your performance, whether or not I get any utility from that performance. A guarantee is consideration, because it's being made in exchange for the other party performing on the contract (here allowing the tenant to use the property according to the lease).

So it's clear there's consideration for the original agreement. As far as what the agreement covers, that's a different issue, but I would say that when it says it covers "any amendments, options, renewals, or extensions" then it will cover those amendments and extensions made. It can't be argued by the guarantor that he only thought that it would cover the original, as the express language indicates that there are possibilities that could arise that are not expressly agreed to, but rather that this guarantee will cover those things in the future, whether the guarantor likes it or not. That's an assumption of risk, and would be enforceable.

Hope that clears things up a bit. If you have any other questions, please let me know. If not, and you have not yet, please rate my answer AND press the "submit" button, if applicable.

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Customer reply replied 1 year ago
Drilling down a little. Guarantors acknowlege liability for the performance of the lease as written. They contend that the guarantee is "boiler plate" and includes irrelevant language as it pertains to the lease. In other words, because portions of the guarantee were not pursuant to any terms in the lease, they do not apply. Also, a small caveat. The lease contains an express term that states. The lease begins on X date and ends on Y date unless sooner terminated by any provision herein. The guarantors are clinging to this one line in the lease to suggest that the lease cannot extend beyond 24 months per it's own terms. Landlord argues that the line is meant to say that if the tenants do not peform the lease may be terminated sooner. Can I get your opinion on that. Thank you.

That's correct (what the landlord said). "Boilerplate" language is enforceable language. Only if it's expressly contradictory to other language would it then be a question of which one holds. But it says "amendments" and "extensions" and "renewals". So while the original ends on Y date and can be terminated sooner, it's also open to being amended and extended and renewed. Landlord would be right here.

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RGMacEsq
RGMacEsq, Attorney
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Satisfied Customers: 18,167
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