Enforceability of a “Personal Guaranty” Clause
September 22, 2015
Reprinted with permission from NYSBA Journal, September 2015 issue.
A potential client is the nominated executor under the will of his deceased friend. He would like you to represent him in probating the decedent’s purported will. He explains to you that a will contest is likely, as the will treats the decedent’s children unequally. He further advises you that the family is very litigious and, specifically, he is concerned that the decedent’s children might assert claims against him personally concerning his administration of the estate. Accordingly, the potential client wants the best representation, not only to ensure that his friend’s testamentary wishes are carried out, but also to protect himself from liability
You explain to the client that, as the fiduciary, he will be entitled to pay your legal fees from the estate “on account.” Ultimately, however, it will be up to the Surrogate to fix the amount of legal fees payable from the estate, and the Surrogate is not required to honor your retainer letter. You present the client with a retainer letter providing that if the Surrogate fixes the legal fee payable from the estate in an amount lower than the fee contractually agreed upon, the client will be personally responsible, in his individual capacity, for the difference. The client signs the retainer, agreeing to be bound by the “personal guaranty” clause. The question, however, is whether the personal guaranty is enforceable.
To read the full article please download the pdf.
View the PDF