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  • Writer's pictureVinicius Adam

Understanding Personal Guarantees: Specificity and Enforceability


A personal guarantee is a legal commitment where an individual agrees to be responsible for a company's debt or performance under a contract if the company fails to pay or perform. In the state of Florida, personal guarantees are often used in business transactions, particularly in situations where a small business is seeking a loan or entering into a lease agreement. Understanding how personal guarantees are created, enforced and interpreted by the judiciary – which is the ultimate goal – is necessary before signing one or having someone sign one that you may seek to enforce.

This article aims to provide an overview of personal guarantees in Florida, focusing on their specificity and enforceability.

What are Personal Guarantees?

A personal guarantee is a legal instrument that allows a lender, landlord, or other party to recover a debt from the personal assets of a guarantor if the principal debtor defaults on its obligations. In essence, it is a promise made by a third party (the guarantor) to pay a debt or fulfill a commitment if the primary obligor fails to do so. The promise is the guaranty whereas the agreement itself is referred to as the guarantee.

In Florida, personal guarantees are commonly used in business loans, commercial leases, and other business transactions. They provide an additional layer of security for the creditor, as they can pursue the guarantor's personal assets if the business fails to meet its obligations. The principal is the entity that is primarily responsible for repaying the debt. The guarantor is the individual that personally guarantees performance of the principal’s contractual obligations, which typically entails payment. The rights and responsibilities of the parties, as discussed further in this article, can vary greatly depending on the contractual language.

When to Seek a Personal Guarantee

Institutional lenders and large companies often request personal guarantees if they believe the company may be unable to meet its financial obligations. However, every business needs to assess and hedge risk. Part of this process includes determining when a personal guarantee may be necessary.

In the world of small business, there are several circumstances where the request for a personal guarantee might arise. This is particularly common when the business is seeking financial assistance or entering into contractual agreements. For instance, when a small business applies for a loan, especially if it's a startup or lacks a robust credit history, lenders often require a personal guarantee from the business owner. This provides the lender with an added layer of security, ensuring that the loan will be repaid even if the business encounters financial difficulties.

Similarly, when leasing commercial property, landlords may request a personal guarantee from the business owner. This acts as a safety net for the landlord, ensuring that the rent will be paid regardless of the business's financial status. Additionally, suppliers may require personal guarantees before extending credit for the purchase of goods or services.

In essence, a personal guarantee serves as an additional financial safeguard for the party extending credit or entering into a contract with the business. However, it's crucial for small business owners to understand that providing a personal guarantee means potentially putting personal assets at risk if the business cannot meet its obligations. Therefore, it's always advisable to seek legal counsel before signing any personal guarantee to fully comprehend the potential implications and risks.

Specificity of Personal Guarantees

Florida law requires personal guarantees to be in writing and signed by the guarantor. However, the law does not prescribe a specific form or language for personal guarantees. The terms of a personal guarantee can vary widely depending on the circumstances of the transaction and the negotiation between the parties.

Despite the lack of a prescribed form, it is crucial for a personal guarantee to be specific and clear. It should clearly identify the guarantor, the primary obligor, the creditor, and the obligations guaranteed. It should also specify the extent of the guarantor's liability, whether it is limited to a certain amount or unlimited, and whether it is a continuing guarantee or limited to a specific transaction.

Enforceability of Personal Guarantees

In Florida, personal guarantees are enforceable if they meet the basic requirements of contract law, including mutual assent, consideration, legality of object, and capacity to contract. If a personal guarantee is vague or ambiguous, a court may interpret it against the party who drafted it, usually the creditor.

If a business defaults on its obligations, the creditor can sue the guarantor to enforce the personal guarantee. The creditor must prove the existence of the personal guarantee, the default by the primary obligor, and the amount of the debt. If the creditor prevails, it can obtain a judgment against the guarantor and enforce it against the guarantor's personal assets. It is important to note that it is the obligation of the creditor to show that all conditions to the guarantor’s liability have occurred or been performed prior to filing of the lawsuit. This obligation includes showing that the value of the assets received as collateral was insufficient to cover the entire debt.

Conditional vs. Absolute Guaranty

The creditor has no obligation to seek repayment of the debt from the principal before pursuing the guarantor if the guarantee specifies that the guaranty is “absolute.” A conditional guarantee, on the other hand, requires the creditor has acted with due diligence to collect the debt from the principal but is unable to collect the amounts due. In fact, a court may conclude that the guarantor was discharged if the creditor unreasonably neglects to proceed against the principal. In the same vein as the conditional guaranty, the courts have also held that if a creditor is negligent in protecting, enforcing or securing collateral for the debt, such as real or personal property and accounts receivable, that the debt or guarantor may be discharged.

A breach of a guarantee giving rise to a cause of action typically occurs when the principal defaults followed by the subsequent refusal of the guarantor to pay the debt. It follows that the best practice even if the guarantee is absolute is to make formal written demand for payment from both the principal and guarantor.

Debt Exceeds the Guarantee

A guarantee is not void if the debt exceeds the personal guaranty. Even improper or excessive charges in derogation of the contract do not relieve the guarantor of the obligation under the guarantee. However, the guarantor under these circumstances can only be held liable to the extent of the guaranty.

Modifying Terms of the Contract

If the terms of the contract are changed in a material way, the creditor should obtain the assent of the guarantors to the new terms. Otherwise, the courts may deem the guarantee unenforceable. A guarantor’s refusal to execute a new guarantee does not constitute revocation of the guarantee in existence.

Attorney’s Fees and Costs

Unless the guarantee specifies that the guarantor is liable for attorney’s fees and costs, the creditor may be unable to collect these significant expenditures that it made in pursuit of the debt.


Personal guarantees play a vital role in Florida's business transactions, providing creditors with an additional layer of security. However, they also pose significant risks to guarantors, who may be personally liable for a business's debts. Therefore, it is crucial for guarantors to understand the terms of a personal guarantee before signing it and to seek legal advice if necessary. Contact the legal experts at VAdam Law with any questions regarding your company’s contracts, including personal guarantees.

If you would like to learn more about VAdam Law and schedule a free consultation, visit our online scheduling portal or call 24 hours a day at (954) 451-0792.



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