Enforcement of an Unconditional Guarantee as a Cause of Action in New York

An unconditional guarantee is a promise by one party (the guarantor) to be responsible for the debt or obligation of another if that party fails to pay. In New York, a creditor can enforce this type of guarantee by bringing a legal action. To succeed, the creditor must prove three specific elements.

Existence of the Guarantee

The first step is showing that a valid, unconditional guarantee exists. This means there must be a written document in which the guarantor clearly agrees to take on the responsibility for someone else’s debt or obligation, without requiring the creditor to take any other steps first, such as suing the original debtor.

An unconditional guarantee is different from a conditional one because it does not depend on any other event happening first. The guarantor’s obligation to pay arises immediately when the primary borrower defaults. The language in the agreement must show that the guarantor’s promise is absolute and not dependent on conditions.

Existence of the Underlying Debt

The second element is proving that the original debt exists. The creditor must show that the borrower failed to pay or otherwise meet the terms of the agreement that created the obligation. This could include a loan that went unpaid, a lease that was broken, or a business obligation that was not met.

In most cases, the creditor will submit documents such as a loan agreement, promissory note, or contract, along with a record of nonpayment or default, to show that the underlying debt is valid and enforceable.

Failure of the Guarantor to Perform

The third and final element is showing that the guarantor did not live up to the terms of the guarantee. This means that after the original borrower defaulted, the guarantor was notified or otherwise had the opportunity to make the payment or fulfill the obligation, but failed to do so.

Evidence might include a demand letter sent to the guarantor, correspondence between the parties, or the passage of time after the default without any action from the guarantor.

Conclusion

In New York, enforcing an unconditional guarantee is a straightforward legal action when all three elements are met. The creditor must show that the guarantor agreed in writing to back a debt, that the debt actually exists, and that the guarantor did not pay when required. Because the guarantee is unconditional, courts generally do not entertain defenses based on the original debtor’s actions unless there is proof of fraud, duress, or another serious legal issue. This makes unconditional guarantees powerful tools for creditors and high-risk commitments for guarantors.

Find the Law

“On a motion for summary judgment to enforce an unconditional guaranty, the creditor must prove the existence of the guaranty, the underlying debt and the guarantor’s failure to perform under the guaranty.” 1325 Ave. of Ams., L.P. v. Frittella, 2020 N.Y. Slip Op. 33275, 7 (N.Y. Sup. Ct. 2020)