Pub. 9 2014-2015 Issue 6

March/April 2015 23 Extraordinary Service for Extraordinary Members. For more information, contact Kent Endacott at Endacott Peetz & Timmer PC LLO at (402) 904-3629 or kendacott@eptlawfirm.com . Endacott focuses his practice in the areas of community banking, estate planning, and corporate and business law. Consideration also can exist in the form of a creditor promising to forbear from enforcing a legal right. For ex- ample, courts have found sufficient consideration to support a guaranty in situations where creditors forgo enforcement of a right to payment or collection efforts and engage in continued dealings with a business, grant an extension to pay an obliga- tion, and forbear from suing on a debt or accelerating it. 10 Aside from knowing what consideration “looks” like and what a creditor can argue in trying to enforce a guaranty, there are also steps a creditor can take on the front end to avoid any dispute later in the relationship: • Draft carefully. For example, ensure that the recitals actu- ally recite and substantiate delivery of consideration for the guaranty. Consider requiring the guarantor to acknowledge that the lender would not have entered into the loan trans- action but for the guaranty. To avoid the future advance argument, consider having the guaranty acknowledge that the guarantor is liable for all future advances. • Try to make the guaranty at the same time of the principal contract because when completed that way, sufficient con- sideration is almost unquestionable. In fact, if the guaran- tor’s promise is given as part of the same transaction or arrangement that creates the underlying obligation, both are supported by the same consideration. The two documents do not have to be executed on the same date, but they should be part of the same transaction. 11 • If the guaranty is made by a parent or subsidiary entity, draft in such a way that shows that the guarantor benefits from the borrower’s loan. Language such as the following can be used: “Guarantor has a direct ownership interest of [ ]% and financial interest in Borrower and Guarantor will benefit directly from the making of the Loan to Borrower.” 12 Guaranties and hypothecation agreements are valuable risk-management tools to lenders, borrowers, and guaran- tors alike, and, done correctly, can be beneficial to all parties involved.  10 Id. § 32. 11 Id. § 30. 12 GREGORY G. GOSFIELD, MANUAL ON GUARANTIES AND SURETIES 12 (2009), available at http://www.klehr.com/C7756B/assets/files/lawarticles/SCN_20100114141843_001.pdf.