Introduction

This blog will focus on Kentucky’s unique guaranty statute, KRS 371.065, which invalidates personal guaranty agreements unless particular requirements are met. The statute has been in place for about 25 years (since 1986), and there is now a small body of case law that sheds light on the statute’s requirements and how they are to be applied by the courts. The sometimes surprising court opinions show how important it is for lenders and other parties relying on personal guaranties, as well as those faced with enforcement of a guaranty, to fully understand the implications of the statute.

The statute provides:

(1) No guaranty of an indebtedness which either is not written on, or does not expressly refer to, the instrument or instruments being guaranteed shall be valid or enforceable unless it is in writing signed by the guarantor and contains provisions specifying the amount of the maximum aggregate liability of the guarantor thereunder, and the date on which the guaranty terminates. Termination of the guaranty on that date shall not affect the liability of the guarantor with respect to:

(a) Obligations created or incurred prior to the date; or

(b) Extensions or renewals of, interest accruing on, or fees, costs or expenses incurred     with respect to, the obligations on or after that date.

(2) Notwithstanding any other provision of this section, a guaranty may, in addition to the maximum aggregate liability of the guarantor specified therein, guarantee payment of interest accruing on the guaranteed indebtedness, and fees, charges and costs of collecting the guaranteed indebtedness, including reasonable attorneys’ fees, without specifying the amount of the interest, fees, charges and costs.

A PDF copy of the statute is available here:

KRS 371.065

 

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