"We're out of business," Charlie Knapp told Bill Phillips when Bill called him at his home. "But I guess you knew that."

Charlie had been president of Knapp Welding Corporation, a customer of Ace Supply where Bill was credit manager.

"Yes, I do know that," Bill replied, "and I'm sure you know why I'm calling."

"Not really," Charlie said. "The corporation owed you money, but what do you expect me to do about that?"

"Pay it," said Bill. "You signed a personal guarantee for the corporation's debts, and we expect you to honor it."

"Wait a minute, I never signed any guarantee."

"Yes you did--on the reverse side of the credit application."

"I don't remember signing any guarantee. Nobody ever told me I was signing a guarantee. Why don't you send me a copy of what you claim I signed."

"I'll send you a copy right away."

A week later Bill called Charlie again. "Did you get the document?"

"Yes, I saw it, but I tell you I wasn't aware that I signed a guarantee, and I'm not even sure I understood that I was signing one. You certainly didn't tell me it was a guarantee, and it was on the reverse side and everything. I don't think I'm liable at all. Anyhow, this is a credit application, and you're asking me to guarantee a credit application. I don't think that's what a guarantee is all about. I'm going to speak to my attorney."

Can Charlie evade the obligation of the guarantee?

Click "Next" for the answer.


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