The Greene Room
Anyone who has spent much time in equipment finance knows the drill. The credit department approves the transaction subject to a personal guaranty. The documents go out. The equipment gets delivered. Months later, the customer defaults, and somebody opens the file and lo and behold, the guaranty was never signed.
Before you consign the guaranty to the proverbial circular file, however, you may want to check your emails.
The North Carolina Supreme Court recently addressed this issue in Smith Debnam Narron Drake Saintsing & Myers, LLP v. Muntjan, 927 S.E.2d 1 (N.C. 2026). Although the case involved unpaid legal fees rather than an equipment lease or finance agreement, its lesson should get the attention of anyone who documents or enforces commercial finance transactions.
The underlying facts were relatively straightforward. A law firm represented a construction company owned by the defendant’s son. The defendant orally agreed to pay the legal fees. An engagement agreement was subsequently prepared, but it was never signed. That created an obvious problem because North Carolina’s Statute of Frauds, like those of most states, generally requires a promise to answer for the debt of another to be evidenced by a signed writing.
But there were emails.
During the representation, the defendant communicated with the firm concerning invoices and payments. He directed that invoices be sent to him, discussed payments, referred to what “we” would do concerning additional fees and payments were made using his credit card.
When the bills ultimately went unpaid, the law firm sued.
The North Carolina Supreme Court concluded that the emails could be considered together and were sufficient, under the particular facts of the case, to constitute the written memorandum required by the Statute of Frauds.
That is where things get interesting.
The Court explained that the Statute of Frauds did not require the guaranty agreement itself to be in writing. Rather, an oral guaranty could be enforceable if there was a subsequent signed memorandum or note containing sufficient evidence of the agreement and its essential terms. Multiple writings could be read together in determining whether that requirement had been satisfied.
In other words, the absence of a beautifully drafted, separately captioned “PERSONAL GUARANTY” was not necessarily the end of the inquiry.
For equipment finance companies, there is an obvious practical application.
Suppose ABC Leasing finances $250,000 of equipment for XYZ Corporation. Its president was supposed to personally guarantee the transaction, but the guaranty somehow was never executed. XYZ later falls behind. During collection efforts, the president sends emails saying:
“Send the invoices directly to me.”
“We’ll get you caught up next week.”
“I’ll make sure you get paid.”
Are those emails meaningless because the original guaranty was unsigned? After Muntjan, at least under North Carolina law, the answer may be no.
There is an important caveat. Muntjan should not be read as holding that a casual email automatically creates a personal guaranty. The Court emphasized the particular facts before it. Moreover, there was already an unchallenged factual finding that the defendant had orally agreed to pay the obligation. The issue was whether his subsequent writings sufficiently memorialized that promise to satisfy the Statute of Frauds.
That distinction matters.
Nevertheless, the case provides a useful practice pointer for lessors, lenders and their counsel: preserve the emails.
When a transaction goes into default, collection communications may contain considerably more than admissions concerning the amount owed. Emails and texts from owners, officers and prospective guarantors may provide evidence concerning an oral guaranty that otherwise appears unenforceable.
There is a lesson on the other side of the table as well. Business owners should be cautious about casually writing “I’ll take care of it,” “we owe you,” or similar statements concerning a company’s obligations. Courts increasingly deal with commercial relationships conducted through email, text messages and other electronic communications. Words that once might have disappeared after a telephone conversation now leave a permanent electronic trail.
The best practice, of course, remains decidedly old-fashioned: get the guaranty signed before funding the transaction.
But when that doesn’t happen, don’t assume the game is over.
Check the emails first.
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