Proceed With Caution – Contract Modification

If your business has secured a personal guarantee as part of an underlying contract you must not thereafter alter the underlying contract without the guarantor’s written consent.  California law holds that a guarantor’s liability may be extinguished by any act of the creditor that alters the original obligation in any material respect, even if the alteration is to the advantage of the guarantor (Cal. Civil Code § 2819; see also Ralston-Purina Co. v. Carter (1962) 210 Cal.App.2d 372, 378 [a guarantor is released if the original obligation is altered and a guarantor is not liable upon any contract not within the terms of his guaranty]; see also McMannus v. Temple Estate Co. (1935) 10 Cal. App. 2d 419, 421).  To avoid inadvertently extinguishing a guarantor’s liability you must always secure the guarantor’s written consent before altering the underlying contract.