Enforceability of a Guaranty

"To recover under a guaranty in Wisconsin, the party seeking to enforce the guaranty must be able to prove: the existence of an unpaid obligation guaranteed, execution of a written guaranty, and consideration.

A guaranty may be a guaranty of collection or payment. Under a guaranty of payment, upon non-payment by the principal debtor, a creditor may immediately seek recovery from guarantor and there is no obligation on the part of the creditor to first proceed against the principal debtor and exhaust those efforts before proceeding against guarantor. First Wisconsin Nat'l Bank of Oshkosh v. Kramer, 74 Wis. 2d 207, 212, 246 N.W.2d 536, 539 (Wis. 1976), citing Schlesinger v. Schroeder, 210 Wis. 403, 408, 245 N.W. 666, 668 (Wis. 1933).

If the guaranty contract does not expressly address whether notice to the guarantor of acceptance of his or her guaranty is required, the creditor must notify guarantor of acceptance of the guaranty to create an enforceable guaranty. Elec. Storage Battery Co. v. Black, 27 Wis. 2d 366, 374, 134 N.W.2d 481, 485-86 (Wis. 1965).

Generally, any change in an agreement between a principal and creditor that results in larger responsibilities or liabilities on the part of the principal, made without the consent of the guarantor, acts as a discharge of the guarantor. Nevertheless, a guarantor waives his or her right to release if guarantor has knowledge of the change and assents, either expressly or by implication, to changes in the assumed obligation. Baumgarten v. Bubolz, 104 Wis. 2d 210, 215, 311 N.W.2d 230, 232-33 (Ct. App. 1981). I See Wiegel v. Sentry Indem. Co., 94 Wis. 2d 172, 179, 287 N.W.2d 796 (Wis. 1980); see also Vandervest v. Kaufman Pizza, Inc., 60 Wis. 2d 230, 244, 208 N.W.2d 428, (Wis. 1973).

If the time within a guaranty operates is fixed and the total amount of the obligation is known or if the guaranty is an absolute guaranty of payment, no notice to the guarantor of the principal debtor's default is required; conversely, if the guaranty is unlimited or open-ended, the guarantor is entitled to notice of default within a reasonable amount of time after a default occurs. Elec. Storage Battery Co., 27 Wis. 2d at 375, 345 N.W.2d at 486; and M&I Marshall & Ilsley Bank v. Schlueter, 258 Wis. 2d 865, 871-72, 655 N.W.2d at 524. However, by the terms of the guaranty, guarantor can waive any right to notice they may or may not have. Id."