CHAPTER 13.03. Consideration

• Jurisdiction: United States

13.03. Consideration

As with all contracts, consideration is required to create a valid guaranty.²⁷ An offer to guaranty an underlying obligation that is not supported by consideration may be withdrawn by the offeror.²⁸ Under Delaware law, consideration can consist of either a benefit to the promiser or a detriment to the promisee.²⁹ Moreover, under Delaware law, making a guaranty under seal, as with all contracts made under seal, creates a presumption of consideration."³⁰

The benefit or detriment that forms the consideration need not flow directly to the guarantor from the obligee.³¹ The consideration flowing from the obligee to the principal obligor is sufficient to support a contemporaneous guaranty.³² However, where the guaranty is a separate agreement from the underlying obligation and is entered into after the underlying obligation, the guaranty requires separate consideration.³³

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Notes:

^[27] Banco Credito y Ahorro Ponceno v. Scott, 250 A.2d 387, 388 (Del. Super. 1969); see also Lyons v. DBHI, LLC, 2010 WL 335634, at *2 (Del. Com. Pl. Jan. 27, 2010) (finding that the defendant's alleged contract of guaranty was a "gratuitous promise" due to lack of consideration).

^[28] See Danby v. Osteopathic Hosp. Ass'n of Del., 104 A.2d 903, 906 (Del. 1954).

^[29] First Mortg. Co. of Pa. v. Fed. Leasing Corp., 456 A.2d 794, 795-96 (Del. 1982).

^[30] Monroe Park v. Metro. Life Ins., 457 A.2d 734, 737 (Del. 1983); Leiter v. Carpenter, 22 A.2d 393 (Del. Ch. 1941).

^[31] See Banco Credito y Ahorro Ponceno, 250 A.2d at 388.

^[32] See id. (describing this area of law as "well settled" in suretyship and applying the principle to a guaranty); W. T. Rawleigh Co. v. Warrington, 199 A. 666, 668 (Del. Super. 1938) ("When, however, the suretyship contract, though not under seal, is made at the same time as the principal contract, and both contracts form parts of the same transaction, there need not be any consideration other than that moving between the obligee and the obligor under the principal contract.").

^[33] See Banco Credito y Ahorro Ponceno, 250 A.2d at 388; W. T. Rawleigh, 199 A. at 668.