Flynn v. Dugas
2004 Mass. App. Div. LEXIS 25, 2004 Mass. App. Div. 79 (2004)
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Rule of Law:
When a party to a proposed contract explicitly alters a form by striking out terms related to personal liability and signs in a representative capacity, no contract for personal guaranty is formed if the other party accepts the altered document without objection.
Facts:
- Adolph Dugas was the chairman and CEO of Automated Products of America, Inc. ('the corporation').
- Dugas met with Peter Ferraro, the general manager for Flynn’s Truck Stop, to arrange for the corporation to receive fuel deliveries on credit.
- Ferraro provided Dugas with a combined credit application and 'Continuing Individual Guaranty' form.
- Dugas completed the corporate information on the credit application.
- On the guaranty portion of the form, Dugas crossed out the preprinted words 'Personally and Individually' located beneath the signature line.
- Dugas signed the form, adding 'Chmn/CEO' after his signature and writing 'Automated Products of America, Inc.' above it.
- Dugas returned the modified form to Ferraro, who saw the changes but accepted the form without commenting on them.
- Flynn’s Truck Stop subsequently delivered fuel to the corporation, which later went bankrupt, leaving the bills unpaid.
Procedural Posture:
- Edward A. Flynn, Jr., d/b/a Flynn’s Truck Stop, sued Adolph Dugas in his individual capacity for the unpaid debts of Automated Products of America, Inc.
- The trial court entered a judgment finding Dugas individually liable as a guarantor for the corporation's debt.
- Dugas (appellant) appealed the trial court's judgment to the Appellate Division, with Flynn's Truck Stop as the appellee.
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Issue:
Does a corporate officer become personally liable as a guarantor for corporate debt when he signs a guaranty form after striking out the words 'Personally and Individually' and adding his corporate title and the corporation's name?
Opinions:
Majority - Koenigs, J.
No, a corporate officer does not become personally liable under these circumstances because there was no meeting of the minds to form a contract for personal guaranty. The court reasoned that Dugas's actions—striking out the words 'Personally and Individually,' adding his corporate title, and placing the corporation's name above his signature—were a clear and unambiguous rejection of the proposed personal guaranty term. The form, as altered, did not reflect a mutual agreement on the essential term of personal liability. Flynn's agent saw these modifications, understood their potential import, and accepted the form without objection, thereby proceeding without having secured a personal guaranty. The court concluded that it was not a matter of interpreting an ambiguous contract, but rather that no contract for personal guaranty was ever formed in the first place.
Analysis:
This decision reinforces the foundational contract law principle that a 'meeting of the minds' is essential for contract formation. It establishes that a party's deliberate, physical alteration of a standard form contract serves as a potent manifestation of intent, which cannot be ignored by the other party. The ruling places the burden on the party proffering the form to object to any modifications before proceeding with performance. If they accept the altered document and act upon it, they may be deemed to have accepted the counteroffer or, as in this case, to have failed to form a contract on the rejected terms, precluding them from later enforcing the original, preprinted language.
