Note References in Kentucky Guaranties

Kentucky has some unusual requirements for enforceable guaranties. In order to be an enforceable guaranty in Kentucky, the guaranty must satisfy one of the following:

  1. It must be written on the instrument it guaranties;

  2. It must expressly refer to the instrument it guaranties; or

  3. It must be in writing, signed by the guarantor, and specify the guarantor’s maximum liability and the date on which the guaranty terminates.

A Kentucky case gave some further definition to the second condition, and explained what constitutes an “express reference” as required by the statute. In this particular situation, the guaranty was defined very broadly and read as follows:

[Guaranty Obligations] are defined to mean one [1] or more security agreements, including but not limited to conditional sales agreements, leases, chattel and/or real estate mortgages, notes or other deferred or time payment paper.

The Court of Appeals determined that this was not an express reference to the instrument it guarantied. The Court determined that simply referring to a “laundry list” of “categories of obligations” and not making the reference to any one specific instrument did not satisfy the requirements of the statute. Therefore, the best practice is to include a reference to a specific note in the guaranty, even if it is included with a list of other obligations as well. In the alternative, the creditor could draft a guaranty that satisfied either the first or the third conditions under the Kentucky statute.