Opinion ID: 1686104
Heading Depth: 1
Heading Rank: 10

Heading: Lafarge as the Obligee Under the Guaranty

Text: Dunn's contract guaranty guarantees DIG's prompt and satisfactory performance of the construction contract between Lafarge and DIG. If DIG defaulted on the construction contract's performance, Dunn had the option to complete the work of the contract or to pay to obligee all damages, costs, and expenses that the obligee is entitled to recover from DIG by reason of the default. The guaranty names as the obligee Lafarge Canada, Inc., a wholly controlled subsidiary of Lafarge. A guaranty, a species of contract, is a collateral agreement for another's undertaking and is an independent contract that imposes responsibilities different from those imposed in the agreement to which it is collateral. Jamieson-Chippewa Inv. Co., v. McClintock, 996 S.W.2d 84, 87 (Mo.App.1999). The rules of construction applicable to other contracts apply to a guaranty. Id. at 88. However, the liability of a guarantor is to be strictly construed according to the terms of the guaranty agreement and may not be extended by implication beyond the strict letter of the obligation. Id.; Ulreich v. Kreutz, 876 S.W.2d 726, 728 (Mo.App. 1994). Nonetheless, such strict construction does not entitle a guarantor to demand an unfair and strained interpretation of the words used in order that it may be released from the obligation that it has assumed. Zoglin v. Layland, 328 S.W.2d 718, 721 (Mo.App.1959). A guaranty agreement may be construed together with any contemporaneously executed agreements dealing with the same subject matter as an aid in ascertaining the intention of the parties. McClintock, 996 S.W.2d at 87. Those agreements, however, do not constitute a single contract, and the liability of the guarantor remains primarily dependent on the guaranty agreement itself. Id. Any ambiguity in a guaranty agreement should arise in the first instance from the agreement itself, and neither a court nor the parties will be permitted to create an ambiguity where none exists. Id. at 89. Guaranties are divided into two typesgeneral and special. Gateway Frontier Properties, Inc. v. Selner, Glaser, Komen, Berger & Galganski, P.C., 974 S.W.2d 566, 569 (Mo.App.1998). A general guaranty is addressed to persons generally and is assignable under the principles of contract law. Id. at 569-570. On the other hand, a special guaranty is addressed to a particular person. Id. at 570. As a general rule, a guaranty addressed to a particular person may only be acted upon and enforced by such party. Id.; Mitchell & Bro. v. Railton, 45 Mo.App. 273, 277 (1891). Where, however, a guaranty is intended by both parties to be for the benefit of someone other than the addressee or named obligee, a guaranty is not special despite being addressed to a specific person. Railton, 45 Mo.App. at 277-80; 38 Am.Jur.2d Guaranty Section 110 (1999). Thus, a principal may take advantage of a guaranty naming its agent as obligee where the guaranty was intended by both parties to be for the benefit of the principal. Id. Such principle is consistent with the general rule in agency law that the other party to a contract made by an agent for a disclosed or partially disclosed principal, acting within its authority, is liable to the principal, unless the principal is excluded as a party by the form or terms of the contract. Restatement (Second) of Agency Section 292 (1958). In this case, Lafarge, not Lafarge Canada, was intended by the parties to be the obligee of the contract guaranty. Lafarge Canada is a wholly controlled subsidiary of Lafarge and is extensively involved in and responsible for the management of the construction project on behalf of Lafarge. The guaranty itself demonstrates that Lafarge was the entity the guaranty was intended to benefit. The guaranty explains that the obligee has executed a Contract with DIG for construction work at the Sugar Creek plant project. The contract for the design and construction of the cement plant, which was attached to and was specifically referenced throughout the guaranty, was executed between DIG and Lafargenot Lafarge Canada. The notation Lafarge Corporation c/o Lafarge Canada-CTS is typed at the top of every page of the construction contract. Throughout the guaranty, reference is made to Dunn's guarantee of DIG's obligations to the obligee under the construction contract. The construction contract between Lafarge and DIG and the guaranty agreement were executed contemporaneously and concern the same subject matter. Construing the agreements together, Dunn's obligations under the guaranty were intended to run to the party with whom DIG contracted for the construction of the cement plantLafarge, not Lafarge Canada. Nothing in the guaranty excludes Lafarge as a party. Cf. Rush Presbyterian St. Luke's Med. Ctr. v. Safeco Ins. Co., 825 F.2d 1204, 1205-06 (7th Cir. 1987). Lafarge may enforce its rights under the guaranty.