Motion to Void Personal Guarantee (Unconscionability)

[COURT NAME] [COUNTY], [STATE] [PLAINTIFF NAME], Plaintiff, v. [YOUR NAME], Defendant. Case No. [CASE NUMBER] MOTION TO VOID PERSONAL GUARANTEE ON GROUNDS OF UNCONSCIONABILITY, ADHESION CONTRACT, AND VIOLATION OF NATURAL PERSON SOVEREIGNTY Defendant [YOUR NAME] ("Defendant"), by and through undersigned counsel [or "appearing pro se"], respectfully moves this Court pursuant to [STATE STATUTE] and the Due Process Clause of the Fifth and Fourteenth Amendments to void the personal guarantee executed on [DATE] on grounds of unconscionability, adhesion contract, and lack of informed consent. In support of this Motion, Defendant states as follows: I. INTRODUCTION This case concerns a personal guarantee obtained through adhesion contract practices that violate fundamental principles of Natural Person Sovereignty and constitutional due process. The guarantee at issue contains unconscionable terms, was presented on a non-negotiable take-it-or-leave-it basis, and involved material concealment of risks to Defendant's home and livelihood. The guarantee should be voided as contrary to public policy and constitutional protections. II. FACTUAL BACKGROUND A. The Underlying Transaction 1. On or about [DATE], Defendant [YOUR NAME], a natural person, operated a small business known as [BUSINESS NAME]. 2. [CREDITOR NAME] ("Creditor") approached Defendant with an offer to provide [TYPE OF FINANCING: merchant cash advance / equipment financing / commercial loan] in the amount of $[AMOUNT]. 3. The financing was urgently needed for [BUSINESS PURPOSE: working capital / equipment purchase / payroll]. 4. Creditor presented Defendant with a pre-printed, standardized personal guarantee form and stated that signing the guarantee was a non-negotiable condition of obtaining the financing. 5. Defendant was given [TIME PERIOD: hours / minutes / no time] to review the guarantee and was not permitted to negotiate any terms. 6. Defendant was not advised to consult with an attorney before signing the guarantee. 7. Defendant signed the personal guarantee on [DATE] under time pressure and economic duress, believing it was necessary to save the business. B. Unconscionable Terms of the Guarantee The personal guarantee contains the following unconscionable terms: 1. **Unlimited Liability**: The guarantee provides for unlimited personal liability for all present and future debts of the business to Creditor, without any cap or limitation. 2. **Continuing Guarantee**: The guarantee is a "continuing guarantee" that applies to all future transactions between the business and Creditor, even those Defendant did not authorize or know about. 3. **Waiver of Defenses**: The guarantee contains a broad waiver of defenses clause, purporting to waive Defendant's right to assert any defenses to enforcement, including fraud, duress, failure of consideration, and breach of contract by Creditor. 4. **Confession of Judgment**: The guarantee contains a confession of judgment clause allowing Creditor to obtain a judgment against Defendant without trial or notice. 5. **Waiver of Jury Trial**: The guarantee purports to waive Defendant's constitutional right to jury trial. 6. **Personal Property Lien**: The guarantee grants Creditor a lien on all of Defendant's personal property, including Defendant's primary residence. 7. **Attorney's Fees**: The guarantee requires Defendant to pay all of Creditor's attorney's fees and costs, regardless of outcome. C. Material Concealment and Lack of Informed Consent 1. Creditor did not explain the unlimited and continuing nature of the guarantee. 2. Creditor did not disclose that Defendant's primary residence would be at risk. 3. Creditor did not disclose the confession of judgment clause or explain its consequences. 4. Creditor did not disclose the waiver of jury trial or explain that Defendant would be giving up a constitutional right. 5. Creditor did not provide Defendant with a separate disclosure statement explaining the risks and consequences of signing the guarantee. 6. Defendant did not understand the full scope and consequences of the guarantee at the time of signing. D. Defendant's Current Circumstances 1. The underlying business has [failed / is struggling], and Creditor is now seeking to enforce the personal guarantee against Defendant. 2. Defendant's primary residence is at risk of foreclosure or forced sale to satisfy the guarantee. 3. Defendant's current income is $[AMOUNT] per [month/year], which is insufficient to satisfy the guarantee obligation. 4. Enforcement of the guarantee would result in [loss of home / financial ruin / inability to support family]. III. LEGAL STANDARD A. Unconscionability Doctrine Under [STATE] law, a contract or contract term may be voided as unconscionable if it is "so one-sided that it is unconscionable under the circumstances existing at the time of the making of the contract." [CITE STATE STATUTE OR CASE LAW]. Unconscionability has both procedural and substantive elements: **Procedural Unconscionability** exists when there is an absence of meaningful choice, often due to: - Unequal bargaining power - Hidden or incomprehensible terms - Lack of opportunity to negotiate - High-pressure sales tactics - Lack of meaningful alternatives **Substantive Unconscionability** exists when contract terms are unreasonably favorable to one party, such as: - Terms that are overly harsh or oppressive - Terms that shock the conscience - Terms that defeat the reasonable expectations of the weaker party - Terms that involve gross disparity in consideration Most jurisdictions require a showing of both procedural and substantive unconscionability, though they need not be present in equal measure. A sliding scale applies: the more substantively oppressive the term, the less procedural unconscionability is required, and vice versa. B. Adhesion Contract Doctrine An adhesion contract is a standardized contract form offered on a take-it-or-leave-it basis, where the weaker party has no realistic opportunity to negotiate terms. Courts scrutinize adhesion contracts carefully and will refuse to enforce terms that are "unduly oppressive" or that "defeat the reasonable expectations" of the weaker party. [CITE STATE CASE LAW]. C. Constitutional Due Process The Due Process Clause of the Fifth and Fourteenth Amendments prohibits government enforcement of contracts that violate fundamental fairness. State court enforcement of unconscionable contracts constitutes state action subject to constitutional scrutiny. See Shelley v. Kraemer, 334 U.S. 1 (1948). Natural Person Sovereignty recognizes that natural persons possess unalienable rights that cannot be waived through adhesion contracts obtained without informed consent. Personal guarantees that put a natural person's home and livelihood at risk require meaningful disclosure, opportunity to negotiate, and substantively fair terms. IV. ARGUMENT A. The Personal Guarantee Is Procedurally Unconscionable The personal guarantee at issue is procedurally unconscionable for the following reasons: 1. **Unequal Bargaining Power**: Defendant, a small business owner in need of urgent financing, had no bargaining power relative to Creditor, a sophisticated commercial lender. This gross disparity in bargaining power is a hallmark of procedural unconscionability. [CITE STATE CASE LAW]. 2. **Take-It-or-Leave-It Presentation**: The guarantee was presented on a non-negotiable, take-it-or-leave-it basis. Defendant was not permitted to negotiate any terms or propose modifications. This absence of meaningful choice is procedural unconscionability. [CITE STATE CASE LAW]. 3. **Time Pressure and Economic Duress**: Defendant was given [minimal/no] time to review the guarantee and was under economic duress due to the urgent need for financing. Contracts signed under time pressure and economic duress are procedurally unconscionable. [CITE STATE CASE LAW]. 4. **Lack of Opportunity to Consult Counsel**: Defendant was not advised to consult with an attorney before signing the guarantee and was not given adequate time to do so. The absence of legal counsel in a transaction involving waiver of fundamental rights is evidence of procedural unconscionability. 5. **Hidden and Incomprehensible Terms**: The guarantee contains complex legal terms (confession of judgment, continuing guarantee, waiver of defenses) that were not explained to Defendant and that Defendant did not understand. Hidden or incomprehensible terms are procedurally unconscionable. [CITE STATE CASE LAW]. 6. **No Separate Disclosure**: Creditor did not provide Defendant with a separate disclosure statement explaining the risks and consequences of signing the guarantee, including the risk to Defendant's home. This lack of meaningful disclosure is procedural unconscionability. B. The Personal Guarantee Is Substantively Unconscionable The personal guarantee is substantively unconscionable for the following reasons: 1. **Unlimited Liability**: The guarantee provides for unlimited personal liability without any cap or limitation. This exposes Defendant to potentially catastrophic financial consequences disproportionate to any benefit received. Unlimited personal guarantees have been held substantively unconscionable. [CITE STATE CASE LAW]. 2. **Continuing Guarantee**: The guarantee applies to all present and future debts, including transactions Defendant did not authorize or know about. This open-ended obligation is substantively unconscionable because it exposes Defendant to liability for debts beyond Defendant's control. 3. **Waiver of Constitutional Rights**: The guarantee purports to waive Defendant's constitutional rights to jury trial and due process (through confession of judgment). Waivers of constitutional rights in adhesion contracts are substantively unconscionable and contrary to public policy. [CITE STATE AND FEDERAL CASE LAW]. 4. **Confession of Judgment**: The confession of judgment clause allows Creditor to obtain a judgment against Defendant without trial or notice, depriving Defendant of due process. Confession of judgment clauses in consumer and small business transactions have been held unconscionable and void as against public policy. [CITE STATE CASE LAW AND D.H. OVERMYER CO. V. FRICK CO., 405 U.S. 174 (1972)]. 5. **One-Sided Terms**: The guarantee contains numerous terms that are one-sided and favor only Creditor (waiver of defenses, attorney's fees, personal property lien). The gross imbalance of obligations is substantively unconscionable. 6. **Risk to Primary Residence**: The guarantee puts Defendant's primary residence at risk. Courts have recognized that contracts threatening loss of a person's home warrant heightened scrutiny and are substantively unconscionable when obtained through adhesion practices. [CITE STATE CASE LAW]. C. The Personal Guarantee Violates Natural Person Sovereignty and Constitutional Due Process 1. **Natural Person Sovereignty**: Natural Person Sovereignty recognizes that natural persons possess unalienable rights that predate government and cannot be legislatively eliminated or contractually waived without informed consent. Personal guarantees obtained through adhesion practices, without meaningful disclosure of risks to home and livelihood, violate Natural Person Sovereignty. 2. **Due Process Violation**: State court enforcement of the unconscionable guarantee constitutes state action that violates Defendant's due process rights under the Fifth and Fourteenth Amendments. See Shelley v. Kraemer, 334 U.S. 1 (1948) (state enforcement of private agreements violates due process when agreements are contrary to public policy). 3. **Fuentes v. Shevin**: The Supreme Court has held that deprivation of property without prior notice and opportunity to be heard violates due process. Fuentes v. Shevin, 407 U.S. 67 (1972). The confession of judgment clause in the guarantee deprives Defendant of property (home and personal assets) without prior hearing, violating due process. D. Public Policy Considerations Enforcement of the guarantee would be contrary to public policy for the following reasons: 1. **Encourages Predatory Lending**: Allowing enforcement of adhesion guarantees with unconscionable terms encourages predatory lending practices that target vulnerable small business owners. 2. **Defeats Reasonable Expectations**: Defendant reasonably expected the guarantee to be limited to the specific transaction and did not understand the unlimited and continuing nature of the obligation. Enforcement defeats Defendant's reasonable expectations. 3. **Disproportionate Consequences**: Enforcement would result in loss of Defendant's home and financial ruin, consequences grossly disproportionate to any benefit Defendant received from the underlying financing. 4. **Undermines Informed Consent**: Enforcement of guarantees obtained without meaningful disclosure and informed consent undermines the foundational principle of contract law that agreements must be voluntary and knowing. V. CONCLUSION The personal guarantee at issue is unconscionable, was obtained through adhesion contract practices, and violates Natural Person Sovereignty and constitutional due process. The guarantee should be voided as contrary to public policy and fundamental fairness. WHEREFORE, Defendant respectfully requests that this Court: 1. Void the personal guarantee executed on [DATE] as unconscionable and unenforceable; 2. Dismiss Plaintiff's claims against Defendant based on the personal guarantee; 3. Award Defendant attorney's fees and costs pursuant to [STATE STATUTE OR CASE LAW]; and 4. Grant such other and further relief as the Court deems just and proper. Respectfully submitted, _______________________________ [YOUR NAME OR ATTORNEY NAME] [ADDRESS] [PHONE] [EMAIL] [BAR NUMBER IF APPLICABLE] Dated: [DATE] DECLARATION OF [YOUR NAME] IN SUPPORT OF MOTION TO VOID PERSONAL GUARANTEE I, [YOUR NAME], declare under penalty of perjury under the laws of the State of [STATE] that the following is true and correct: 1. I am the Defendant in this action and have personal knowledge of the facts set forth in this declaration. 2. On or about [DATE], I operated a small business known as [BUSINESS NAME]. My business needed [TYPE OF FINANCING] in the amount of $[AMOUNT] for [BUSINESS PURPOSE]. 3. [CREDITOR NAME] approached me with an offer to provide the financing. A representative of [CREDITOR NAME] presented me with a pre-printed personal guarantee form and stated that signing the guarantee was a non-negotiable condition of obtaining the financing. 4. I was given [TIME PERIOD] to review the guarantee. I was not permitted to negotiate any terms or propose modifications. I was not advised to consult with an attorney. 5. I signed the personal guarantee on [DATE] because I believed it was necessary to obtain the financing and save my business. I was under time pressure and economic duress at the time of signing. 6. The [CREDITOR NAME] representative did not explain the following terms of the guarantee: a. That the guarantee was unlimited and applied to all present and future debts; b. That my primary residence would be at risk; c. That the guarantee contained a confession of judgment clause; d. That I was waiving my right to jury trial; e. That I was waiving defenses to enforcement. 7. I did not understand the full scope and consequences of the guarantee at the time of signing. If I had understood that my home would be at risk, I would not have signed the guarantee. 8. My current income is $[AMOUNT] per [month/year]. I am unable to pay the amount demanded under the guarantee. 9. My primary residence is located at [ADDRESS] and is valued at approximately $[AMOUNT]. I have lived at this residence for [NUMBER] years. Loss of my home would cause severe hardship to me and my family. 10. Attached as Exhibit A is a true and correct copy of the personal guarantee. 11. Attached as Exhibit B is a true and correct copy of [SUPPORTING DOCUMENT: loan agreement / financing agreement / communications with creditor]. I declare under penalty of perjury that the foregoing is true and correct. Executed on [DATE] at [CITY], [STATE]. _______________________________ [YOUR NAME] [PROPOSED ORDER] [COURT NAME] [COUNTY], [STATE] [PLAINTIFF NAME], Plaintiff, v. [YOUR NAME], Defendant. Case No. [CASE NUMBER] ORDER GRANTING MOTION TO VOID PERSONAL GUARANTEE The Motion to Void Personal Guarantee filed by Defendant [YOUR NAME] came on regularly for hearing on [DATE] before the Honorable [JUDGE NAME]. Having considered the motion, supporting declarations, exhibits, and arguments of counsel [or "the parties"], and good cause appearing, IT IS HEREBY ORDERED that: 1. The personal guarantee executed by Defendant [YOUR NAME] on [DATE] is VOID and UNENFORCEABLE as unconscionable and contrary to public policy. 2. Plaintiff's claims against Defendant based on the personal guarantee are DISMISSED WITH PREJUDICE. 3. Defendant is awarded attorney's fees and costs in the amount of $[AMOUNT] pursuant to [STATE STATUTE OR CASE LAW]. 4. Each party shall bear their own costs except as provided above. SO ORDERED. Dated: [DATE] _______________________________ [JUDGE NAME] [TITLE]